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Law No . 123-IT Baku, July 14, 1996.
The Law of the Azerbaijan Republic About banks and
banking activity in the Azerbaijan Republic
Chapter I. General Provisions
Article 1. Basic definitions
Definitions stated below are used in the present Law.
Credit organisation represents a corporate body, which is entitled
to conduct banking operations, specified by the present Law with the aim
of profit extraction being the basic in its activity and on the basis of
the license (special permit) of the National Bank.
Bank is a credit organisation, having exclusive right to fulfil
in totality the following banking operations: attraction of pecuniary means
of natural and juridical entities on the deposit, allocation of stated
means on their behalf and at their own expense on terminal conditions and
percentage recovery, opening and holding of banking accounts of natural
and juridical entities.
Non-banking credit organisation is a corporate body, that have
got the license of the National Bank for conducting certain banking operations.
Branch is a separate subdivision of credit organisation, which
is not a corporate body and is opened with the National Bank consent apart
from the location of the credit organisation, it conducts all or part of
banking operations, specified by the license, on the credit organisation
Representation is a separate subdivision of credit organisation,
which is not a corporate body and is opened with the National Bank notification
apart from the location of the credit organisation, it does not have the
right to lead banking activity, represents and protects the interests of
the credit organisation, concludes transactions on its behalf and conducts
other legal actions.
Affiliated credit organisation is a corporate body, the activity
of which is determined by another credit organisation in accordance with
the prevailing participation in the authorised capital or on the basis
of contract concluded between them.
Foreign bank is a corporate body, carrying out banking activity
in compliance with the legislation of the country, on the territory of
which it has been registered.
Branch of the foreign bank is a separate subdivision of a foreign
bank, having the right to fulfil on its behalf in the Azerbaijan Republic
banking operations, the conducting of which is permitted to the bank on
the territory of the country it has been registered at, in the volume,
fixed by the license of the National Bank.
Article 2. Banking system and legal grounds for
banking activity in the Azerbaijan Republic
1. Banking system of the Azerbaijan Republic includes the National Bank
and credit organisations of the Republic.
2. The regulation of the banking activity is conducted by the Constitution
of the Azerbaijan Republic, present Law, the Law "About National Bank of
the Azerbaijan Republic", other legislative acts, normatives of the National
Article 3. Independence of credit organisations
1. The credit organisation does not bear responsibility for obligations
of the state, whereas the state is not responsible for credit organisation
obligations, excluding cases, when the credit organisation and the state
have taken appropriate obligations.
2. Under the contracts concluded credit organisations are entitled
to conduct operations with budget means, settles accounts with executive
power bodies and municipal bodies, provide purpose utilisation of budget
means, allocated for the execution of governmental and regional programs.
Appropriate contracts are to include mutual obligations of the parties
and stipulate their responsibility, terms and forms of the control over
the use of budget means.
3. Credit organisation cannot be made bound to fulfil activity, not
foreseen by its constituent documents, excluding cases, specified by the
4. Credit organisation does not depend on legislative bodies, executive
power bodies and municipal bodies in the making of decisions, connected
to the current banking activity.
Neither state body has the right to interfere with the credit organisation
Article 4. Submitting of the data about the activity
of credit organisation
1. During the fulfilment of banking operations the credit organisation
is to submit according to the demand of its client or the juridical or
natural entity, willing to become its client, the license for conducting
of banking operations, the information about its accounts (accounting balance,
account of profits and losses), auditing conclusion for the previous year,
as well as monthly accounts for the current year. In case of necessity
and according to the demand of the above mentioned persons the reference
of accounting documents is to be issued.
2. Credit organisation bears responsibility in accordance with the
legislation for leading natural and juridical persons into error by means
of non-supply of information or supply of erroneous or unful information.
Article 5. Prohibitions in banking activity
1. Juridical and natural entities are prohibited to conduct banking
activity without the license of the National Bank .
2. Credit organisations are prohibited to conclude agreements and conduct
co-ordinated operations, directed to the monopolisation of the market of
banking services, as well as the restriction of competition in banking
Control over the execution of rules, aimed against the monopolisation
of banking activity is carried out by the National Bank and appropriate
3. Employees of government and municipal bodies are prohibited to participate
in the managing structures of credit organisation, including participation
by means of combination (excluding cases , specified by the chapter VIII
of the present Law).
4. Credit organisation is prohibited to carry out insuring, trade and
Article 6. Name of credit organisation
1. Credit organisation has the full official name in Azeri, may have
contracted name in Azeri and the name in foreign language. Credit organisation
has its seal with the official name, where its official sign may be inserted.
Words "bank" or "non-banking credit organisation", included into the official
name of the credit organisation reflect the character of activity of this
juridical entity, as well as its organisation-legal form. The use of symbols
of the Azerbaijan Republic and words "Azerbaijan Republic", "State", "national",
"central" in the name of the credit organisation is permitted in the legally
It is not permitted to use one and the same name by different credit
2. Juridical entities are prohibited to use words "bank" and "non-banking
credit organisation" or their derivatives in their name, excluding cases,
when the context where the words have been used clearly implies that they
do not refer to the banking activity.
Chapter II. Licensing of banking activity
Article 7. Order of the application for a license
1. After the registration in the legally established order the credit
organisation is to address the National Bank in written form for the bank
license. The application is also to include the following data and documents:
1) copy of the state certificate of incorporation;
2) constituent instruments (foundation agreement, minutes of the Articles
adoption, appointment of leaders of control and management bodies, excluding
cases when the bank is founded by one person, Articles, registered in the
registration office, statement of the foreign bank affiliate);
3) accounting balance, reflecting financial state of founders-persons
for the last year, account of profits and losses and auditing statement
4) data of professional adequateness of candidates for leaders positions
and position of chief account, proposed by founders, availability (lack
of) of previous conviction, form, filled by the said persons.
2. Branches of foreign banks, credit organisations, completely owned
by foreign investors, and joint credit organisations are to submit the
following certified documents for the obtaining of bank license:
1) foreign juridical entity is to submit:
· the resolution of its corresponding body about the foundation
of credit organisation or opening of the branch on the territory of the
· Articles or another document, confirming the status of the
juridical entity, its published balances over the last three years;
· written consent of the country of its permanent residence
for its participation in the foundation of the credit organisation or opening
of its branch on the territory of the Azerbaijan Republic (if such is required
by the legislation of the country of its residence);
2) foreign natural entity is to submit:
· documents, required from natural entities according to the
Law "About state registration of juridical entities in the Azerbaijan Republic"
Article 8. Granting of bank license
1. The National Bank considers applications for obtaining of bank licenses
for not more than 30 days after the receipt of all documents, specified
by the present Law.
2. After the initial expertise of the documents obtained the National
Bank is to notify the applicant of the fact within a three-days period,
open a corresponding account for the credit organisation with the requirement
to pay 100% of the minimum authorised capital, determined by the National
Bank, within a month. The National Bank makes a decision to grant a license
for carrying out banking activity within 3 days against the documents,
confirming the payment of 100 % of the minimum authorised capital by the
3. In case of denial of bank license, establishment of certain conditions
or restriction of bank license force, the applicant is to be furnished
with the official information about reasons for that.
Article 9. Grounds for denial of bank license
1. The denial of bank license is permitted in the following cases:
1) Discrepancy with qualification requirements, established for the
chairman of the board, his deputy and chief accountant. Discrepancy with
the qualification requirements , established for the persons mentioned,
is understood as the lack of higher economic or juridical education and
experience in the management of credit organisation, connected with the
execution of bank operations, or independent of these conditions lack of
not less than two year experience of management of such subdivision; availability
of previous conviction for crimes against ownership, economic crimes and
crimes connected with appointment; availability of factors of labour contract
(agreement) cancellation with the said persons for the last two years by
the administration initiative for the actions connected with the service
of money or trade valuables (loss of credit).
2) Unsatisfactory financial state of founders;
3) Discrepancy of documents, submitted by the credit organisation for
license obtaining, requirements of the present Law and normatives of the
2. The applicant is notified of motivated decision about denial of
license in written form.
3. The applicant is entitled to appeal the court against decision of
bank license denial.
Article 10. Affiliated enterprises, branches and
representations of credit organisation
1. Branches of credit organisations are opened on the Republic territory
and abroad with the National Bank consent, whereas representations - with
the notification of the National Bank.
2. Branches and representations operate in compliance with the provision,
adopted by the credit organisation.
3. Heads of branches and representations are appointed by the head
of the credit organisation and operate on the basis of power of attorney,
issued in the legally established order.
Article 11. Licensing and regulation of credit organisations
activity with participation of foreign capital and branches of foreign
1. The National Bank determines the limit of foreign capital participation
in the Republic banking system. The National Bank terminates the issue
of bank licenses to credit organisations with participation of foreign
capital and branches of foreign banks at the achievement of the stated
limit or the establishment of restrictions for credit organisations of
the Azerbaijan Republic in the corresponding state.
2. The head or one of the deputies of the credit organisation with
participation of foreign capital or the branch of the foreign bank is to
be the citizen of Azerbaijan Republic.
3. Credit organisation is to get the National Bank permit for the increase
of its authorised capital at the expense of means of non-residents, the
alienation of its shares in non-residents favour. In this case the National
Bank has the right to ban the increase of authorised capital of the credit
organisation at the expense of means of non-residents and the alienation
of shares in favour of non-residents, if the result of the transactions
mentioned leads to the break of limit for foreign capital participation
in the Republic banking system. Such transactions, concluded with non-residents,
are considered invalid without the National Bank permit.
4. Non-residents being among the shareholders during the period of
credit organisations activity, additional documents, specified by the article
7 of the present Law, are to be submitted to the National Bank.
5. The National Bank is entitled to fix additional requirements to
credit organisations with foreign investments and branches of foreign banks
concerning the establishment of obligatory normatives, the order of reporting,
composition of administration, executed bank operations, as well as the
minimum capital amount of newly founded credit organisations with foreign
investments and branches of foreign banks and the order of the placement
of capital abroad.
6. If the foreign bank has got the permit in the country of its origin
for obtaining pecuniary deposits or other means from juridical and natural
entities, requiring return, bank licenses can be issued to its branches.
In this case the foreign bank is to undertake a full responsibility on
its branch debts.
7. The foreign bank is bound to get the National bank license to conduct
the activity through its branch. The license issued by the National Bank
prohibits the branch to carry out bank operations, not specified by the
license, issued to the foreign bank in the country of its origin.
Article 12. Terms and restrictions for the granting
of bank license
1. The bank license is granted without restrictions to the period of
2. The National Bank is entitled to determine motivated terms or restrictions
during the consideration of the bank license issue. After the issue of
bank license the terms and restrictions can be applied to it only in case
of meeting by the credit organisation, that have got the license, requirements
of the present Law and other normative acts of the National Bank.
Article 13. Register of bank licenses
1. The central register of licenses and permits for general audits and
obtaining of mass information is kept in the National Bank. The register
includes names, addresses of all credit organisations, their branches,
registration numbers and dates of licenses and permits granted to them.
2. The register contains records and other data, concerning the liquidation
of credit organisations, their branches, as well as credit organisations
and branches with recalled licenses or permits.
Article 14. Grounds for recall of bank license
1. Bank licenses or permits, granted to credit organisations and their
branches can be recalled only at the resolution of the National Bank Board
in the following cases:
1) appeal of credit organisation founders;
2) repeated application of measures, specified by the Law of the Azerbaijan
Republic "About the National Bank of the Azerbaijan Republic" against the
credit organisation for a year for permanent infringement of banking legislation
and normative acts of the National Bank;
3) establishment of non-authenticity of data, on the basis of which
licenses or permits have been granted;
4) non-use of licenses or permits for one year after its coming into
force, or the suspension of its operation for a period over six months.;
5) liquidation of credit organisation;
6) lack of minimum amount of necessary capital and special reserves,
specified by normative acts of the National Bank, by the credit organisation,
non-fulfilment by it the obligations in relation to creditors and depositors,
lack of guarantee for the preservation of means credited to it;
8) establishment of the fact of non-authenticity of submitted reporting
9) fulfilment of operations, not-specified by the license or permit;
10) obtaining from the head organisation of the branch the right to
execute bank operations.
2. Prior the recall of license or permit the measures, directed to
the prevention of law infringements are to be taken in the legally established
The National Bank notifies the credit organisation of the resolution
about the recall of bank license or permit in written form with statement
of reasons for recall.
Article 15. Measures take after the recall of bank
1. The National Bank is to notify within 5-day period the state registration
body of the recall of license or permit,granted to credit organisation,
and publish the official data of that in papers.
2. Since the date of bank license recall coming into force it is prohibited
to carry out operations in all kinds of banking activity. The liquidation
is fulfilled by liquidation committee under the control of credit organisation,
and in case of necessity - under the control of the National Bank. The
liquidation committee is to liquidate the assets of the credit organisation,
suspend its current agreements on deposits and execute its payments on
obligations as soon as possible. The liquidation committee should fulfil
its work in compliance with the requirements of the Law of the Azerbaijan
Republic "About enterprises".
Chapter III. Ownership and management of banks
Article 16. Founders, shareholders of credit organisation
1. Credit organisations may be found by one or several juridical or
natural entities, except for political parties, public funds (including
charity societies), in al organisation-legal forms, specified for enterprise
by the legislation. Credit organisation in the form of joint-stock society
is created by not less than three founders.
2. Founders and shareholders do not have right to use attracted funds
to form the charter capital of the credit organisation. Only basic means,
necessary for the credit organisation activity are to be used as a share.
Credit organisation bears responsibility for the infringement of this requirement.
Budgetary means and free pecuniary means from non-budgetary funds, other
means,available at the state power body disposal, cannot be used for the
formation of authorised capital of credit organisation, excluding cases,
specified by the legislation.
3. Minimum and maximum share contributions amounts of founders and
shareholders of credit organisation are not limited.
Article 17. Requirements laid down to the capital
and the maximum participation in the capital
1. The minimum amount of the necessary capital of credit organisations,
obtained bank licenses, and the minimum amount of means, subject to preservation
as special funds, are determined by normative acts of the National Bank.
2. The preliminary consent of the National Bank is necessary to get
more than 20% of the capital as a result of one or several deals with one
juridical or natural entity, or the group of juridical and (or) natural
entities connected with each other on contractual terms, being engaged
in affiliated or depending relations. The National Bank is to notify the
applicant of its decision not later than 30 days after the obtaining of
the application. The denial maybe motivated only with unsatisfactory financial
state of share buyers, infringement of anti-monopoly rights and other reasons,
specified by the legislation.
Article 18. Restrictions for participation of juridical
entities in the capital
1. Unless the higher percentage is specified by the normative acts of
the National Bank, direct or indirect participation of a juridical entity
in the capital of credit organisation is not to exceed 10% of the credit
organisation own means, whereas a total amount of all such participations
- 40% of the credit organisation own means.
2. In cases, not contradicting the legislation, the credit organisation
is entitled to own the whole or part of the juridical entity capital for
two years without National Bank consent. To prolong the said ownership
for more than two-year period instead of the payment of credit issued the
National Bank consent is necessary. Appropriate statement of the fact is
to be considered by the National Bank within 30 days.
Article 19. Reorganisation of credit organisation
The reorganisation of credit organisation is permitted only with the
National Bank consent. In this case a newly formed credit organisation
is to get the bank license in the corresponding order. The credit organisation
with recalled license can enter another credit organisation or be reorganised
into its branch with the National Bank consent.
Article 20. Articles of credit organisation
1. All credit organisations operate on the basis of Articles, approved
by the state registration body. All amendments to the Articles are to be
registered in the state registration body and the National Bank is to be
notified of that within 5 days. The information about the change of juridical
address of credit organisation, its branch or representation is to be submitted
to the National Bank within 3 days.
2. Articles, other legal documents of credit organisation, data of
its administrative body leaders, as well as signatures samples are kept
in the National Bank.
Article 21. Structure of credit organisation management
1. The supreme managerial body of credit organisation is represented
by the general meeting of shareholders. Every credit organisation is governed
by the Supervisory Council - the body, responsible for the development
of its policy and executing control over its activity, as well as finance-revision
committee and the board, representing responsible executive body.
2. During the foundation of credit organisation the problems connected
to its management, are solved on the basis of rules, introduced by the
founder in compliance with the laws of the Azerbaijan Republic and included
into the Articles of the bank.
Article 22. General meeting of shareholders
1. Authorities of the general meeting of shareholders (hereinafter referred
to as "general meeting") include:
1) determination of general directions of credit organisation activity;
2) adoption and amendments to the Articles of credit organisation;
3) election and recall of staffs f the Supervisory Council, finance-revision
committee and the board;
4) approval of annual reports (including branch reports), accounts
of finance-credit committee;
5) introduction of rules for profit allocation and losses compensation;
6) foundation of branches and representations, confirmation of provisions
about them, termination of their activity;
7) reorganisation of credit organisation and termination of its activity.
2. The meeting is considered to be plenipotentiary with participation
of shareholders representing over 75 % of votes. The resolution on the
issues stated below are adopted by the majority of shareholders participating
in the meeting and representing over 75% of votes : adoption and amendments
to Articles; reorganisation of credit organisation and termination of its
activity; election and recall of staffs of Supervisory Council, finance-revision
committee and the board.
Resolutions on other issues are adopted by the simple majority of votes
of shareholders, participating in the meeting.
3. Shareholders have votes at the meeting proportionally to their share
in the authorised capital of credit organisation. The shareholder has the
right to assign the vote to his attorney.
4. The meetings can be held as regular and extraordinary. Regular meetings
are to be held annually not later than one month after the composition
of the balance of credit organisation for the accounted period. The extraordinary
meeting can be called by the request of shareholders, representing 20%
of votes, Supervisory Council, finance-revision committee and the board.The
notification of the meeting and agenda are to be sent to shareholders not
later than 30 days before its holding. In case of extraordinary issues
to be considered the extraordinary meeting can be called on the exception
terms without the observation of 30-day period condition. The meeting cannot
adopt resolutions on issues, not included into the agenda.
Article 23. Supervisory Council
1. Supervisory Council represents the body, executing general control
over the credit organisation activity and not having executive authorities.
In cases, specified by the Articles of credit organisation, at the resolution
of the general meeting the Supervisory Council can be assigned some authorities
of the general meeting (excluding subparagraphs 2-4 and 6-7 of the first
paragraph of article 22). For the consideration of issues stated below
and connected with the activity of credit organisation consent or resolution
of Supervisory Council (excluding cases when the general meeting has undertaken
these authorities) is to be obtained:
1) determination of interest policy by the credit organisation;
2) extention of blank credit at the amount exceeding established limit;
3) determination of general principles for accept, return or use of
estate in the form of guarantees by the credit organisation;
4) confirmation of credit organisation participation in the capital
of other corporate bodies;
5) decisions about drawing of employees of credit organisation, its
branches and representations to property responsibility;
6) elaboration of system for salary payment and awarding of administrators
and employees of credit organisation, its branches and representations;
7) other issues, specified by the normative acts of the National Bank.
2. Supervisory Council is to include the odd number of members, but
not less than three. Members of the council are elected by the general
meeting among the shareholders for the term not longer than 4 years. The
Council is headed by chairman, elected at the general meeting. Council
members can be reelected for the next four years. The general meeting is
entitled to grant awards for council members; the award is to be given
only from the net profit of credit organisation.
3. The member of Supervisory Council is released from membership in
the council in the following cases:
1) if he is a member of the council at three other enterprises or another
credit organisation, registered on the territory of the Azerbaijan Republic;
2) if he is a hired employee in this credit organisation;
3) is he is deprived of membership in Supervisory Council by law.
4. Supervisory Council and its members do not have the right to impose
their duties on others.
5. Resolutions of Supervisory Council are adopted with a simple majority
of votes. If the Council is composed of more than three members, the meeting
of the Supervisory Council is considered plenipotentiary in case of participation
of over 60% of Council members. Abstention from voting is not permitted.
Article 24. Finance-auditing committee
1. Finance-auditing committee is elected by the general meeting for
the period not exceeding four years. It is composed of odd number of members,
but not less than three. Members of Supervisory Council and the board are
not entitled to be at the same time the members of finance-revision committee.
The chairman of the committee is elected by the general meeting. Finance-revision
1) controls the execution of banking legislation, normative acts of
the National Bank and the Articles of credit organisation;
2) fulfils accounting control.
2. Finance-revision committee executes audits according to the plan
it adopts and by the demand of the Supervisory Council, the board and shareholders,
representing over 10%of votes and in other cases, specified by the Articles.
The general meeting does not have the right to approve the annual balance
without the statement of finance-revision
3. Resolution of the committee are adopted with a simple majority of
votes.Abstention from voting is prohibited.
4. The general meeting is entitled to award the members of the committee;
awards are to be granted only from the net profit of credit organisation.
Article 25. Board
1. Credit organisation is governed by the Board, which is responsible
for its activity.
2. The Board consists of not less than three members. Members of the
board are elected by the general meeting for the period, not exceeding
four years. Members of the Board may be re-elected for the repeated period.
The Board may include both the shareholders of credit organisation and
outsiders. The board is headed by the chairman, elected by the general
3. The member of the board is dismissed from its post in the following
1) if he is a member of the Supervisory Council or has been transferred
for service in the administration bodies of another enterprise, registered
in the Azerbaijan Republic;
2) if he has been deprived of membership in the board on the basis
of the law;
3) if he is the representative of governmental or municipal body;
4) if he is a spouse, relative of first and second grade of the board
member of credit organisation.
4. The Board makes its decisions by the simple majority of votes. If
the board consists of more than three members, its session is considered
plenipotentiary with participation of 60% of board members. Asbstention
from voting is not permitted.
Chapter IV. Banking activity
Article 26. Requirements established for the provision
of stability of credit organisation
In cases, specified by the National Bank, the credit organisation is
bound to create obligatory reserves, fulfil classification of archives,
form reserves for coverage of possible losses, provide the execution of
requirements, concerning the minimum amount of authorised capital, maximum
volume of risks and liquidation indices.
Article 27. Banking operations and other transactions
1. Credit organisation has the right to carry out the following bank
operations in accordance with bank license:
· attraction of pecuniary means on the deposits at interests
or without hem (to be called for, as a fixed deposit or in another form);
· granting of credits on the basis of contract with creditors;
· opening and keeping of accounts of juridical and natural entities;
· settlements on the accounts of natural and juridical entities,
including credit organisations-correspondents, by their orders;
· collection of pecuniary means, promissory notes, payment and
settlement documents, cash service of natural and juridical entities;
· purchase-sale of foreign currency in cash and non-cash form;
· attraction on deposits and placement of precious stones;
· granting of bank guarantees.
2. Apart from bank operations, enumerated in the beginning of the present
article, the credit organisation is also entitled to carry out the following
· issue of vouchers for third parties, foreseeing the execution
of liabilities in pecuniary form;
· acquire of demand right for the execution of liabilities in
pecuniary form from the third parties;
· trust control over pecuniary means and other property under
the contract with natural and juridical entities;
· carrying out of operations with precious metals and stones
in accordance with the legislation of the Azerbaijan Republic;
· rendering of special premises and safes located there for
the preservation of documents and valuables for the lease of natural and
· leasing operations;
· rendering of consulting and information services.
Credit organisation has the right to carry out other deals in accordance
with the legislation.
Article 28. Credit organisation activity at the
1. Under the license of the National Bank for the execution bank operations
the credit organisation is entitled to fulfil the issue, purchase, sale,
account, preservation and other operations with securities, representing
payment documents, securities confirming the attraction of pecuniary means
onto the deposits and accounts, with other securities during the execution
of bank operations in compliance with the legislation. Credit organisation
is entitled to buy, sell, keep state securities and carry out other operations
2. Credit organisations have the right to control the above securities
by trust on the basis of contracts with natural and juridical entities.
Credit organisation is entitled to lead professional activity at the securities
market in accordance with the legislation.
Article 29. Fulfilment of operations with persons,
connected to credit organisation
1. Credit organisation grants credits to persons, connected to credit
organisations in the order, established by the National Bank. Persons engaged
include: administrators of credit organisation, persons, whose share in
the capital of credit organisation makes 10%; any corporate body with considerable
participation share in the capital of credit organisation; person, being
the relative of first grade of the administrator of credit organisation
or connected with him by business interests; employees of credit organisation.
2. Total amount of liabilities on credits, granted by credit organisation
to the persons mentioned, is not to exceed 20% of the credit organisation
Chapter V. Relations between credit organisations.
Relations of credit organisations with clients
Article 30. Operations between credit organisations
1 Credit organisations may attract on contractual terms and place at
each other means in the form of deposits, credits, carry out other mutual
operations, specified by licenses.
2. Credit organisations are to monthly inform the National Bank of
newly opened correspondent accounts on the territory of the Republic and
3. At the lack of means for the execution of its liabilities the credit
organisation may address the National Bank for credits.
Article 31. Relations between credit organisations
1. Relations between credit organisations and their clients are realised
on contractual basis. Credit organisation does not have the right to establish
and control the directions for the use of their clients pecuniary means,
restrict in any way, not specified by the legislative acts or contracts,
the right of clients to use pecuniary means at their discretion.
2. Clients choose credit organisations for the credit -settlement and
cash service independently, they may use services of one or several credit
organisations on all forms of bank operations. The order of opening and
termination of accounts is fixed by the normative act of the National Bank.
3. Credit organisation independently establishes interest rates and
the amount of commission on all operations.
4. Credit organisation is not entitled to unilaterally change interest
rates on credits, deposits, commission amount and terms of contracts with
clients, excluding cases, specified by the legislation or contract with
5. Credit organisation has the right to grant credits on mortgage of
property, including property rights, securities, guarantee, voucher or
liabilities in any form, applied in banking practice. In case of creditor's
infringement of his obligations under the contract, the credit organisation
is entitled to demand credits granted by it and interests on them (if it
is specified by the contract) ahead of time.
If creditor fails to execute obligation, provided with a mortgage,
the payment of credit organisation demand at the expense of mortgaged property
cost is effected without court resolution.
6. Credit organisation has the right to make decisions about granting
of credits without obtaining the guarantee (blank credit).
Article 32. Settlement of accounts
Credit organisations effect settlements on forms and rules, established
by the normative acts of the National Bank and those applied in the world
Article 33. Unions and associations of credit organisations
Credit organisations may form unions and associations, not pursuing
the aims of profit extraction, for the protection and representing of interests
of its members, co-ordination of their activity, development of inter-regional
and international relations, meeting of scientific, information and professional
interests; elaboration of recommendations for the fulfilment of banking
activity, solution of other mutual problems of credit organisations.
Article 34. Groups of credit organisations and holdings
Groups of credit organisations and holdings are created for the solving
of joint problems (joint realisation of bank operations) be conclusion
of corresponding contract between two and more credit organisations. Holding
is a credit organisation, possessing the prevailing participation share
in the capital of one or more credit organisations or in accordance with
contracts with them, having the force for decisions, connected with their
activity.The National Bank is to inform of the creation of groups of credit
organisations and holdings 10 days in advance.
Article 35. Bank secrets
1. Credit organisation guarantees the secret of operations, accounts
and deposits of their clients and correspondents.
2. All shareholders and employees of credit organisation are bound
to keep in secret data of accounts, operations and deposits of its clients
and correspondents. This rule remains in force also after their release
from work or share participation.
3. References of accounts, operations, deposits of juridical and natural
entities are given,besides these entities and their attorneys, only to
court bodies at the availability of sentence of confinement that have come
into force, penalties on pecuniary means and other valuables of clients
or their confiscation.
4. References of accounts and deposits in case of death of their owners
are given by the credit organisation to persons, stated in the testament
order produced by the owner of the account or the deposit for credit organisation,
state notary office (on the inheritance cases on deposits of dead depositors
being under their consideration), as well as foreign consulates, experiencing
5. Data of banking activity of credit organisation are submitted to
the attorney of the National Bank and auditor, assigned by it.
Article 36. Arrest and penalties of pecuniary means
and other valuables, disposed by the credit organisation
1. Pecuniary means and other valuables of juridical and natural entities,
available at the credit organisation can be arrested only on the basis
of court sentence in the order, specified by the legislation in force.
Credit organisation is to stop spending operations on accounts and deposits
(in the amount of means arrested) immediately after the receipt of appropriate
resolution about arrest.
2. The penalty of pecuniary means and other valuables of juridical
and natural entities, available at the credit organisation, can be applied
only on the basis of executive documents, submitted in accordance with
3. Credit organisation does not bear responsibility for the damage,
caused to its clients as a result of arrest or penalty of their pecuniary
means or other valuables.
4. Confiscation of pecuniary means and other valuables is effected
on the basis of court sentence that have come into force.
Article 37. Order of disputes consideration
Disputes between credit organisations or credit organisations and their
clients are permitted in court in appropriate order.
Chapter VI. Savings sphere
Article 38. Deposits
1. Deposits may be taken from natural entities of the Azerbaijan Republic
by credit organisations, that have got the license of the National Bank
for the execution of this operation. Licenses for such operations are granted
by credit organisations, operating for not less than two years.
2. Attraction of means onto deposits is drawn up with a written contract
in two copies, one of which is given to the depositor. Deposits may be
registered and on bearer.
3. Credit organisation is bound to provide the preservation of deposits
and timely execution of its obligations in part of clients.
Article 39. Depositors of credit organisation
1. Depositors of credit organisation may be represented by citizens
of the Azerbaijan Republic, foreign citizens and persons without citizenship.
Depositors are free in the choice of credit organisation for placement
of means onto the deposits they posses and may have deposits in one or
several credit organisations.
2. Depositors may be in command of their deposits, get income from
them in the form of an interest, carry out clearing settlements. Income
on the deposit is paid in pecuniary form.
3. Depositor is entitled by force his order to the credit organisation
to bequeath his deposit to any person or state.
4. In case of depositors death the deposit, the order have been made
on, is to be given to heirs by the credit organisation in the legally specified
order. If the legal heir of the deposit is not determined the credit organisation
is to carry out its search for not rarer than once a year for 20 years,
publishing statements in papers at the expense of this deposit. The deposit
which heir has not been identified is used in accordance with legislation
Chapter VII. Responsibility for infringement of
Article 40. Responsibility for infringement of
1. Sanctions, specified by the Law "About the National Bank of the Azerbaijan
Republic"may be applied in relation to credit organisation for the infringement
of banking legislation and normative acts of the National Bank. The resolution
about sanctions imposture may be claimed in court.
2. Application of sanctions does not exclude other civil or criminal
liability, established in accordance with the legislation of the Azerbaijan
Republic depending on the character of infringement.
Chapter VIII. Conservation and liquidation
Article 41. Conservation
At the repeated or systematic non-execution of requirement, established
or applied in accordance with the present Law, by credit organisation,
the board of the National Bank may issue resolution about the conservation,
if there is some hope for the improvement of its financial state. Period
of conservation is not to exceed 18 months.
Article 42. Resolution of conservation
1. The resolution of conservation is also to indicate:
1) reasons for conservation;
2) data of the person, appointed for the fulfilment of conservation;
the said parson may the employee of the National Bank or outsider;
3) period of conservation;
4) possibility of freezing of deposits or other means, belonging to
2. In case of necessity the period of conservation of credit organisation
may be prolonged by the National bank resolution for not more than 18 months
on the basis of an application of the person, carrying out the conservation.
3. Appointment of the person, carrying out conservation suspends the
rights of the credit organisation administrator in relation to this credit
organisation and rights of shareholders for its management until the end
of conservation period.
Article 44. Authorities of person, conducting conservation
The person, who conducts conservation, is given authorities for taking
any measures in the sphere of credit organisation management and execution
of operations, he thinks necessary and effective. The said authorities
include any measures for the improvement of credit organisation state,
namely closing of branches, representations and other similar bodies, dismissal
in accordance with the legislation of employees of credit organisation,
representing, to his mind, idle labour or not capable of execution of their
duties owing to professional non-conformity.
Article 45. Freezing of deposits
In cases necessary for the improvement of financial state of credit
organisation the person, conducting conservation may decide to fully or
partially freeze deposits of population, available at this credit organisation,
for the period up to three months, provided the measures taken by the person
responsible for conservation protect the approximate cost of the said deposits.
Article 46. Declaration of bankruptcy
The National bank recognising the credit organisation insolvent until
the end of conservation period, its license is subject to recall, whereas
credit organisation is declared bankrupt in accordance with the legislation
Article 47. Control over the actions of person,
conducting conservation and responsible for conservation results
Control over the actions of person, conducting conservation is effected
by the National Bank, the National Bank is responsible for conservation
Article 48. Termination of conservation
Conservation is terminated in the following cases:
1) at the expiration of the period, fixed in the resolution about conservation;
2) earlier at the National Bank decision, if the activity of credit
organisation is acknowledged normal;
3) at the liquidation of credit organisation in accordance with provisions
of the present Law.
Chapter IX. Account and reporting in credit organisation.
Control over its activity
Article 49. Account and reporting
1. Regulations of accounting in credit organisation, the character,
volume and terms for submitting of its reports are fixed by the National
2. Accounts, reporting documentation and financial accounting of credit
organisation are to reflect operations and financial state of its branches.
During the annual report the credit organisation is to submit summarised
balance and report of profits/losses with consideration of the report of
affiliated credit organisations.
3. Branches of foreign banks are to submit their reports to the National
Bank in compliance with the requirements of the present article.
Article 50. Audit of credit organisation
Finance-economic activity of credit organisation is subject to annual
audit by auditors, the organisation selects itself or if necessary, appointed
by the National Bank. After the notification of the National Bank of audit
results, the annual balance and report of profits/losses are published
in papers in the form and within terms, established by the National Bank.
Article 51. Reporting and inspections
1. Credit organisation prepares report of administrative control and
conducted operations, its liquidity-credit capability and profitability.Reports
are made in the form and with details, established by the normative acts
of the National Bank and are periodically submitted to the National Bank.
Reports are submitted to the general meeting of shareholders.
2. Audits of credit organisations and their branches are executed only
by the National Bank in the order, specified by the article 50 of the present
Law, excluding audits, made by the State Tax inspectorate of the Azerbaijan
Republic. If other bodies of state power, conducting audits and control
functions, provide the National Bank with the motivated applications, the
National Bank is entitled to carry out the audit itself or attracting the
President of the Azerbaijan Republic
Baku, July 14, 1996.