Kadagidze’s Presidency Ends: Pros and Cons of his 7 Years of Governance
For seven years (2009-2016) he’s got chaired the central bank of Georgia. This time has recorded both progressive and regressive tendencies and we will expose several ones in this posting. Naturally, it is not easy to valuably and perfectly highlight Giorgi Kadagidze’s performance within the NBG in a newspaper article.
Even the whole newspaper issue probably would not suffice to that end. Seven years cover a protracted period and also research works is often conducted to valuably explore this era. Therefore, we can make concentrate on famous and a lot more or less publicized facts out of this period.
Giorgi Kadagidze occupied the NBG President’s position in February 2009, amid deep economic in Georgia and worldwide. 2 yrs before he chaired the financial supervision agency which were breached through the NBG six years before.
Before Kadagidze’s appointment, for two years the NBG was functioning and not using a president, in practice. The second in command David Amaghlobeli was managing the NBG. At the start of 2009 the then Authorities was actively discussing possibility of abolishing the NBG entirely, along with of replacing GEL, for an only payment currency, and moving to your multicurrency regime.
However, as soon as the appointment, Kadagidze persuaded everybody they objected to abolishing the central bank along with the national currency. Shortly, the interbank currency exchange was cancelled plus it was replaced by the currency auction system. This signifies the GEL exchange rate determination started due to modern practice.
However, Kadagidze closed the content on currency auction demands below the absurd pretexts as if these records may be misinterpreted in several directions. Consequently, the Georgian society lost accessibility information about the level of sales of a currency. The GEL exchange rate formation issues were classified, in practice.
Thus, Kadagidze took the earliest decision after his appointment since the NBG President. As noted above, it can be impossible to pay all bad and good parts of Kadagidze’s performance while in the same article. Therefore, we’ve got selected 4-4 samples in every direction that will be easily perceptible and understandable to the society. Thus, we stop talking making deep economic assessments.
Commercial Banks Were Stripped of Noncore Businesses
In October 2014, good NBG decision, Georgia-based commercial banks were stripped of your rights for doing noncore businesses.? Due to this fact, your budget sector is qualified to receive complete only traditional finance services. Moreover, the regulations for issuing licenses for undertaking noncore business were also tightened as well as pre-2008 practice was restored. The commercial banks who had noncore assets were given an acceptable time until December 31, 2015 for gradual withdrawal from their noncore businesses.
The business sector and economic experts had long suggested the NBG to adopt this decision as well as national bank finally satisfied this request.
It should really be also noted the NBG smoothed noncore business regulations in 2008 together with the make an effort to alleviate the world financial crisis affect on Georgia. The NBG substantiated the decision by way of the intention to prevent negative effect on competition inside the real economic sector. The existing practice generated risks for clash of interests, the NBG noted then.
It is interesting there is various practices in numerous countries. In 49 countries commercial banks are banned to help keep noncore assets, while 48 countries have set strict regulations on noncore business activities.
Protection of Consumer Rights
Protecting the rights of users of monetary services is among the most priorities with the NBG. For years Georgian consumers stress that commercial banks violate the buyer rights and ask for within the government as well as NBG to look at efficient steps.
The national bank has executed several important initiatives in the ruling of Giorgi Kadagidze. In fact our universe keeps criticizing commercial banks even now and is also tricky to assert the customer rights are protected by credit institutions, but Giorgi Kadagidze has genuinely accomplished certain steps to better the specific situation.
In May 2011 the buyer rights protection department launched operation along at the NBG. The department is always to execute continuous monitoring on the finance sector’s consumer market. Moreover, this department administers the fulfillment of “regulations for supply of required information to consumers by commercial banks when providing banking services”.
Under these regulations, that have been enacted on June 1, 2011, commercial banks must supply all required information to the clients which might be connected with taking loans and explain the potential risks from unpaid loans. Concurrently, commercial banks are obliged to express to clients concerning the efficient annual rate of interest on loans that are included with all expenditures necessary for the money service.
At one time, commercial banks are banned to impose more than 2% of your principal sum on early repaid loans. Subsequently, loans porting practice was expanded.
Currency Reserves Hit Record High
Geogia’s currency reserives are situated in the record high in the ruling of Giorgi Kadagidze. Next year Georgia’s international currency reserves marked 2.65 billion USD, although this amount slightly declined within the next years.
The NBG international currency reserves as a result of years (USD):
2010? – $2 billion;
2011? – $2.5 billion;
2012? – $2.65 billion;
2013? – $2.6 billion;
2014 – $2.43 billion;
2015 – $2.32 billion;
The Banker Named Giorgi Kadagidze the Best Manager of Central Bank in Europe in 2014
The Banker, the British financial magazine owned by the Financial Times Group, has named Giorgi Kadagidze when the best manager of a central bank in Europe for 2014.
The world’s on the list of influential editions executes annual research to mention leading financial institutions and the best bankers in 149 countries. The winners were named in accordance with the report of the previous year.
The Banker: – “The well-capitalized and stable bank sector that has shown sustainability to main shocks, because main characteristics over the past years in Georgia. Due to this fact, the Georgian National Bank President Giorgi Kadagidze shared the Georgian knowledge in the lender sector supervision on the central banks of Kazakhstan, Tajikistan as well as other countries within the WB-financed enter in 2014”.
Record Low as well as Inflation Rates
The NBG’s key assignment is to ensure stability of prices, id est, controlling the harmful inflation processes. Inflation turned out to be an inordinate problem for Kadagidze plus the central bank. Inflation tendencies were permanently chasing the Georgian economy along with the Kadagidze’s performance period was not able to be exception.
The highest inflation rate while in the 2009-2016 period was registered in May 2011, in the event the annual inflation rate marked 14.3%. This figure was by only 0.2% higher than Georgia’s lowest ever inflation rate of 14.5% that is recorded in July 2006, under the management of Roman Gotsiridze.
Moreover, the record deflation of – 3.3% was recorded beneath the ruling of Giorgi Kadagidze. The fact that was registered in May 2012. All economic experts realize that deflation is worse than inflation.
It really should be also noted, starting 2009 the central bank follows the point inflation rate monetary policy. In such a regime, the NBG preliminarily determines the prospective inflation rate, id est, the figure which will stop covering the predetermined annual inflation rate. Regretfully, the NBG’s all target inflation rates been found unrealistic and erroneous. Therefore, the continent had to be affected by either deflation or inflation tendencies for many years.
For days gone by Many years, the inflation tendencies did not become dramatic developments (excluding all seasons of 2011, the annual inflation recorded two-digit figures), but the inflation rate was not curbed in the target benchmarks.
Failure of Larization
The public trust to the Georgian national currency is low plus the high dollarization coefficient staying with you sector proves this consideration. Good last reports, the dollarization coefficient is 69% in the bank sector. This signifies the ratio of foreign currency denominated deposits in your pocketbook sector accounts for ?.
In 2010 the modern NBG President Giorgi Kadagidze announced the dollarization coefficient reduction for being one of several priorities of the central bank. He also introduced a completely new term to the newest campaign