Relaxing banking licensing requirements alone is unlikely to persuade reputable international banks to enter the Georgian market, Giorgi Kepuladze, founder of the Society and Banks, has told BMG.
Commenting on proposed amendments to the Law on the Activities of Commercial Banks, Kepuladze said increasing competition in the sector was a positive goal. However, he argued that Georgia’s relatively small market would remain a major obstacle for international lenders, noting that several foreign banks had previously withdrawn from the country for this reason. Georgian banks themselves are seeking opportunities in neighbouring countries and other international markets because of the limited number of customers and lending opportunities at home.
Kepuladze also questioned how much competition a single foreign bank branch could bring to a market dominated by two major lenders. He said it was possible that members of the ruling Georgian Dream party had business interests behind the proposed changes, although he stressed that the motives were unclear. He called for greater transparency about how the reform would actually increase competition.
Parliament has approved the proposed amendments to the banking law in its first reading. Under the changes, foreign banks operating in jurisdictions considered reliable and holding credit ratings acceptable to the National Bank of Georgia would be able to establish branches or subsidiaries and obtain licences through a simplified procedure. The bill’s author, Economic Policy Committee Chair Shota Berekashvili, says the aim is to increase competition and make borrowing more affordable, while NBG President Natia Turnava believes the changes will encourage new financial institutions to enter the Georgian market.
