Last week the Azerbaijan Deposit Insurance Fund began its activity. It is one more organization established in the Country through the demand of the time. Establishing such a financial institution in Azerbaijan is the classic form of the market economy. The necessity to establish the fund appeared due to the increase of the deposits by the population to the banks and it testifies the growing trust of Azerbaijan's population on the banks. The existence of the Deposit Insurance Fund further strengthens the interest of population towards the banking sector.
Currently nearly 30 banks have become members to the Fund. They have successfully passed the stage of capitalization held by the National Bank of Azerbaijan. The assessment of the banks' capitals was held in accordance with the normative requirements of the National Bank as of 1 July, according to which the minimal amount of the statutary capital of each bank should total at least AZN 10mln. The assessment of the banking sector of Azerbaijan is planned to be completed by the end of August 2007. As a result, the banks which have not implemented the requirement will be deprived of the license for attracting deposits and will not become a member to the fund. They will have to become consolidated or change their status and become non-banking credit organizations.
The banks who joined the Fund have already been issues certificates and from the first day of Fund's activity, they should transfer one-off fees defined in amount of AZN 10.000. In addition, the Fund will be formed at the expense of calendar payments in amount of 0.6% annually. Further, taking into consideration the credit resources of the German Development Bank KfW, which plans to allocate €5mln for the Fund, the Fund's capital will be increased up to AZN 7mln.
For the effective management of the Fund's finances, the accumulated finances may be allocated to the State short-term Eurobonds of the Finance Ministry and banknotes of the National Bank, as well as to the high-rating securities of the foreign countries. The key goal of the Fund is not to make profits, but placing the monies into high-liquidate securities is aimed at ensuring zero risks. High-rating securities will be selected in order not to lose in the rate difference.
In the first stage, the German bank will sent consultants to the Fund. The experts of the bank will visit the Country each month to become familiarized with the activities of the Fund and bring its activities into conformity with international standards. The first consultant had been sent in July who has already become familiarized with the documents adopted by the Supervisory Board of the Fund and presented his recommendations. The second expert who will arrive in Azerbaijan in August will assist the Fund in devising internal documents.
Currently nearly 26% (AZN 260mln) out of the gross deposits of population may be insured at the expense of the Fund. The figure may be increased in the future due to the successful development of the events. In addition, the deposits will be growing. The annual growth of the deposits makes up 40-60%.