1. (ADIF’s Payout experience ) Azerbaijan Deposit Insurance Fund Azerbaijan, Baku 17 Jan 2014 1

2.  Date of establishment – 2007 (“Law on deposit insurance” and Decree of the President of the Republic of Azerbaijan)  Mandate – «pay-box»  Reporting – to the President of the Republic of Azerbaijan, Central Bank and institutions represented in the Board of Custodians 2

3.  Number of member banks– 42 banks  Type of funding used by DIS – «ex-ante»  Total capacity of the individual – 6 127million manats ($ 7 810 million )  Total capacity of the protected deposit– 3 856 million ($ 4 916 million)  Portion of the compensated deposits in the total amount of the insured deposits – 1 986 million manats/51,5 % ($ 2 532 million) * All data are to date of 31.12.2013 3

4.  Total number of protected depositors – 5 137 thousand (91.6% of total).  Fund’s insurance reserves – 69.6 million manats ($ 88.7 million)  Amount of compensation– 30 000 manats ($ 38 241)  Number of insurance event – 1 * All data are to date of 31.12.2013 4

5.  A written notice from the Central Bank is received that reports an insurance event at a member bank  The bank shall submit summary records of obligations in case of an insurance event to the Fund no later than 3 business days.  The Fund shall, within 7 calendar days from the receipt of an insurance event notice from the Central Bank, announce in the mass media and publish a notification of the place and time of payment of compensations. 5

6.  Forced liquidation or bankruptcy of the member bank  Applying moratorium according to deposits RoyalBank  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 Fund. 6

7.  Total amount of the whole deposits of the individuals – 73 176 thousand manats /$ 93 159 thousand  Total protected deposits – 28 683 thousand manats/$ 36 515 thousand (39% from the total amount of the whole deposits)  Total amount of compensation – 14 850 thousand manats /$ 18 906 thousand (20% from the total amount of the whole deposits)  Number of protected depositors – 5 759 (81.6% of total)  Number of problematic depositors – 228  Number of branches – 33 7

8.  Agent bank – member bank or banks selected by the ADIF for realizing payment of the compensatory pay offs on behalf of ADIF’s name and account  Main functions  Receiving the documents and applications from depositors  Payment of compensations  Reporting to the Fund 8 Selection Process Accreditation (permanent) Competition (in case of insurance event)

9.  The Fund’s financial stage for reimbursement  Selection of the Agent Bank Requirements for Agent Banks : 1) Liquidity 2) Compliance with the CB requirements 3) IT capacity 4) Number of branches 5) Payout experience 9

10.  Conducting trainings with the selected Agent Banks’ officials regarding the rules of payment of compensation.  Delivering of the stamps, application forms and blanks, as well as definition of the forms of reports submitted by Agent Banks. The Fund submits the depositors’ records to the Agent Bank.  The Fund transfers the compensation amount to the Agent Bank’s account in 3 tranches: 25%, 50%, 25% (from total amount of compensation) 10

11. AGENT BANK 1 AGENT BANK 3AGENT BANK 2 RoyalBank ADIF Server and Payout Software Bank data – Depositor data and balance XML files Data installation VPN Connection ADIF

12. “ RoyalBank” Case 12 Period for claim handling Expiration of period for claim handling Problem First announcement of date and place of the pay out – 21.07.2012 14 days90 days 60 days30 days 1 year (Starting this period creditor claims not registered in liquidation process are not reimbursed)

13.  Total paid amount – 13 018 thousand manats/$ 16 573 thousand (88 % from total amount of compensation)  Total number of paid depositors – 1 591 (28% of total)  The Fund spent 16 thousand manats for the preparations and conducting of the reimbursement process ($20,3 thousand) 13

14.  In accordance with the Law “on deposit insurance ” the Fund shall accept depositor applications during one year from the date the payment of compensations was first announced.  Notwithstanding the foregoing, the depositor shall at any rate retain the entitlement to compensation during five years from the date the Fund first announced the payment of compensation.  10 depositors have been paid compensation by the Fund from the date of suspension of payment of compensation through Agent Banks (6 non-residents and 4 residents) in the amount of 145 500 thousand manats ($ 185 405 thousand) 14

15.  In accordance with the Law on Banks of the Republic of Azerbaijan “ the Funds’ requirements shall be implemented firstly  Agreement between the bank’s liquidator and the Fund. The Fund’s requirements in the amount of 7 108 thousand manats by cash ($9 049 thousand), 7 607 thousand manats ($ 9 684 thousand) by transferring credit portfolio to the Fund 15

16.  The rights on the portfolio is delivered to the Fund, accumulation shall be realized by bank  The report of the liquidator to the Fund regarding the results of the accumulation and transferring of the accumulations to the Fund’s account  12 328 thousand manats have been reimbursed to the Fund by «RoyalBank» at the moment ($ 15 694 thousand), and is in dept 2 526 thousand manats ($ 3 216 thousand). 16

17.  Building of the software  Timely solution of the monetary issues  Right selection of the Agent Banks  77,2% from the total amount of compensation have been paid within the first month of the whole period 17

18.  Late provision with the depositors records (29.07.2012)  It took long time for opening special account in CB for the purposes of payment of compensation 18

19.  The priority was given to the payment of creditors’ obligations, but not payment of insurance fees.  Absence of the data in the bank’s record  Incompliance in the format of bank’s record  Problems occurred with the depositors who had blocked deposits (set-off)  Falsification cases 19

20.  Incompliance of the interest rate of the deposits in reality with the terms of the deposit contract  Unawareness of the non-residents about the insurance event  Payment of the compensation in the national currency on the deposits with two different currencies at the same time one of this deposits is not protected 20

21.  Unawareness of the bank in case of any changes in ID of the depositor and so on (identification issues ).  Absence of the documents of the depositors verifying the deposit 21

22.  Working on the creation of the depositors’ records at each member bank  Proposals on the making amendments to the Law “on deposit insurance”. 22

23. www.adif.az 23