The Law on Deposit Insurance of the Azerbaijan Republic was adopted
on December 29, 2006 by the Azerbaijani Parliament and the compensation
mechanism of the deposits came into force on August 12, 2007 according to the
Decree #530 of the President of the Republic dated February 9, 2007.
The main function of the Fund is to collect insurance fees for the deposit
insurance from the participant bank, to provide safety of the Funds money fund
according to the law and to provide with the payment of the compensation to the
protected depositors in case of insurance event.
Banks, as well as local branch offices of foreign banks licensed to take individual deposits shall be participants of the Fund after they get a certificate
from the Deposit Insurance Fund.
Banks shall do the followings in order to inform the depositors:
- Certificate confirming banks membership to the Fund shall be hung in
the place where the depositors serviced;
- Informations on the deposit insurance, as well as terms of payment
copmpensations and Mass media that announced and published about
the Funds function shall be indicated in Bank deposit or bank amount
contracts and shall be hung in the written form in the place where
depositors are serviced;
- According to the depositors written and oral questions they should be
informed about the participation of the bank in the insurance system,
terms of the deposit insurance and compensations.
The Fund does not compensate on the following deposits:
- bearer deposit certificates;
- money funds of the individuals involved in the entrepreneurial activity on
the bank account;
- deposit of the depositor in the amount of his/her principal debt to the
bank and its accrued interest regardless of whether the banks
counterclaims are due or not;
- deposits, which are collaterals for the liabilities to the bank;
- deposits accumulated through the local banks sections outside the
Azerbaijan Republic;
- illegal money funds;
- deposits originated as a result of a committed crime, as confirmed by an
effective court order;
- attached deposits;
- deposits placed at an annual interest rate which is more than 1.8 times
higher than the refinancing rate of the National Bank on the date of
accumulation;
- individuals money managed by a bank on trust basis;
deposits of the persons who is closely related to the bank and their close
relatives (members of the banks Supervisory Board, Audit Committee,
Managing Board and their immediate family, persons who hold 10 per cent or
more of the banks voting shares.
Depositors do not pay any money for the deposit insurance and insurance fees
are paid only by banks.
Dear depositors,
National Bank of the Republic of Azerbaijan defined the interest rate 12 per cent in October 14, 2008 and 10 per cent in Ocober 31, 2008.
According to the Article 2.1.2.6 of the Law on Deposit Insurance of the Republic of Azerbaijan deposits involved at 1.8 higher annual interest rate as the refinancing rate of the National Bank of Azerbaijan Republic (hereinafter - the National Bank) on the date of accumulation are not considered protected deposits.
So, the deposits involved at 1.8 higher annual interest rate (i.e. 18 %) as the refinancing rate of the National Bank by the participant banks from October 31, 2008 are not considered protected deposits. If deposits involved until October 31, 2008 have been considered protected deposits, although the National Bank has changed the interest rate, those deposits are protected by the Deposit Insurance Fund and in case of insurance incident a compensation will be paid for those deposits.
For instance: a depositor has put a deposit one of the participant banks with 21,4 % in October 5, 2008. The interest rate of the National Bank was 15 % on that date (i.e. deposits accumulated up to 27 % had been considered protected deposits) thats why deposits of that depositor are considered protected deposit even from October 31, 2008.
It should be noted that there have been following changes in the interest rate by the National Bank from the date of functioning of ADIF (August 13, 2007):
According to the interest rate of the National Bank deposits placed in the higher limit than annual interest rates in the indicated periods are not considered protected deposits.
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