According to the decision of the Board of Trustees of the Azerbaijan Deposit Insurance Fund (ADIF), the maximal interest rates on deposits, which provided insurance coverage, will be reduced up to 12% from June 1, the Foundation Executive Director Azad Javadov said. The fund insures bank deposits at a rate of up to 15 percent now. It should be said that Center for Economic and Social Development (CESD) announced that percent rate would be decreased at the begging of May, 2010 (more information about CESD recommendations in Azeri can be found at; http://www.cesd.az/m43.htm) and listed policy recommendations on this issue.

"Investigations of the deposit base of the banking sector showed that deposits worth  $182 million manat were drawn under 15 percent," he said. [As of May 1, the amount of physical entities' deposits in the banks of the country amounted to 2.4747 billion manat]. He said that banks attract savings of the population at lower interest rates. In this situation, it was reasonable to reduce rates on insurable deposits in the ADIF.

"It is necessary for  banks to run risk less, as high interest rates lead to high risks. It can lead to repayment problems," ADIF head said.

The maximal limit of interest rates on insurable deposits was reduced to decrease the level of risk, since according to studies, the major part of the deposits was drawn on 11-12 percent.

"So, we decided to reduce the limit up to 12% for other banks to adhere to the policy of lower interest rates to reduce the risks", Javadov said.

Physical entities' total deposits in ADIF member-banks in the first quarter amounted to 2,385 billion manat, of which uninsured deposits were 707.69 million manat, and the insured - 1,678 billion manat.

The number of insured depositors as of the reporting period was 5,197,888 people. Calendar payments of 43 member-banks of the fund amounted to 831,000 manat, $1.345 million and 172,000 euros in the first quarter. The fund's insurance reserves amounted 25.698 million manat in the first quarter.

Since January 1, 2009 deposits placed in the ADIF member-banks, at an annual interest rate of over 15%, are not insured by the fund. Payment of compensation is not foreseen. The maximum level of insurance coverage for the deposit is 30,000 manat. Depositors do not make any payments to ensure their deposits. Insurance payments are made only by banks.

The Fund began its activity August 13, 2007. Today it has 43 members. Calendar payments of members make up 0.15% of the average daily balance of deposits in manat for the previous quarter, from the third quarter of 2008 - 0,125%.