Azerbaijan

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Azerbaijan
«Mandate and powers of
deposit insurance schemes»
29 April 2014
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Azerbaijan Deposit Insurance Fund
Mandate and Powers
Ramil Tahirov
www.adif.az
Azerbaijan Deposit Insurance Fund
General information about ADIF
 December, 2006 Law on Deposit Insurance Fund (LDI)
 June, 2007
Azerbaijan Deposit Insurance Fund was
established
 Status of the ADIF Privately administered non-profit organization
 Membership
Mandatory
 Member banks
42 commercial banks
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Management bodies
 Supreme management body
Board of Custodians – 7 members

Ministry of Finance of Azerbaijan Republic (one representative)

Ministry of Economic Development (one representative)

Central Bank of Azerbaijan Republic (three representatives)

Member banks (two representatives)
 Executive body
Executive director
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Public Policy Objectives
Protect Insured
Depositors
Public Policy
Objectives
Contribute to
Financial Stability
Promote Public
Confidence in
Banking System
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Mandate and powers
PAYBOX
Main powers
• Protect depositors
• Collect premiums and manage funds
• Reimburse depositors
• Establish funding sources
Other powers
• Enter into contracts
•
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Set regulations, internal policies and internal operating budgets
Access depositors' information
Share information with financial safety net participants
Compel member banks to pay insurance premiums
Receive recoveries from estate of failed bank
Participate in provisional administration and liquidation of insolvent banks with a restricted powers
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Authority to protect depositors
Deposits of private individuals
Deposits of legal entities
Deposits of entrepreneurs
Excluded deposits:
 deposits received at the annual rate of over limit (10%) on the date ofreceipt
 amount of deposits equal to the depositor’s loan
 deposits securing obligations to the member bank and etc.
Excluded depositors:
 members of the bank’s Supervisory Board, Audit Committee, Managing Board and their close
relatives
 shareholders which are the owners of 10 % or more voting shares and their close relatives
 external auditors
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Collecting insurance premiums
Member bank
status
Membership fee
AZN 10 ths. (12,8 ths. USD)
ADIF
Issuance membership
certificate
10 days
Calendar fees
0.125 per cent (0,5%
yearly) of the quarterly
average daily balance of
protected deposits
ADIF
ADIF
End of quarter
Member banks
Quarterly
reports
checking the
accuracy and
completeness of
reports
5 days
10 days
Other funding
resources
ADIF
ADreserves
Insurance
Target ratio
5 % of protected
deposits
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Compel member banks to pay insurance
premiums
Penalty =
Insurance premiums paid in previous quarter
X Central Bank’s refinancing rate
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Notification for
payment of penalties
Member banks failed to pay
insurance premiums on time
ADIF
Payment of delayed
premiums and
penalties
Member bank 1
Notification
Premiums and
penalties are not paid
in 30 days
Member bank 2
Central
Bank
Member bank 3
If insurance fees and fines are not paid in 30 days, penalties shall cease to assess and the Fund shall take actions
necessary to withhold such funds from the member bank’s correspondent accounts
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Management of funds
Purposes
 Liquidity
 diversification of risks
 Security
 Reasonable return on assets
Possible financial instruments
 Government bonds
 Securities issued by central banks
 Deposits in central banks and AAA
rated banks
 AAA rated other financial instruments
 Investment rules and Annual Investment Policy are approved by Board of
Custodians
 Executive director should decide for investments according to the investment
policy
 Euro funds are invested in Euro market through Deutsche Asset & Wealth
Management
 USD funds are invested in Federal Reserve as overnight
 AZN funds are invested in securities issued by Azerbaijan Government (Ministry
of Finance)
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Establishment of funding sources
ADIF in need
Board decision to borrow funds
• Central Bank
• Government
• Financial market
Ex-ante funds
(depleted or under AZN 1 mln.
(USD 1.3 mln.) or likely)
Borrowing funds
to be used
at first
Max. 0.2 per cent of the quarterly average daily
balance of protected deposits in addition to
calendar fees
Calculation and payment depends on the
amount and repayment terms of the ADIF loans
Issuance of debt securities
Finish of the repayment of loans
Board decision to levy supplementary fees
from member banks
Ex-post funds
Suspension of levying supplementary fees
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Reimbursement
Insurance Event
 Forced liquidation or bankruptcy of the member bank
 Applying moratorium to deposit liabilities
 Inability to perform its statutory contractual obligations to
depositors.
For considering these cases as an insurance event it is
required to receive the confirmation and official notification
from Central Bank to the ADIF.
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Reimbursement (cont.)
Problem
(Starting this period creditor claims not registered in liquidation process
are not reimbursed)
Expiration of
period for claim
handling
60 days
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90 days
1 year
Announcement of date
and place of the pay
out
14 days
30 days
Period for claim handling
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Reimbursement (cont.)
 Coverage - the compensation amount per one insurance
event - 100 % of deposit, max AZN 30 ths. (38,2 thsd USD)
 deposits in AZN, USD and EURO – in the same/original
currency
 deposits not in AZN, USD or Euro – compensated in USD or
EURO
 deposits in mixed currencies– compensated in manats
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Reimbursement (cont.)
ADIF has a right to realize reimbursements through agent banks
selected among the member banks.
Selection Process
Accreditation
(permanent)
Competition
(in case of insurance event)
Main functions of Agent bank
Receiving the documents and applications from depositors
Payment of compensations
Reporting to the Fund
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Access to depositor information
Bank data – Depositor data and balance sheet
XML files
Failed bank
ADIF Server and
Payout Software
ADIF
 ADIF may access to depositor data of failed bank after insurance event
 Failed bank should submit register of obligation of failed bank to depositors
within 3 days after occurrence of insurance event
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Future plans
From Paybox to Loss minimizer
New expected powers:
 Exclude banks from membership in ADIF
 Conduct onsite or offsite inspections in member banks
 Determine the resolution method (bank resolution)
 Liquidate insolvent member banks
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THANK YOU FOR
YOUR ATTENTION !
www.adif.az
Azerbaijan Deposit Insurance Fund
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