National Bank Given Greater Supervisory & Enforcement Powers

The President of Georgia has signed legislative amendments to the Organic Law of Georgia on the Central Bank, the Law of Georgia on Commercial Bank Activities and other respective laws endorsed by the Parliament of Georgia.

Irakli Kovzanadze, Chairman of the Budget and Finance Committee of the Parliament of Georgia stated that almost six months of scrupulous, labor-intensive work and approximation of positions within the Fiscal Committee of the Parliament of Georgia preceded the endorsement of the referred package of legislative amendments by the Parliament of Georgia last December. The aim is to regulate issues that over recent years were consistently raised by citizens and businesses regarding the performance of commercial banks and other credit institutions operating in the country.

Namely, according to Kovzanadze, “banking holdings” have been segregated at a legislative level from commercial banks, thus granting the authority and responsibility of supervision to the National Bank of Georgia (NBG) not only towards individual banking institutions, but also towards entire banking holdings or financial groups that certain commercial banks are related or affiliated to. The NBG has been mandated to obtain any essential information; carry out consolidated supervision, and request the separation of a bank and other legal entities within a group whenever required to enforce financial or other sanctions.

Further, a Framework of Operation and Regulation has been defined at the legislative level for micro-finance organizations (MFOs) and those credit organizations that attract funds from the general public in any form and manner. The NBG has been granted all the essential rights to carry out comprehensive supervision of the sector.

Areas of responsibility have been defined for commercial bank management, shareholders and administrators at the legislative level so that they are prevented from applying work-related information and position for their own investments or for positioning other businesses or legal entities directly or indirectly related to the bank in a privileged position. The NBG has also acquired a number of tools to carry out due control.

“The Budget and Finance Committee of the Parliament of Georgia will tightly and permanently oversea the enforcement of the referred law. We will closely analyze the administrative regulations that the NBG will develop within its competence towards this end. We will periodically collect information and hold Committee Hearings,” Kovzanadze said.