ADIF Does Not Publish Financial Statements and Is Silent on Creditors� Requests

The Azerbaijani Deposit Insurance Fund (ADIF) has not yet released information on the sale of property of eleven bankrupt banks. The electronic resource of the organization that manages the bankruptcy of the bursting banks persistently does not publish financial statements, as well as plans for the liquidation of credit and financial institutions. According to available information, the Fund does not respond to creditors' requests.

This can be verified by going to the official website of ADIF under the link: http://adif.az/?~%2Faze%2Fcontent%2Ffull%2F34. The electronic resource of ADIF does not contain information on the conduct of tenders for the sale of assets of the liquidated banks, and there are no announcements of auctions. As a rule, the most expensive property is brought for sale - real estate, professional equipment, etc. What, when, to whom, or under what conditions the Fund sold or sells is not known.

The electronic resource does not contain financial reports on banks whose licenses have been withdrawn. The website also does not include plans for liquidation, which, according to the law, within 120 days after the bankruptcy of the bank, the court was to announce openly upon presentation of ADIF. “Plans are not published or issued to anyone, which reinforces the view of a corruption component in the liquidation process. After my written request, the Financial Markets Supervisory Authority ordered ADIF to follow the lawful practice. However, ADIF does not do this,” Akram Hasanov, a member of the Azerbaijan Bar Association, the author of the Banking Law book, said.

ADIF ignores the process of recovering troubled debts, ignoring the ruling of the first administrative and economic court on the meeting of Bank Standard’s creditors committee.

The range of issues caused by the closed character of the liquidation process is not limited to violation of the rights of uninsured depositors, since the insured deposits are reimbursed by ADIF from loans granted to the Fund by the Central Bank. It is reported that during the liquidation of only Bank Standard (the total amount of deposits is 603 million manat, including 568 million manat of insured deposits), the Fund requested 460 million manat from CBA at 0.15% per annum for a period of 10 years. The funds raised in the liquidation process are the source of the ADIF debt obligations to the country's main bank.

“In fact, the activity of the Fund to compensate for insured depositors depends entirely on loans from CBA,” Hasanov said. “At the same time, many questions arise about the uninsured deposits of individuals, legal entities and companies. There is no data on the Fund’s work in this direction,” he added. The expert said he received the response of the Financial Markets Supervisory Authority (FIMSA) regarding the official request of December 2 last year. In his letter, he stressed the need to organize committees and meetings of creditors in order to avoid corruption.

FIMSA responded that it appealed to the courts about the need to create creditor committees, and, according to the December decree of the first administrative economic court in the process of liquidation of the largest Standard Bank, a committee of creditors should be created. The court not only adopted a resolution on the establishment of such an entity in the said bank, but even approved its regulations and instructed the Fund to deal with organizational issues on the convening of the committee.

FIMSA also states that ADIF submitted financial reports on all the banks to the courts and the courts approved these reports, assuring that any creditor can receive reports. However, until now the Fund has not presented them to anyone. “FIMSA sends us to the Fund for financial reporting, but this entity does not respond to written statements. In addition, ADIF has an electronic resource, where financial reports on bankrupt banks should be publicly available. It is easier to do this than to respond to numerous requests,” Hasanov said.

It should be noted that ADIF, which also acts as a guarantor of 100% deposit insurance, performs these functions on loans from the Central Bank. However, under the Law on Deposit Insurance, the state and CBA are not responsible for the obligations of this body. Simply put, the law does not oblige the Central Bank to issue loans to the Fund to repay the obligations to the insured depositors. At the same time, the body is managed by the Board of Trustees consisting of seven members - representatives of the Authority on risk supervision, the Central Bank, the Ministries of Economics and Finance and two representatives of banks. It turns out that ADIF is governed by the state, but by law the state does not bear responsibility for its obligations.