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BoG CEO Objects to Obligatory Insurance of Foreign Currency Denominated Deposits

Bank of Georgia CEO Murtaz Kikoria assures the World Bank (WB) experts should be persuaded the deposits insurance model is useless.

We should perform much job in this direction. We should provide due explanations and compare the effects of 5 000 GEL deposits insurance to administrative expenses. Much difference is a certain ground to conclude it is not necessary to introduce the system.

As reported, the deposits insurance framework bill calls for insuring only GEL denominated deposits, while GEL denominated deposits constitute only 29% in total deposits portfolio (01.04.2016 – 14.3 billion).

The system would work in the event of large-scale portfolio, but it is not justified, in general, to insure deposits in foreign currency, Murtaz Kikoria noted.

The World Bank has assumed obligation before the EU to fulfill and finance the EU directives in Georgia. From the existing three models, the obligatory model was selected for Georgia. This model calls for establishing a foundation by financial support of commercial banks. Other commercial banks also object to this model.

The past decade has not recorded even minimal threats, while amid the 2008 hostilities only a small portion of deposits were withdrawn from the bank sector.

Georgian bankers also doubt that accumulated funds in the insurance foundation will promote a growth in revenues, because the domestic stock market has been frozen, in practice. There are only government treasury bills and national bank’s deposits services. Moreover, the current legislation bans investing the funds of the foundations abroad.