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Central Bank announces working principles of Pledge Fund

Central Bank of Azerbaijan (CBA) is focusing on safe and effective organization of settlements on operations via payment cards among the banks. One of these measures is creation of Pledge Fund, Central Bank of Azerbaijan told APA-Economics.

CBA said that the Fund aims to make sure the latest settlements on operations via payment cards are completed: “Current mechanism does not fully eliminate the liquidity risk. So, despite the Central Bank reserves funds in the correspondent account of a bank in order to reduce the risk of incompletion of the latest settlements on operations via payment cards, a risk of incompletion of card payments arises if a short-time liquidity problem occurs in a bank. The new mechanism allows completion of settlements on account of Pledge Fund even there is not sufficient funds in the bank. For repayment the funds used from Pledge Fund, the bank should ensure that fund in its correspondent account by the end of that day. Otherwise, the Central Bank will unquestionably deduct that amount from bank’s correspondent account. One more advantage of this model is that the funds required from banks to ensure sustainability of recent settlements is twice less than previous model”.

 

According to information, discussions are being held with banks on mechanism during creation of Pledge Fund and settlement rules: “After agreeing with banks, a collective agreement will be signed and this model will be applied”.

 

At the same time, Central Bank of Azerbaijan will monthly calculate the operations carried out by payment card owners of every bank in other banks’ ATM, POS-terminal and e-trade network and inform that bank. The banks will transfer that amount to the Pledge Fund in first working day of every month.

 

“In case there is not sufficient fund in the correspondent account of a bank to complete the recent settlements on operations via payment cards, the Central Bank deducts that amount from Pledge Fund’s account for completion of the settlements and informs the participant.  If the bank repays that amount to the Pledge Fund on that day, no interest is calculated on that amount. If the bank does not repay that amount on that day, the Central Bank will unquestionably deduct that amount with its interest from bank’s correspondent account. The commission for the amount used from Pledge Fund is added to other participants’ account. If the bank is declared bankrupt, the Central Bank deducts the interest from its account and transfers to the Pledge Fund”, the bank said.  

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