The year 2018, which was previously announced as the year of financial education, brought some special benefits to 600 000 borrowers, as their debts were annulled.
The Cartu Foundation bought off bad loans from the bank as well as nonbank organizations, and all debts were written off. The CreditInfo database has added a new category: “Bought by Cartu”.
2019 will show whether financial education and responsibility of the pardoned borrowers has improved. The banking lobby hopes that no creditor will intercept the pardoned borrowers again.
Aleksandre Dzneladze, the President of the Association of Banks, was a key lobbyist of the bank sector in 2008, says:
“Some important regulations were introduced in 2018. New crediting rules were announced with increased coefficients, and they will come into force on January 1. 50% restrictions on loan rates was a serious commitment, but I would not say the same regarding other regulations. Starting January 1, new restrictions will be enforced on currency loans of about 200,000 GEL. The financial sector currency crediting limit was restricted by 40,000 USD.
These reforms should determine future trends. They are meant to minimize risks. All crediting organizations were subject to supervision, because their offers have damaged many citizens, and we could not protect them”, Silk Road Bank Director General Aleksandre Dzneladze noted. He would prefer to show more responsibility regarding the granting of additional leverage to the supervisor for protection of consumers, he said. He abstains from making preliminary appraisals, and says that such an important job should be performed for developing bank products in 2019. According to the forecasts of the National Bank of Georgia (NBG), the crediting growth trend will amount to around 13%-14%.
Aleksandre Dzneladze expects the process of Larization to strengthen in 2019. This year the program increased the banks’ portfolio by 14%, but loan regulations announced in the second half of 2018 considerably increased currency mortgaging, and the NBG could not curb this process.
In 2018, the banking sector’s crediting portfolio constituted 26.2 billion GEL (22.4 billion GEL in 2017). Many experts showed skepticism regarding the de-dollarization program because the artificially empowered GEL remains weak in relation to USD, and it cannot strengthen without economic growth.
For the purpose of promoting the banking sector, the NBG introduced new reserve requirements. Commercial banks keep large reserves in USD-denominated resources.
Banking sector representatives assert that, besides the instrument strengthening the GEL, the 50% margin loan rate is also an important regulation. They disapprove of tightened crediting during revenue confirmation, but abstain from complaints.
Vakhtang Butskhrikidze (director general)
“The main thing is that our clients appreciate our care and support, that TBC Bank is their bank. At the same time, the nearly 30% of our economy in the bank system is a huge responsibility for our country. We should maintain individual approaches and relationships with our partners. Our positioning at the London Stock Exchange is also very important, but our priority is to satisfy the needs of our clients. I am content with our achievements in the digital strategy field, because transactions through digital channels grow. Our digital bank SPACE draws more and more clients, and our sales are also growing. This system serves about 186,000 clients”.
As of December 1, 2018, the bank’s assets make up 14.6 billion GEL (36.2% in 2017), with a 38% market share.
|Assets||14.6 billion GEL||12.5 billion GEL|
|Loans||10.2 billion GEL||8.5 billion GEL|
|Deposits||9.1 billion GEL||7.9 billion GEL|
|Net Profits||320.5 million GEL||238 million GEL|
|Supervisory Capital||2.2 billion GEL||1.891 billion GEL|
Bank of Georgia
Kakha Kiknavelidze (director general)
The year 2018 has brought positive results. Stability has strengthened.
The Bank of Georgia is a system bank, a major market player, and its success is unimaginable without a thriving economic environment. Therefore, this year, we have implemented important projects, including those for micro, small and medium companies.
The trend of the year in the economy is related to GEL-denominated issuance as a consecutive extension of the long-term Larization campaign.
However, Kakha Kiknavelidze plans to finish his career at Bank of Georgia. He has managed the bank since Murtaz Kikoria moved to the NBG. The new CEO will inherit a good starting position at Bank of Georgia.
The system bank ranks second in terms of assets and with 34.6% market share.
|Assets||13.3 billion GEL||11.95 billion GEL|
|Loans||8.7 billion GEL||7.06 billion GEL|
|Deposits||9.02 billion GEL||6.77 billion GEL|
|Net Profits||283 million GEL||328 million GEL|
|Supervisory capital||1.8 billion GEL||1.7 billion GEL|
National Bank of Georgia
Koba Gvenetadze, NBG President
“The 2018 financial year is coming to an end, but this direction remains our priority in 2019 too, when the National Bank will mark its 100th anniversary. We plan to hold a lot of events throughout the year. A new 5-GEL collectible coin will be issued in relation to this jubilee.
The banking system has overcome difficult times, thanks to optimal prudential policy. This policy has stabilized the system. Our objective is to help the banking system maintain this valuable crediting practice, and we have taken significant steps in this direction in 2018. Several regulations will help initiate an era of responsible crediting.
The banking sector is the only segment of the Georgian economy which is absolutely transparent. No other sector is so transparent in Georgia, and I urge other sectors to follow this example and make their system transparent”.
Benefits and Risks of Regulations
A market with two dominant banks reduces risks for investors, but generates certain threats, too. The NBG has organized additional buffers to prevent these threats.
Starting January 1, 2019 TBC Bank, Liberty Bank and theBank of Georgia are obliged to provide additional capital on the following proportion: +1%, +0.6%, and +1% respectively.
Liberty Bank, which was included in the list of system banks because of its social context, ranks third and holds a major network, and serves more than 2 million clients. Its portfolio mainly consists of retail loans (97%).
|Assets||1.8 billion GEL||1.8 billion GEL|
|Loans||1.1 billion GEL||0.9 billion GEL|
|Deposits||1.46 billion GEL||1.3 billion GEL|
|Net Profits||43 million GEL||45 million GEL|
|Supervisory Capital||263 million GEL||229 million GEL|