When placing a deposit in a bank, the ultimate question is always the same: what will happen to my money if the bank stops operating? Such a situation can occur if the bank's license is revoked, if it becomes insolvent, or if the regulator decides to initiate liquidation proceedings.
This means that the bank can no longer serve its customers, conduct operations, or return funds to depositors through regular procedures.
It is precisely for such cases that Armenia has a mandatory state deposit insurance program. If a bank ceases to operate, depositors who are individuals (natural persons) receive compensation through the Deposit Guarantee Fund, in accordance with the procedure established by the RA Law "Оn Guaranteeing Compensation of Bank Deposits of Physical Persons". The amount of compensation depends on the currency of the deposit.
As of today, the guaranteed limits are:
Up to AMD 16,000,000 for deposits in the national currency;
Up to the equivalent of AMD 7,000,000 for deposits in foreign currency.
AFM has looked into how the compensation is calculated and how the payment mechanism is activated.
Who Protects Your Deposits
The Deposit Guarantee Fund is responsible for the operation of the state deposit guarantee program in Armenia.
This is important for one simple reason: the program belongs to the state financial system, rather than being an initiative of an individual bank.
What Does This Mean?
This is not a private insurance company selling policies.
This is not a voluntary service that a bank can choose to turn on or off.
This is a mandatory state program in which all banks operating in Armenia participate.
If a bank operates legally and holds a license from the Central Bank, it automatically becomes a participant in the deposit guarantee program.
Where Do the Funds for Payments Come From?
The Fund is not financed by the state budget. Its resources are built up in advance through contributions made by the banks themselves.
Banks pay regular guarantee fees amounting to 0,05% quarterly of the average volume of physical persons' deposits. These funds accumulate in the Fund to form a financial reserve. This exact reserve is utilized if any bank becomes insolvent.
Simply put:
Depositors do not pay to participate in the program;
The bank does not insure you separately;
Protection is activated automatically;
Payments are made by the Fund, not the bank.
This creates a financial safety cushion that helps reduce the risk of panic and ensures the return of funds.
Which Banks Participate in the Program?
In Armenia, the deposit protection program operates on a mandatory basis. If a bank has received a license and operates under the supervision of the Central Bank, it automatically participates in the guarantee program. This means that all 17 banks in the country are included in the program.
If you want to quickly verify whether a bank is supervised by the CBA, check if it is included in the official list of licensed banks published on the CBA website.
Another crucial point: the guarantee applies not only to local banks but also to branches of foreign banks that are officially registered and operating within the territory of Armenia. However, deposits opened in branches of Armenian banks located outside of Armenia are not necessarily covered by this program. In that scenario, the laws of the country where the branch is located will apply.
What Exactly is Guaranteed as a Deposit?
The guarantee applies not to a specific banking product name, but to the money that the bank is obligated to return to you.
In other words, it does not matter whether the product is called a "Premium Deposit," "Super Accumulative," or "High-Interest Deposit." If it is your money held in an account at a licensed bank—be it a term deposit, current, accumulative, or savings account—it is covered by the guarantee program.
The protection covers:
Term deposits;
Current accounts;
Savings accounts;
Accrued interest;
Nominal deposit certificates;
Funds belonging to Sole Proprietors (SPs / Individual Entrepreneurs).
At the same time, it is vital to remember that the program is aimed at protecting individuals. Corporate deposits (legal entities) are not included in the standard guarantee framework, so companies must take this factor into account when allocating their funds.
How Much Money Does the State Guarantee?
The limit of the state guarantee is defined by law and is the same for all banks. The compensation amount depends on the currency of the deposit and is calculated using a set formula.
Type of Deposit | Maximum Compensation |
AMD deposit only | Up to AMD 16,000,000 |
Foreign currency deposit only | Up to the equivalent of AMD 7,000,000 |
AMD + Foreign currency | Via a combined formula |
How the Combined Formula Works
If a depositor holds both AMD and foreign currency deposits in the same bank at the same time, the compensation is calculated using a special formula. First, the amount of the AMD deposit is considered, and then it is determined what portion of the foreign currency deposit can be additionally compensated within the set limit.
Example:
If you have AMD 10 million and foreign currency equivalent to AMD 5 million:
First, the AMD deposit is considered (it will be compensated in full—AMD 10 million).
The foreign currency deposit is compensated within the remaining balance of the overall limit up to AMD 7 million. That is: 16 million (maximum combined limit) - 10 million = 6 million AMD. Therefore, your AMD 5 million equivalent foreign currency deposit will be compensated in full, as it does not exceed the remaining 6 million threshold.
Important: All payments are made in Armenian Drams (AMD), even if the deposit was opened in a foreign currency. The conversion of the foreign currency amount is carried out at the official exchange rate of the Central Bank on the day the bank is recognized as insolvent.
In Which Cases Might a Deposit Not Be Compensated?
Despite the fact that the guarantee program covers the majority of individual deposits, the law provides for a number of exceptions. In certain cases, a deposit may not fall under state protection.
These exceptions include:
Deposits belonging to the bank's managers and major shareholders;
Deposits recognized as being acquired through criminal means;
Deposits with an interest rate at least 1.5 times higher than the bank's standard rate;
Deposits of less than AMD 1,000.
Special attention should be paid to the clause regarding inflated interest rates. If the yield on your deposit at the time of placement was significantly higher than the bank's standard terms, such a deposit may not be guaranteed.
How is Payment Carried Out in the Event of Bank Bankruptcy?
If a bank becomes insolvent, the legally mandated deposit compensation procedure is triggered. Payments are not made automatically on the very same day, but they follow a clearly defined algorithm and timeline.
The process is as follows:
The bank is officially recognized as insolvent by the CBA.
The Guarantee Fund publishes an official announcement regarding the occurrence of the case.
Starting from the 7th working day, the depositor can apply for compensation.
The payment is made within a maximum of 3 working days.
The money is paid in Armenian Drams (AMD).
An application can be submitted within 3 years from the date of the event.
Note: If the depositor also has a loan in the same bank, the compensation is calculated as the difference between the deposit and the liability.
Example:
Suppose you have AMD 5,000,000 in your bank account. Concurrently, you have an outstanding loan of AMD 2,000,000 in the same bank.
In this case, the Fund will first take your liability into account. The compensation will be calculated not from the total deposit amount, but from the difference:
$$5,000,000 \text{ AMD} - 2,000,000 \text{ AMD} = 3,000,000 \text{ AMD}$$
This is the exact amount you will be able to receive under the guarantee, as it fits within the established limit.
What is Important to Consider in Advance?
The deposit guarantee program operates under strict rules, and it is important to understand them before placing your funds, rather than when the bank is already facing issues.
The guarantee applies to each bank separately. If you hold accounts in different banks, the limit is calculated independently for each of them. This creates a simple risk management strategy: for large sums of money, it is advisable to distribute the funds across several banks so that you do not exceed the set protection threshold in any single one of them.
Be cautious with inflated or promotional interest rates. The law defines exceptions for deposits whose rate at the time of placement is substantially higher than the bank's standard conditions. Therefore, an attractive yield should be evaluated not only in terms of profit but also through the lens of the deposit's legal status.
The deposit guarantee program is a protection mechanism within a set limit, not a tool for full insurance of any amount. Anything that exceeds the limit is returned later through the bank's liquidation and bankruptcy proceedings (based on the priority of creditors' claims).
Knowing these rules allows you to make informed decisions when allocating funds and to mitigate risks beforehand.
Frequently Asked Questions (FAQ)
Is it necessary to get a separate insurance policy?
No. The guarantee program applies automatically to all individual deposits in licensed banks. You do not need to sign an additional contract or pay for an insurance policy. If a bank offers additional deposit insurance as a separate service, that is a commercial product rather than a state guarantee, and it may have its own terms and limitations.
Is there a fee to participate in the program?
No. Depositors do not make any payments. Regular contributions to the Fund are made by the banks themselves from their own resources. You receive protection regardless of the size of the deposit or customer status. There is no distinction between "premium" and "regular" depositors—the rules are the same for everyone.
Are interests included in the guaranteed amount?
Yes. The compensation calculation includes not only the principal deposit amount but also the interest accrued up to the moment the bank is recognized as insolvent. Important: Interest is factored in up to the date the event occurs. After that date, interest accrual stops, even if the deposit term according to the contract has not yet expired.
What happens if the deposit amount exceeds the limit?
The portion within the limit will be paid out by the Fund. The amount exceeding the limit will become a standard claim against the bank within the scope of the bankruptcy proceedings. Getting the "above-limit" portion back can take significantly longer and depends on the availability of the bank's assets. Therefore, for large sums, it is wise to distribute funds across different banks beforehand.
Can I allocate a large sum of money by opening deposits in different banks?
Yes. The state guarantee applies to each bank individually. If you diversify your funds across multiple licensed banks and the amount in each does not exceed the limit, protection applies to each bank independently.
If the deposit is less than AMD 1,000, will I receive compensation?
No. Deposits under AMD 1,000 are not subject to compensation. In practice, this mostly applies to technical residual balances on accounts. However, if you have multiple accounts in the same bank, they are combined, meaning small amounts across different products will be aggregated.
Does the guarantee apply to money held on a card?
Yes. If the funds are available in your bank account (linked to the card), they are considered a deposit under the guarantee program. Important: A credit line on a card is not a deposit and, consequently, is not covered by the protection program.
Do I need to go to court to receive the guaranteed money?
No. To receive the guaranteed portion, it is sufficient to submit an application within the defined timeframe. Court proceedings are only required for claims exceeding the limit, as those are filed within the bankruptcy process.
If I have a loan in the same bank, how will it affect the payment?
The compensation will be calculated as the difference between your deposits and your outstanding liabilities to the bank.
For what reasons can a bank become insolvent?
A bank is declared insolvent if it is unable to meet its obligations to depositors and creditors. This status is formally established and triggers the legally prescribed procedure. Reasons can include a massive outflow of deposits, severe losses on loans, management failures, or an economic crisis. That said, a bank does not go bankrupt automatically at the first sign of trouble; the regulator (CBA) may first take measures to restore its stability.
Does a state of emergency or force majeure affect deposit payments?
No. A state of emergency, military conflict, or economic crisis in itself does not cancel the guarantee program. The key factor is the bank being officially recognized as insolvent. Once that status is declared, the compensation mechanism is activated regardless of the underlying causes of the crisis.
Summary
The state deposit protection program in Armenia operates on a straightforward principle: if a bank is officially recognized as insolvent, the legally mandated procedure is launched, and individual depositors receive compensation through the Deposit Guarantee Fund.
The program:
Includes all licensed banks in the country;
Automatically applies to individual deposits;
Compensates funds within the defined guarantee limits;
Provides clear timelines and procedures for payouts.
In practice, the amounts that the bank is legally obligated to return to you are guaranteed. However, this protection operates strictly within the limit; everything exceeding that threshold is subject to recovery through the bank's standard bankruptcy and liquidation process.
