President’s Office Warns Against Bill on Banking Supervisory Agency

A newly proposed bill on stripping the Georgian National Bank of banking supervisory functions and transferring them to a separate agency can have adverse effect as planned reform seems to be motivated by political rather than economic reasons, President’s economic adviser, Giorgi Abashishvili, said on May 22.

He also hinted that if approved the bill might be vetoed by the president.

The bill, which was submitted to the Parliament for consideration on May 21, is sponsored by two lawmakers from Georgian Dream parliamentary majority group – Tamaz Mechiauri of the Georgian Dream-Democratic Georgia party and Nodar Ebanoidze of the Republican Party.

MP Mechiauri, who became chairman of the parliamentary committee on finances last month, has been a vocal critic of the central bank and its governor Giorgi Kadagidze.

MP Mechiauri makes no secret of the bill’s political motives.

Members of the central bank’s board “do not reflect at all interests of those forces, which are currently in power,” he told Tbilisi-based Maestro TV’s business program on May 22.

“They still continue pursuing interests of the previous authorities, who appointed them [current members of board],” Mechiauri said and claimed that the board remains under control of Georgia’s former justice minister Zurab Adeishvili, who is wanted by Tbilisi on multiple criminal charges. “Adeishvili possesses more information about what is going on in the banking sector than the Parliament.”

“Separation of this [banking supervisory] agency from their [leadership of the central bank] subordination will at least discourage some to make use of currency exchange rate fluctuations,” he said and also added that the central bank should be “de-politicized”.

His remarks echoed speculation, also voiced last week by energy minister and deputy PM Kakha Kaladze, that currency transactions by some commercial banks might be one of the reasons behind depreciation of Georgian currency lari. Kaladze also complained that under the law the government has no access to information about such transactions. Central bank chief Giorgi Kadagidze dismissed such speculation on May 16 as “conspiracy theories.”

The proposed bill envisages setting up of the Financial Supervisory Agency from July 1 2015, which will be in charge of monitoring and supervision of banking sector and other financial institutions; these functions are currently carried out by departments, which are part of the central bank.

According to the bill, the Financial Supervisory Agency will have seven-member board; central bank governor will be an ex-officio member of the board, but will have no right to also serve as a chairperson of the board. Six other members of the board will be elected by the Parliament. Chairperson of the board will have the right to appoint head of the agency.

Speaking at a press conference on May 22, President’s economic adviser, Giorgi Abashishvili, who also president’s deputy chief of staff, said banking sector is one of the most robust segments of the Georgian economy and carrying out proposed reform may only cause troubles.

“Such a proposal is surprising – what are the economic motives behind it?.. Why cure a sector, which needs no cure?” he asked.

“We think that there are political reasons. Political games are inadmissible in economy; it will harm economy,” Abashishvili said.

Asked whether President Margvelashvili will veto the bill if the Parliament approves it, Abashishvili responded: “We should keep in mind – all those initiatives, which will be damaging to economy and dictated only by political reasons, will definitely be neglected.”

Commenting on the proposed bill, Economy Minister Giorgi Kvirikashvili said on May 23 that it requires a thorough consideration.

“Discussions are ongoing – there are arguments on the both side, so we will weigh all the arguments and take final position,” Kvirikashvili said.