By Ambrosi Grishikashvili
Merger of American-Georgian Bank Absolute Bank with Georgian Kartu Bank once more made us to think about wide spread financial event called merger of banks. The above process is intensive in developed countries like USA, Japan etc.
Most intensive it has become in the first half of 90’s. The biggest ever merger in the history of US took place in 1990 when Bank One Corporation unified 13 banks. This bank was looking for high-quality activity banks, offering them attractive conditions, providing them with certain independence and giving opportunity to increase incomes.
Generally, improvement of financial state of both, purchased and purchaser banks, follows merger. However, history has also shown the contrary. For example: in 1987 merger of American Republic Bank and InterFirst (387 million US dollars) that has finished with crash. After an year of living the bank FirstRepublic has announced about critical state and with the help of Deposit Insurance Federal Corporation could join the NCNB.
Thereof, merger of banks could not be considered as a panacea. According to calculations by scientists, successful mergers excess unsuccessful ones a little. Thus, the same source declares that accurate and correct use of the chance after merger, can increase incomes by 2-3%. Besides, there are lots of more advantages merger can give to banks and that’s clear with the one of Switzerland banks.
Namely, the new bank United Bank of Switzerland that increased its competitiveness on world market and claimed convincing positions in US, Japan and other countries.
On 17th of 2001, banking system of our country attended one of the most important events in its life. Namely, that day the AbsoluteBank being at the stage of bankruptcy and under commission of National Bank liquidation group, had assigned the agreement with Kartu Bank on AbsoluteBank yielding rights and requirements about putting the debt aside. Levan Nozadze the Administrator of AbsoluteBank had been presenting the bank at that process. Kartu was presented by Chairman of Managerial Board George Chrdileli.
According to statement by Irakli Managadze the President of National Bank of Georgia (NBG), the document on merger of banks implies that Kartu Bank purchases actives and passives of the AbsoluteBank, which is the first in Georgian banking history. Till now, creation of temporary administrative commission was followed by liquidation. Purchase of AbsoluteBank and its liabilities by Kartu Bank creates the guarantee of securing the customers’ interests. Finally, that will support maintenance of Georgian banking system. Otherwise, it could damage the confidence of population to Georgian banks. As Managadze declared, important here was the support by media, as it did not gave a background for panic and uncertainty.
As to opinion of NBG presenters, overtaking the existing during past 7 months environment in AbsoluteBank caused by scales of deposits in the accounts, had been the priority of National Bank. Bank had been working in special regime: with an establishment of certain limits, bank was given an opportunity to use the reserves of National Bank to serve for customers, bank was apportioned with special rehabilitation credit line. National Bank had been negotiating with European Reconstruction and Development Bank. So does it now. According to statement by George Chrdileli, all current accounts will be restored. Within the process of acquiring the active-passives of bank, interests of all customers will be kept at all. In this case, losers will only the founders be, as at the moment of purchase, capital of AbsoluteBank was negative.