Georgian Banking Sector Overview Q3 2018

Georgian Banking Sector Overview Q3 2018

This report summarizes and analyzes the financial results of the 15 commercial banks of Georgia for the 3rd quarter of 2018, as well as provides some insights into the recent developments in the sector.

Irina Gevorgyan

Partner, Advisory

KPMG in Georgia

Georgian Banking Sector Overview Q3 2018

General highlights

In July 2018 JSC International Bank of Azerbaijan (IBAR) - Georgia has taken decision on cancellation of banking license and transformation into non-bank organization.

In May 2018 demerger of BGEO Group took place. Following the demerger, Bank of Georgia Group (banking business) and Georgia Capital (investment business) started operating separately, leaving BOG, Galt&Taggart and BNB (Bank in Belarus) operating as Bank of Georgia Group.

A member of supervisory board of Liberty Bank – Irakli Rukhadze announced that Liberty Bank is planning on acquiring Cartu Bank. Timing and other details of acquisition are yet unknown.

Since June 2018 Liberty Bank is serving corporate clients providing the operational services, payroll programs, deposits and certificates, business cards and remote channels services. Opening a corporate account is available at any of 181 service centers and is handled by a banker who is available to corporate clients.

According to the new National Bank of Georgia (NBG) regulation from September 2018 commercial banks are obliged to report their leverage coefficients to NBG monthly. The aim of this rule is prevention of accumulation of excess leverage in the banking sector.

By the end of 2018 NBG plans to enforce new regulations by introducing new crediting restrictions:a. 15-year limit on mortgage loans, b. 10-year limit on consumer loans secured by real estate, c. 6-year limit on auto loans, and d. 4-year limit on all other types of loans. Additionally, financial institutions will be obliged to follow certain required procedures to examine solvency of their clients prior to issuing loans. The same regulation introduces limits on PTI and LTV coefficients.

In September 2018 NBG approved Corporate Governance for commercial banks. The code is based on international practice, including guide on the governance from Basel Committee on Banking Supervision, principles of corporate governance of the Organization for Economic Cooperation and Development (OECD), acting directives of the EU and various researches. Banks have to bring membership of their supervisory councils and subordinated committees in compliance with requirements of the code no later than 31 December 2019. By 1June 2019, they have to bring their charters and related policy documents in compliance with the code.

In October 2018 NBG and China Banking and Insurance Regulatory Commission have signed a memorandum on cooperation. Under the memorandum, the parties have agreed to ensure information exchange on permanent basis and tight cooperation in the banking sector supervision field.

In May 2018 TBC Bank launched its own cloud-based, digital-only neobank - SPACE. The application offers various online banking products, such as remote account opening, money transfer, bill payments, etc.

In October 2018 TBC Bank bought BONACO MFO. The portfolio was purchased via the auction held on October 29. BONACO MFO had been in liquidation according to NBG’s decree.

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