STATE FUND SET UP TO GUARANTEE SMALL DEPOSITS IN BANKS

By Shakeh Avoyan
A state fund has been set up to safeguard small deposits kept in Armenian bank accounts, beginning this summer. People whose deposits do not exceed 2 million drams (about $4,500) will be guaranteed the return of their money should their banks collapse.

The fund's newly appointed Executive Director, Artak Pirumian, assured RFE/RL that the fund itself is not subject to insolvency. "Our fund will invest in high-liquidity assets meaning that it will have lower profits but guaranteed security," he said.

Pirumian said that the Fund will sign an agreement with the German Kredit fuer Wiederaufbau (KfW) Bank in the next few days under which it will obtain a loan of 3.5 million euros ($4.3 million) for 40 years on preferential terms for the first 10 years.

"The Fund has been set up not to assist or save banks, but primarily to
guarantee small depositors that if their bank has problems, their deposits
will be safely returned," said Pirumian.

Another landmark event for the country's banking system this summer will be the end of the financial amnesty for large cash of uncertain origin, which
means that people who would like to open bank deposits after the end of the amnesty will have to produce proof that they obtained that money legally.

The Central Bank hopes these measures will increase the number of bank
deposits in drams and will eventually restore peoples' habit of keeping
chequebooks rather than cash "under their mattresses."

There is no good news for the bilked depositors of the Soviet Savings Bank,
though, as the fund has no mandate to deal with their problems.

"By law, the functions of the Fund are limited to guaranteeing the deposits ofphysical persons and nothing is foreseen for the Savings Bank's bilked
depositors," said Pirumian. "If such a responsibility is ever placed on the
Fund, it will see to it as well, but for the time being it is other
structures and commissions that deal with the issue."