President (National Bank of Georgia)

“The main goal is to maintain the stable prices in the country”

Earlier hundreds of banks were created in Georgia within a very short period of time and people had very little idea what a bank was supposed to do and many of the banks were used as the devices for taking deposits from people and then loaning money to the friends or the owners of the banks.

There was also an episode when banks began to offer impossibly high interest rates and many unsophisticated people put their life savings into the banks and then when the banks collapsed they lost everything. That is sad history and Georgia is not the only country where that kind of history occurred.

Certainly for those people who lost their money, there is the reason to be cautious about banks but since 1997 when Georgia had created the National Bank system is very stable and responsible banking institution that operates on banking principles that are pretty much the same as the banking principles that are in use anywhere else in the world. “We pay big attention to transparency and we meet international requirements regarding tools against money laundering; we have small banks but with big reputation,” President of National Bank, Roman Gotsiridze, said.

- Could you contextualize National bank and financial sector of Georgia and speak about the history of Georgian National Bank?

Right after gaining the independence the first parliament passed a law on a banking system and 15 years ago two banks were established: national bank and commercial banks. But the banking system was shaping up in hard times as we had civil conflicts, aggression from Russia, war in Abkhazia and South Ossetia and there was a period when there existed 200 banks in Georgia. But today there are 18 banks operating in Georgia meeting the international standards and bank system is very solid now.

- How is the structure of National Bank?

We are independent bank; we do not subordinate anybody, especially executive branch, we are just accountable to the parliament. The board of government of the national bank consists on 9 members, one from the in president and three vice presidents, and member of the board can not be a public servant or member of the government or any other state institutions that is serious sign for institutional independence. We have eight regional branches, have very high professional staff and one of the most important directions that we follow is that we constantly focus on refining their qualification

- What are the main goals for the bank right now?

The main goal is to maintain the stable prices in the country, to have low inflation within 5-6 percent, and to start sweeping reforms, big structural changes and the main goal is to facilitate macro economic stability, to maintain stable banking system and we have been successful in achieving these goals within this last years. Many experts say that there is banking boom here.

- Last year Georgian economy growth was 9.3%. What affect has it had on a financial sector?

Well, the mentioned economy growth was supported by financial sector as well and development of banking system but the growth created the new demands like control on credit resources, the banks acquired international ratings like Fitch Rating for instance that has developed a unique procedure for assessing banks and these factors gave additional opportunities to attract capital, for example TBC bank received 35 million USD for City Bank, earlier the Bank of Georgia received 25 millions, so due to confidence growing Georgian banks acquire mere assets.

- What is your strategy to attract foreign investors?

First that attracts the foreign investor is political stability in the country, low corruption rate, good tax system and of course good projects. The reserves of the national bank is growing, it doubled in two years and reached 550 million dollars. Within last two month we sold big state enterprises and from this process of privatization we will get half milliard USD and till the end of this year this data will double as well. This additional capital inflows which is very good, needs very good management and the national bank had enough instruments to deal with it.

- Privatization process is one of the consequences of reforms undergoing in the country, what are the benefits?

When big enterprises are privatized, this is additional foreign capital, additional job opportunities, and introduction of western management culture. In banking system we also have many foreign investors as 50 percent of the banking capital belongs to the foreigners. That means that western corporate governance is being implemented in our sector and this is a news experience, new culture of management that impacts not only economy but introduces new traditions

- What about Russia, how the rations of Georgia with the country effects your sector?

Russia had an illusion that with sanctions that it posed on Georgian mineral water or wine export it could control the country but it turned out that Georgia has already quite a long time found new markets. Russia is our main partner but this is only 16 present of all general trade that is exports and imports. If we do not include gas it turns out that Russia is our second partner as Turkey comes the first. So we were well prepared for one more aggression from Russia as it is used to blow up a pipeline and cause an energy crisis in Georgia especially in winters and we were forced to look for alternative source of gas and we survived.

- And in the last year the relations had more and more deteriorated…

Last year Russia started new kind of pressure; first they banned import of Georgian citrus fruits in Russia claiming that they are of low quality then they banned wine and mineral waters then they intended to ban money transfers but this is 21 century and this is impossible within our banking system.

- What impact had Russian on Georgia?

0.5-0.7% decreased of GDPs and sure that was decries of income but it was compensated through other sources: privatization and new markets. So Russia failed to achieve its goal but further more it awaken us and we started to search for other markets.

- What markets exactly?

Definitely it is EU market, US market, China, Ukraine, Central Asia and step by step our high quality agricultural products, Georgian wines with very specific flavor, Russians like it very much too and they especially miss Borjomi, as in Soviet times even while political bureau meetings in Russia Georgian mineral water Borjomi was at all tables as a symbol of health. But their government deprives them right t o enjoy them.