The Georgian government does not intend to restrict the right of banks to own non-core assets – and this is despite the fact that banks have long owned companies in sectors such as construction, insurance, tourism, leasing, sports, wine, and even fitness.
Out of 21 banks registered in Georgia, non-core assets are mainly owned by two of them – “Bank of Georgia” and “TBC Bank” – the first owns 61 subsidiaries, the second – 10. It should be noted that these subsidiaries own other companies, respectively, the real figure is much higher than 61 or 10.
According to the National Bank, “Bank of Georgia” owns a 100% stake in the insurance company “ALDAGI – BCI”, 51, 2% in the wine company “Teliani Valley”, 99% of the tour operator “Intertour”, 51% – in the clinic “My Clinic”, 100% – in ” Caucasus Auto House “, 100% – in the basketball club “Dynamo”.
The bank also owns stakes in 11 hospitals throughout Georgia.
“TBC Bank” owns a 89% stake in “TBC Leasing” company , 75% – in the MFO “TBC-credit “, 75% – in the brokerage company” TBC-broker, “93%” – in the United Financial Corporation, “100%”- in the Real Estate Fund etc.
Despite this, the government has not yet taken any action to limit the rights of banks to own non-core assets – either the government does not see any problem, or it does not want to interfere with the bankers. The current legislation does not prohibit financial institutions to create subsidiaries.
According to the expert Levan Kalandadze, the NBG partially supports the claims of the public to commercial banks, but does not go beyond individual consultations with experts and specialists.
The experts, in turn, state that the ownership of subsidiaries by banks restricts competition in Georgia, and a direct conflict of interest is evident.
“Possession of non-core assets allows subsidiaries to have a lot of preferences in comparison with independent business entities. For example, banks have reduced lending to construction companies, but they own developers have unrestricted access to finance. In fact, it turns out that banks control entire sectors of the economy. At this stage, the share of non-core assets in total bank portfolio is low, but the trend is clear. If the share of subsidiaries of banks becomes dominant in some sectors of the economy, it will dramatically reduce the competitiveness of the other players, “- Levan Kalandadze notes.
President of the Georgian Developers Association Irakli Rostomashvili has the same opinion. According to him, banks assess other players as competitors and prevent them in every way in the sectors of the economy in which banks have non-core assets.
“Banks do not hide their biased attitude, and if a customer who wants to buy an apartment comes to the bank, bankers advise him to buy a property in projects carried out by their subsidiaries,” – he says.