7 December 2020, Baku: The Law of the Republic of Azerbaijan on Full Deposit Insurance was adopted on 19 January 2016 to safeguard financial stability, ensure banking system sustainability and boost confidence of depositors in the banking system amid global economic crisis. According to the Law that came into force on 4 March 2016, all protected deposits with the annual interest rate set by the Board of Trustees of the Deposit Insurance Fund (ADIF) are fully insured for 3 years irrespective their amount. The said period was extended until 4 December 2020 based on the amendments made to the Law in the following periods.

Since the introduction of the blanket guarantee in 2016 the financial stability has been safeguarded, the dynamics of deposits stabilized and measures taken to rehabilitate the banking sector implemented.

Over the past period, taking into account the results of banking sector rehabilitation efforts and that the blanket guarantee mechanism is an anchor for financial stability, the Central Bank of the Republic of Azerbaijan and the ADIF developed a comprehensive strategy in line with best practices. The strategy was in-depth discussed at the Economic Council of the Republic of Azerbaijan chaired by the Prime Minister of the Republic of Azerbaijan. Following the discussions, the period up to 5 April 2021 was set as a transition period for departing from the blanket guarantee scheme and formulating current situation-driven advanced deposit insurance framework. The following amendments were proposed to the Law of the Republic of Azerbaijan on Deposit Insurance and the relevant draft Law was presented to the Milli Majlis:

• increase the amount of compensation on insured deposits of individuals from AZN30 thousand to AZN100 thousand (up to AZN100 thousand equivalent in foreign currency). This amendment will ensure full protection of 99.9% of deposits of total depositors in terms of number.
• insure the funds on bank accounts of individuals engaged in entrepreneurial activity in the amount of AZN20 thousand. As entrepreneurs in this category are more vulnerable to financial risks, loss of funds may result in the cessation of their activities. In this regard, inclusion of individual entrepreneurs in the deposit insurance system will support the government's small business development policy and serve to increase confidence in the banking system.
• full insurance of funds of individuals remaining in deposit accounts of notaries. This amendment will further strengthen protection of the rights of consumers of financial services in notarial transactions, especially in buy and sell of real estate.

The proposed amendments to the Law of the Republic of Azerbaijan on Deposit Insurance are in harmony with other important decisions taken by our state amid the pandemic. The intended amendments will allow to fully protect deposits of the vast majority of depositors, improve risk management in banks, strengthen market discipline and competitive environment, thus ensuring banking system sability and reliable protection of depositors' interests.