12-08-2017 13:30 30006

hermine 1

The Deposit Guarantee Fund is a non-profit organization founded on the initiative of the Central Bank of the Republic of Armenia, based on the RA Law on Guaranteeing Individuals' Bank Depts.

The purpose of the Fund is to guarantee the compensation of individuals' deposits. All deposits in Armenia, as well as bank account balances, bonds issued by the Bank and purchased by citizens, and interest accrued on them are guaranteed. The redemption is made in case of bank insolvency.

Hermine Harutyunyan, director of the Foundation, presents the details of the Foundation's activities in its interview to finagent.am.

Hermine, what was the main reason for establishing the fund?

One of the reasons for creation of the fund was the fate of the USSR depositors. Do you remember that many depositors were unable to return their money after the collapse of the USSR? There were cases when some banks failed, they went bankrupt. For such cases, the Deposit Guarantee Fund was established to protect the interests of depositors.

There are countries where such institutions are called deposit insurance funds. Although there is practically no difference, both we and they deal with compensation, if this or that bank has a problem, or gets bankrupt and fails to repay its depositors. This, in fact, is a supplemental security cushion for individuals. They are protected by our Fund as stipulated by law.

How well are they insured and what is the amount of money today?

The amount of the insured deposit is clearly fixed by law. Since 2005 up to now it has been revised twice. The maximum amount of compensation in 2010 was 4 million drams, and now it's already 10 million drams.

In other words, our supreme management body reviews the amount of compensation at least once in 5 years, which means that the indicators and standards based on which we determine the maximum limit of the guarantee are kept in the center of attention.

One of these criteria is, for example, the percentage of totally guaranteed depositors in common depositors. At present, more than 98% of depositors are fully guaranteed. It refers to bank deposits and bank accounts, as well as bank account balances, bonds issued by banks and bought by citizens, and interest accrued on them. That is, in addition to the classic deposit, we also guarantee a wider range of benefits. Moreover, one citizen may have a deposit or accounts in different banks. It does not matter the citizenship of the beneficiary, we guarantee both residents or non-residents.

In international practice there are two models of deposit insurance financing ex-ante and ex-post. Which one does the Deposit Guarantee Fund use?

That's right, in international practice, an ex-ante or prepaid system of deposit insurance is applied when members pay at regular intervals prior to any bank insolvency, or ex post or postpaid system. In this case, the members pay one-time payments in case of bank insolvency. There is also a hybrid or a combined system that includes elements specific to the above mentioned two systems. Most deposit insurance systems have a pre-paid format, which is a collection of periodic guarantee fees, based on the amount of commitment by the system member-party to the individual.

It is noteworthy that although some European countries could choose between prepaid and postpaid deposit insurance policies prior to the revision of the 2014 European Deposit Insurance Guidelines, some countries selected a postpaid model. The use of the pre-paid model with the revision of the directive was defined as a mandatory requirement for the deposit insurance system.

In Armenia, the pre-paid model was introduced at the very beginning, as it was obvious that the latter's advantages were inevitable for the financial system.


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