Central Bank Accused of Political Crackdown
01 December, 2011
Central Bank Accused of Political Crackdown

Progress Bank owned by Kakhi Kaladze, Georgian legionary of football club “Milan”, in Georgia perceives the underway probe  of the National Bank of Georgia as a part of political  crackdown on Kaladze and Georgian billionaire Bidzina Ivanishvili [who has recently acquired about 9% shares of Progress Bank and plans to increase the share to 25%] as both oppose  the government.

No sooner Ivanishvili, owner of Cartu Bank where the National Bank of Georgia (NBG) assigned a two-month long on-site inspection on

October 19, 2011 under alleged money laundering suspicion, purchased about 9% at Kaladze’s Progress Bank a fortnight after the NBG launched the financial probe of the bank the next day the purchase transaction was completed.

On November 24, 2011 Kaladze put an announcement on his facebook page accusing central bank of a banking terror.

“This is a follow-up to the banking terror implemented through the NBG at Cartu Bank that now involves Progress Bank too,” Kaladze’s announcement reported.

Kaladze also criticized the incumbent government for applying foul means to detain power, for practicing the policy of stick and carrot against its people meantime addressing to “carrots’ only in the pre-election period, called the post-rose-revolution years as an era of overwhelming nihilism and ruined hopes, and pledged to uphold Ivanishvili’s campaign to change government through constitutional means.

“We share the public opinion that this is a chase after Ivanishvili’s business,” Otar Chrdileli, a spokesperson of Progress Bank told Georgian Journal. “The similar probe was launched at Cartu Bank shortly before this and they assured society that the probe aimed at inspection of bank’s financial affairs and was no crackdown on Ivanishvili’s business personally. However no sooner Mr. Ivanishvili purchased shares at Progress Bank and next day the NBG entered under the similar probe excuse. Yes, it is a crackdown on Mr. Ivanishvili and Mr. Kaladze. It is an open secret that these two people do not share governmental course, moreover they manage to be decent opponents, accordingly the NBG politicized the business and presses on their banks.”

The NBG addressed to its legal right to probe financial affairs of Cartu as a consequence of cash seizure accident on October 18, 2011 when Georgian law enforcers caught Cartu encashment group  under  alleged money-laundering attempt when the group executed two standard banknote deals with the Bank of Georgia (BOG), and transferred USD 2 million and EUR 1 million through their partner banks of Deutsche Bank Trust Company Americas, Citibank International and Commerzbank in the US and Germany respectively.

Nodar Javakhishvili, Head of Cartu Group and Chairman of Supervisory Council of Cartu Bank, claimed the cash seizure was a part of political pressure on Ivanishvili as a consequence of his political inactivation early in October as far as the standard banknote transaction implemented through reputable global partners was questioned only by the NBG. Besides BOG, through which Cartu implemented encashment is still not involved in the affair.

Moreover, the NBG inspection did not provide with any detailed probe-program neither at Cartu nor at Progress banks that is an obligatory document during inspection any financial institution not only banks, sector pundits say.

“Inspection program is not my caprice it is the best world practice. Barclays Bank for example is 300 years old and is the UK central bank supposed to inspect its papers starting 1701 during a regular probe?” Javakhishvili asked GJ. “If the NBG does not have an inspection program how did it outline the inspection timelines, how it knows that the inspection will take 2 months?”

Javakhishvili claims that the NBG inspection team supervises not the completed transactions of the bank but preliminary operations [so claims Chrdileli of Progress Bank] that opposes to international guideline of banking supervision and regulation of CAMELS quoted by Giorgi Kadagidze, President of the NBG, as the key regulation based on which the NBG supervises banks and that laid ground to launch the probe at Cartu after its management team quit one day after ten years of office-term.

The NBG does not make any comment on repeated inquiries of GJ.

“The NBG cannot make comments due to confidential nature of the issue,” Kakha Barabadze, a spokesperson of the NBG said.

However in his official statements Kadagidze counterclaims Javakhishvili and accuses Cartu Bank in politicizing the issue and withholding access to information for the inspection team. Moreover, in his TV appearance at the Public TV Broadcast program Accents, Kadagidze accused Cartu in using bank infrastructure for political purposes like collecting signatures at the Bank’s branch-offices, and spreading political announcements that is not acceptable for commercial banks by regulation.

Cartu probe deadline expires on December 19, and if the NBG does not stop its crackdown Javakhishvili does not rule out to go to the World Bank and the International Monetary Fund headquarters in Washington to clear the situation with the NBG.

On the other hand, Ivanishvili plans to enhance his shares at Progress Bank to 25% tentatively. The deal on share enhancements is already agreed, sides confirm but it also required the NBG consent to which partners did not refer as of yet.

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