The FINANCIAL — Georgian banks are offering new products to bring back the depositors they lost since the August war. Archil Jacobashvili, Associated Professor of Georgian-American University (GAU), says the best incentive for depositors is offering them attractive rates of interest on their savings and during the ongoing crisis, depositors should also feel that their savings are safe.
“Georgian banks have already offered some guaranties on savings: investing money in well-performing and safe assets, like gold. They also introduced deposit insurance which works in many countries. This will increase confidence among depositors,” Jacobashvili says.
“Georgian banks have not increased interest rates on deposits since the August war,” Akaki Tavadze, teacher of the Management Programme of Tbilisi Free University, ESM Tbilisi, says.
“Issuing credits is still restricted in Georgian banks. Banks have the chance to finance business loans but it’s still a risky business. It’s not clear whether the banks really need deposits as they have not increased interest rates on deposits, which can help to attract new customers.”
“Georgian banks faced problems related to financial resources last year,” Tavadze says. “In January banks raised interest rates on credits. When in December of 2007 People’s Bank faced the problem of liquidity, the Bank offered 14% customer’s interest on deposits in EUR.”
Tavadze thinks that customers have maintained their faith in banks as they have kept up stability during the hardest time of the recession. “People don’t know where to keep their money. They can’t invest in real estate, but they are afraid to keep their money at home also. That is why people have started bringing back their money to the banks.”
Jacobashvili says that introducing new products may be another way to attract new depositors and this is what some Georgian banks are doing right now.
Bank of Georgia has introduced an Investment Deposit, which provides the depositor with a guaranteed interest rate plus additional interest. This additional interest depends on the change in price of Gold and Oil and EUR/USD exchange rate.
TBC Bank’s Gold Deposit is insured by gold purchased by the Bank. The depositor is guaranteed a 9% rate of interest and additional interest depends on the percentage change of the price of gold. The depositor may earn an additional maximum 7% on his/her saving.
Bank Republic, Societe Generale Group, has launched the “Megobari” deposit, which has very flexible terms: you can add or withdraw money from your savings account at any time. What is remarkable, you earn 2% interest even on money already withdrawn.
“The types of deposits which Georgian banks are now offering their clients are popular in other countries as well. Some of them already had such services before our banks introduced them in the domestic market, while others are only launching products like these in the present. This structure works quite well and is a cause for their popularity,” Jacobashvili declares.
Jacobashvili, GAU, says that each of the abovementioned types of deposits are attractive in some way, however flexibility of managing the deposit seems to be the most important factor. Nevertheless the different types of deposits are still largely popular.
“Banks reacted quickly to the process of deposit withdrawal. Bank of Georgia was the first to start insuring Oil Deposit. Gold Deposit was offered first by TBC Bank,” Tavadze, ESM, notes.
“Banks can’t issue credits at the moment. That’s why they started increasing their interest rates on different services, including on money withdrawals from ATM machines,” Tavadze says.
“Since its opening in June 2008 HSBC Bank Georgia has offered its customers three types of products to save money: Time Deposit, Deposit with Interim Interest Payment, Savings Account. All are interest-bearing accounts,” Maka Gvritishvili, Marketing, Communications and Corporate Sustainability Manager of HSBC Bank, told The FINANCIAL.
As the main advantage of HSBC, Gvritishvili underlines an international authority that HSBC Bank gained worldwide. “HSBC is one of the strongest capitalized banks in the world which operates in 85 countries. HSBC Group is recognized as one of the safest deposit-takers in the world by ratings agencies and other experts; by governments; by the global media; and by all our 100 million customers worldwide.”
Interest rates on HSBC products have not changed significantly since its opening.
“Interest rates differ according to currency and maturity terms. For time deposit with 12 months maturity period, the following interest rates apply: GEL – 9%; USD – 6%; EUR – 4%; GBP – 1.4%,” Gvritishvili says.
“Depositors have to be careful in their dealings with banks. Not only because of the risks related to the current financial crisis,” Jacobashvili declares.
“According to the law when financial organizations face problems there are some kind of privileges and depositors are among one of the last privileges,” Tavadze says.
Written By Madona Gasanova
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