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New regulations for private banks

By Tatia Megeneishvili
Friday, October 10
According to the President of the National Bank of Georgia (NBG) Giorgi Kadagidze commercial banks will be deprived of undertaking non-profile businesses.

The commercial banks might not be allowed to own developer companies, educational institutions and other non-banking sector ventures.

“This is a serious topic that has been discussed for a long time. We have worked hard and we are on the brink of making a decision that will be announced by the end of October. Nobody will ban the private shareholders of banks from investing in other industries. However, banks itself must not be involved in various fields not related to banks’ general activities,” Kadagidze stated.

According to the NBG, there are mainly two banks in Georgia possessing non-core assets: Bank of Georgia and TBC Bank. Based on the NBG, Bank of Georgia owns 61 subsidiaries while TBC bank owns 10.

For example, Bank of Georgia owns 100% shares of a developer company m2, 100% share in the insurance company ALDAGI - BCI, 51.2% of the Teliani Valley Winery, 99% of the tour operator Intertour, 51% of My Clinic, 100% in the Caucasus Auto House, 100% in the Dynamo basketball Club.

While TBC Bank owns a 89% share in TBC Leasing company, 75% in the TBC-credit, 75% in the brokerage company TBC-broker, 93% in the United Financial Corporation, and 100% in the Real Estate Fund.

Expert Levan Kalandadze said that possession of non-core assets allows subsidiaries to have a lot of preferences compared to independent business entities.

“When a bank has its own developer company for instance, it suggests better conditions to consumers that affect independent actors and might make them bankrupt,” Kalandadze said.

General Director of Arsi construction company Tornike Abuladze said that banks have become rivals to private business since 2008.

Director of the Development Company Axis, Giorgi Kapanadze, said that banks sue to attract more consumers as well.

“For example, if a customer who wants to buy an apartment comes to the bank, bankers advise him to buy the property in projects carried out by their subsidiaries,” said Kapanadze.

General Director of Bank of Georgia Irakli Gilauri said that their non-core activities have always been separated from the bank’s main functions. “However, we are ready to follow the amendments if they are introduced,” Gilauri said.