Azerbaijan introduces transitional stage in insurance system of bank deposit
BAKU, Azerbaijan, Dec. 8
By Zeyni Jafarov - Trend:
The Azerbaijani government considers it advisable to leave the full deposit insurance scheme, with the definition of a transition period until April 5, 2021, and the creation of a more perfect framework for deposit insurance within the current situation, Trend reports citing the Central Bank of Azerbaijan (CBA).
“In order to maintain financial stability in the country amid the global economic crisis, ensure the stability of the banking system and strengthen depositors' confidence in the banking system, on January 19, 2016, Azerbaijan adopted the Law on Full Deposit Insurance. According to the law, which came into force on March 4, 2016, all protected deposits within the annual interest rate set by the Board of Trustees of the Deposit Insurance Fund are fully insured for three years, regardless of their amount,” the CBA noted.
As reported, the current deposit insurance system expired on December 4, 2020.
“The Central Bank of Azerbaijan and the Azerbaijan Deposit Insurance Fund (ADIF) have prepared an updated strategy for a new deposit insurance mechanism. This strategy was discussed at a meeting of the Economic Council of Azerbaijan and a decision was made on a transition period until April 5, 2021. Corresponding amendments to the legislation have already been made to the Parliament of Azerbaijan. According to these amendments, the amount of compensation for a bank deposit is increased from 30,000 manat ($17,647) to 100,000 manat ($58,823), which makes it possible to fully protect 99.9 percent of deposits in banks,” said the message.
“Along with this, the amount of compensation on deposits of individual entrepreneurs is set at around 20,000 manat ($11,764), which will support the development of small businesses and increase their confidence in the banking system. Moreover, the funds of citizens in the deposit accounts of notaries are fully subject to insurance,” the CBA noted.
According to the Central Bank, these proposals will provide full insurance coverage for a significant part of deposits, improve the banking risk management system, and ensure the stability of the banking system.
(1 USD = 1.7 manat on Dec. 8)