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no longer rely on the assets of borrowers as collateral because there was the possibility that this collateral could be superseded by a tax lien even if the borrower had no tax obligations at the time the financial institution’s collateral was registered.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
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
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
July 2019
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 31