The FINANCIAL — “The market currently has several leading banks, but they will lose their positions soon as a result of the fairness policy of the new government,” Nodar Javakhishvili, General Director of Cartu Bank and candidate for President of Georgian National Bank, said in an exclusive interview with The FINANCIAL. “Cartu Bank won’t become a new leader by supporting the government, that’s for sure,” he said.
According to Javakhishvili, distributing pensions and state salaries won’t belong to just one bank either. This function will be shared between several banks as an aspect of healthy competition. This will firstly affect Liberty Bank, which is run by Lado Gurgenidze, former PM.
Q. Is Cartu Bank getting back the clients which it lost over the last year?
A. Lots of our previous clients want to come back, but the Bank does not have its financial resources. The Bank is having some financial problems. They are quite huge clients and we can’t satisfy their financial needs at present. Demand for loans is quite big as well but we are not issuing them because of this problem. Cartu Bank doesn’t have any financial capability at the moment. This fact also illustrates why Ivanishvili won’t let there be a monopoly in the banking sector.
Q. How would you estimate the current situation in the banking sector?
A. Banks are somehow divided into two parts. The government directly interfered in the business of some banks and even had shares in them. The second half of banks wouldn’t dare show any resistance to the government’s criminal activities and therefore somehow remained passive banks, those which aren’t developed very much. As a result of the government’s direct interference in the country’s banking sector, banking confidentiality has been totally lost. The government even had control over cards issued abroad. Banks participated in the processes of bankrupting different companies to protect the government’s interests. This has been harming the economy and especially the banking sector of the country. Ultimately society has lost its trust in banks. The situation needs to be changed urgently.
As well as all this, the government was also fighting against Cartu Bank. Negative activities against any bank are dire for the image of the country globally as well as for the development of the sector.
Q. In your opinion, what has to be changed in banking and how?
A. To implement changes first of all you have to take a position. So I can’t say exactly for the moment. In my opinion, the management of National Bank of Georgia has to resign. First of all, National Bank of Georgia has to be independent from the government and only in this case will the banking sector have the possibility to develop properly. After this the process of development will start automatically. The parts of the process are somehow related to each other and will change for the better after the appearance of independent commercial as well as national banks. Business needs interference from the government, but only according to the country’s legislation. So National Bank of Georgia will support the banking sector for its successful operation.
Q. You were the President of National Bank of Georgia in the past. Please compare that period with now, what are the similarities and what are the differences?
A. These are totally different periods. But I can compare them in terms of the problems. When I became the President of National Bank of Georgia in 1993, the central bank didn’t exist either in reality or in legislation. There were 230 banks operating in the market with only USD 500 officially as their capital. But in reality they were playing with millions. I and my team managed to create a banking system from scratch and everything was going quite well when I left the bank.
Currently the main problem is that banks are not independent from the government. But I think that everything can be improved. Motivation is the main issue as practice shows. I encouraged the team to work in terribly cold winters for just USD 4 a month and the results were great. Their job was appreciated later when the sector starting operating properly. This has to be done now as well.
Q. Do you think that interest rates on loans in Georgia are high? Do you plan to implement changes in this direction?
A. Yes, the interest rates on loans are high. But when discussing this we have to compare it to others. If we compare the interest rates on the loans to those on the deposits, we can easily see that they are in accordance as both of them are high. This is the current policy of the banks. If the interest rates on the loans are reduced, then those on deposits will definitely be reduced as well. This is an automatic process.
Q. Larization is one of the main priorities of National Bank of Georgia’s current strategy. Do you plan to continue this?
A. Larization is essential for Georgia. Having a strong currency is one of the signs of a country’s identity. To tell the truth, the current management of National Bank of Georgia only say that they are trying to increase the share of GEL in loans and deposits. I can’t see any real activities in this direction. The GEL will become a strong currency soon though.