Banks 0.1X10 awaiting sanction
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: BRGAccording 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.
1732095626
