C.Bank Chief Slams Bill on Banking Supervision

Central bank chief, Giorgi Kadagidze, criticized the bill, which would remove banking supervisory functions from the National Bank of Georgia (NBG), and welcomed President Giorgi Margvelashvili’s intention to veto it.

“It will damage the [banking] sector and it is already damaging investors’ attitudes,” Kadagidze told journalists on July 28.

“This bill is fraught with a serious threat. It does not even hold water from the technical, legal point of view as there are numerous provisions open to interpretation, which will create serious problems. I think it is not in line with the constitution and not in line with Georgia’s Association Agenda with the EU. It has been fiercely criticized by the international organizations. It is obvious that the only goal of this bill… is to weaken the National Bank, as well as to downgrade the role of the President,” he said; according to the bill the President will have no say in the process of nomination and appointment of board members of the banking supervisory agency, which will be removed from NBG.

“Our position is that this bill should not go into force. Not a single self-respected economist can assess it positively,” Kadagidze said.

The bill has not yet been formally vetoed. But president’s administration has announced about working on objections, that involves drafting of an alternative bill. It means that vetoing of the bill, adopted by the Parliament, is imminent. The Georgian Dream ruling coalition has enough seats in the Parliament to override the presidential veto.

“We welcome presidential veto, which is expected. We think that the veto will be an opportunity for parliament members to revise their decision,” Kadagidze said, adding that the central bank had consultation with the president’s office in drafting of objections.

Economy Minister, Giorgi Kvirikashvili, told journalists on July 28 that the adopted bill “is really in line with the international standards”; he rejected criticism of the bill as a “speculation, which aims at halting the process” of removing banking supervisory functions from the NBG.

Although the bill has been amended, as Parliament speaker Davit Usupashvili said on July 16, to put it in line with international financial institutions’ recommendations, the key principle of removing banking supervision from the NBG remained unchanged. 

IMF, EBRD, Asian Development Bank (ADB), and the World Bank said in “Georgia’s case, moving banking supervision out of the NBG does not seem prudent.”