ADIF says insurance coverage on deposits maybe revised
By Gulgiz Dadashova
Azerbaijan Deposit Insurance Fund of individuals (ADIF), which provides insurance for deposits of citizens in banks, announced that it is ready to consider increasing the sum of insurance coverage for a single deposit which has stood at 30,000 manats since 2009.
Only deposits with the maximum 30, 000 manats and the annual interest rate of 10 percent or less are paid-off by ADIF to the protected depositors of banks which provide insurance coverage.
ADIF Executive Director Azad Javadov said that such a scenario is possible due to lasting development of the Azerbaijani economy, and increase in the solvency of the population, which in turn affects the amount of deposits in banks.
"The amount of insurance coverage by ADIF has been increased five times up to 30,000 amid the global economic crisis, and positive changes have been observed in the economy [GDP per capita] for the last period. That is why, this issue may also be included in the agenda of discussions in view of the forthcoming changes in legislation," Javadov told journalists.
However, Javadov believes, there is no need to change the upper limit of the interest rate on deposits insured by ADIF. In 2014, the rate was reduced from 10 to 9 percent.
Meanwhile, the package of the proposals prepared by the fund stipulates introduction of deposit insurance of individual entrepreneurs. Currently, ADIF insures only deposits of individuals.
The parliament may consider the deposit insurance of individual entrepreneurs this year.
"The package of the proposals prepared has already been submitted to the parliament. Specific terms for consideration and adoption of these proposals are entirely dependent on the parliament," Javadov said earlier, noting that insurance of legal entities' deposits is not in the agenda.
He further said that ADIF continues to further expand, as the insurance reserves of the fund currently amount to 84.3 million manat. Its member banks offer services to 6,073,126 depositors, 91 percent (5,504,255 people) of which are the insured depositors.
The volume of the compensated deposits hit 1.931 billion manat, which makes 55 percent of the insured deposits.
As of the second quarter of 2014, 54.8 percent (3.47 billion
manat) of the total volume of deposits of individuals (6,335
billion manat) in the ADIF member banks were insured and 45.2
percent (2.87 billion manat) - not insured. Some 62 per cent of the
insured deposits are in manats, while 34 per cent - in dollars and
four percent - in euros.
Annual return on the fund assets averaged 4.34 percent.
Deposits placed at ADIF member banks at an annual interest rate of over nine percent are not insured and the compensation for them is not available. For the insurance of their deposits depositors do not make any payments, insurance payments are made only by the banks themselves.
ADIF, established in 2007, aims to prevent the risk of losing money deposited by individuals and to ensure the sustainability and development of the financial and banking system whenever banks and local branch offices of foreign banks become insolvent. Currently, 42 commercial banks of 44 banks operating in Azerbaijan are the members of ADIF.