Perspectives of banking sector development (RESUME)

BESO TODUA

Increase of commercial banks’ minimal capital amount will produce some positive results and trends in banking sector and bring out perspectives of banking sector development, namely:

This will significantly improve capitalisation level and quality of less capitalised banks thereby making for stability of banking sector;
Less capitalised banks will leave banking market or will merge with each other and with larger banks, which will lead to the growth of banks, healthy re-distribution of forces in banking sector and strengthening of competition;
Capitalised banks will have greater opportunities to expand branch network in the country, to improve and bring bank service to perfection and to develop new banking products, which, in its turn, serves as a pre-condition for bank culture and attraction of free monetary funds;
Banking sector consisting of banks with well-capitalised, stable and satisfactory financial standing will become more attractive both for society in the country as well as for foreign investors;
Increase of capitalisation and stability level of banking sector will create necessary pre-conditions for activating bank deposits’ insurance system through bank capitalisation.
In February of the current year banks are to be informed on the position of the National Bank about the further growth of banks’ capital. The matter is that in earlier stage, banks were given the possibility to establish their own strategy and tactics of action, to begin work on the search for different alternative ways and means so that they would prove to be ready to meet the requirements for minimal capital growth.
Commercial banks’ minimal capital amount and growth schedule was considered and agreed by the Georgian Banks Association with commercial banks ? members of the Georgian Bank Association. Growth of minimal capital in stages and in equal proportions makes it possible to maximally take into account interests of increasingly developing banks and banks with stable, but comparatively smaller capital. Subsequent upon the implementation of the above-mentioned development stage, the banks that have of late years faced chronic deficit of bank capital in accordance with financial indicator will have to leave banking market even in a more liberal regime of minimal capital growth. Yet the banks with correct development strategy and capital growth perspectives will have the opportunity of functioning in a peaceful environment and in pure market conditions. At the same time, this will serve to protect principle of market competition maximally.