Cartu Bank Destined To Go Bankrupt
19 July, 2012
Cartu Bank Destined To Go Bankrupt

Cartu Bank is destined to go bankrupt due to politically aligned regime enforced since July 11, 2012. Its bankruptcy is supposed to have a double impact on the country by undermining its investment climate and affecting local banking sector. 

 

The forced management regime introduced by the National Bureau of Enforcement (NBE) at Cartu Bank, once owned by Bidzina Ivanishvili, a billionaire leader of oppositionist political coalition Georgian Dream, is supposed to lead Cartu Bank to bankruptcy.

NBE seized 100% of Cartu Group

including the 100% of Cartu Bank within itself as well as 21.7% held by Ivanishvili at Progress Bank to impel him pay off the GEL74 325 065 penalty imposed for alleged breakage of law on Party Financing.

Ivanishvili refuses to pay for he finds the penalty unfair. Moreover, he assures that he does not appear the beneficiary owner of Cartu Group as he handed his shares to 16 foreign offshore investors companies by May of 2012. Consequently, the questioned property is arrested illegally and cannot impel Ivanishvili to pay.

Nevertheless, NBE put the illegally arrested assets along with the Progress Bank shares at auction on July 2-10, 2012 but no bidder turned around for either assets.

Before expiration of auction date lawyer of Cartu Group foreign stakeholders assessed the auction as expropriation of foreign investments and appealed to Georgian authority to stop the auction unless stakeholders would appeal to the international court.

But the statement sounded as the voice in the wilderness. However the auction failed and experts expected another auction to be announced but failed.

Authorities chose to pass the property to the forced management that implies appointment of a new manager at companies under enforcement and incremental payment of money to the creditor. Until termination of forced management the new manager has all rights of the owner, whereas the property still belongs to the owner.

Vladimer Ugulava, Irakli Zarkua and Roin Tsitsishvili make the new supervisory council members of Cartu Bank with Ugulava as the President and General Director.

New management did not disclose its strategy as of yet. Uncertainty and old faces [having dealt with other politicized bank-bankruptcy schemes] in new management lays ground to speculations that Cartu is destined to go bankrupt.

Otherwise authorities might apply to less scandalous and more effective tools to impel Ivanishvili to pay the penalty.

“If the state was really interested in the penalty payment it could bypass all these scandalous property arrest, auction, infringement of foreign investors’ rights and levy the questioned money through encashment system from Ivanishvili’s account alone without much noise and affecting other stakeholders,” said Ditrikh Muller, a financial analyst with Georgian Investment Group, “But the bad thing is the issue is politicized and real purpose is Cartu’s bankruptcy.”

Lia Eliava, a financial analyst, believes since the forced management is assigned Cartu Bank will be led to bankruptcy and sell out.

“That’s a completely political game. The state did not take over Cartu property into its ownership for it could not make bankrupt its property. Now they will lead Cartu to bankruptcy and sell it out. What’s going on with Cartu is beyond economy and comments,” she said.

Experts fear the Standard Bank scenario will be duplicated.

Zarkua was a member of temporary administration at Standard Bank [owned by late political tycoon Badri Patarkatsishvili] that went bankrupt in 2007 after Patarkatsishvili entered politics as an opposition. The NBG assigned as temporary administration at the Standard Bank, arrested its accounts and led the Bank to bankruptcy.  Giorgi Kadagidze, the incumbent President of the NBG, was the head of that temporary administration at Standard Bank. Zarkua was a member of financial inspection the NBG assigned in Cartu Bank by end of 2011.  Tsistishvili was a liquidator of the Maritime Bank in this past spring. Only Ugulava, with his backgrounds in governmental and non-governmental as well as private sector activity prior-and-post-rose-revolution periods, seems more or less neutral. But he still did not spell a word of management strategy. Besides he is in a bad company: the trio of Kadagidze, Zarkua and Tsitsishvili makes experts alert.

Eliava presumes authorities need Cartu bankruptcy to cut funding channel to its key political opponent Georgian Dream in the parliamentary elections scheduled this October. But Muller thinks there are other much simpler tools besides bank transfers to get due financing and finds Cartu bankruptcy absolutely unreasonable move from both political and economic points of view.

“First and foremost it will affect the image of the ruling party and I cannot understand how they think to attract USD 4 billion of investments as the new PM plans after that. Politicizing economic things scares investors off for they no longer can be sure their assets in Georgia are safe, that if the ruling party does not like some other investor tomorrow it can expropriate its property too. The more so that Cartu is not the single precedent,” he said.

Except Cartu and Standard banks, there were other banks that suffered from mind-change of Rose-Government during its first office-term. Such volatility of approach undermines trust of local people toward Georgian banks that may face competition problems.

As a matter of fact clientele of Cartu Bank is standing in long queues since the Bank was subjected to the forced management to withdraw their deposits. That can be contagious, Muller warns.

“People may think that other Georgian banks favored by government now can also face difficulties tomorrow if government changes, or the incumbent authorities do not like someone. Ultimately, they will prefer to keep their money home or make saving at foreign-based banks operating in Georgia that are less vulnerable for they have foreign founders and  Georgian banks may face problems,” Muller elaborates.

As to progress Bank, it has a chance to escape more or less unscratched as only 21.7% of it is at the stake and forced management cannot get its full control at hands.

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
23.09.2018
24.09.2018
USD
1
USD
2.6216
2.6216
EUR
1
EUR
3.0854
3.0854
GBP
1
GBP
3.4584
3.4584
RUB
100
RUB
3.9340
3.9340
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6216
EUR
1
EUR
3.0854
GBP
1
GBP
3.4584
RUB
100
RUB
3.9340