Claims Against Commercial Banks in 2017 Rose by 140%.
In 2017, claims against commercial banks submitted to National Bank of Georgia (NBG) rose by 140%, according to the NBG report for 2017. The NBG department for consumer rights protection registered 3,269 claims in 2017, including 2,329 (71%) claims submitted by phone and 218 (71%) in written form, 200 claims submitted by social networks (6.1%), 341 (10.4%) by email and 181 (5.5%) in person.
The bulk of the claims concern restructuring requests, advance payment procedures, fines and writing off charged fines, contract terms and the Larization program. Moreover, the interest increased in regards to the simplification of legislation.
As for claims submitted by citizens to commercial banks, a total of 3,665 claims were registered throughout 2017, up 28.3% since last year. In general, the number of registered claims has been growing since 2012 as a result of the growing awareness of mechanisms for consumer rights protection. At the same time, the ratio of substantiated claims declines each year. The year 2017 was different in this respect, because the ratio of substantiated claims increased to 27%.
“The majority of claims refer to the following bank products: 1) current account; 2) consumer loans; 3) credit cards and 4) installment loans. This ratio does not change from year to year, and this is natural, because the bulk of claims refer to the most-used bank services,” the NBG report for 2017 states.
Discontent with commercial banks is not expressed only by the growing number of claims (+140%) submitted to NBG. Recently, several government officials and businessmen also criticized the sector. The Minister of Finance was the first, and said that the banking sector hampers economic development. Several members of parliament also agreed with Mamuka Bakhtadze, and businessmen also expressed discontent.
“In previous years, the NBG management applied authoritarian methods, and it could be efficient for a certain period. Under related legislation, like in all other countries, the NBG should be an independent regulatory institute. Certain doubts arose that commercial banks have influenced the NBG. Instead an independent and strong institution, the NBG is influenced by major commercial banks and, to a certain degree, carries out their policy. As a result, since 2008 commercial banks began active interference in the noncore business sector. In 2014, the NBG instructed commercial banks to restrict their involvement in noncore businesses, but today we have the following reality:
- Commercial banks have no motivation to issue long-term loans to the business sector, because they receive lower income from these loans;
- Commercial banks have grown into competitors with the business sector, but this signifies unequal competition, unequal resources and unequal access to business information. As a result, the business sector refrains from making additional investments and taking financial risks. Thus, the financial development is ultimately hampered. This signifies that we have a classical example of economic frustration. Businesses do not fear the authorities, but are afraid of commercial banks and this is the first challenge,” said Kakha Okriashvili, PSP founder and member of the Georgian Dream party.
Claims against the NBG and commercial banks are submitted by not only specific businessmen, but also whole sectors. For example, the insurance sector made antitrust claims against commercial banks. At the Insurance Association meeting, initiated by the Unison Company, six insurance companies of the 11 in attendance backed these claims, two abstained and only three companies voted against the claims. Based on this decision, the Insurance Association will submit a written application to the NBG to clarify whether the NBG, as a regulator of the banking sector, is entitled to control and prevent monopolies.
“Only three companies rejected this idea – Aldagi, Imedi L and TBC Insurance – and these insurance companies are affiliated with commercial banks. It is necessary to enforce antitrust legislation in the banking sector to dissolve the ugly business model of these two dominant commercial banks,” Unison head Vasil Akhrakhadze said.
Discontent with commercial banks grows, both in the general population and business sectors. If the NBG delays essential steps to improve the situation, this negativity will penetrate the agenda of politicians, and eventually the government will have to carry out more radical policies under public pressure.