The National Bank of Georgia (NBG) has banned commercial banks to hold non-core assets. The decision was published on the NBG official website on 30 October, 2014. Commercial banks will provide only traditional financial services.

The commercial banks, which own non-core assets, have to submit a detailed strategy for a phased withdrawal from the non-financial sector to the National Bank within 30  days. Banks should give up non-core business until December 31, 2015.

In addition, the central bank claims that such a practice raises the risk of a conflict of interests. Avoidance of adverse impacts on competition in the real sector of economy is named an additional argument.

According to the NBG, the decision was adopted after meetings with the representatives of various business sectors and reviewing the international practices. Development companies met the NBG’s initiative to restrict non-core assets positively. Most of them were in favor of banning the ownership of non-core assets.

According to President of the Association of Banks of Georgia, the decision of the National Bank  is mainly designed for the future. In his words, it is rather a preventive measure.


Levan Kalandadze

Expert of Economy, Head of the Georgian Initiative for Infrastructure Projects

The decision is to improve the business environment and to form competitive and favorable environment for business development.

The problem is that the right for unrestricted implementation of non-core activities gives commercial banks and their subsidiaries a certain dominant position in concrete business sectors and companies founded by commercial banks may become monopolists in these sectors. As a result, development process may be artificially thwarted and competition environment may be restricted to the companies operating in those business sectors.

Similar problems are registered in the construction sector, development business, hospital sector, retailing sector, insurance industry, higher education sector and so on.

Naturally, the ratio of non-core assets in total assets is not considerable, but problems may arise from high paces of growth in the volume of those assets. We are facing real threat as companies founded by commercial banks my turn out monopolists and only irreplaceable players in this or that business sector.

Thus, the NBG decision on separating commercial banks from non-core assets is a one correct and timely decision.

The strategy and tactics the NBG has followed for the problems resolution is also very important. To spare the time, each bank was sent  writing instructions on the mentioned restriction and commercial banks have been given a 30 day term for developing a non-core assets restructuring plan and submitting it to the NBG. Commercial banks are obliged to fulfill writing instructions of NBG (Georgian law on commercial Banks, article 30, paragraph 2). Therefore we can say the process is underway. Commercial banks have to get rid of non-core assets by the end of 2015 and this is a reasonable term.

At the same time, NBG plans to develop a package of legislative amendments so as the legislation reflect new regulations. Naturally, this process requires hard work and much time and many technical and financial details should be specified.

Irakli Lekvinadze

Expert of Economy

The decision the National Bank of Georgia (NBG) has taken to ban commercial banks of holding non-core assets is an adequate decision amid the current market realities in Georgia. The issue has become relevant because of various business cases, when conflict of interests was registered in some occasions. I believe restriction on non-core assets will result in creating equal conditions and subsidiaries of the strongest financial organizations will have no preferential conditions on the market. In whole, the ratio of non-core assets in total assets of commercial banks is very small, but the decision meet the market realities and needs.

Today commercial banks show interest in all profitable business sectors, including insurance, housing, retailing, hospital, education sectors. I believe the NBG decision will bring considerable results to guarantee comeptitive environment on the market.