An interview with Advisor to the President on Economic Affairs George Abashishvili
You strongly negatively assessed the initiative to separate the Banking Supervision Agency from the National Bank, which had already been sent to Parliament. What are the dangers, if it is adopted?
The main principle is that the economy should be free from political influence, and the abovementioned initiative was not submitted on the basis of economic motives. It is obvious that there is no economic justification for why banking supervision must be carried out separately from the National Bank. The motivation of the project clearly indicates that the project was designed for political reasons.
It states that in different countries there are different successful models of banking supervision, including this that operates in Georgia. If all of these models are successful, there is no explanation as to why one already existing successful model needs to be changed to another. The argument that it is necessary to adopt it only because this model is valid in some countries is unconvincing. The motivation part should have a clear and professional explanation of why the current system should be changed, and why the other system will be better.
The initiators of the project say they want to put an end to the National Bank’s sole control of the banking system of the country. Is this argument convincing?
Members of the National Bank’s Board are appointed by the parliament. The board includes 7 people, and sole control there is almost impossible. Let me remind the MPs that in 2016 four seats will be vacant in the Board, in 2014 another member of the Board was approved – the process was transparent and included experts, professionals, members. This system makes the sole management of the National Bank virtually impossible.
Presented by the MPs system provides the deputies nomination of members of the Board of the National Bank by the parliamentary groups that will immeasurably increase the risk of politicization, while the current system envisages much more serious involvement of professionals and experts in the selection of candidates to the board.
If the system of appointment of members of the Board remains intact, the question of the separation of the supervisory body will be on the agenda – what will be the position of the President? Will it be negative, as it is now?
We have to see in what way the debates on this issue will be held in Parliament, but I repeat that while there is no clear explanation of the need for establishment of an independent supervisory authority and weakening the National Bank. Therefore, we cannot talk about the support of this document. We will not support any single initiative that could harm the economy.
Whether this initiative is associated with statements by a number of ministers who blame the large commercial banks for the weakening of the national currency?
We must clearly understand that it is necessary to exercise caution in any statements relating to the banking system, since this sector is one of the most stable in Georgia. Of course, this does not mean the inviolability of the banks, but the political pressure on the commercial banks and the decisions that can cause fluctuations in the banking system are very dangerous. Investors and shareholders are behind the banks, the banks reputation is very important for the business climate of the country. Such statements are a very bad signal to investors.
At the same time, if a bank commits an offense, there are special structures that can investigate it under the law. But any solution that do not contribute to the stability of the banking system, including the issue of supervision, are absolutely unacceptable.
Who of the expert community and the banking system is involved in the development of the project?
Nobody. During his speech in the Parliament, President said that the government should consult with the business when making decisions related to the economy. The project we are talking about directly concerns the banking sector, but representatives of the financial system were not asked in the drafting process. That is, the document was adopted without any consultation. Many experts accuse the National Bank of conscious devaluation of the national currency.
Do you have any questions to the National Bank? The issue of devaluation of the national currency is much more complex than the activity of one particular institution, including the National Bank. I am not a supporter of conspiracy theories and believe that now is not the time for mutual accusations that are interesting to nobody. Now we have to cooperate and have a clear vision of the actions needed to resolve the situation.
What is your forecast concerning the national currency rate?
On the one hand, imports have reduced, respectively, the outflow of currency. On the other hand – foreign exchange earnings have increased. Accordingly, there are no obvious economic factors that have contributed to the decline in the country’s currency.