OREANDA-NEWS. September 11, 2009. The law on “Amending and Supplementing the law of the Kyrgyz Republic on “Bank Deposit Protection” entered into force. The law states that the amount of the guaranteed repayment of bank deposits will increase from KGS 20,000 to KGS 100,000, reported the press-centre of AUB.

All commercial banks of Kyrgyzstan have already become participants of the deposit protection system. Bank deposits are a subject to guaranteeing, and in case of a guarantee event (e.g. collapse of a bank) individuals will get their deposits (including interest accrued) up to KGS 100,000 repaid through the Deposit Protection Fund.

Deposit protection system is meant to facilitate stability of the financial system as a whole and protect depositors of banks in case of a guarantee event through compensation. According to recommendations of the International Association of Deposit Insurers, the number of bank accounts subject to repayment in full under the deposit guaranteeing system is to be about 80%, and the total amount of deposits subject to compensation is make up about 40% of the total volume of individual deposits.

“Thus, after repayment of deposits up to KGS 100,000 had been introduced, indicators of the Kyrgyz deposit protection system – the number of bank accounts covered and the total amount of deposit insurance – appeared to comply with international standards and made up 96% and 36% respectively” – Jyrgalbek Kasymov, Executive Director of the Deposit Protection Agency, said.
Deposit Protection Fund is formed through contributions of the Government of the Kyrgyz Republic (76%) and those of commercial banks (24%). The Fund is managed by the KR Deposit Protection Agency .

“The target value of the Deposit Protection Fund in increasing up to KGS 340 million. To reach the new figure, the KR Government makes a contribution to the Fund totaling KGS 230.5 million, including KGS 39.1 million which is a banks’ share, as a lump sum within 30 days after the law has entered into force” – Jyrgalbek Kasymov said.

On 12 August 2009, the Deposit Protection Agency issued a certificate to designate “AsiaUniversalBank” as a member bank of the deposit protection system. It must be noted that initial contributions of current banks to the Deposit Protection Fund amount to 0.2% of the total deposit base. Thus, being the largest bank in the country in terms of a deposit base, AUB has made the largest contribution to the Deposit Protection Fund.

“Many CIS countries have already successfully implemented the bank deposit protection system. Deposit protection guaranteed at the government level results in higher credibility of the banking system and protection of depositors’ interests. At the same time, when depositing money in the bank, a customer is not required to incur any additional financial costs or spend additional time since compensation is guaranteed by law. AUB has always been an up-to-date bank seeking positive innovations and co-opting best international experience. Therefore, we have taken this reform of the KR banking legislation very positive. Now we can assure even the most distrustful depositors that their money is protected by law” – Nurdin Abdrazakov, President and Chief Executive Officer of OJSC “AsiaUniversalBank”, pointed out.