Intrigue of banking sector

Nino ArveladZe

Georgia faces consumer credits price growth tendency, including mortgage credit number rise. Banks and insurance companies jointing become too frequent deal.

Bank makes consumer every sort of service insurance what hits on credit prices. Any sort of document preparing difficultness in bank possessing problem –the credit agreement and mortgage must by notary way confirmed, payment must be done for register notification receiving, what means serious amount paying in total. In the case of preliminary credits meeting the banks forfeit will include 1-3 %. The bank officials tell they give out 15-16 % loans, but the account opening is fee, cash money taking from account means 0.5 % payment, followed with bail agreement, credit agreement, mortgage notary way confirmation, what means that consumer losses amount immediately after taking and has 15 % business credit or 18 –19 % mortgage. The banks get larger in Georgia, Georgian bank appeared on London Stock what is the same as revolution. The banks foundation specifics is each one` s specialization, but credit climbs in Georgia, despite. We interviewed Georgian Bank Association Chairman, Mr. Zurab Gvasalia, concerning the issue.
– Prices rising on what is mostly high demandable in Georgia. The reason of credits climbing because is registers and notaries are its un-separateness to the banking structure. Each knows, nothing can be done without that, that is why the service prices increase and need additional payment. There is one more novelty: movable property needs nothing expect notary approve, so movable property can be sold without court officials sharing. It can be said, that bureaucracy regime moments un -separate part of credit taking process, what can not be passed by, so the price is dependable. Credit price jumped up and mortgage means facing huge, “Commercial banks code” amendment enforced by parliament will come into action soon, in accordance of which the court is obliged mortgage defense issue between a client and a bank reviewing during twenty days period, but the processes often lasted for years. Proceed code told nothing about the issue, but made amendment will get easer the process much more. But there is a damage of so many credits turning negatively to the population. More then 80 % US employees dependent on bank credits, but they have stabile jobs –that is inevitable condition for credit taking. Job loosing may turn into horror for the family, because will oblige to leave them without house, car and other necessary thing. The same credit dependence condition comes into action slowly in Georgia. But we have no stabile jobs and the wages remain low level, so the banks present strict demands, they do not finance casino dealers, petroleum station and restaurant employees. Micro finance organization foundation is seen, for instance “Georgian Capital” invested in USD 400 000 less then in a month period, so there is demand on consumer credit. Foreign investitions appeared in Georgian bank system. I believe that would sharp compete, would maintain credit rates low and deposit interests increase, but it was not take place that way. “Procredit Bank” announced 6% credit, it got 9 % and 12 % after, but now the bank is giving out the credits the same way as others.
The National Bank of Georgia claims 40 large depositories list each bank. We are trying every best for each individual and corporate clients to be pointed out.
– Why the National Bank needs these dates?
– These dates are really necessary for the National Bank. The National Bank bears responsibility for the information clandestine. It can maintain large depositors percentage number determining among the population, often one is having deposits in separate banks. With the dates the National Bank determines every risk factors may be possessed to the depositors. One depositor is able large among taking out from the bank or entire amount taking. Despite of 200 GEL note was released in Georgia, but the population do not save in GEL, what is caused with population low profits, but the population revives credit debts.
– How many acting banks are in Georgia? Not including banks under the closing process.
– There are 17 acting banks in Georgia for today and each is Bank Association member.
– Which foreign banks functioning in Georgia?
– The banks: “Zirat Bank”, Azeri “Caucasus Reconstruction and Development Bank,” “Azeri International Bank”, which domains 46-47 % at Azeri market and the only one bank not being privatized and remaining the status of the state bank up till present. The Treasury Fond constantly faces its attempt of influence on he bank, for its share hold impact, but everything remains unchanged for yet. There is also “Agroinvst Bank.”
– You told about micro finance organizations foundation in Georgia, did they inculcate on Georgian market?
– Micro finance organization “Constanta” is succeeding, “Georgian Capital” is newly founded one, “Tbilbusiness Bank” re-changed into financial organization.
– What are their specific signs?
– They are basically financing small and middle business and deeply tight to small and middle business projects of USAID. They are negotiating concerning credit lines creation issue for now.
– Should they attract depositors and invest in credit?
– Micro finance organizations are not able depositors altercating and net banking operations, money transferee providing. That is main separate point of them for the banks. The organizations include fundraising capital, are able giving out as a credit and return with charged per cents. They are able credit taking from some other instances.
– Is their credit more expensive then banks`?
– Their credit is relatively more expensive, but much more easy to be taken out from the micro finance organizations then from the banks. They have the segments not taking banks` interest sphere.
– What tendencies does the banking sector face? Doubtless that the banks constructing larger will keep continue.
– They will not be able to compete. “TBC Bank” holds negotiations with Israeli bank “Leum” concerning 25 % shares possible selling.
– Georgia` s banks getting larger, shares increase, credits become more demandable and the credit interests jumps up. What we should expect following the banks widening?
– Logically estimation will bring us to the idea of the credit interests lowing expectation, but the banks reporting that the reason of credit interest not dropping is the high-level risk factor issue.
– While the bank announces 15 % deposit receiving, does it mean “money hunger” in Georgia? Foreign investor banks boosting in Georgia from the one hand, but as it turns out Georgia is suffering deposit insufficiency.
– We held meeting with the Treasury Found officials, and the reserves foundation in banks will be realized by supplied currencies, the reserves forming was realizing in GEL recently. The National Bank of Georgia is main provider of reserved USD, EUR and GEL interests charging. The National Bank provides the money transferring operations itself, to some other place –like open market abroad.
– You mean the National Bank is creating dealing –center, but reserves interests charging is unprecedented event.
– GEL was charged recently because of inflation level.
– Evidence is that new income sources abilities will appear for the banks, so what based the deposits deficit, why charged interest on deposit hits over 15 % from 6-7 %, the increase is more then double. But from the other hand consumer credit includes approximately 17 –30 %, what was the cause of the credit climbing? Credit is one of most demandable among population and if there any banks agreement concerning credit price increase?
– I persuade you that is not the way you are telling. I am participator and initiator of the held closed meetings where too tension debates took place, but the negotiation came into being despite. The banks had pretension just against the only bank.
– I guess that is the “Bank of Georgia”, because it` s providing aggressive politics?
– Certainly it does. The bank attracted many clients, what was stipulated by right managing principle.
– The same was done by “TBC Bank” recent years.
– The “Bank of Georgia” charges interest on accounts and rests. Others believe the operation failed with damage, otherwise they are requesting for explanations concerning the issue. But the Bank of Georgia rejecting any comments making concerning the secret, but agrees on to be checked by the national Bank for making sure in that the bank meets no damage but such sort of steps making. The Bank of Georgia revived and took on serious work after its management staff changing, the bank ruined banking stereotype existed in Georgia, changing the bank administrating model.
– Economy suffers from interest increasing on deposits and credits. The most big profit and money is taken by the banks for today, each prefers deposit putting into the bank despite amount putting into the entrepreneur, the bank guarantees its` 15 % and faces less risk, or zero point risk.
– Deposits insurance process is starting now, that is also directive of the EU. Creditor Bureau provides serious works also. The bureau was founded in 2004 as dependent juridical instance, initiated by the Association of the Bank of Georgia. The founders of the structure are banks. The debtors were supplied just with negative information but the positive one sharing will take place for now.
– You mean information bank creating, with every sort of information capacity?
– Yes, I do. Credit Bureau has no information about an individual who has taken credit up from 2004, the number of times does not mention. The banks avoiding from positive information share, caused by their clients taking away by the other banks damage.
– Who finances Credit Bureau?
– It keeps itself. Every sort of information service has its fees. When a bank giving out a credit on an individual, can check if his (her) dossier and if had any problems with other banks recently. Who will get under the “red lines” will come across the problems concerning debt receiving. The moment reduces the risk factor again.
– How do you believe 2007 tendency concerning depository rates?
– Existed banks ` number will be reduced. Negotiations between five banks under the way can be finalized with their uniting. The announcement of the National Bank of Georgia bearing huge importance because it opposites third category banks jointing. The National Bank expressing agreement on the joint issue but says the first or the second category bank finding is necessary for being used as locomotive by the left others. In the case of five banks uniting, it will take them at least a year period for solid positions gaining on the market, to be able to hold negotiations with some big banks. That will easy condition for the National Bank of Georgia, because it holds the third category banks under strict control. Ha basic is their interests coming to agreement. One bank must lead information about its` condition to lefts four, after the audit should be provided, what will be followed with three, four or five banks unit. I think every detail will be resulted in July, but the several bank will be actually united, that is the fact.
– Which banks do you mean?
– I am talking about “Standart Bank”. Kazakhain bank “Alliance” was about to invest in Georgia, the bank delivered application to the National Bank, but nothing is known for yet. Italy bank expressing big interest from its side, which` s financial group launched visit to Georgia and is under the resolution receiving process for today –to purchase the bank, new bank foundation or to create branch in Georgia.
– What will you tell about banks and insurance companies affiliation in Georgia?
– Insurance companies and banks dealing is legally dissociated, no risks transferring on each other is possible. That is not correct when the National Bank reports that it domains 100% of the insurance company, because we have no law concerning holdings. Incorrect is when a bank purchasing any company, because the law lets just 20 % domain of the A/S, what must not excel 5 % of the capital.
– Why the National Bank is not reacting on the issue?
– I can just say, that, that is the best way for the bank proper packaging, I mean preparing the bank to be sold.