Weekly economic review (23.08- 28.08.2010)

Analysis Materials 31 August 2010 12:04 (UTC +04:00)

Until recently, one of the main reasons that the citizens of Azerbaijan did not actively invest their savings was a lack of confidence in the banking system of the country. Now, thanks to the deposit insurance system, Azerbaijanis willingly put their money in banks. Clearly, establishing an insurance system has stabilized the financial market, inspired calmness and increased public confidence in the banking system of Azerbaijan.

Such a deposit insurance system has successfully been operating in Azerbaijan for three years and its results are tangible. In order to insure the activities of the insurance system, since August 2007 the State has created a nonprofit organization - Azerbaijan Deposit Insurance Fund (ADIF). The agency pays to individuals refunds on deposits, controls the formation of deposit insurance fund due to payments from banks and manages the fund.

Last week, it became clear that Deutsche Invest (a subsidiary of Deutsche Bank) has become the foreign broker company for management of funds of Azerbaijan Deposit Insurance Fund (ADIF).

Now, together with Deutsche Invest, preparatory work is implemented to place the Fund's assets, and according to our expectations, the Fund will allocate its assets abroad already in September.
Today, partly the Fund's resources (11 million manat) have been placed in government short-term bonds (10 million manat) and mortgage bonds (1,000,000 manat).

After receiving five million euros loan from the KfW for the capitalization of ADIF, the Fund's assets have increased to 24 million manat, and therefore, the Fund has involved a broker company to transfer the funds to short-term management of foreign banks.
Under the Fund's investment policy, the resources can be placed in the high-rating securities of foreign banks and financial institutions with a rating of "AAA".

Today, the Fund brings together 43 banks out of 47 banks operating in the country. ADIF started its activities on August 13, 2007. Total deposits in ADIF member banks in the second quarter amounted to 2,483 billion manat, of which uninsured deposits total 818 million manat, and insured - 1,665 billion manat.

The number of insured depositors as of the reporting period totaled 5,277,283 people. Fund's insurance reserves amounted to 27.31 million manat as of the second quarter.

Since January 1, 2010, the deposits placed in ADIF member banks at an annual interest rate of over 12 percent have not been insured by the Fund, and compensation is not envisaged for them.

Currently, the maximum level of insurance coverage for the deposit is 30,000 manat. For the insurance of their deposits, depositors do not make any payments, and insurance payments are made only by banks.