Azerbaijan: deposit insurance system

Purpose - The purpose of this paper is to investigate a deposit insurance program for household deposits, which is designed to act as safety net in order to minimize or eliminate the risk of loss of depositors' funds with banks represents a primary element of this reform. Design/methodology/approach - This research paper is scientific investigation aimed at discovering and interpreting facts related to deposit insurance system in Azeri context. The goal of the research process is to produce new knowledge, through the exploratory research, which structures and identifies new problems, and the constructive research, which develops solutions to a problem. Findings - The main finding is that the deposit insurance system in Azeri context as well everywhere provides for the security of funds in the event of bank failure and, thus, contributes substantially to the stability of the financial system in Azerbaijan. The deposit insurance system supports the smooth functioning of the payment system and the credit mechanisms and facilitates the exit of problem banks. Practical implications - As a result of this research paper some changes may be made in local legislation in order to defend the depositor's rights in the most effective way in the case of bank failures. Originality/value - The originality of this paper is that it for the first time describes the deposit insurance system of the Republic of Azerbaijan, its advantages and disadvantages. The paper is addressed to the international business community, particularly those involved in all aspects of banking and deposit insurance law.