CBA: Full insurance of deposits in Azerbaijan to cover 8.3 million depositors

By Azernews

By Ofeliya Afandiyeva

Extension of the term of full insurance of deposits in Azerbaijan until December 4, 2020 will protect the interests of 8.3 million depositors, local media reported, citing the official website of the Central Bank of Azerbaijan (CBA) on April 27.

“As it is known, Azerbaijani President has signed a law on extension of full insurance of all protected deposits of the population irrespective of their amount for another 9 months (on April 25). This decision serves to protection of interests of total 8.3 million depositors (it includes term deposit accounts, as well as current accounts per depositor with different banks) and covers $4.3 billion worth of deposits,” the Central Bank reported.

The government adopted this decision in order to ensure the interests of the population and strengthening financial system sustainability amid COVID-19 pandemic, CBA said in its press-release.

“Accordingly, banks operating under the banking licenses and members of the Deposit Insurance Fund (ADIF) have rolled over the blanket guarantee period for all protected deposits with the annual interest rate set by the Board of Trustees of the ADIF as of the date of attraction until 4 December 2020 irrespective of deposits’ amount, currency and banks’ financial standing. Thus, the deposits attracted from 4 March 2020 to the effective date of the Law (26 April 2020) under the above conditions are also covered with the Law in force,” the statement reads.

Referring to the disclosure of the CBA, the re-application of the law "On full deposit insurance" will more reliably protect the interests of depositors and creditors, protect a stable and healthy financial sector and increase confidence in the banking sector.

In addition, the extension of the blanket guarantee will support both the restructuring of the banking sector and the completion of remediation work, improve its role in the economy and give better access to financial services to businesses and the public.

Note that the decision on full deposit insurance entered into force on March 4, 2016, for a period of three years. The goal was to prevent the outflow of deposits from banks after devaluation of the country’s national currency manat twice in 2015. In March 2019, the parliament extended the law for another year.

The adoption of the law paid off, since three months after the document entered into legal force, bank deposits in Azerbaijan began to grow again and reached about $5.17 billion in October 2019, renewing a four-year high.

From March 4, 2016, the insurance system applies to the entire volume of deposits of the population (previously, deposits up to $17.6 thousand were considered insured).

The only condition is that the interest on the deposit should not exceed the limit set by the Azerbaijan Deposit Insurance Fund (ADIF). Accordingly, deposits of the population with an annual interest rate of more than 10 percent in national currency and more than 2.5 percent in foreign currency are not insured.