Expert Urges Mugan Bank Creditors to Unite for Justice in Courts

In October last year, OJSC Mugan Bank was declared bankrupt, with the Deposit Insurance Fund appointed as the bank's liquidator. Thousands of local and foreign depositors, including construction companies operating in liberated zones, had left hundreds of millions of manats in the bank. Reports indicate that Mugan Bank issued illegal guarantees and was poorly managed. The bank's leadership, much like those of Bank Standard, Texnikabank, and AtaBank, left nothing unscathed. However, none of the individuals responsible for Mugan Bank's collapse have been held accountable. Notably, Samir Valiyev, the son of the bank’s owner, former MP and Odlar Yurdu University founder Ahmed Valiyev, has since become a member of parliament, according to banking sector expert Akram Hasanov in a Facebook post.

"It seems that one must squander significant funds here to get away scot-free," wrote Hasanov.

The pressing issue now is how the Deposit Insurance Fund will handle the bank's liquidation. According to regulations, the Fund should auction off the bankrupt bank's assets, recover issued loans, and if any wrongdoing is found among the bank's owners and management, seek restitution from them. The recovered funds are to be distributed among the depositors who have not yet received their money. Deposit holders are entitled to regular updates on the liquidation process, which should be overseen by a Creditors' Committee.

However, Hasanov pointed out that the Baku Court of Appeals has yet to approve the creditors' list, despite being legally required to do so by February 2024. "It is highly likely that the bank has not provided a complete list of creditors to the court. With a full list, a Creditors' Committee could be established to oversee the Fund’s activities, something the Fund likely wants to avoid," Hasanov explained.

He further alleged that the Deposit Insurance Fund is not committed to legally compliant liquidation, as it might be protecting Mugan Bank’s leadership from accountability, thus obscuring the reasons behind the bankruptcy and those responsible for it.

"Foreign creditors have been reaching out to me, perplexed by the opaque liquidation procedures in a bank where their funds are frozen. Unfortunate as they are, they’ve never seen anything like this in any other country. This is bankruptcy and liquidation, Azerbaijani style," Hasanov remarked sarcastically.

He urged creditors not to wait or engage in separate negotiations, as such approaches could lead to manipulation and delays. "Organize a meeting, unite. Only together can you ensure proper actions by the Fund and fair decisions in courts. Otherwise, you won’t receive even a single manat from the Fund," Hasanov cautioned.

The Deposit Insurance Fund reported that between November 27, 2023, and October 18, 2024, it compensated 7,434 depositors of the bankrupt Mugan Bank, disbursing a total of 198,278,931 manats. This indicates that 97% of compensation obligations have been fulfilled, according to the Fund.

Mugan Bank was declared bankrupt by the Administrative Board of the Baku Court of Appeals on October 24, 2023, following which the Deposit Insurance Fund was appointed as the bank’s liquidator. The first notification regarding the location and timing of compensation payments to protected depositors was issued on November 1, 2023. Compensation payments have been processed through the International Bank of Azerbaijan and Kapital Bank.