Central Bank Vs. Brokerage Companies

access_time2018-02-14 11:11:38

"For many years the National Bank of Georgia (NBG) has been methodically trying to oust brokerage companies that are direct competitors of commercial banks," Vakhtang Svanadze, the head of the company-registrar of securities Caucasus Register, says.


According to Svanadze, Georgian government is staffed with people came  from the banking sector who lobby the interests of commercial banks and perfectly know  that the capital market is a direct competitor of banks.


"Since early 2000, the capital market in Georgia has developed very rapidly. People began to withdraw savings from banks and invest in securities. Commercial banks are now trying to prevent  this situation. They do not want an alternative and are trying to maintain full control over the country's financial system," he explains.


In Svanadze’s words, in 1999 American experts wrote for Georgia a law on securities, which limited the control of the banking sector over the capital market. One of the points of the project stipulated that banks and financial organizations have no right to control more than 50% of any infrastructure in  the capital market, for example, broker companies.


"At a time when this law worked, the capital market was free of bank control. But in 2007, the law was amended-  the 50% restriction was lifted and commercial banks immediately took advantage of this. They completely seized control over the infrastructure of the securities market, and 99% of transactions with shares and bonds occurred outside the exchange. As a result, the capital market has lost liquidity, " Vakhtang Svanadze explains.


He notes  after 50% of the shares of the exchange were owned by banks, the board of trustees  staffed by representatives of various structures was dissolved.


 "Now the Council includes  only representatives of banks which completely seized control over  the exchange. In this they are supported by the National Bank, which for many years methodically fights against brokerage companies by putting forward  requirements that do not correspond to market principles in any way, " Svanadze points out.


According to him, because of the artificial restriction of the capital market, the business has no means of raising funds, except for banks, where they have to borrow at very high interest rates.


"The lack of a developed capital market hinders not only the development of business, but the pension system reform as well," the financier believes.

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