A study undertaken by the NBG found that only 3 percent of those surveyed held an account with a commercial bank. National Bank of Georgia (2000), “Banking System of Georgia: Public Opinion and Reality,” Banki, 4: 65-67.
“Dollarization in Georgia: Size of the Problem, Factors, and the Ways of Solution,” Merab Kakulia and Nina Aslamazishvili. NBG Website.
The Code identifies the broad principles for good transparency practices. In making public the objectives of policies, the considerations guiding policy decisions, and information on the conduct of policies, the central bank and other financial agencies enhance the public’s understanding of what they are seeking to achieve. Such information also provides a context for articulating the supervisors’ policy choices, gives an opportunity to obtain feedback from the market and strengthens general credibility, thus, contributing to the effectiveness of such policies.
Unless otherwise indicated, all data in this section are as of March 31, 2001, before the impact of new asset classification and provisioning rules showed their effects.
In addition, during 2001 a local court reinstated the license of a bank that had been revoked in August 2000, over the objections of the NBG, but the decision of the local court was subsequently overruled by the Supreme Court.
Foreign investors in Georgian banks include the EBRD, IFC, a German commercial bank, offshore firms, and a number of private investors.
Interest rates on foreign currency denominated loans and deposits are generally higher than those on lari-denominated loans and deposits. This can be explained by banks’ desire to dollarize their balance sheet, by their less comfortable liquidity position in foreign exchange than in lari, and by the fact that, as three quarters of all lending is foreign-currency denominated, lari lending rates are not representative of rates available to all clients.
The adjusted baseline is based on the inspections of nine banks, one of which is among the ten largest banks. An “average inspection result,” in terms of asset quality, was constructed and applied to all banks, except one, which did not fit the pattern described above and was not representative of the system. The inspection results for this bank were excluded from the sample used to construct the adjusted baseline. The mission’s work on the adjusted baseline was discussed with the NBG for use in their work and to improve the analysis as more banks are inspected. Given that the adjustment is based on inspection results from only one of the ten largest banks, it is subject to considerable uncertainty.
A further adjustment in the baseline implies the reversal of a long foreign exchange position to a short position. See paragraph 40.
Historical data for Georgia do not allow an analysis of the relationship between exchange rate movements and banks’ loan portfolios, because until mid-2001, the authorities were unable to measure nonperforming loans and capital properly.
Under the covenants of the loan contract, the creditor has the right to accelerate repayment when a recipient bank is liquidated. However, in this case the creditor has indicated its willingness not to demand accelerated repayment. Provided that certain conditions are met, it will acquiesce to the government’s continued debt servicing on the original schedule.
Weaknesses in the areas discussed in paragraphs 55, 56, and 57 are addressed in pending banking legislation.
The need for anti-money laundering measures is contained in Basel Core Principle 15.
For example, one large bank referred to a rule whereby cash deposits in excess of US$200,000 required authorization from a special committee, with smaller deposits automatically accepted.
The interbank funds transfer system has been developed over several years in line with international best practices. NBG personnel have participated in international seminars and workshops, and have acquired practical experience working with payment system experts in the United States, Europe, and countries of the former Soviet Union.
Currently, trading sessions are held on Tuesday and Thursday afternoons for one hour each.
The government is presently considering adding two new maturities (56 days and 140 days) to improve the spectrum of maturities available for issue.