Banks’ Mortgage Rights Will Be Restored
08 March, 2012

Mortgage rights of banks will be equalized with the tax lien again. Due amendment bill to the tax code is already initiated by the government and presented for parliamentary procedures.  


The governmental initiative approved by Parliament Bureau sitting on February 27 aims to restore the equal creditor right of banks on double arrested mortgage collaterals. This right was seized from banks by end-December of 2011 under similar governmental initiative in favor of the state leaving banks vulnerable to risks and

affecting Georgian investment climate as a consequence.

As a matter of fact the seizure of equal mortgage creditor right off banks meant that if property of tax-payers was under double-arrest of the Revenue Service (RS) and banks, in insolvency case banks could claim for their lien only after the state even if they attached the questioned property as a collateral to the disbursed mortgage loan before the RS imposed a lien.

The point is banks very rare disburse a mortgage loan if its collateral is under tax lien already while tax service always charges a property by lien even if it has previously been charged by bank lien. Therefore banks chronologically are almost always first creditors and the seizure of this first creditor right might give a powerful impact on banking sector international non-governmental watchdog International Transparency Georgia (TI Georgia) as well as Georgian investment groups warned:  the loans given to the Georgian banks or non-banking entities (industrial companies, etc.) by international financial institutions (IFIs) would bear serious risks and the credibility of Georgian financial institutions as business partners be undermined on the international level that was supposed to lead to more expensive credits and dwindling investments.

Levan Surguladze, Head of the investment bank Caucasus Financial Service, feared Georgian banks and other financial institutions could no longer rely on the assets of borrowers as collateral because there was the possibility that this collateral could be superseded by a tax lien even if the borrower had no tax obligations at the time the financial institution’s collateral was registered. Georgian banks might face risks while borrowing at the international market as International Financial Institutions (IFIs), therefore the banks were likely to request additional collateral and fix higher interest rates.

Actually government did not provide with any explanation why the first mortgage creditor right was revoked in this past December or is to be restored again now.

“This bill is just initiated and actually I cannot say anything more than that of its motivation and reasons at the moment,” Giorgi Khuroshvili, Parliamentary Secretary of Georgian Government, said in the interview with Georgian Journal.

Officially the explanatory note of the questioned bill stipulates that the issue of streamlining creditors’ priority rose in frames of partnership of Georgian government and business sector   and is solved in the bill. However, in private talks experts say that government restored banks creditor right under pressure of international financial institutions as well as both foreign and Georgian business associations. And Nika Gilauri, Prime Minister of Georgia, confessed that they made wrong decision during traditional annual meeting of government and business community in Batumi on February 18-19, 2012. Gilauri promised to retrieve the legislative defect and kept his word.

Georgian economic analysts believe that the first creditor right seizure had a political lining aimed to undermine Cartu Bank assets owned by Georgian tycoon Bidzina Ivanishvili who came out as a political opposition past fall. Out of 19 commercial banks operating at Georgian market Cartu together with Progress Bank [owned by Georgian legionary of football club “Milan” Kakhi Kaladze also appearing as a political opponent of Georgian government where Ivanishvili bought up to 9% past fall], where the only banks that remonstrated the risky change in the tax code. Others turned blind eye.

Nodar Javakhishvili, Director General of Cartu Bank, assured the tax lien change was additional tool of political pressure on Cartu Bank that was suspected in alleged money laundering action and put under the probe of the National Bank of Georgia (NBG) in mid-October of 2011.

As a matter of fact Cartu turned out the single bank that suffered of the questioned change. TI Georgia having researched the impact of the priority mortgage right change came to this conclusion. The international watchdog sent requests to leading six Georgian banks including ProCredit Bank, TBC Bank, Bank of Georgia, Bank Republic, Cartu Bank and Liberty Bank inquiring whether or not the collaterals of their debtors were auctioned to pay off tax lien starting the prvilged creditor right was granted to tax service Only two ProCredit Bank and Cartu responded to the request. ProCredit said no.  According to media reports, as of January 29, 2012, TBC Bank also was spared.

The story for Cartu Bank is different. Between the date the amendments to the tax code entered into force (October 28, 2011) and January 27, 2012, tax authorities discovered tax debts of 16 of Cartu Bank’s debtors, all of which arose before the registration of the bank’s lien on the debtor’s property which (49 lots) were auctioned to satisfy the tax debt for half market price.

Nevertheless, in most cases, there was no buyer at the auctions and the state became the owner of the assets. There were two cases when a person bought the property, but in these cases the auction price was not paid and, ultimately those assets were transferred to the state as well. According to the information received from Cartu Bank, the aggregate market price of the auctioned properties makes GEL 112.883 million.

The point that the burden of the change has fallen only on one bank, makes TI Georgia think that these laws were applied selectively.

“However, without information from other major Georgian banks, it is difficult to say for sure. We hope that those commercial banks which have not yet responded to us will make information concerning these regulations public, in order to shed light on this important issue,” TI Georgia announcement of March 2, 2012 reads. However neither of banks did respond to date.

Other Stories
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.
Equivalent to buried treasure – resources that are underused in Georgia
For 2018 the IMF Commission has forecast an annual economic growth for the Georgian economy of about 5,5%.
Does the quality of Georgian wine increase and how the export affects it
If we look at the data collected about modern Georgian wine, we will find out that the Georgian wines produced between 2015-2017 are much better in terms of their quality and Oenologic features rather than the wines produced between 2009-2011.
Japan simplifies the visa requirements for Georgian citizens
Diplomatic and economic relations between Georgia and Japan are now moving to a new phase. Recently Japan has decided to simplify the visa requirements for Georgian citizens.
M&S (Marks and Spencer) and H&M collections to be produced in Georgia
Garments manufacturer MGMTEX will start production of the M&S and H&M trendy collections from this September.
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.
Exchange Rates
GEL Exchange Rate
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
November 2018
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30