Economist Nika Alavidze believes the purpose of the proposed amendments to Georgia’s Law on the Activities of Commercial Banks is unclear. Speaking to BMG, he said the existing licensing rules do not prevent new players from entering the banking sector or hinder its development.
Alavidze did not rule out the possibility that the government may have specific interests behind the planned changes, particularly as the amendments would further expand the powers of the National Bank of Georgia (NBG).
“This is change for the sake of change. The current version of the law does not restrict anything or hinder the development of the sector. Georgia’s banking sector is one of the most successful and developed in the region and has, over time, become an innovator on the global market as well. Alongside the two major banks, our market also has developed medium-sized and smaller banks. There is no sound reasoning behind why these amendments are being introduced. The explanatory note to the bill does not fully reflect the reality behind the initiative,” Alavidze said.
He argued that the amendments are unnecessary and represent a political rather than an economic or business decision. Alavidze also warned that expanding the NBG’s discretion would create additional risks, as the regulator would have greater authority to determine which countries’ banks and capital can enter Georgia. “This carries a greater risk of causing harm than producing positive effects,” he said.
Parliament has approved the proposed amendments to the Law on the Activities of Commercial Banks at the first reading. Under the bill, foreign banks operating in countries deemed trustworthy and holding a credit rating acceptable to the NBG or higher would be able to establish branches or subsidiaries in Georgia and obtain banking licenses through a simplified procedure. The bill’s author, Shota Berekashvili, says the aim is to increase competition and make borrowing more affordable, while NBG President Natia Turnava has said the changes would encourage new financial institutions to enter the Georgian market.
