Behind the scenes war in the banking sector is sacrificing citizens

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- Akram bey, the Constitutional Court has ruled on the problem faced by depositors of 4 closed banks. What is envisaged in the decision? In general, does the decision fully cover the requests and rights of depositors?

- The decision solves 2 types of problems of depositors in 3 closed banks. The first problem is related to Atabank, Agbank, and NBC Bank. It is alleged that these banks allegedly accepted deposits from citizens despite a ban by the banking regulator (formerly the Financial Market Supervision Chamber, now the Central Bank). Therefore, the Deposit Insurance Fund refused to compensate these deposits, considering them illegal. The Constitutional Court ruled that the deposits accepted despite the ban were protected deposits and that the fund should compensate them. Because the banking supervision body was supposed to monitor the implementation of the ban but it did not. In addition, the banking supervision body had to announce the ban in the press within one working day so that the public would know that the relevant bank could not accept deposits. But this was not done. Of course, a depositor cannot be punished if a state body has not properly exercised its powers. It is true that the Constitutional Court is also silent on the issue of who should be punished. In fact, officials of both the Financial Market Supervision Chamber and the Central Bank should be prosecuted for negligence, in which case they could face up to five years in prison. However, the court ruled in favor of the depositors but did not assess this issue. Even the name of the decision is so that this issue is not touched upon. Such that the title of the decision states that it allegedly comments on Article 2.1.2.6 of the Law on Deposit Insurance. However, the decision does not contain an interpretation of that article. They also did so because the Constitutional Court can only interpret the law and cannot resolve a specific dispute. In this decision, a specific dispute was resolved, but no specific assessment was made of the culprit's actions.

The second issue is related to Atabank. So, this bank closed one branch last year and transferred its deposits to another branch (migration). In its electronic system, it also indicated the date of migration, not the date of deposit agreements with citizens as the date of receipt of deposits. The Deposit Insurance Fund also refused to reimburse those deposits, citing the low insurance rate in the history of migration. However, it itself admitted that the problem was simply a technical error. The position of the Constitutional Court was that the date of acceptance of the deposit is, of course, the date of conclusion of the deposit agreement and the receipt of funds in the bank, not the date in the internal system of the bank. In fact, this issue is so clear that in general, it should not have come up to the Constitutional Court. In short, the Court decided to compensate these deposits as well.

Apparently, both cases, which were decided by the court, are clear even to a non-lawyer. Of course, these deposits are protected. But depositors in the four closed banks have other problems too. That is, the fund does not return deposits under other pretexts. However, the court was not asked about these issues. Let me emphasize two of those pretexts. For example, some depositors also have loan debt to the bank. The depositor wants the loan to be withdrawn from the deposit because after the bank closes, interest is not charged on the deposit, but on the loan. However, the fund says that first pay off a debt by your own expense, and then I will return the deposit when I have the money. However, according to the law, it is the citizen's right to demand compensation. Another example: in some deposit agreements, there is a condition that the depositor can increase the amount of the deposit during the term of the agreement. Depositors used this right. And now, the fund states that additional deposits are not protected, as the protection interest rate was low at the time of their adoption, but the bank accepted the deposit at the initial interest rate. Here, the fund is again unfair because the citizen can not know the protection interest rate, the bank must know because it is a participant in the deposit insurance system, i.e. a representative of the fund. But as I said, these and other issues remain open. There are no plans to return these deposits. Depositors with such problems were forced to file a lawsuit against the fund.

- Depositors are dissatisfied with the decision. They have repeatedly protested in front of the Central Bank. What decision could the Court make to fully cover the rights of depositors? So what is missing in the court decision?

- The court ruled on the request it received. Although the decision is far from perfect in terms of legal literacy, in any case, it is in favor of citizens. Depositors who have problems with the issues reflected in the decision are not dissatisfied with the decision, but with the fund. Because the fund has stated that even these deposits will be gradually returned only from August 14. That is, even if there is a decision, the fund will not return the deposits covered by the decision in full and immediately. At the same time, the citizens who are not covered by the decision and are unable to receive their deposits due to the excuses I mentioned earlier are also dissatisfied. The paradox is that why do these citizens protest in front of the Central Bank? After all, it is not the Central Bank that does not return the money, but the fund. The fund is not subordinated to the Central Bank. I think that in fact the fund's appeal to the court was intended to hit the Central Bank. Someone is turning people against the Central Bank. In other words, there are behind-the-scenes struggles and games between government agencies, and the victims are citizens.

-Why has this process been extended so far? Why do they make it so difficult for depositors? Aren't these purposeful?

- First of all, as I said, there is a struggle between officials to hit each other. On the other hand, the fund does not have enough funds, the Central Bank must give it a loan. The Central Bank does not want to give that much money at once. Because as soon as they receive their deposit, most people convert it into dollars and do not put it in the bank again. In other words, the pressure on the national currency is growing, foreign exchange reserves are declining, and a lot of money is being withdrawn from the banking system. There may also be other reasons, of course. But none of them are legitimate and reasonable.

- In your opinion, don’t the closure of banks and obstacles to the return of depositors damage confidence in banks? Also, doesn't this put other banks in a difficult position?

- That's the problem. No one thinks about the confidence in the banking system. In general, there is a very negative trend in Azerbaijan today. Most officials work in the short term (1-2 years). Because they have little hope of remaining in office, they just want to hide, and now they are keeping the blow away from them. In the past, officials worked for at least a medium-term (5 years) perspective. Because they knew that postponing the problem could be a boomerang phenomenon. At the same time, the situation may worsen. Of course, as a result of all this, confidence in the banking system is sharply shaken and the crisis deepens.

- The other side of the issue. The president has repeatedly said that not a single job will be closed during the pandemic. But these 4 banks were closed during the quarantine period. Are there any decisions regarding the employees of those banks? Did the government take any steps to provide them with jobs or compensation, or did it leave those people to their fate?

- The statements of the country's leadership in this direction were mostly directed at active employers. Of course, if someone goes bankrupt, the state must either save him or reconcile with the situation. The second way was chosen. Most employees of these banks have lost their jobs. Many bank employees have lost their jobs in recent years. If the number of banks decreases, it is impossible to find jobs for them. Of course, these citizens can receive unemployment benefits as usual. I would also like to note that, in fact, most banks have always overstated their staff. There was no need for that many employees. I'm not saying that now only talented people remain at work. Naturally, acquaintance, kinship, and other factors are still in place. But the market economy finally has its say. No matter how painful it is, first and foremost, the jungle laws of capitalism must show their face.

- What would you suggest? What steps should be taken in the country to ensure the normal operation of banks, to make them strong, and to increase people's confidence in banks?

- First of all, there must be personnel changes. At present, along with the law enforcement and justice systems, only the leadership of the Central Bank remains in place. It is Elman Rustamov and his team who destroyed the banking system today. I hope that this issue will be resolved as soon as the pandemic problem is over. We need educated and honest staff in this area as well. Then the banking legislation must be radically changed. The President twice ordered the drafting of the Banking Code in 2004 and 2014, but the task remained unfulfilled. Finally, there must be public control over the banking system. The Board of the Central Bank must have 2 independent members. It is still in the law, but it is not observed.