Tbilisi (GBC) - The banking sector lobby will present its opinion and recommendations on the feasibility of doubling the maximum penalty rate for banks by November 27.
The Banking Association will study the arguments of the National Bank of Georgia on increasing the 3-point scale to 5 - how proportional are the new rates of 0.5% and 1% to assets, capital, threats, challenges, expectations...
The National Bank of Georgia submitted a draft amendment to the penalty rules, which will add 0.5% and 1% to the 0.01%; 0.05%; 0.1% penalty rates, for discussion last week and will finalize it next week.
The regulator cites a 15-year trend of 10.8-fold growth in banking sector assets (04/2009 – 8.3 billion; 09/2024 – 90 billion).
However, it is noteworthy that the threshold increased in the meantime, in 2018, when the Responsible Lending Framework and a number of regulations came into effect, including the GEL 200,000 threshold for foreign currency lending, which has already been raised to GEL 400,000.
According to financiers, a 10-fold increase in the sanction rate between 2018-2024 interval should not only follow the trend of asset growth. There are many other circumstances to consider, including the banks' own funds in financial indicators and the increased cost of resources.
In addition, since the last change, when the maximum limit was raised to 0.1%, only 6 years have passed, not 15. Assets have also increased 2.6 times compared to 2028 (04/2018 – GEL 34.3 billion), not 10 times. As of 09/2024, the chartered capital of the banking sector is 13.3 billion GEL.
According to the current rules, which were updated in April 2018, for failure to comply with the requirements (restriction, limit, prohibition...), the bank is fined 0.01%, 0.05%, 0.1% of the regulatory capital (how much it has at the time of violation), not less than GEL 20,000, and the maximum is exceeded.
In addition, the revised rule also sets fixed fines, which have increased compared to the previous one, 2009. These include 5,000 GEL for violation of reporting rules, 10,000 GEL (for each case) for failure to submit documents related to bank administrators. 20,000 GEL for repeated violations and 50,000 GEL for multiple violations.
(See: 10, 81, 82) Source: BRG
According to the draft amendment to the rule for determining monetary fines for commercial banks and their administrators, the maximum 1% limit is not a ceiling. Under the current rule, a bank paying a maximum of 0.1% will have to pay each time if it violates it again.
To make it more impressive, the new draft tariffs will see the largest capital TBC Bank pay 65 million if a 1% sanction is imposed, and the smallest - Silk Bank - half a million.
The draft amendments mention the harmonization with EU legislation in the explanatory memorandum and refer to the document within the framework of the relevant EU legal regulation, namely Directive 2013/36/EU of 26 June 2013 on the prudential regulation of credit institutions (CRD).
Previously, harmonization was also announced in the area of transparency. The supervisor intends to fully disclose information on fines in the future, just as it has already done on AML violations.
