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