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Parliament Did a Central Bank a Favor

An interview with the expert George  Khukhashvili

Presidential veto on the decision of the Parliament to strip the National Bank  of a supervisory role  was evaluated by representatives of the ruling majority as political. At the same time, the President said that the veto is not an instrument of political confrontation. In your opinion, how politicized is the process around the National Bank?

No one, including the authorities themselves, hide that the authority’s position is political. It’s quite a dangerous precedent that represents a personal problem – the rejection of the central bank’s president  by the ruling majority who is one of the last representatives of the former government – and is sufficient for the adoption of legislative changes. The country  should be  is amended  because of the personal factor – it does not matter how justified are the claims to  a particular person. If the President of the National Bank violates the law, then we should not change the law but involve the law enforcement bodies.

Such actions are dangerous. Today, the National Bank is  managed by  the ‘wrong’ president, but if tomorrow it is led by worthy, then what? Will the supervision function be returned to the National Bank?

The government and parliament have performed completely inexplicable actions, and the president’s veto is justified. Based on all of this, we cannot  say that the process is not associated  with politics. In general, the president’s veto can be assessed positively, as head of the state is trying to explain the government how to act, what issues and how to solve. I rule out a political game from president, since he has no political goals. His mission  is  to strengthen state institutions.

If we do not have in mind the problem with the  central bank’s President, are there points in  a new law that create a specific systemic threat ?

We are not talking about  specific dangers, but about a fact that  such decisions cannot be taken this way. Parliament and the government say they are taking the new law because of distrust to the central bank’s president. This is their main argument. The second is that the new law will not bring harm.

Authors of the bill claim that stripping the national bank of the monitoring service  will help the government to obtain information necessary to determine the real exchange rate. Is  this argument convincing?

If the government wants to understand the details of the activities of commercial banks, it has all the possibilities. I do not think the National Bank could withhold information. However, the problem is that the government has a direct access to monitor all financial flows , both corporate and private. This is even more dangerous than the precedent of decision -making based on personal animosity

Of course, we cannot exclude anything, but if there is some kind of conspiracy, the function of law enforcement to uncover  it. With that, the very suggestion that there is some kind of conspiracy against the interests of the state by the bankers – is absurd. We also need to understand that the bank executes instructions of the client. It seems the government wants to control the banks  that  violates the right to privacy. It is very dangerous.

There is information that the banks are unhappy with the adopted decision, and some of them are planning to leave the Banks Association which agrees with the new law. How logical is  the banks’ dissatisfaction ?

It’s difficult to say something about  the Association’s  position, because it has changed several times. I have no information regarding the banks’ intentions to leave the  Association, but there is nothing surprising in the fact that banks are  dissatisfied. The  Association cannot  understand that the new law  is at least useless, and at best, it just will not harm, but definitely will not bring any good.

What can be expected after the presidential veto?

The head of state has sent a clear signal to the government and parliament that such behavior is unacceptable. President refused to take the responsibility for this decision. The new solution is in a sense a great service to the current President of the National Bank. God forbid, if the lari devaluation continues in the fall, then the government will not be able to blame the National Bank’s President and the current government will have to take full responsibility. What will they say then? So, this decision is harmful even in terms of political tactics, not to mention its content.

By this logic, if the national currency regains, it will be an additional argument against the current leadership of the National Bank?

It is practically impossible. It’s obvious that in September the pressure on the lari will intensify. A hope for the lari strengthening   is an illusion and nothing more.