1. www.adif.az Azerbaijan Deposit Insurance Fund «Mandate and powers of deposit insurance schemes» 29 April 2014 Azerbaijan Deposit Insurance Fund Mandate and Powers Ramil Tahirov EARCEARC

2. 2 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

3. 3  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

4. 4 Contribute to Financial Stability Contribute to Financial Stability Promote Public Confidence in Banking System Promote Public Confidence in Banking System Protect Insured Depositors Protect Insured Depositors Public Policy Objectives Public Policy Objectives Public Policy Objectives

5. 5 PAYBOX Main powers Protect depositors Collect premiums and manage funds Reimburse depositors Establish funding sources Other powers Enter into contracts 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 Mandate and powers

6. 6 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

7. 7 Collecting insurance premiums Issuance membership certificate Member bank status 10 days Membership fee AZN 10 ths. (12,8 ths. USD) Member banks Quarterly reports ADIF checking the accuracy and completeness of reports ADIF Calendar fees 0.125 per cent (0,5% yearly) of the quarterly average daily balance of protected deposits ADIF End of quarter 5 days 10 days Other funding resources AD ADIF Insurance reserves Target ratio 5 % of protected deposits

8. 8 Compel member banks to pay insurance premiums Insurance premiums paid in previous quarter 360 X Central Bank’s refinancing rate Penalty = Member bank 1 Member bank 2 Member bank 3 ADIF Member banks failed to pay insurance premiums on time Notification Central Bank Sanction Notification Notification for payment of penalties Payment of delayed premiums and penalties Premiums and penalties are not paid in 30 days 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

9. 9  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) 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

10. 10 Establishment of funding sources Ex-ante funds (depleted or under AZN 1 mln. (USD 1.3 mln.) or likely) Borrowing funds to be used at first ADIF in need Ex-post funds Board decision to borrow funds Central Bank Government Financial market Issuance of debt securities Finish of the repayment of loans Board decision to levy supplementary fees from member banks 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 Suspension of levying supplementary fees

11. 11 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.

12. 12 Period for claim handling Expiration of period for claim handling Problem Announcement of date and place of the pay out 14 days90 days 60 days30 days 1 year (Starting this period creditor claims not registered in liquidation process are not reimbursed) Reimbursement (cont.)

13. 13  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 Reimbursement (cont.)

14. 14 Selection Process Accreditation (permanent) Competition (in case of insurance event) ADIF has a right to realize reimbursements through agent banks selected among the member banks. Main functions of Agent bank  Receiving the documents and applications from depositors  Payment of compensations  Reporting to the Fund Reimbursement (cont.)

15. 15 Failed bank ADIF Server and Payout Software Bank data – Depositor data and balance sheet XML files Data installation ADIF Access to depositor information 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

16. 16 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

17. 17 THANK YOU FOR YOUR ATTENTION ! www.adif.az Azerbaijan Deposit Insurance Fund EARCEARC