Reduced bank deposit rates will not lessen the financial risks in Azerbaijan

Reduced bank deposit rates will not lessen the financial risks in Azerbaijan

Azerbaijan Deposit Insurance Fund (ADIF) decreased the maximum insurance rate on household deposits attracted by banks from 9% to 10 % on May 20, 2014.

Centre for Economic and Social Development (CESD) announced that this is the second time of reduction in the 9 months- in August last year, the rate decreased from 12 to 10 % at a consistently high percentage of business and banking loans, and particularly consumer loans. Rights of borrowers will be violated as long as there is no decision of the Central Bank to lower interest rates on bank loans.
In addition, commercial banks violate conditions of ADIF, offering public to place deposits at 12% and above. Appropriate recommendations of the Central Bank could prevent the risks of many thousands of contributions in the case of bankruptcy of private financial institutions, says the economist. Unfortunately, neither the Fund nor the Central Bank responded to the violations, despite the fact that the prohibited advertising of “profitable” contributions is being on TV channels and other electronic media.
CESD invited the Fund to raise the bar for maximum insured deposits from 30,000 AZN to a higher level. For comparison – in Poland until 2008 they insured 22,500 euros and in 2009 due to increased financial capacity of the population this level rose to 100,000 euros. Azerbaijan has a large number of investors that have the capacity to organize personal account funds in excess of 30,000 manat. Restrictions imposed by ADIF are forcing both residents and non-residents to open several accounts, which also violates their rights, the expert believes.

ADIF was created under the presidential decree of February 9, “On approval and enactment of the law “Deposit Insurance” adopted on 29 December 2006. The Fund fully covers deposits amounting to 30,000 manat.

Members of the deposit insurance fund are 42 banks.

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