the Prime Minister of Georgia, Irakli Gharibashvili, talked about issues concerning the separation of the monitoring service from the National Bank of Georgia. The Prime Minister said that he was satisfied as all of the opinions and recommendations of international organisations were taken into account by the Parliament of Georgia.FactCheck
took interest in the accuracy of the Prime Minister’s statement and verified it.On 17 July 2015, the Parliament of Georgia adopted the Law on the National Bank of Georgia at the third hearing. The aforementioned bill was widely discussed by the public. The Advisor of the President of Georgia on Economic Issues, Giorgi Abashishvili, stated that this bill contradicts the agenda of the Association Agreement with the European Union and its Action Plan. The accuracy of Mr Abashishvili’s statement was affirmed by FactCheck’s study
It should be pointed out that the President of Georgia is planning to veto the Law on the National Bank of Georgia as adopted by the Parliament of Georgia. In addition, the President’s Administration has already started working on the new version of the bill in accordance with the EU-Georgia Association Agenda. Appropriate consultations will be held and international financial institutions will also receive the working version of the bill.
If the Parliament overrides the President’s veto and refuses to take his notes into account, the financial monitoring service will be separated from the National Bank of Georgia and the Financial Supervision Agency will serve this purpose on its own.International financial institutions addressed the Prime Minister of Georgia and the Chairman of the Parliament of Georgia with a highly critical letter.
The letter, authored by the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development and the Asian Development Bank, reads: "We are addressing you to express our deep concerns about the recently proposed draft amendments to the Organic Law on the National Bank of Georgia (NBG) that would remove banking supervision from the NBG and create a new banking supervision agency. We believe that enacting the amendments as tabled in Parliament would weaken the independence and quality of banking supervision in Georgia, threaten banking sector stability and undermine prospects for sustained growth."The main advice given by these organisations was to leave the financial supervision service within the competence of the National Bank of Georgia. "Our best advice is to keep banking supervision inside the National Bank of Georgia," states the letter. In addition, if the Government of Georgia is really determined to separate the financial supervision service from the National Bank of Georgia, international financial institutions have deemed it very important for the respective legislation to be in accordance with the Basel Core Principles.
The legislation must include a guarantee for the new Agency’s independence, including the rules for approving the budget and the Agency’s Head and so on.
At this stage, according to the law adopted by the Parliament of Georgia, the Government of Georgia will present a five-member Financial Supervision Agency Council to the Parliament for approval. The Parliament will approve the Agency’s Head, presented by the members of the Council, for seven years, whilst the Council’s Chairman is elected by a simple majority by the Council itself. The Agency’s Head is elected by the Parliament of Georgia at a plenary session by the majority of those present and not less than 50 MPs. The Financial Supervision Agency will be funded from the National Bank of Georgia’s budget.
It should be noted that the candidates for membership of the Agency’s Council will be presented to the Parliament by the Government of Georgia and not the President who, unlike the government, is not a member of any political party or team.
According to the Prime Minister’s statement, the authors of the bill and the Parliament have taken the recommendations of international organisations into account. The bill’s explanatory note underscores that no international organisations or experts were involved in the bill’s formulation. In order to further clarify the matter, we addressed the Parliament of Georgia’s Budget and Finance Committee with the following questions:
- Were any international organisations or experts involved in the formulation or improvement of the bill at any stage?
- Recommendations from which international organisations or experts were taken into account during the formulation of the bill? (If any, please indicate the article [or articles] which were changed according to the recommendations of international organisations or experts).
According to the response letter received from the Parliament’s Budget and Finance Committee, numerous international and other organisations were involved in the process of improving the aforementioned legislation. Despite this, the letter does not indicate which organisations participated in the process or the nature of their contribution. It should be pointed out that the authors of the bill, after informal communications, might have, indeed, taken some recommendations into account but the main recommendation of international financial institutions was to leave financial supervision within the functions of the National Bank. As we can see, this recommendation, along with other important notes, was not heeded by the Parliament of Georgia.
However, it should also be noted that 65 of 67 remarks of the Parliamentary Committees and local experts were, in fact, taken into account. For example, the Internal Audit Service of the National Bank of Georgia was authorised to control the Financial Supervision Agency’s financial accounts. It did not have this function in the initial version of the proposed bill. In addition, the National Bank will have two (and not one) representatives in the Agency’s Council.
The bill adopted on 17 July 2015 has become a topic of important discussion and debate. It should be noted that many local and leading financial organisations have assessed this bill quite negatively.During a hearing in the Parliament, the bill on the National Bank of Georgia, which provides for the separation of the financial supervision service from the National Bank, was amended 65 times. Neither the documentation on the website of the Parliament nor the information provided by the Parliament of Georgia’s Budget and Finance Committee confirm the involvement of international organisations in the formulation of the bill. The fact of heeding any important recommendations from such organisations has also not been confirmed. FactCheck
does not exclude some informal communications with international organisations and heeding some of the technical remarks they provided but the main body of the bill was not changed and hence the results of such communications were not included in any official documents.FactCheck concludes that Irakli Gharibashvili’s statement is FALSE.
The Basel Committee on Bank Supervision was founded in 1974 by the heads of ten international central banks. The Committee provides regular fora on issues of bank regulations and supervision.