Explainer: National Bank of Georgia demands largest bank in country fire its chairman. Why?
The National Bank of Georgia has demanded the resignation of TBC Bank co-founder and chair, Mamuka Khazaradze.
TBC is one of the largest banks in Georgia.
Since the demands of the National Bank of Georgia went public, the shares of TBC have fallen dramatically by almost 7.5 per cent. The National Bank of Georgia has never before made such a hefty demand concerning a bank in the country.
The opposition and observers say that the informal ruler of the country and influential businessman Bidzina Ivanishvili is behind the story. What exactly is going on?
The National Bank of Georgia has given TBC shareholders two months to relieve Mamuka Khazaradze of his post as chair. The bank has also demanded the resignation of the vice-chair, Badri Japaridze.
The basis for the decision of the National Bank was an audit conducted of TBC Bank several months ago, according to which violations dating back to 2007-2008 were revealed and which may be evidence of money laundering, the head prosecutor’s office says.
The bank’s chair, Mamuka Khazaradze, and his vice-chair, Badri Japaridze, have been implicated in the suspicious transaction.
Prosecutors say that they laundered $17 million.
TBC Bank has categorically denied the charges.
In addition to the opposition, political and economic observers are of the opinion that the case is politically motivated.
Mamuka Khazaradze’s response
Khazaradze, who has headed the bank for 27 years, published a post on Facebook yesterday outlining his position regarding the matter.
He said that an organized campaign was being waged against the bank for eight months now, and noted that it is most likely connected to the Black Sea project which forsees the construction of a large port in Anaklia.
“It is highly suspicious that the decision was made in an accelerated mode and the campaign, which is detrimental to our reputation, was started precisely when we are so close to implementing the most important project for the country, the port of Anaklia.” [toggle title=”Info: Anaklia and TBC Bank “]
The TBC Group, which includes TBC Bank, is a co-founder of the Anaklia Development Consortium.
The consortium is overseeing the construction of the first deep-water port in Georgia, which many observers say is the largest project being implemented in the country.
In terms of importance, it is comparable to the Baku-Tbilisi-Ceyhan oil pipeline project which started back in the Shevardnadze era.
The United States is particularly interested in the successful implementation of the project, as there has been significant investment from private investors. The port is an important infrastructure project, one which will open up an export route for cargo from Central Asia to Europe and vice versa.
The deep-water port hopes to compete with Turkish ports, as well as the ports of other states in the region. A total of 2.5 billion dollars will be invested in the project.
“We will not cede our case, our freedom, our honor nor our dignity. We will not accept this injustice, and we will defend TBC and the legal rights of its shareholders in local and international institutions via all available and possible means,” Khazaradze said in his statement.
Khazaradze pointed out that the allegedly “suspicious” transaction of TBC Bank was studied by Dentons, a law firm of international renown. The firm found nothing untowards in the company’s records.
TBC lawyer Zviad Kordzadze stated that the bank will appeal the demands of the National Bank of Georgia.
Bidzina Ivanishvili was not mentioned in Khazaradze’s statement. Ivanishvili, formerly the Prime Minister of Georgia, is the chairman of the ruling Georgian Dream party and the informal ruler of Georgia.
Observers and the opposition on the case
The opposition and non-governmental sector, as well as observers, speak openly about Ivanishvili’s potential involvement in the case.
They say that the case is a serious threat not only to the company but to the entire country, and few doubt that the case has not been initiated and personally waged by Ivanishvili.
TBC is one of the leading banks in Georgia. It was opened in 1992 and has nearly two million customers. This is the first asset bank in Georgia and the market leader in the deposit segment. Together with TBC subsidiaries, it provides jobs to more than 7,000 people.
One of the leaders of the National Movement and former President of the National Bank, Roman Gotsiridze, stated that “there is no National Bank in Georgia”.
Gotsiridze says that the institution is under the dictates of Ivanishvili, and that “the president of the National Bank, with his deputies, must resign”.
Zurab Chiaberashvili, a leader of the European Georgia party, says he is not surprised by the events concerning TBC Bank:
“It is logical that, after the media and the non-governmental sector, Ivanishvili is striking at the banking sector. Anyone who resists his dictates can expect the same fate.”
[toggle title=”Differing accounts: why is Ivanishvili waging war against one of the country’s largest banks? “]
Nobody believes that the prosecutor’s office would dare come after one of the country’s main financial institutions without the knowledge and consent of Georgia’s informal ruler, Bidzina Ivanishvili.
– Some believe that Ivanishvili sees Khazaradze as a political rival and that he is “clearing the political field” ahead of the parliamentary elections slated for 2020;
– Others say that the attack against Khazaradze is a result of his friendly relations with the former prime minister of the country and former favourite of Bidzina Ivanishvili, Giorgi Kvirikashvili;
– Yet another theory posits that Ivanishvili wants to take over TBC Bank;
– There are parallels with the events of 2004 in Russia, when Vladimir Putin attacked his potential competitors, businessmen and media magnates – Gusinsky, Khodorkovsky and others.
The Association of Banks of Georgia has announced a full support on TBC Bank, and mentions the presence of political pressure on TBC.
The director of Transparency International – Georgia, Eka Gigauri, says that Anaklia is central to the issue:
“It is very disturbing when a company engaged in the implementation of the country’s most important port project, Anaklia, has such problems. It is possible that Russia is interested in the failure of a project that is vital for Georgia.”
She added that Khazaradze’s tactics in the struggle should be publicity and openness.
“It is important that Mamuka Khazaradze speak openly about the reasons that led to the emergence of the current situation.”
The former Minister of Defense of Georgia, Batu Kutelia, believes that: “Ivanishvili has appropriated the state, the court, law enforcement agencies and the banking sector. All this serves to further strengthen the informal power.”
What do the country’s officials say?
TV channel Rustavi-2 says that in recent months, people close to Ivanishvili have been negotiating with the management of TBC Bank to acquire their shares – specifically, the Minister of the Interior, Giorgi Gakharia.
The minister himself categorically denies this information. He says it is necessary to wait for the decision of the regulatory body, after which everything will become clear. Other party members speak along similar lines.
MP Beka Natsvlishvili says that TBC is far from being a helpless organization and is quite capable of hiring strong lawyers who will be able to prove the innocence of its leadership.
Minister of Economy Giorgi Kobulia is convinced that the TBC Bank issue is not indicative of pressure [being applied] to the entire business.
“There are serious accusations against the bank management based on factual evidence. Therefore, specific departments should deal with this matter,” Kobulia said.