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Do Overseas Banks Have the Right to Own Non-core Business?

A topic of  possession of non-core assets by commercial banks is relevant not only in Georgia, but also in many other countries.

The World Bank (WB) conducted a study of bank management and supervision of the banking system in 2012, and one of its themes was devoted to  non-core assets.

According to a survey, in  63 out  of 137 surveyed countries commercial banks have the right to possession of securities – we are talking about  the right to conduct the full spectrum of activities in this area.

In 46 countries, banks have the right to ownership of shares, but only through subsidiaries or companies belonging to a single holding.

In 17 countries, ownership of securities is limited, and some  activities associated with the shares are allowed through subsidiaries or members of holding company.

In nine countries,  banks are completely banned to own non-core assets, including through subsidiaries or members of  holding company.

With regard to insurance companies , in 7 countries out of 137 banks have an unlimited right to conduct activities in the insurance business,  in 72 they are allowed under certain conditions, in 36 – the activities are severely restricted,  in 22 – prohibited.

Banks are allowed to work in real estate without any conditions in 20 countries, in 29 their activities are allowed with certain conditions,  in 35 countries- limited and in  50 countries – are prohibited.

The statistics indicate that in most countries, commercial banks are allowed to operate in the securities market, participation in the insurance business is permitted under certain conditions while activities in the construction business are prohibited.

“Citibank” founded  in New York in 1812 (now has branches  in 160 countries and serves 200 million clients) owns large non-core assets – GAAP shares in the amount of USD 156 billion, OneMain Financial (USD  10 billion) , MSSB JV (USD  8 billion.), etc.

In 2014, German “Deutsche Bank” sold “Cosmopolitan” hotel in Las Vegas to “Blackstone Group” company for USD  1, 7 billion, which was bought by the bank in 2008. In 2013, the German bank  made investment  Maher Terminals), BHF-Bank, etc.