Depositors of closed banks can receive compensations from August

/By Azernews/

By Nigar Abbasova

Depositors of four recently closed banks in Azerbaijan will be able to apply for compensations starting August, 1, Azerbaijan Deposit Insurance Fund (ADIF) reported. Insured event occurred in Zaminbank, Dekabank, Kredobank and Parabank on July 25.

The licenses of the banks were abolished in accordance with the decision of the Financial Market Supervisory Body (FMSB) dated July 21, 2016.  

The licenses of four banks were revoked due to their failure to meet necessary requirements specified in the relevant legislation. The assets of banks were not classified in line with the law, they didn’t create adequate reserves and the aggregate capital of these banks doesn’t meet the minimum requirements which stand at 50 million manats ($31.8 million). In general, they haven’t fulfilled the instructions of the regulator. The decision was taken to avert more serious problems in the financial institutions.

Previously, highlighting the issue of existence of other troubled banks in Azerbaijan, Rufat Aslanli, head of the Board of Directors of FMSB said that currently the country has no problem banks except the International Bank of Azerbaijan and Bank Standard. Nevertheless, the closure of these banks is not currently on the agenda.

Earlier, the court appointed ADIF a liquidator of the banks. Azad Javadov, Executive Director of ADIF, said that the Fund will value the assets. Previously, the Fund also reported that it will sell properties of liquidated banks at an auction through a new website of the Fund - emlakadif.az, which will start to function in the short run. All properties that were used by the banks including those taken by banks as a credit pledge will be offered for sale. The Fund is also planning to create a show-room so that those who want to acquire a property get a possibility to familiarize with it beforehand.

The closure of the banks is expected to reduce the risks for the banking sector, as well as strengthen the financial stability, increase the confidence and ensure the development of the financial sector.

The insurance covers all deposits in member-banks of the fund at an interest rate not exceeding three (for deposits in foreign currency) and 12 percent (for deposits in national currency), respectively, regardless the amount of the deposit.

The recently adopted law “On full insurance of deposits” envisages that within three years, the public deposits, with the annual interest rate not exceeding the maximum level set by the Council of Trustees of the ADIF should be insured, regardless of the amount of deposits in banks that are fund-members. The compensation of uninsured deposits should be paid according to the “Law on deposit insurance” should the insurance case occur in ADIF member-banks.

 FMSB is currently engaged in developing an individual program on strengthening financial stability for every bank of the country taking into account processes that occur in the global and local economy.

ADIF operates since August 13, 2007.Currently, 33 banks have licenses for implementing banking activities in Azerbaijan.

Licenses of six banks including AtraBank, Caucasus Development Bank, Bank Technique, Ganja Bank, Bank of Azerbaijan and United Credit Bank,  have been cancelled in early 2016.