Georgian President Minds Russian Banks
07 March, 2013
Georgian President Minds Russian Banks
Presidnet of Georgia, Mikheil Saakashvili, bewares of likely entry of Russian banks into Georgian banking sector as hazardous for Georgian economy and population. Sector pundits find his statement irresponsible and affecting the image of Georgia and its banking sector. Georgian president looks so concerned over possible entry of Russian banks into Georgian reality that he disseminates the false information about alleged handover of leading Georgian banks such as Liberty Bank and TBC Bank to Russian giant banks Alfa Bank and SberBank
respectively.
“Alfa Bank, one of the biggest Russian banks, closely affiliated with the Kremlin, buys TBC Bank, Cartu [owned by the family of Prime Minister of Georgia Bidzina Ivanishvili, who earned his billions in Russia before he joined Georgian political life -GJ] is already a Russian bank, Gazprom Bank is intent on buying several Georgian banks. We should understand that 60-70% of Georgians is tied to those banks through their credits, mortgages, etc. Georgian authorities declare that economy will go down. If there is no growth, people fail to pay off credits, the banks will seize their property,” Saakashvili said during his meeting with Georgian media that was aired by TV channels on February 26, 2013.
The President warned that Ukraine is already facing that problem as 70% of Ukrainian capital is in Russia’s hands, which prompts Europe to have “cold reaction” to Ukraine. According to Saakashvili, he spoke of the entry of Russian banks based on the information of the National Bank of Georgia (NBG); however, the NBG as well as the Georgian banks in question refuted the information. Both Liberty Bank and TBC Bank instantly, against the backdrop of the ongoing press-conference where Saakashvili starred, spread the counter-information stating that they hadn’t either sold out their banks or were planning to divesture them to the referred or any other Russian banks. The NBG disclaimed the presidential statement on the second day, stating that “it has no information about possible divesture of share of Georgian commercial banks that were named at the TV press conference.” Press-centers of SberBank and Alfa Bank also refuted any ongoing or upcoming negotiations on acquisition of the shares of Georgian banks, Inter-Press news agency reported. Later Saakashvili said “sorry” for voicing mistaken information although he insisted that Russian banks are interested in purchasing Georgian banks and he just confused the names of the banks.
“If I named banks incorrectly, it was not a deliberate action, I did not want to create problems to the banks,” Saakashvili said on February 27, 2013.
However, he created problems. Georgian authorities as well as economic analysts assessed the Presidential lie as unethical and irresponsible since negative statements of high-ranking officials might inflict an irretrievable damage on the said Georgian banks.
“This presidential statement was an outrageous sabotage. When the President goes and announces about banks’ handover, it may lead to the bankrupcy of the banks, clients may panic and demand their money. There are such instances in the world practice. Fortunately, Georgian clients did not react that way,” Irakli Lekvinadze, the economic analyst, said.
According to Giorgi Kvirikashvili, Minister of Economy and Sustainable Development of Georgia, who was director general of Cartu Bank just a year ago, banks are ten-fold sensitive businesses and statements should be made carefully. He reminds Saakashvili that he was the one who approved entrance of Russian VTB Bank in United Georgian Bank (UGB) in 2005 when UGB covered 10% of entire Georgian system. The sector pundits also indicate on divesture of state property with strategic importance to the state-owned Russian companies such as gold exploration and procession industry, electricity and water distribution networks of Tbilisi. Besides, the Czech-based company that privatized electricity distribution network in regions is supposed to be a front figure to Russian capital. Saakashvili’s government was intent to divesture the Georgian portion of the North-South gas pipeline running from Russia to Armenia and only interference of the White House changed their mind.
“I wonder that Saakashvili who has been handing Georgian companies to Russian companies for 9 years of his office term is wary of Russian capital inflow in Georgia now,” Demur Giorkhelidze, an economic analyst said. “As a result Russian capital is so heavily represented in Georgia that addition of two more banks cannot aggravate the situation. The more so that Alfa Bank is a very successful bank with good management and it may do only good to Georgia distorted banking system if this bank enters here with its financial policy and skills.”
According to him, Saakashvili’s regime is responsible for creation of a vicious banking system in Georgia monopolized by couple of favorite banks that finance only their own affiliated businesses and enjoy huge profits rather than to finance economy.
“Russian banks disburse credits at 11-12% as cap interest rates and aim to cut to 9-10% while rates of Georgian banks start from 12% and go as high as 24%. It will be great if they enter here and cut down credit price,” Girokhelidze said.
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