Last week, the Azerbaijani Central Bank (CBA) expressed approval of work of the Azerbaijan Deposit Insurance Fund's work (ADIF) of providing the bankrupt RoyalBank depositors with compensation. ADIF managed to show itself as an effective institution, and the CBA, as the regulator of the banking market in the country, is pleased with its performance.
ADIF started to pay out compensation to RoyalBank depositors through three agent banks since Aug. 1. As of Aug. 27, the fund have paid 11 million manat - over 73 percent of insured deposits of individuals. Azerbaijani citizens who have invested money in manat, are those mainly appealing for compensation. Non-residents mainly receive compensation in a foreign currency, while Azerbaijani citizens are paid out in the national currency. More than 80 per cent of deposits in the manat have been returned. Depositors do not appear to hurry to apply for compensation in foreign currency.
The compensation is being paid through the Muganbank, Bank Respublika and Agbank where special working groups have been created. The accounts of depositors in 33 RoyalBank branches will be served by 27 branches of the three agent banks.
About 1100 of 7000 depositors had received compensation. About 2000 deposits do not exceed 100 manat, so there are a few people willing to get compensation," he added. Roughly 15-20 people appeal per day. The process of payments will run until July 20, 2013.
The fund plans to pay about 14.9 million manat for the first payment in its history, that is a third of its funds (the fund has 48 million manat). If before the Fund planned to direct 16 million manat to the payment of, after reassessment of total compensation, it declined by 1.1 million manat.
This experience will allow the fund to reveal the areas for further development and will enable the fund to share experience with similar organisations in other countries. The relevance of deposit insurance systems has increased in the context of the global economic crisis since 2008. These systems are an important element in ensuring financial stability, improving public confidence in the banking system and protecting the interests of customers.
ADIF expects to increase its insurance reserves to 50 million manat by late 2012. The fund's insurance reserves increased by 6.39 per cent for the second quarter and amounted to 48.3 million manat. After paying the compensation, the fund will have about 34 million manat, but after a few months the fund will get the money back from RoyalBank's liquidator - Azerbaijan Consulting Company
The fund receives about 3.5 million manat every quarter. Total deposits of individuals in the member banks of the Azerbaijan Deposit Insurance Fund (ADIF) amounted to 4.319 billion manat for the first half, increasing by 1.72 percent for the second quarter. Around 2.776 billion manat of this amount fall to insured deposits. The number of insured depositors as of the reporting period amounted to 6,125 people.
At present, the maximum level of insurance coverage for the deposit is 30,000 manat.
The depositors do not make any payments to insure their deposits. The insurance payments are made only by banks.