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TBC Bank Paid 1.1 Million GEL Fine to National Bank of Georgia

Annual report of TBC Bank says, that the bank has paid  1,100,000 Gel ($400,000) fine to National Bank of Georgia. The report has been published today and it covers recent regulatory events. According to the report TBC has paid the fine on 12 March 2019.

Matters Related to National Bank of Georgia Investigation – From PWC’s Report to the members of TBC Bank

On 19 November 2018, the National Bank of Georgia (‘NBG’) issued a report concerning JSC TBC Bank, the main subsidiary of TBC Bank Group plc. The NBG’s report relates to its inspection of loans issued to the Bank’s clients in 2008. These loans were immediately paid to the two founders of the Bank. The clients’ loans were fully provided for by the Bank at the end of the same year. NBG concluded that, in relation to these transactions, the Bank had failed to fully comply with NBG Decree 116 on “Regulation of Conflicts of Interests and Transactions between Bank Administrators and related Parties”. The NBG conclusion resulted in a GEL 1.1m fine, and required the two founders to step down from the Supervisory Board of JSC TBC Bank. The Bank is also required to appoint 2 new board members within a period of 3 months.

We focused on the implications of this matter for our audit approach and risk assessment, and the appropriateness of audit procedures performed with respect to management override of controls, related party lending, any material unrecorded regulatory fines, and the reliability of management representations.

We read the NBG report and other related correspondence between NBG and the Bank, in order to understand the nature and extent of the NBG conclusions, and we considered the impact of these on our audit. We made inquiries of the founders of the Bank, and other Board executives, including Legal Counsel and Head of Compliance, to more fully understand the NBG findings in detail, including requesting and reviewing additional documentation from the Bank’s records. We discussed our work with TBC Bank Group plc’s Audit Committee, and understood the approach taken by the independent directors to fulfil their obligations. We carried out the following additional audit procedures and looked back over the period from 2008:

  • We re-confirmed our understanding of the oversight and monitoring controls that management has in place regarding related party transactions. We tested these controls to assess whether they were operating effectively.
  • We examined the loan book data to identify any unusual items, including any loans with terms which appeared unusual with respect to commercial terms, for example, maturity, interest rate. We analysed reported related party credit exposures for any unusual terms.
  • We examined the list of loans which had been written off, and obtained explanations for any unusual items. We tested a sample of loans to assess whether funds issued to borrowers had been used according to the approved lending purposes.
  • We checked the Bank’s correspondence with NBG. We reviewed the work of Compliance and Internal Audit in the area of related party procedures, and evaluated any remediation undertaken by management of findings in this regard.
  • We verified that the fine had been correctly accounted for in the Bank, and agreed it to the payment made on 12 March 2019.