О деятельности коммерческих банков

 

 

LAW OF GEORGIA

ON COMMERCIAL BANK ACTIVITIES

 

Chapter I – General Provisions

 

Article 1 – Definition of terms

For the purposes of this Law, the terms have the following meanings:

a) administrator – a member of the Supervisory Board, or the Directorate of a commercial bank, and/or other persons who either directly or indirectly have the authority and responsibility to plan, manage and/or control banking activities. The list of relevant positions shall be approved by the Supervisory Board of the bank;

b) bank branch – a bank subdivision where all or part of banking activities are carried out;

c) persons connected to a bank – bank administrators, shareholders, and their relatives who represent first and second legal heirs under the Civil Code of Georgia, or persons related to them by business interests;

d) beneficial owner – a person receiving financial or other benefits under the law or an agreement, and who has no obligation to transfer these benefits to another person; and if a beneficial owner is a legal person established to achieve non-entrepreneurial (non-commercial) objectives, or if an owner is a legal person that has no person who owns a significant share, a beneficial owner is a member of its management body;

e) developed countries – countries on the list of developed countries compiled by the National Bank of Georgia;

f) group of jointly acting partners (shareholders) – a group of closely related partners (shareholders), or partners (shareholders) connected to each other by commercial interests in addition to the bank interests, as well as partners (shareholders) among whom there is an explicit or implicit agreement, in any form, regarding the acquisition of the significant share of the bank;

g) commercial bank – a legal person licensed by the National Bank of Georgia (‘the National Bank’) that accepts deposits and uses them to conduct banking activities on its behalf under the legislation of Georgia;

h) credit – any commitment to disburse monetary funds in consideration of their repayment, value, security and definite terms;

i) (deleted – 20.12.2019, No 5682);

j) banking licence – a permit issued by the National Bank to carry out banking activities;

j ^{​ 1} ) (deleted);

j ^{​ 2} ) (deleted – 10.03.2017, No 439);

k) banking activities – types of activities determined by Article 20 of this Law;

k ^{​ 1} ) (deleted – 9.9.2022, No 1802);

k ^{​ 2} ) banking day – a banking day determined by the Law of Georgia on Payment Systems and Payment Services;

l) blank credit – a credit granted without collateral;

m) debt instrument – a negotiable instrument of any debt and any other instrument equivalent to it; also any negotiable document enabling one to acquire another debt instrument by subscription or exchange; a negotiable debt instrument may be in certificate or book entry form;

n) trust – a fiduciary function;

o) foreign trust bank – a bank of a developed country that is assigned a rating at a certain level or higher by a competent international rating organisation; the National Bank compiles a list of competent international rating organisations and defines the rating levels for each rating organisation;

p) factoring – a trade commission transaction which is adjusted to crediting of a customer's working capital, that includes collection of a customer's accounts receivables, crediting and guarantees for credit and foreign exchange risks;

q) fiduciary transaction – trust transactions performed by a bank or a trust company on its behalf but by order and for the account of a customer (usually to manage investments); the customer shall be liable for all risks, while the bank shall receive commission charges;

r) financial institutions – entities determined under the Law of Georgia on Securities Market;

s) forfeiting – crediting exports in foreign trade agreements by acquiring non-negotiable commercial bills of exchange or other debt liabilities by the supplier; a bank of an importing country shall be the guarantor bank during such transactions;

t) (deleted – 20.12.2019, No 5682);

u) subsidiary (subsidiary organisation) – a legal person or an organisational establishment without a legal status controlled by a parent company (head organisation);

u ^{​ 1} ) parent company (head organisation) – a legal person with one or more subsidiaries (subsidiary organisations);

v) regulatory capital – a type of capital created for conducting banking activities, for reserving against expected or unexpected financial loss/damages and protecting from different risks;

w) share capital – a commercial bank’s shareholder capital determined as the difference between total assets and total liabilities of the bank;

x) authorised capital – a capital agreed upon by the company shareholders and provided for by the charter;

x¹) subscribed capital – the amount of money determined by a company. The subscribed capital of a company shall be equal to the sum of the nominal values of the subscribed shares of the company, or if the company has also subscribed shares with no nominal value, the subscribed capital shall be more than the sum of the nominal values of the subscribed shares. If a company (except for a joint-stock company) has subscribed only shares without nominal value, the subscribed capital may be determined in any amount;

y) paid-in capital – the actually paid-up portion of the subscribed capital;

z) insolvent bank – a bank with total liabilities (regardless their terms) and the sum of conditional liabilities exceeding total assets, regardless their maturity;

z₁) control – direct or indirect ownership of 50 per cent or more of the voting shares of a company, and/or the authority to manage the activities of the company on the basis of an agreement concluded with it, its charter, and/or agreement with other shareholders or partners, allowing a controlling person to receive economic benefits and to affect their amount, including the authority to appoint or dismiss the majority of the administrators;

z₂) controlling person – a person who exercises control;

z₃) affiliate – a company that is under the control of a legal person, as well as its controlling persons, and the companies under their control;

z₄) person – a natural or a legal person, as well as an organisational establishment under the legislation of Georgia which is not a legal person;

z₄¹) close relative – a close relative determined by the Organic Law of Georgia on the National Bank of Georgia;

z₅) significant share – more than 10 per cent of the authorised or paid-in capital and/or the voting shares of a commercial bank owned either directly or indirectly by a person or jointly acting partners (shareholders), and/or the possibility to make a significant influence on and/or control over the commercial bank by a person or jointly acting partners (shareholders), irrespective of the amount of share in the capital and/or voting rights;

z₅ ^{​ 1} ) significant influence – the right to participate in the decisions relating to the financial and operational policy of the enterprise, which is not a control of this policy or a joint control;

z₆) indirect participation (ownership) – shares in the capital of a legal person held through a third person.

z ^{​ 7} ) financial recovery plan – a plan developed by a commercial bank which among other elements includes the measures that have to be taken for the recovery of the financial situation when significant financial difficulties arise;

z ^{​ 8} ) resolution plan – a plan developed by the National Bank for a commercial bank which among other elements includes the issues related to the use of the resolution instruments and implementation of the resolution powers against the commercial bank in the framework of the mode of resolution;

z ^{​ 9} ) recapitalisation – the increase of the supervisory capital of the commercial bank;

z ^{​ 10} ) writing off the shares and/or other instruments of the supervisory capital and/or liabilities of the commercial bank – the revocation or the decrease of the value of the shares and/or other instruments of the supervisory capital and/or liabilities of the commercial bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 1617 of 4 July 2002 – LHG I, No 23, 24.7.2002, Art. 108

Law of Georgia No 1938 of 28 December 2002 – LHG I, No 3, 17.1.2003, Art. 19

Law of Georgia No 4519 of 27 March 2007- LHG I, No 9, 31.3.2007, Art. 84

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 1924 of 3 November 2009 – LHG I, No 35, 19.11.2009, Art. 234

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 1802 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 2 – Scope of the Law

1. A commercial bank may be established as a joint stock company. Commercial banking activities shall be regulated by this Law, the Organic Law of Georgia on the National Bank of Georgia, the Law of Georgia on Entrepreneurs, and other normative acts.

1¹. The requirements of this Law on convening a general meeting of shareholders, reorganising a company, the rights and obligations of shareholders, redemption of shares by a company, and the squeeze-out of shares by a company, including the requirements set out in Article 34(2), Chapter VIII, Article 152(10)-(12), Article 163(1), (2), (4) and (6), Article 164(4), Article 166(1), Article 169(3) and (8), Articles 170 and 189, Article 191(1) and (2), Article 192(1), (2), (5) and (6), Article 193(1), (2), and (5)-(10), Articles 194 and 201, Article 202(1)-(3), and Article 225 of the Law of Georgia on Entrepreneurs, shall not apply to commercial banks in the resolution mode.

2. No one shall have the right to solicit deposits and use them for granting credit on its behalf without a licence issued by the National Bank.

3. No one shall have the right to use the terms ‘bank’, ‘micro-bank’ or other word-combination with those terms without a banking licence issued under this Law, or a micro-banking licence issued under the Law of Georgia on the Activities of Micro-Banks, in accordance with the procedure established by the same Law, unless their use is provided for or recognised by law or an international agreement, or when the context in which the term ‘bank’ or ‘micro-bank’ is used shows that no banking activity is carried out under this Law, the Organic Law of Georgia on the National Bank of Georgia, or the Law of Georgia on the Activities of Micro-Banks.

4. (Deleted – 1.7.2011, No 5002).

4 ^{​ 1} . (Deleted – 1.7.2011, No 5002).

4 ^{​ 2} . (Deleted – 1.7.2011, No 5002).

4 ^{​ 3} . (Deleted – 1.7.2011, No 5002).

5. Provisions of this Law shall apply in case of conflict between this Law and other laws with respect to relations with commercial banks.

Law of Georgia No 1636 of 13 October 1998 – LHG I, No 2, 26.10.1998, Art. 27

Law of Georgia No 1742 of 24 December 1998 – LHG I, No 7, 31.12.1998, Art. 60

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 4519 of 27 March 2007- LHG I, No 9, 31.3.2007, Art. 84

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Chapter II – Licensing

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

 

Article 3 – Licensing requirements

1. The National Bank shall issue a banking licence to a legal person registered as provided for by the legislation of Georgia, which meets the following requirements:

a) the amount of its paid-in capital complies with the requirements established by the National Bank;

b) the administrator meets the requirements set forth in this Law and a legal act of the National Bank on fit and proper criteria for the commercial bank administrators;

c) the shareholder holding a significant share meets the requirements set forth in this Law and the legal act of the National Bank on the acquisition of significant shares in commercial banks;

d) the group structure, ownership structure, management structure, and operating activities/environment are transparent, comply with appropriate corporate governance standards, allow for the effective individual or consolidated supervision and do not pose a threat to the stability and sound functioning of the bank and/or the financial sector. If one or more natural and/or legal persons referred to in sub-paragraphs (b) and (c) of this paragraph are subject to the jurisdiction of another country, when evaluating the criterion provided for in this sub-paragraph, the National Bank shall also take into consideration the impact of the legislation and administrative procedures of that country on effective supervision;

e) it will have the ability to operate sustainably, considering the adequacy and feasibility of its business plan and its potential position in the banking sector;

f) its head office (the place where most of the decisions related to the management of the bank are made) is located in the territory of Georgia, and the area occupied for carrying out banking activities complies with the requirements set by the National Bank.

2. In order to support the stability and development of the financial sector, as well as based on the interests of the banking sector, including in order to increase the use of substantially new and innovative financial technologies in the local market and the customers’ access to financial services, the National Bank shall be authorised to grant to a legal person a conditional licence, by temporarily simplifying the requirements established by the legislation of Georgia regarding the minimum capital for the licensing of commercial banks. In the case of granting a conditional licence, in order to reduce risks, the National Bank shall be authorised to establish relevant restrictions and/or individual/additional requirements, and the stages and time frames for fully complying with them.

3. The National Bank shall determine, by its legal act, the rules and conditions for licensing commercial banks, including the additional information to be submitted and the rules and conditions for granting a conditional licence.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 3¹ – Written applications for obtaining a banking licence

1. In order to obtain a banking licence, an application for obtaining a banking licence shall be submitted to the National Bank in writing by a person authorised by the Supervisory Board or shareholders of a banking licence seeker.

2. The following documents and information shall be attached to the written applications for obtaining a banking licence:

a) the articles of association of the banking licence seeker;

b) a statement of a commercial bank on the authorised capital and its paid-in portion of the banking licence seeker, also information about the ownership and origin of the authorised and regulatory capital of the banking licence seeker. A branch or a subsidiary bank of a foreign bank shall submit information regarding the amount of resources allocated to it by its parent bank;

c) a bank statement on the replenishment of capital as provided for by an order of the president of the National Bank on determining the minimum amount of capital for commercial banks;

d) information on the compliance of the administrators and management bodies (the Directorate and the Supervisory Board) of the banking licence seeker with the individual and joint fit and proper requirements as provided for by this Law and subordinate normative acts;

e) a document certifying the payment of the licence fee determined by the Law of Georgia on Licence and Permit Fees;

f) information on the holder of the significant share as provided for by a legal act of the National Bank on the acquisition of significant shares, and in the case of its absence, the identification information on the 20 largest shareholders;

g) information on the ownership structure/group structure of the banking licence seeker in accordance with paragraph 3 of this article;

h) information on the Supervisory Board, including the Audit Committee and the Directorate, of the banking licence seeker in accordance with paragraph 4 of this article;

i) documentation approved by the Supervisory Board of the banking licence seeker in accordance with paragraph 5 of this article;

j) the business plan of the banking licence seeker in accordance with paragraph 6 of this article;

k) information on the past activities of the banking licence seeker in accordance with a legal act of the National Bank on licensing commercial banks;

l) in the case of licensing foreign banks or subsidiary banks, additional information in accordance with paragraph 7 of this article;

m) documents certifying the right of use or ownership of the real property where the banking licence seeker or its branch shall be located in the future;

n) any other information reasonably required by the National Bank in each individual case.

3. The information about the ownership structure/group structure of the banking licence seeker/commercial bank shall include the data on the ownership on every level, including the direct shareholders, intermediate owners, and beneficial owners of the significant share. In particular, such information shall include:

a) in the case of a natural person:

a.a) an identity document;

a.b) information about the citizenship or residence;

a.c) a detailed CV;

a.d) information about the shares and other business interests in the commercial banks operating now or those which have operated in the past in the territory of Georgia;

a.e) a criminal record certificate from the administrative bodies of all countries, the resident of which he/she has been during the past 10 years;

a.f) data on the financial status, and the source and origin of income;

a.g) an income tax return;

b) in the case of a legal person:

b.a) registration documents;

b.b) financial statements of the latest period (quarter) audited by an auditor;

b.c) criminal record certificates/certificates of criminal liability of the legal person and its administrators from the administrative bodies of all the countries, the resident of which he/she has been during the past 10 years.

4. Information on the Supervisory Board, including the Audit Committee and the Directorate, of a banking licence seeker shall include the information determined by a legal act of the National Bank on the fit and proper criteria for administrators.

5. Documents approved by the Supervisory Board of a banking licence seeker shall include the following:

a) the principles of corporate governance;

b) the organisational structure and job descriptions of the members of the management;

c) the credit, market, operational, money laundering and terrorism financing, and other relevant risk management frameworks;

d) the internal model of assessment of capital adequacy;

e) the calculation of capital adequacy in accordance with the requirements established by the National Bank, based on the budget provided for in the business plan;

f) the accounting policy.

6. The business plan of a banking licence seeker shall correspond with the planned activities of such legal person and contain at least the following information:

a) a business strategy;

b) information about the potential impact of the macroeconomic situation of the country on the business strategy;

c) the description of the target market and an assessment of its own competitiveness;

d) a budget plan and a financial forecast, including stress scenarios, for the next 3 years;

e) risk factors related to business and regulatory norms;

f) the minimum of information technologies to be implemented at the initial stage and the plan for their implementation in the following operational period.

7. In the case of the licensing of a branch or a subsidiary bank of a foreign bank, additional information shall include the following:

a) a financial statement and a profit and loss statement of the parent bank for the past 3 years;

b) a decision of the Supervisory Board of the parent bank on the application to the National Bank to obtain a banking licence;

c) the approval of the supervisory body of the parent bank to open a branch/subsidiary bank in Georgia.

8. The documents referred to in this article shall be submitted in the form of the originals or notarised copies thereof. Documents issued in a foreign country shall also be certified by an apostille and/or legalised. In addition, properly certified translations into Georgian of the said documents shall be submitted.

9. In the case of a non-resident legal person, if the legislation of the relevant country does not provide for the issuance of a certificate of criminal liability, an official document confirming the above, issued by an authorised agency, shall be submitted to the National Bank.

10. A licensed commercial bank, its shareholders, intermediate owners, and the beneficial owners of the significant share shall, upon the request of the National Bank, submit to the latter the respective updated information determined by this article.

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 4 – Decision on licensing

1. A decision on issuing a banking licence shall be made only by the National Bank.

2. A banking licence shall be valid for an indefinite period. It shall not be transferred to another person.

3. In order to make a decision on issuing a banking licence, the National Bank shall examine the compliance of the submitted documents and information with the licensing requirements established by the legislation of Georgia. The National Bank shall be authorised to hold relevant consultations with the banking licence seeker before receiving a written application for obtaining a banking licence.

4. Within 5 working days after the submission of a written application for obtaining a banking licence, the National Bank shall verify the formal compliance of the submitted information/documents with the requirements of Articles 3 and 3¹ of this Law and those established by the National Bank. If the banking licence seeker fails to submit in full the information/documents determined by the legislation of Georgia, the National Bank shall establish a gap in the application of the banking licence seeker and set a time limit of not more than 15 working days to remedy it. If the time limit set to remedy the gap is missed, the National Bank shall refuse to issue a licence to the licence seeker. If the licence seeker submits a complete written application, the National Bank shall issue a written confirmation of receipt thereof and set a deadline for making a decision on issuing the licence.

5. The National Bank shall review the information and documents submitted for obtaining a banking licence within 6 months after the issuance of the confirmation of the receipt of a complete written application. During the review period, the National Bank shall have the right to request, within the scope of its authority, the submission of any additional information/documents required in a specific case to make a reasoned decision. In the case of a request to submit additional information/documents, the time limit as provided for by this paragraph shall cease to run, and a time limit for submitting additional information/documents (including several times) shall be set. The submission by the licence seeker of the information/documents requested by the National Bank shall constitute the basis for the renewal of the time limit, and the failure to submit the information/documents within the set time limit shall constitute the basis for a refusal to issue the licence. As a result of the review, the National Bank shall inform the interested person in writing of the consent to issue the licence, and if the licence seeker fails to meet the licensing requirements established by the legislation of Georgia, a reasoned refusal.

6. The total period for making a decision by the National Bank on the issuance of a licence shall not exceed 12 months.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 5 – Fit and proper criteria for the administrators of commercial banks

1. An administrator of a commercial bank shall meet the following fit and proper criteria:

a) a good reputation, reliability and a conscientious attitude to work, which, inter alia, implies that the administrator must not have previous convictions for serious or particularly serious crimes, the financing of terrorism and/or illicit income legalisation, or other economic crimes;

b) the appropriate knowledge, skills and experience necessary to carry out banking activities;

c) independent judgment, which means that the administrator shall have the ability to make decisions based on independent and objective judgment, assess decisions made by other members of the management bodies and avoid conflicts of interest;

d) enough time to perform his/her duties properly;

e) the number of simultaneously held positions – the administrator of a commercial bank shall not be the administrator of another commercial bank, micro-bank, microfinance organisation and/or non-bank depository institution – a credit union registered in Georgia, except where the said entity/entities is/are subject to the control of the commercial bank, or is/are the controlling entity/entities of the commercial bank, in which he/she holds the position of an administrator. The administrator of a commercial bank shall not be a member of the Supervisory Board and/or Directorate of more than 5 undertakings. In addition, 1 executive position shall be compatible with 2 non-executive positions, or 5 non-executive positions may be held. For the purposes of this sub-paragraph, positions held in non-entrepreneurial (non-commercial) organisations shall not be taken into account. For the purposes of this sub-paragraph, the following shall be regarded as one position:

e.a) positions held in one group. For the purposes of this sub-paragraph, a group means a commercial bank, its parent undertaking and its subsidiary undertaking/undertakings;

e.b) positions held in the undertaking/undertakings in which the commercial bank holds the significant share.

2. Decisions on the compliance of administrators with fit and proper criteria shall be made by the National Bank, which shall, in the process of assessment, be guided by the principle of proportionality that implies the assessment of the said criteria according to the size, organisational structure, risk profile and complexity of the bank. The principle of proportionality shall not apply when assessing the criteria of good reputation, reliability and conscientious attitude. The degree of intensity of the assessment, the assessment procedure, and the content of information/documents to be submitted shall be determined in accordance with the principle of proportionality.

3. The assessment of the compliance of administrators with fit and proper criteria shall involve the assessment of both their individual suitability and the joint suitability of the Directorate and the Supervisory Board of the bank.

4. When assessing the compliance of administrators with fit and proper criteria, a diversity policy shall be taken into consideration, which shall be based on at least the following factors: education, professional experience, age, and sex.

5. Before appointing an administrator, the bank shall submit to the National Bank the information/documents determined by a legal act of the National Bank on the fit and proper criteria for administrators, and shall not appoint a person as an administrator until the National Bank makes a decision on the compliance of the administrator with the fit and proper criteria, and where the appointed person does not meet the said criteria, shall dismiss him/her.

6. In exceptional cases, the National Bank may grant conditional consent to the appointment of an administrator without the information/documents determined by a legal act of the National Bank on the fit and proper criteria for administrators being fully submitted, and determine the time limit of not more than 6 (six) months for the complete submission of information/documents. If the information/documents are not submitted completely within the said time limit, the conditional consent granted for the appointment of an administrator shall be automatically annulled from the moment of the expiry of the time limit determined by the National Bank.

7. The National Bank may determine by a legal act the rules and procedure for assessing the compliance with the fit and proper criteria by the commercial bank administrators, including issues related to the joint suitability of the Directorate and the Supervisory Board, and the information to be submitted, and clarify the content of the assessment criteria.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 6 – Special conditions for simplification of licensing procedures

1. Granting a banking licence to a foreign bank branch or subsidiary company may be carried out in a simplified manner if a banking licence seeker is an exclusively reliable bank, in particular, if it has a high level of popularity, good reputation, high credit rating, long-term experience in financial sector, sustainable financial indicators and high level of transparency.

2. In order to facilitate the credibility of entering of the foreign trust bank into the Georgian market, the National Bank shall individually define the list of documents and information that the branch or subsidiary of the foreign bank provided for in paragraph 1 of this article shall submit to obtain a banking licence.

3. The National Bank shall be authorised to determine the simplified procedures for the licencing of the interim bank.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 7 – Revocation of banking licences

A banking licence may be revoked only by the decision of the National Bank:

a) upon the request of a commercial bank on revocation of a banking licence;

b) due to violation of Article 21 of this Law;

c) if a licence is issued on the basis of false statements or other inaccuracies in the application for a banking licence;

d) if a commercial bank has not carried out activities within 12 months after obtaining a banking licence, or if an operating commercial bank terminates activities for more than 6 months;

e) if there was a significant deviation from the business plan and business strategy submitted by the commercial bank to obtain banking licenses without prior agreement with the National Bank;

f) if a commercial bank has been merged with, acquired by, or separated from other bank;

g) if a commercial bank no longer has a minimum cash amount of equity capital or regulatory capital determined by the National Bank; or a bank is no longer reliable for creditors due to failure to fulfil its obligations towards them; or a bank is no longer able to ensure security of assets entrusted to it;

h) if shareholders of a commercial bank decide to liquidate the bank or the bank ceases to exist as a legal person;

i) if a commercial banks has a weak risk management model, a commercial bank follows or has followed a harmful or unsound banking practice for its financial condition, which may significantly damage its depositors or pose a threat on a stable and effective functioning of a bank system;

j) if a commercial bank has or expects significant financial difficulties which may be expressed by a weak profitability indicator and disruption of the supervisory coefficient or otherwise;

k) if a commercial bank is insolvent or faces insolvency;

k ^{​ 1} ) if, for the purpose of the further functioning of a commercial bank, there is a need for a temporary state financing determined by the Organic Law of Georgia on the National Bank of Georgia, or the use of other cash amount accumulated in the resolution fund, or the need for the loans of last resort provided for by Article 33(3) of the same Law;

k ^{​ 2} ) if the supervisory measures provided for by Article 30 of this Law and/or the early interventional measures determined by Article 30 ^{​ 1} of the same Law have been used ineffectively;

l) the complexity and/or non-transparency of a commercial bank group structure, which interrupts the effective supervision;

m) a change of the structure of the owner of the commercial bank which poses a threat on financial stability and healthy operation of the commercial bank and/or a financial sector;

n) court decision on the revocation of the banking right of a commercial bank;

o) the failure by an administrator or the holder of significant shares of a commercial bank to comply with the fit and proper criteria provided for by the legislation of Georgia;

o ^{​ 1} ) if the resolution mode of a commercial bank has finished ineffectively;

p) revocation of a banking licence of the parent institution of a foreign bank branch in the country of its residence, or the situation where the National Bank believes that the foreign bank does not meet the requirements for the foreign bank branch, and the resolution mode is not established or shall not be established within the reasonable time, or the insolvency or bankruptcy proceedings shall not be commenced in the country of its residence, or the establishment of the resolution mode, or the commencement of the insolvency or bankruptcy proceedings in the country of its residence will not be enough to facilitate its financial stability in Georgia, or the equal protection of the interests of the creditors of the foreign bank branch located in Georgia shall not be ensured in the resolution mode established or during the insolvency or bankruptcy proceedings carried out in its country of residence;

q) in the case of issuing a conditional licence, failure to comply with the requirements/restrictions related to the issuance of the conditional licence.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 3950 of 15 December 2023 – website, 28.12.2023

 

Article 8 – Publication and effect of the decision on revocation of banking licences

1. The decision on revocation of a banking licence shall be published by the Legislative Herald of Georgia and on the official website of the National Bank. The decision shall be effective from the date of its publication on the official website of the National Bank, or from any other date determined by the decision.

2. After revocation of the banking licence, a commercial bank may not conduct any activities granted under this licence and the bank must be liquidated in accordance with the procedure established by Article 37 ^{​ 12} of this Law.

3. After the banking licence is revoked, the commercial bank must, within the shortest period of time, discharge all liabilities related to its activities. During termination of its activities until all liabilities are discharged, a commercial bank shall follow the provisions of this Law as a licensed bank.

4. Only the National Bank shall make decisions on insolvency and bankruptcy of a commercial bank.

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

 

Chapter II ^{​ 1} – Acquisition of Significant Shares of Commercial Banks

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

 

Article 8¹ - Obligation to submit information and give notifications

1. A person or a group of jointly acting partners (shareholders) (‘an applicant’), who intend to directly or indirectly acquire a holding in a commercial bank in such amount that their direct/indirect participation in the capital of the commercial bank, as a result of the acquisition, exceeds 10%, 20%, 30% or 50%, and/or they will acquire significant influence or control over the commercial bank, regardless of the amount of holding in the capital and/or voting shares, shall submit to the National Bank, either personally or through a representative or the bank, the information/documents determined by a legal act of the National Bank on the acquisition of significant shares. In the case of a group of jointly operating partners (shareholders), the total amount of shares held by such group shall be taken into account in order to establish the acquisition/change of the significant share.

2. Where an applicant acquires a significant share without prior intention, the relevant information/documents shall be submitted to the National Bank immediately as the applicant becomes aware of the said fact. Until the National Bank makes a decision on the suitability of the owner of significant shares, a person shall not exercise voting rights and other powers related to the holding of significant shares. Where an applicant acquires significant shares without prior intention, he/she shall be obliged to submit information/documents regardless of whether the acquirer plans to sell the amount of the shares, as a result of which the shares held by him/her will return to the threshold number.

3. In order to make a decision on the acquisition of significant shares, the National Bank shall examine the compliance of the submitted information/documents with the requirements of the legislation of Georgia and shall take into account the following fit and proper criteria:

a) the reputation of the applicant, which includes his/her reliability and appropriate competence;

b) the compliance of the person selected by the applicant as a bank administrator (if the applicant has such powers) with the requirements set out in this Law and a legal act of the National Bank on the fit and proper criteria for administrators;

c) the financial stability of the applicant;

d) the compliance of the bank with the prudential supervisory requirements after the acquisition of shares by the applicant;

e) the absence of money laundering and terrorist financing risks related to the applicant/ transaction.

4. A person shall be prohibited from being the holder of the significant shares of a commercial bank, if he/she has previous convictions for serious or particularly serious crimes, the financing of terrorism and/or illicit income legalisation, or other economic crimes.

5. When assessing the suitability of an applicant, the National Bank shall be guided by the principle of proportionality, which implies the assessment of the fit and proper criteria based on the size, organisational structure, risk profile and complexity of the bank, as well as the amount of shares, the type of acquirer of shares (a natural person, a legal person, a direct/indirect holder/acquirer), the purpose of the acquisition of shares, and its possible impact on the bank. The degree of assessment intensity, the assessment procedure, and the content of the information/documents to be submitted shall be determined in accordance with the principle of proportionality. The principle of proportionality shall not apply to the assessment of the reliability of an applicant within the framework of the assessment of the applicant’s reputation.

6. Both direct and indirect acquirers of significant shares shall be obliged to submit information/documents to the National Bank. Upon the consent of the National Bank, a beneficial owner may submit information/documents on behalf of an intermediate owner.

7. If the National Bank considers that additional information/documents needs/need to be submitted in order to make a decision, it shall be authorised, within its competence, to request the submission of any other information/documents (including confidential) in addition to the information/documents provided for by this Law and a legal act of the National Bank on the acquisition of significant shares.

8. A direct/indirect owner of a commercial bank, who intends to directly or indirectly sell the holding in the commercial bank in such amount that, as a result of the sale, his/her holding in the capital of the commercial bank falls below 10%, 20%, 30% or 50%, shall notify the National Bank to this effect in advance. Such notification shall contain as detailed information as possible about the said transaction.

9. A commercial bank shall immediately notify the National Bank of any changes in the compliance of the owner of the significant shares of the commercial bank with the fit and proper criteria (including any changes related to the ownership of shares that are known to it).

10. The National Bank may determine, by a legal act, the content of the fit and proper criteria for owners of the significant shares of commercial banks, the issues related to the determination of the amount of significant shares, the information/documents to be submitted, and the rule and procedure of assessment.

11. The National Bank shall be authorised to establish simplified procedures for the acquisition of the significant shares of a commercial bank in the resolution mode.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5528 of 20 December 2011 – website, 28.12.2011

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5228 of 30 October 2019 – website, 30.10.2019

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 8² – A ssessment of the suitability of an applicant

1. Within 5 working days after the submission of information/documents by an applicant, the National Bank shall examine the formal compliance of the submitted information/documents with the requirements set out in this Law and a legal act of the National Bank. If the applicant fails to submit in full the information/documents determined by the legislation of Georgia, the National Bank shall establish a gap for the applicant and set a time limit of not more than 15 working days to remedy it. If the time limit set for remedying the gap is missed, the National Bank shall refuse the applicant the acquisition of the significant share. If the applicant submits complete information/documents, the National Bank shall acknowledge the receipt thereof and specify the deadline for making a decision regarding compliance.

2. The National Bank shall review the submitted information/documents within 60 working days after providing a written acknowledgement of the receipt of complete information/documents. During the review period, the National Bank shall have the right to request in writing, within the scope of its authority, the submission of any additional information/documents required in a specific case to make a reasoned decision, and it shall also have the right to verify the said information or check it directly with the applicant. Additional information/documents may be requested not later than on the 50 ​ ^th working day after the issuance of a written acknowledgement of receipt of complete information/documents. In this case, the time limit for review shall cease to run until the submission of additional information/documents, for not more than 20 working days, or if the applicant is a non-resident, for not more than 30 working days, of which the applicant shall be notified. The submission by the applicant of the requested information/documents shall constitute the basis for the renewal of the time limit, and the failure to submit the information/documents within the set time limit shall constitute the basis for the refusal of the acquisition of significant shares. The National Bank shall have the right to repeatedly request the submission of additional information/documents or the clarification of information. In this case, the time limit for review shall not be repeatedly suspended.

3. Following the review of the submitted information/documents, the National Bank shall give its consent to the applicant to carry out a respective operation, or give a reasoned refusal, if the applicant fails to comply with the suitability requirements determined by this Law and a legal act of the National Bank on the acquisition of significant shares of commercial banks, or fails to submit the information/documents requested by the National Bank. The National Bank may refuse the applicant to carry out the said operation in the cases provided for by Article 48(4) of the Organic Law of Georgia on the National Bank of Georgia.

4. A consent or a reasoned refusal to carry out the operation of acquisition of significant shares shall be notified to the applicant within 2 working days after the completion of the assessment, without violating the total time limit of assessment.

5. Failure by the National Bank to respond within 60 working days after the acknowledgement of the receipt of documents/information shall automatically mean consent to the carrying out of the respective operation. If necessary, the National Bank shall be authorised to extend the period for making a decision on the acquisition of significant shares to 90 working days, of which the applicant shall be notified before the expiry of the time limit specified in this paragraph.

6. In the case of acquisition of shares despite the failure to submit the respective information/documents to the National Bank or a reasoned refusal from the National Bank, the National Bank shall be authorised to suspend the voting right of the person concerned and/or require that he/she reduce the shares held by him/her to 10%/ withhold significant influence/control, as well as require the commercial bank to annul the results of the exercise by the person concerned of the voting right and/or other powers obtained as a result of the acquisition of shares.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29.

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 8 ^{​ 3} – Information to be submitted to the National Bank periodically

1. Based on available information, a commercial bank shall submit to the National Bank, together with an annual report, information about the owner of its significant shares and shall specify whether it confirms the accuracy of this information or not.

2. The owner of significant shares shall submit to the National Bank, in April of each year, updated information about changed circumstances, or confirm that the circumstances have not changed.

3. The failure of the owner of significant shares of a commercial bank to submit the requested information to the National Bank shall result in the imposition of liability as provided for by the legislation of Georgia.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 8 ^{​ 4} – Request for the submission of information/documents by the owner of significant shares and supervisory measures

1. In the case of reasonable doubt, the National Bank may require that a commercial bank submit updated or clarifying information/documents about the owner of its significant shares.

2. If, in the case provided for in paragraph 1 of this article, the owner of the significant shares fails to submit appropriate information/documents or, based on the assessment by the National Bank, the owner of the significant shares no longer complies with the fit and proper criteria, the National Bank shall have the right:

a) to suspend his/her voting right and require that he/she reduce the shares owned by him/her to 10% within 60 days;

b) to suspend his/her voting right for an indefinite period.

3. The person shall have the right to appeal the decision of the National Bank on refusal to acquire shares in a commercial bank, suspension of the voting right and/or requirement to reduce his/her shares to 10 per cent to a court.

4. If there is a court decision suspending voting rights, the person shall have the right to exercise his/her voting rights proportionate to only 10 per cent of the shares.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Chapter III – Ownership and Administration

 

Article 9 – Requirements towards commercial bank capital and reserves

1. The National Bank shall periodically determine the minimum amount of reserves, paid-in capital and regulatory capital of a commercial bank, and regulations for their formation. A commercial bank may not pay up/form the subscribed capital in a nonmonetary form.

2. A commercial bank may not reduce its subscribed capital by redeeming shares, or reduce its regulatory capital by using reserves without the prior written consent of the National Bank, and without an appropriate amendment regarding a change in the subscribed capital in the charter of the commercial bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

 

Article 10 – Restriction of ownership rights, assets, ownership structure and group structure of commercial banks

1. A commercial bank may:

a) in accordance with paragraph 1 ^{​ 1} of this article, without the permission of the National Bank, directly or indirectly own a maximum of 20 per cent shares in the subscribed capital of a legal person, unless the commercial bank's total share exceeds 15 per cent of its equity capital;

b) (deleted – 23.12.2018, No 1895);

c) in accordance with paragraph 1 ^{​ 1} , establish and/or acquire subsidiaries that are engaged in other businesses in which its share exceeds 20 per cent under written permit of the National Bank; the permit shall specify the type of business each subsidiary may conduct; in this case, activities of subsidiaries shall be restricted to the businesses specified in the permit; without a written permit of the National Bank this share shall not exceed 15 per cent of the equity capital;

d) receive a share from a subsidiary to repay the amount of credit granted. A commercial bank shall notify the National Bank about it and shall inform about the activities of the subsidiary. If the activity of the subsidiary is not the one provided for by paragraph 1 ^{​ 1} of this article, the commercial bank shall take measures to sell the share within 6 months. After receiving a consent form the National Bank, a commercial bank has the right to sell the share in no later than 1 year. In a special case, the National Bank may extend this time, which shall not exceed 2 years, despite the number of extensions. If its shares provide the commercial bank with the control and management right over the subsidiary, in the period from acquiring to alienation no new additional activity shall be allowed without the prior consent of the National Bank;

e) establish or acquire a subsidiary – a brokerage company which is engaged only in brokerage activity as determined by the Law of Georgia on Securities Market; the commercial bank may hold an unlimited amount of shares in the brokerage company unless the shares exceed 15 per cent of the bank's equity capital without permission of the National Bank.

1 ^{​ 1} . A commercial bank is prohibited to hold share directly or indirectly in the capital of a legal entity which is not a financial institution or whose activity is not related with banking activities or social projects of a commercial bank. This restriction does not apply to securities intended to carry out dealing operations in accordance with the procedure established by the National Bank.

1 ^{​ 2} . In the case of investing in a foreign country outside Georgia, a commercial bank shall justify that the legislation of the relevant country does not restrict the possibility of an effective supervision by the National Bank, including the exchange of information between the supervisory bodies.

2. The total cost of shares referred to in paragraph 1(a) and (c-e) of this article may not exceed 50 per cent of the equity capital of a commercial bank. The National Bank shall be entitled to release the commercial bank form complying with the requirements of this paragraph for a period not exceeding one year.

2 ^{​ 1} . For a guidance while making investment decisions by a commercial bank, the National Bank is entitled to define criteria by a normative act.

3. A commercial bank shall be obliged to have complete information about the identity of each beneficial owner of the bank who directly or indirectly owns more than 10 per cent of shares (indicating the amount of shares); to provide the National Bank with that information, as well as with information of any significant changes regarding a beneficial owner, and to publish this information in the bank's annual reports. The National Bank shall define the method of providing and publishing this information on the basis of International Financial Reporting Standards and best international practices.

4. The obligation under paragraph 3 of this article shall not apply to beneficial owners of a commercial bank who cannot be identified by the bank because the nominal ownership in their favour is held by a clearing organisations located and exercising their authority in developed countries, or by international depositaries.

5. For the purposes of this Law, the requirements that apply to the partners (shareholders) of a commercial bank shall also apply to beneficial owners who directly or indirectly hold shares in the commercial bank.

6. The National Bank is entitled to request changing, simplifying or separating ownership structure and/or group structure from a commercial bank if the difficulty of the ownership structure/group structure interrupts carrying out the effective supervision and/or poses a threat or may pose a threat on the stability of a commercial bank and/or financial sector and its healthy operation.

7. A commercial bank shall agree in advance with the National Bank such changes in the founding structure which may have an impact on the compliance of the bank with the licensing conditions/criteria, in accordance with the procedure established by the National Bank.

Law of Georgia No 1751 of 24 December 1998 – LHG I, No 1(8), 14.1.1999, Art. 4

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 1617 of 4 July 2002 – LHG I, No 23, 24.7.2002, Art. 108

Law of Georgia No 1938 of 28 December 2002 – LHG I, No 3, 17.1.2003, Art. 19

Law of Georgia No 2787 of 17 March 2006 – LHG I, No 8, 24.3.2006, Art. 59

Law of Georgia No 4519 of 27 March 2007 – LHG I, No 9, 31.3.2007, Art. 84

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 2830 of 23 March 2010 – LHG I, No 19, 13.4.2010, Art. 104

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.03.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.01.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 10 ^{​ 1} – Requirements for commercial bank subsidiaries that conduct activities outside Georgia under the legislation of Georgia for accountable persons provided for by the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism

1. To conduct activities outside Georgia under the legislation of Georgia for accountable persons provided for by the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism, a commercial bank shall submit to the National Bank within 14 days after establishing or acquiring a subsidiary the commercial bank's decision that, upon commencing operations, the subsidiary has developed a program to combat money laundering and the financing of terrorism for fulfilling the recommendations on combating money laundering and the financing of terrorism, and of the Financial Action Task Force (‘the FATF’).

2. If fulfilment of the FATF recommendations by a subsidiary is not provided for in the laws and subordinate normative acts of a foreign country of the subsidiary’s residence, or if this country fails to combat money laundering and the financing of terrorism and the FATF recommendations are not followed, or followed insufficiently, then:

a) a commercial bank shall undertake a written obligation that it shall ensure the implementation of measures for combating money laundering and the financing of terrorism by its subsidiary under the requirements established in Georgia towards commercial banks and the FATF recommendations;

b) a commercial bank shall ensure that the National Bank is informed if its subsidiary cannot carry out measures under the legislation of Georgia for combating money laundering and the financing of terrorism because these measures are prohibited or restricted by the legislation of a foreign country of a subsidiary’s residence.

Law of Georgia No 2830 of 23 March 2010 – LHG I, No 19, 13.4.2010, Art. 104

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 5228 of 30 October 2019 – website, 30.10.2019

 

Article 10² – Transformation of a commercial bank into a micro-bank

1. A commercial bank shall be authorised to change the scope of its activities and apply to the National Bank with a request to obtain a micro-banking licence in accordance with the procedure established by the legislation of Georgia.

2. Until the National Bank makes a decision on granting a micro-banking licence to a commercial bank, the commercial bank shall carry out its activities without interruption and the requirements established by this Law shall apply to it.

3. The National Bank shall, together with a decision on granting a micro-banking licence, make a decision on revoking the commercial bank licence. Upon the revocation of the commercial bank licence, the relevant micro-bank shall become its legal successor.

4. In the case of refusal to grant a micro-banking licence, the commercial bank shall continue its activities as provided for by this Law.

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 11 – Division and merger of commercial banks

1. The division (division or separation) or merger (a merger by acquisition or a merger by the formation of a new company) of commercial banks shall be carried out only upon a written consent of the National Bank. No division or merger of commercial banks that fails to comply with provisions of Article 10 of this Law shall be implemented.

2. The National Bank shall examine the compatibility of the merger of commercial banks with the competitive environment in accordance with the procedure established by the Law of Georgia on Competition and by the National Bank.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 7130 of 16 September 2020 – website, 21.9.2020

 

Article 12 – Charter of commercial banks

1. A commercial bank has its charter which complies with the legislation of Georgia. The National Bank shall be immediately informed in writing if any amendments are made to the charter.

2. A commercial bank shall be managed on the basis of its charter and other internal organisational procedures which shall determine its organisational structure, risk management framework and responsibilities, and shall be formalised and constantly available to the National Bank.

3. A commercial bank shall submit to the National Bank its charter and other internal organisational procedures, as well as the lists of officials who have the authority to represent the commercial bank, their specimen signatures and the reference about the scope of their authority.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 13 – Management bodies of commercial banks

Commercial bank management bodies shall be formed and operate under the Law of Georgia on Entrepreneurs. The highest management body of a commercial bank is a General Meeting of Shareholders which acts in compliance with the legislation of Georgia and the company Charter. The Meeting shall appoint the Supervisory Board. The National Bank shall be informed of the date and agenda of the General Meeting for its possible participation in the Meeting, within the time frame determined for shareholders under the legislation of Georgia.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

 

Article 14 – Supervisory Board

1. The Supervisory Board of a commercial bank shall supervise commercial bank activities. The Board shall consist of at least 3 and a maximum of 21 members. The procedure for establishing a Supervisory Board and determining its composition shall be regulated by the Corporate Governance Code of Commercial Banks approved by an order of the President of the National Bank.

2. Members of the Supervisory Board of a commercial bank shall not perform executive functions.

3. Each member of the Supervisory Board shall be elected by the General Meeting of Shareholders for a term of not more than 4 years. Their re-election shall be unlimited.

4. The General Meeting of Shareholders shall determine remuneration for the members of the Supervisory Board in accordance with the Corporate Governance Code of Commercial Banks approved by an order of the President of the National Bank. Members of the Supervisory Board shall be permitted to receive only fixed remuneration.

5. A person, who fails to comply with the suitability requirements for administrators as provided for in Article 5 of this Law and a legal act of the National Bank on the fit and proper criteria for administrators, shall not be elected as a member of the Supervisory Board, and shall be dismissed from the membership of the Supervisory Board by a decision of the General Meeting of Shareholders.

6. Members of the Supervisory Board shall manage the activities of the commercial bank in good faith, take care of the bank as a diligent and prudent person would take care in similar circumstances, and act in the interests of the stability of the bank. The members of the Supervisory Board shall be jointly and severally liable to the bank for any damage caused by their culpable failure to fulfil the said duties. A member of the Supervisory Board shall be exempted from liability if, by his/her action, he/she executes a decision of the General Meeting of Shareholders, unless he/she contributed to the decision of the General Meeting by providing incorrect information, or knew that making such decision would result in damage, but had not informed the General Meeting thereof before the decision was made or enforced.

7. The decisions of each member of the Supervisory Board shall be in line with the interests of the commercial bank. The members of the Supervisory Board shall approach matters reasonably and independently. They shall select and retain competent directors and determine the strategy of the activities of the commercial bank.

8. The Supervisory Board of a commercial bank, or its members, may not delegate their rights to others without the consent of the General Meeting of Shareholders.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 15 – Directorate

1. The management and representation of a commercial bank shall be entrusted to the directors of the commercial bank. They shall be responsible for managing the activities and performing the functions of the bank. The Directorate shall consist of at least 3 directors appointed by the Supervisory Board for a term of not more than 4 years. Their re-appointment shall be unlimited.

2. The structure of the Directorate of all banks shall include the General Director, who shall be appointed by the Supervisory Board.

3. A person, who fails to comply with the suitability requirements for administrators as provided for in Article 5 of this Law and a legal act of the National Bank on the fit and proper criteria for administrators, shall not be appointed as a member of the Directorate of a commercial bank, or shall be dismissed from the membership of the Directorate by a decision of the Supervisory Board.

4. Members of the Directorate shall manage the activities of the commercial bank in good faith, take care of the bank as a diligent and prudent person would take care in similar circumstances, and act in the interests of the stability of the bank. They shall be jointly and severally liable to the bank for any damage caused by their culpable failure to fulfil these duties. A director shall be exempted from liability if, by his/her action, he/she executes a decision of the General Meeting of Shareholders, unless he/she contributed to the decision of the General Meeting of Shareholders by providing incorrect information, or knew that such decision would result in damage, but had not informed the General Meeting thereof before the decision was made or enforced.

5. The Directorate of a commercial bank shall have the right, in each specific case, based on the prior written consent of the Supervisory Board of the bank, to fully or partially delegate its powers to others.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 16 – Audit committee

1. By a decision of the Supervisory Board of a commercial bank, the Audit Committee shall be set up from among the members of the Supervisory Board. The majority of the members of the Audit Committee shall be independent members of the Supervisory Board.

2. A member of the Supervisory Board of a commercial bank shall be considered independent if he/she is not influenced by the bank or any other party, which may prevent him/her from making objective and independent decisions in the course of his/her activities. Additional criteria for determining an independent member of the Supervisory Board of a commercial bank shall be established by the Corporate Governance Code of Commercial Banks approved by an order of the President of the National Bank.

3. At least 2 members of the Audit Committee, including the chairperson of the Audit Committee, shall have skills or experience in analysing financial statements, or financial education.

4. The Audit Committee shall periodically submit a report on its activities to the Supervisory Board of a commercial bank.

5. The main functions of the Audit Committee shall be as follows: determining the approaches and financial reporting policies of the bank in relation to the matters of internal control, monitoring the financial reporting process, and facilitating the functioning of internal audit, and the auditors of the commercial bank. The functions and responsibilities of the Audit Committee shall be additionally determined by a legal act of the National Bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

 

Article 17 – Bank secrecy

1. No one shall have the right to give anyone access to confidential information, to disclose or disseminate such information, or to use it for personal benefit. Confidential information may be provided only to the National Bank and the Commission for Review of Disputes within the National Bank provided for by the Organic Law of Georgia on the National Bank of Georgia, within their competence.

2. Information about any transaction (including attempted transaction), payment operation, account, transaction from the account, and the balance on the account, may be released to the party participating in such transactions, and in the case of carrying out a payment operation − to the paying person and/or the receiving person, the holder of the relevant account and their representatives, in the cases provided for by the legislation of Georgia − to the Financial Monitoring Service of Georgia and the persons who are authorised to enforce the subordinate acts on enforcement as determined by the Law of Georgia on Enforcement Proceedings, in the process of the enforcement thereof, when carrying out inspections provided for by the Law of Georgia on Personal Data Protection − to the Personal Data Protection Service, on the basis of a court decision provided for by the Administrative Procedure Code of Georgia − to the Legal Entity under Public Law called the Georgian National Communications Commission, on the basis of a court decision provided for by the Administrative Procedure Code of Georgia, the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) within the scope of the Convention of 25 January 1988 on Mutual Administrative Assistance in Tax Matters, or the agreements on automatic exchange of financial account information between Georgia and the appropriate jurisdiction − to the tax authority, and in the case provided for by the Law of Georgia on Deposits Insurance System − to the Legal Entity under Public Law called the Deposit Insurance Agency. Such information may also be released based on a relevant court ruling.

3. The tax authority may forward the information referred to in paragraph 2 of this article to the competent authority of the United States of America as provided for in the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA).

3¹. The tax authority may forward the information referred to in paragraph 2 of this article to the competent authorities of the jurisdictions, in which the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) within the scope of the Convention of 25 January 1988 on Mutual Administrative Assistance in Tax Matters, or the agreement on automatic exchange of financial account information between Georgia and the appropriate jurisdiction, are effective.

4. The restriction provided for by paragraph 2 of this article does not apply to the exchange of information inside the commercial bank group and between commercial banks for the purposes set out in the legislation of Georgia on the prevention of money laundering and the financing of terrorism.

Law of Georgia No 163 of 21 March 1996 – newspaper 'The Republic of Georgia', 3.4.1996

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 2474 of 20 June 2003 – LHG I, No 20, 11.7.2003, Art. 140

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 213 of 15 July 2008 – LHG I, No 17, 28.7.2008, Art. 129

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5528 of 20 December 2011 – website, 28.12.2011

Law of Georgia No 2948 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 4459 of 28 October 2015 – website, 11.11.2015

Law of Georgia No 853 of 17 May 2017 – website, 2.6.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 3294 of 21 July 2018 – website, 9.8.2018

Law of Georgia No 4246 of 27 December 2018 – website, 29.12.2018

Law of Georgia No 4593 of 8 May 2019 – website, 8.5.2019

Law of Georgia No 5228 of 30 October 2019 – website, 30.10.2019

Law of Georgia No 1332 of 30 December 2021 – website, 13.1.2022

Law of Georgia No 1802 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2144 of 30 November 2022 – website, 15.12.2022

Law of Georgia No 668 of 12 June 2025 – website, 13.6.2025

 

Article 17 ^{​ 1} – Right to verify information

1. The bank shall be entitled to obtain personal information of a person from the Legal Entity under Public Law called Public Service Development Agency based on a written consent of the person in accordance with the Law of Georgian on Personal Data Protection.

2. The bank is obliged to prevent disclosure of information obtained from the Public Service Development Agency to a third person, except as provided for by law.

Law of Georgia No 5978 of 21 March 2008 – LHG I, No 9, 4.4.2008, Art. 65

Law of Georgia No 6317 of 25 May 2012 – website, 19.6.2012

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

 

Article 18 – Branches of commercial banks

Branches, representative offices and other similar subdivisions of a commercial bank shall be established by decision of the Supervisory Board under the terms and conditions determined by the National Bank.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

 

Chapter IV – Operational Requirements

 

Article 19 – General principles of banking activities

1. A commercial bank shall be managed and its operational activities shall be performed according to administrative and accounting procedures, conditions and restrictions attached to the banking licence that are substantiated by the legislation of Georgia, as well as under the resolutions, procedures and guidelines of the National Bank. The National Bank procedures, standards and guidelines applying to more than one commercial bank shall be subject to mandatory publication and shall become effective from the date of publication or the date indicated in the procedures, standards and guidelines. If the National Bank has not determined procedures for a certain banking activity, a commercial bank shall act according to international banking standards and practices.

2. A commercial bank shall maintain an appropriate level of capital and liquid resources, and shall diversify its assets considering the risk of loss, as required by the National Bank.

3. The relationship for banking services between a bank and its customers shall be regulated by agreement. If the time frames under a money transfer agreement are violated, the bank shall be obliged to pay the customer not less than 0.5 per cent of the delayed amount for each overdue banking day.

4. A commercial bank shall be entitled to develop a security policy for using electronic signatures in providing certain banking services and shall submit the policy to the National Bank for approval. On the basis of the security policy approved by the National Bank for using electronic signatures in providing certain banking services, an electronic signature used when providing certain banking services by a commercial bank shall have equal legal affect as personal signatures on a hardcopy document. An electronic document certified by this electronic signature may be used in all cases where the legislation of Georgia requests the material document.

5. It is not mandatory to submit the electronic signature security policy provided for in paragraph 4 of this article to the National Bank only in the case if a commercial bank while carrying out banking services uses a signature carried out via an electronic ID issued by the administrative body authorised by the legislation of Georgia or a signature a certificate of which is issued in accordance with the requirements of the Law of Georgia on Electronic Document and Electronic Trust Service.

6. Paragraphs 4 and 5 of this article do not restrict the right of commercial bank to use electronic signature in accordance with paragraph 8 of Article 3 of the Law of Georgia on Electronic Document and Electronic Trust Services while performing banking service. In this case, the National Bank shall be entitled to require a commercial bank in accordance with this paragraph to agree the electronic signature security policy with the National Bank. If the National Bank after assessing electronic signature security policy submitted by a commercial bank refuses to agree with the electronic signature security policy in accordance with this paragraph, a commercial bank is obliged to stop using such electronic signature.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 6019 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

 

Article 19 ^{​ 1} – Financial recovery plan

1. The commercial bank shall develop and submit to the National Bank the financial recovery plan approved by the Supervisory Board of this commercial bank. Among other elements, the financial recovery plan shall include idiosyncratic, systematic and combined stress scenarios to reduce the risks related to the liquidity and/or insolvency of the commercial bank and the measures that have to be taken and implemented for the recovery of the financial health.

2. The National Bank shall discuss and evaluate the financial recovery plan. The National Bank is entitled to request the commercial bank to make amendment to the financial recovery plan to remedy significant defects which may pose a threat on the implementation of the plan.

3. The commercial bank shall review the financial recovery plan annually and if appropriate, update it. The financial recovery plan shall be updated if the activity, structure, risk positions of the commercial bank or admissions which have been used during the development of the financial recovery plan have changed significantly. The National Bank is entitled to require the commercial bank any time to review the financial recovery plan and update it.

4. Every commercial bank and enterprise included in the in the banking group shall be obliged to cooperate with the National Bank in the process of the development of the financial recovery plan. This cooperation shall also include the submission of any information required by the National Bank.

5. The National Bank shall be authorised to establish additional requirements and rules related to the financial recovery plan provided for by this article by a legislative act. Taking into account their size, system and risk profile, the National Bank shall also be authorised to determine relevant criteria for those commercial banks which may be offered simplified/different requirements.

6. The financial recovery plan does not prevent the National Bank from acting differently from this plan.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 20 – Banking activities

1. Commercial banks may only be engaged in:

a) soliciting interest-bearing and interest-free deposits (call deposits, term deposits and others) and other refundable means of payment;

b) grant loans including consumer loans, mortgage loans, unsecured and other credits; factoring operations with or without right of recourse; financing commercial deals, issuing guarantees, letters of credit and acceptances, including forfeitures;

c) enter into a derivative contract, sales, with its own and customers means, of monetary instruments (including cheques, bills of exchange and depositary certificates), securities, currency and interest rate instruments, debt documents, foreign currency, precious metals and gems;

d) performing monetary and non-monetary payment transactions and cash-collection services;

e) issuing means of payment and organising their circulation (including payment cards, cheques and bank bills);

e ^{​ 1} ) providing interest-free banking services;

f) rendering intermediary services in financial markets;

g) performing fiduciary (trust) transactions, soliciting and placing funds by order of customers;

h) storing and registering valuables (including securities), including performing the function of an intermediary;

i) providing credit reference services;

i ^{​ 1} ) carrying out the activities of a specialised depositary in accordance with the legislation of Georgia;

i ^{​ 2} ) leasing property;

i ^{​ 3} ) providing payment services, operating payment system, performing the functions of a paying agent;

i ^{​ 4} ) leasing property;

j) providing services related to all of the above activities;

k) providing virtual asset services in favour of another person in accordance with the Organic Law of Georgia on the National Bank of Georgia, namely, the exchange (including via self-service kiosks) of convertible virtual assets in the national or foreign currencies, for another virtual asset or financial instrument, their transfer, and/or the storage of convertible virtual assets or instruments that are necessary for their use, allowing control over the virtual assets, and the ancillary activities necessary for providing such services.

2. Exercising the rights referred to in paragraph 1 of this article with respect to securities transactions shall be regulated by the Law of Georgia on Securities Markets, the Law of Georgia on the Ownership of Dematerialised Securities, and other legislative and subordinate normative acts of Georgia.

3. Before providing a banking service under paragraph 1(e ^{​ 1} ) of this article, a commercial bank is obliged to submit the description of the respective bank product to the National Bank for approval.

4. In accordance with paragraph 1(i ^{​ 2} ) of this article leasing property by a commercial bank is allowed only for the purpose of the management of property to fulfil an existing liability against a commercial bank and/or provided that the property will be used only for banking activities, related activities or the social projects of a commercial bank during the entire lease period.

5. In addition to the cases provided for by paragraph 4 of this article, a commercial bank shall be prohibited to buy or possess property for the purpose of letting it on lease.

6. The National Bank of Georgia shall be authorised to define additional/different criteria for the activity provided for in paragraph 1(i ^{​ 2} ) and (i ^{​ 4} ) and by paragraph 4 of this article.

Law of Georgia No 1751 of 24 December 1998 – LHG I, No 1(8), 14.1.1999, Art. 4

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 6019 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 6306 of 25 May 2012 – website, 12.6.2012

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 1792 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 3729 of 16 November 2023 – website, 7.12.2023

 

Article 21 – Economic limits, standards and individual requirements

1. Commercial banks are obliged to observe the following economic limits determined by the National Bank:

a) the minimum amounts of subscribed capital and regulatory capital;

b) a ratio between various capital accounts of a bank and its classified assets under the procedures of the National Bank;

c) a marginal ratio between solicited deposits of the bank and its regulatory capital;

d) a ratio between the total sum of credits and other liabilities issued by a bank to one borrower (an insider or outsider) and the regulatory capital of the bank;

e) a ratio between the total sum of credits and other liabilities issued by a bank to all insiders (persons connected to the bank and to each other) and the regulatory capital of the bank;

f) (deleted – 23.12.2018, No 1895).

2. Commercial banks are obliged to observe the following economic standards determined by the National Bank:

a) a ratio of the minimum total sum of liquid funds or certain types of such funds to the value of assets (including acquired guarantees and pledges) or a change in their values. The ratio may be set generally for assets or liabilities (including off-balance sheet liabilities) or for specific types. Banks have the right to place appropriate funds with the National Bank of Georgia to comply with liquidity requirements;

b) a standard for a maximum total sum of credits and investments or of special types;

c) classification of assets and off-balance sheet liabilities, and formation and use of reserves against probable losses; also terms and conditions under which accounts receivable based on assets will not be entered into revenue except when received in cash;

d) standards for prohibitions, restrictions and conditions in relation to:

d.a) types and forms of credits granted and funds invested;

d.b) conformity of maturity periods and interests based on assets and liabilities (off-balance sheet and other liabilities);

d.c) open positions in foreign currencies, precious metals and gems formed as a result of exceeding set limits.

3. Based on the risk-based supervision principles, the National Bank is authorised to set for each commercial bank individual indices and requirements for economic limits and standards.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

 

Article 21 ^{​ 1} – Business relations with the customers

1. A commercial bank shall carry out an account opening procedure in accordance with the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism, the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA) and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) within the scope of the Convention of 25 January 1988 on Mutual Administrative Assistance in Tax Matters, or the agreement on automatic exchange of financial account information between Georgia and the appropriate jurisdiction.

2. In business relations with its service consumer and when verifying a transaction carried out by the consumer, a commercial bank must be aware of the identity and activity of its service consumer, and the level of risk of the activity with regard to money laundering and the financing of terrorism. A commercial bank shall, based on the requirements established under the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), also define tax residency of the client and obtain the information on the appropriate status of the person.

2¹. If a commercial bank is a reporting financial institution as determined by the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) within the scope of the Convention of 25 January 1988 on Mutual Administrative Assistance in Tax Matters, or the agreement on automatic exchange of financial account information between Georgia and the appropriate jurisdiction, it shall implement the appropriate procedures determined by the said agreement in accordance with the Common Reporting Standard provided for in that agreement.

3. Commercial banks operating in Georgia shall have the right to decide and require other additional information.

4. A commercial bank operating in Georgia shall have the right to refuse to open an account or provide services, without giving any reasons. A commercial bank is obliged to open an account determined by Article 20 ​ ² (1) of the Law of Georgia on Payment Systems and Payment Services for its client, if the fulfilment of this obligation does not lead to the violation of the legislation on the prevention of money laundering and the financing of terrorism.

5. A commercial bank shall have the right to refuse to open an account for a person or close an existing account of a person if this person refuses to provide the commercial bank with information based on the requirements established by the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) within the scope of the Convention of 25 January 1988 on Mutual Administrative Assistance in Tax Matters, or the agreement on automatic exchange of financial account information between Georgia and the appropriate jurisdiction.

Law of Georgia No 4519 of 27 March 2007 – LHG I, No 9, 31.3.2007, Art. 84

Law of Georgia No 4459 of 28 October 2015 – website, 11.11.2015

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5228 of 30 October 2019 – website, 30.10.2019

Law of Georgia No 1802 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2144 of 30 November 2022 – website, 15.12.2022

 

Article 22 – Prohibited agreements and methods of working

1. (Deleted – 19.9.2020, No 7130).

2. Commercial banks may not conclude any agreement with their customers that will require acquisition or use of a non-banking service of this bank or any of its affiliates in exchange for granting a loan or providing any banking service, unless the customer is given an opportunity to receive this non-banking service from other providers.

3. A controlling person/administrator of a commercial bank is prohibited to carry out an action as a result of which the information received from a commercial bank will put him independently or together with other persons in a dominant position, and/or will result the competition restriction in the non-banking sector.

4. A controlling person and an administrator of a commercial bank are obliged to avoid conflict of interests, and to prevent putting their own interests over those of a commercial bank or abusing of official powers. A controlling person/administrator of a commercial bank who has access to a non-public information which may have a significant influence on the value of certain investment, is prohibited to use this information independently or with other persons.

5. In order to meet the requirements of this article, a commercial bank is obliged to ensure the implementation and monitoring of adequate policies, procedures and technical systems related with the management of non-public information. This should ensure the limitation of the improper outflow of information to the parties related to the commercial banks, its controlling persons and administrators.

6. In the case of non-fulfilment or improper fulfilment of the requirements of this article, the National Bank shall be entitled to apply supervisory measures and/or sanctions (monetary fine) provided for by Article 30 of this Law.

7. In order to meet the requirements of this article, the National Bank shall with a relevant legal act determine procedures regarding prohibited transactions and working methods with them, as well as the relevant supervisory measures and/or sanctions (monetary fine) for shareholders of a commercial bank, controlling persons and administrators.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 6150 of 8 May 2012 – website, 25.5.2012

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 7130 of 16 September 2020 – website, 21.9.2020

 

Article 23 – Registration of transactions and liabilities

1. Commercial banks are obliged to keep all documents related to each of their transactions for the time frames determined by the National Bank, in particular:

a) requests and all contractual documents related to transactions (including agreements on credits, guarantees and pledges);

b) those financial records and other documented certificates of the bank partners (including borrowers and guarantors) that form the basis for the bank to approve a transaction;

c) a signed record of the bank's decision to approve a transaction;

d) other documents as provided for by the National Bank standards.

2. Commercial banks shall be obliged to store information on their customers and any transactions on their accounts in an electronic form for not less than 15 years.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 2830 of 23 March 2010 – LHG I, No 19, 13.4.2010, Art. 104

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

 

Article 24 – (Deleted)

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

 

Article 25 – Transactions with interested persons

Commercial banks may not grant any banking product or render any banking service within their banking activities under preferential conditions to any administrator, controlling person, affiliate or connected persons despite the type of loan, interest rate, maturity period, collateral, value or any other conditions.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

 

Chapter IV ^{​ 1} – (Deleted)

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 4519 of 27 March 2007 – LHG I, No 9, 31.3.2007, Art. 84

 

Article 25 ^{​ 1} – (Deleted)

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 4220 of 29 December 2006 – LHG I, No 2, 4.1.2007, Art. 27

Law of Georgia No 4519 of 27 March 2007 – LHG I, No 9, 31.3.2007, Art. 84

 

Chapter V – Reports, Audit, Accounting and Inspection

 

Article 26 – Reports and financial statements

1. Banks and their subsidiaries shall regularly prepare reports, records and annual financial statements that precisely include their operations and financial conditions under International Accounting Standards. In addition, banks and their subsidiaries shall follow an appropriate form of regulations, level of details and accounting standards determined by the National Bank.

2. Bank reports, records and financial statements shall reflect operations and the financial condition of its subsidiaries on a consolidated basis.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

 

Article 27 – Audit

1. A commercial bank and its subsidiary shall invite an auditor and audit their financial statements annually, as determined by the National Bank.

2. Upon the completion of the audit of its financial statements, a commercial bank shall submit to the National Bank the audit report and publish the financial statements together with the audit report as determined under the procedures of the National Bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

 

Article 28 – Branches of foreign banks

Articles 26, 27 and 29 of this Law shall apply to branches of foreign banks and their subsidiaries that operate in Georgia under licences issued by the National Bank. Under the law, financial and accounting documentation of a bank branch may be submitted as simplified financial statements, which implies that an Audit Committee of the foreign bank or other respective body may be considered to be the Audit Committee for the bank branch.

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

 

Article 29 – Reporting and inspections

1. Commercial banks shall prepare reports and submit them to the National Bank. The reports shall include organisational-administrative and operational activities (of commercial banks and their subsidiaries), their liquidity, solvency and profitability in order to evaluate the financial condition of commercial banks and their subsidiaries jointly and individually. For the purposes of legislation on the prevention of money laundering and the financing of terrorism, a commercial bank shall submit relevant reports to the National Bank. The form, degree and terms for submitting reports shall be determined by the legal acts of the National Bank.

2. A commercial bank and its subsidiary shall be subject to inspection to be performed by inspectors of the National Bank, or auditors appointed by the National Bank. If a branch or a subsidiary of a foreign bank is inspected, the employees of financial or regulatory bodies of respective foreign countries may be the auditors.

3. When inspecting commercial banks and their subsidiaries, the National Bank and its auditors shall have the right to:

a) check accounts, funds, account books, documents and other necessary records of a commercial bank and its subsidiary;

b) require administrators and employees of a commercial bank and its affiliates to provide information regarding the bank’s shareholders, controlling persons and administrators, and any information on banking operations and transactions. If these requirements are not complied with or fully complied with, or if a commercial bank/administrator fails to submit the information within the time limit determined by the legislation of Georgia or the National Bank supervisory measures and/or sanctions (monetary fine) under Article 30 of this Law shall apply.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5228 of 30 October 2019 – website, 30.10.2019

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Chapter VI – Supervisory Measures of the National Banks and Sanctions (Monetary Fine), Early Intervention

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 30 – Supervisory measures of the National Bank and sanctions (monetary fine)

1. The National Bank shall be authorised to impose one or more supervisory measures and/or sanctions (monetary fine) provided for by this article on the commercial bank, administrator of the commercial bank or a controlling person if one or more of the following reasons exist:

a) the commercial bank, the administrator of the commercial bank or the controlling person violates:

a.a) one of the provisions of this Law or any standard, instruction, provision, rule, regulation, requirement, direction of the National Bank;

a.b) any of the conditions or limitations which is attached to the licence of the banking activity or to the corresponding provision of the National Bank;

a.c) reporting time limits (submission of wrong reports and other incorrect information);

a.d) the requirements of the Law of Georgia on Facilitating the Prevention of Money Laundering and Terrorism Financing;

a.e) the requirements of the Law of Georgia on Payment Systems and Payment Services;

a.f) the requirements of the Law of Georgia on Competition;

a.f¹) the requirements of the Law of Georgia on Mortgage-backed Bonds;

a.f²) the requirements of the Law of Georgia on Securitisation;

a.g) the requirements established by the legislation of Georgia and/or the National Bank that has interrupted the implementation of the supervisory process of the National bank;

a.h) the requirements of the Law of Georgia on Supplementary Supervision of Regulated Undertakings in a Financial Conglomerate;

b) the commercial bank has been or is involved in the unhealthy or hazardous banking practices;

c) the risks have been revealed during the process of supervisory revision and evaluation (including the framework of the general programme of the risk evaluation).

2. If one of the reasons provided for by paragraph 1 of this article have been revealed, the National Bank shall have right to, consistently or inconsistently, following the principle of proportionality, use one or more of the following supervisory measures:

a) send a written warning notice to the commercial bank, the administrator of the commercial bank and/or the controlling person;

b) require from the commercial bank to raise additional capital;

c) require from the commercial bank to review and improve domestic policy and procedures, financial recovery plan, control system and strategies;

d) determine special measures, suspend or restrict the certain types of the operations of a commercial bank, or issue an instruction (direction) requiring that a commercial bank ensures the compatibility with the requirements of the legislation of Georgia and the healthy banking practices and take necessary measures to eliminate the reasons determined in the paragraph 1 of this article. The National Bank shall have right to require the respective plan from the commercial bank;

e) require from the commercial bank to use specific approach related to the reservation of assets or for the purpose of the adequacy of capital;

f) suspend the right of signature of one or more administrators of the commercial bank and of the Supervisory Board of the commercial bank and in the case of the member of the Supervisory Board – require form the General Meeting of Shareholders to temporarily remove from office or dismiss the administrator(s);

g) suspend or restrict a commercial bank from increasing assets, distributing profits, paying dividends and bonuses, increasing salaries and soliciting deposits;

h) suspend the voting right of the controlling person and/or the owner of the significant share of the commercial bank in the case of failure to submit the financial or other information to the National bank, or other violation of the legislation of Georgia, including the failure to comply with the fit and proper criterion/criteria referred to in Article 8¹ of this Law, by the controlling person and/or the owner of the significant share, or if based on the assessment by the National Bank, the controlling person or the owner of the significant share uses his/her powers deriving from the holding of shares to the detriment of the bank's interests. The time limits and terms for cancellation or limitation provided for by this sub-paragraph shall be established by the National Bank, depending on the circumstances;

i) demand the controlling person of the commercial bank to remove or limit control in the case of non-submission of the financial or other information to the National Bank or in the case of other type of violation. This removal or limitation shall be accompanied by the terms and time limits which shall be considered to be appropriate by the National Bank based on the circumstances;

j) suspend or limit some types of the activities and operations of the commercial bank, including the demand of the alienation of separate activities or business areas if those expose excessive risks and/or pose a threat on healthy functioning of the commercial bank;

k) demand the commercial bank to respectively react on the risks related to its activities, products and/or systems;

l) demand the commercial bank to decrease variable payment to the extent that is necessary to meet the established coefficient of the adequacy of capital and to fulfil other standards;

m) suspend and/or prevent the commercial bank from distributing capital and/or interest to its shareholders and/or owners of the additional initial capital;

n) establish additional requirements for the commercial bank related to the supervisory reporting;

o) establish individual liquidity requirements for the commercial bank, including limitations on the different maturity of the assets and liabilities;

p) establish additional disclosure requirements for the commercial bank;

q) revoke the banking licence of a commercial bank.

3. In the case of the existence of one or more of the grounds of paragraph 1 of this article and/or the weakening of the financial situation of the commercial bank which may also be represented by the deterioration of the capital and liquidity situation, the growth of the leverage, inactive loans or the concentration of risk position, the National Bank shall, with or without applying supervisory measures provided for by paragraph 2 of this article, be authorised, with the observance of the principle of proportionality, to use one or more of the following measures:

a) demand the commercial bank to apply one or more measures provided for by the financial recovery plan;

b) demand the commercial bank to evaluate the assets and liabilities by an independent appraiser agreed with the National Bank;

c) demand the commercial bank to make changes to its business strategy or organisational structure;

d) demand the commercial bank to develop and implement an action plan which by the decision of the commercial bank may include the issue of negotiating loan obligations and/or undertaking obligations related to the elimination of the problems of the commercial bank by the owner of the significant share;

e) request any information from the commercial bank and/or receive any information onsite form the commercial bank which is necessary to update the resolution plan;

f) demand the Supervisory Board and the Directorate of the commercial bank to invite an extraordinary general meeting to discuss the reasons determined in paragraph 1 of this article and take necessary measures for their elimination. In the case of non-fulfilment of the request of the invitation of the extraordinary general meeting of the shareholders the National Bank shall be authorised to invite the extraordinary general meeting with the agenda set by itself and demand the discussion of the reasons determined in paragraph 1 of this article and take measures for their elimination.

4. With the observance of the principle of proportionality the National Bank shall, with or without application of the supervisory measures for the cases provided for by sub-paragraphs (a) and/or (b) of this article, have right to impose sanctions (monetary fine) in accordance with the procedure and the amount established by the National Bank that shall not exceed the supervisory capital of the commercial bank.

5. The amount of a financial penalty imposed under this article shall be paid into the State Budget.

6. The party, on which the supervisory measures and/or sanctions (monetary fine) are imposed, shall have right to appeal in the court within one month after the official review of the respective individual administrative act.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 1796 of 9 September 2022 – website, 23.9.2022

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

Law of Georgia No 3769 of 29 November 2023 – website, 19.12.2023

Law of Georgia No 3932 of 15 December 2023 – website, 27.12.2023

 

Article 30¹ – Early intervention

1. If, in the case of the existence of one or more reasons determined by Article 3(1) and/or (3), the supervisory measures are not effective, or the National Bank believes that such measures are not sufficient to achieve satisfactory result, the National Bank shall, with or without application of the supervisory measures provided for by Article 30(2) and/or (3), be authorised to appoint a temporary administrator in order to ensure the stable and effective functioning of commercial bank and financial sector and protect the interests of the depositaries or other creditors of the commercial bank. The temporary administrator shall meet the fit and proper criteria established by the legislation of Georgia, as well as no conflict of interests shall exist. The National Bank shall issue an individual administrative act on the appointment of the temporary administrator. This act along with other issues shall determine the duties and powers of the temporary administrator. The above individual administrative act shall enter into force from the date of its publication on the official website of the National Bank. The decision on the appointment of a temporary administrator shall also be published in the official gazette. A temporary administrator shall start performing his/her duties from the date referred to in the above decision.

2. The temporary administrator shall be authorised to work together with other administrators of the commercial bank or substitute them. If the temporary administrator carries out his/her duties together with the administrators of the commercial bank, the National Bank shall be authorised to determine the obligation of the consent of the temporary administrator for making certain decisions. The powers of the general meeting of the commercial bank shall not be transferred to the temporary administrator. By the decision of the National Bank, some of the decisions of the temporary administrator may require the prior consent of the National Bank. The obligation of the prior consent of the National Bank may be determined at the time of the appointment of the temporary administrator, as well as at some stage of exercising his/her powers. The consent shall not be required in the cases provided for by the Law of Georgia on Payment Systems and Payment Services and the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives. The National Bank shall be authorised to dismiss the temporary administrator at any time with any ground.

3. The temporary administrator shall be appointed for not more than 1 year. In the exceptional case, if, according to the assessment of the National Bank, the reason of the appointment of the temporary administrator is not eliminated, this term may be extended.

4. The National Bank shall be authorised to determine the powers of the temporary administrator and the procedure for his/her appointment.

5. The party, against which the early intervention measures are used, shall have right to appeal in the court within 1 month after the official review of the respective individual administrative act.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

 

Article 30 ^{​ 2} – Principle of proportionality

1. The decision of the National Bank made on the basis of Articles 30 and 30 ^{​ 1} of this Law shall be proportional to the grounds of the application of the supervisory measure, sanction (monetary fine) or early intervention measure. When making the decision on the application of the supervisory measure, sanction (monetary fine) or early intervention measure, the National Bank shall consider the following criteria:

a) the seriousness of the grounds determined by Articles 30 and 30 ^{​ 1} . For this purpose, the National Bank shall at least evaluate the financial status of the commercial bank, the level of the adequacy of the capital of the commercial bank against its risks, the scale, amount, interrelation, duration and frequency of the grounds determined by the same articles that affect the financial status of the commercial bank, the legality of the activities of commercial bank and/or the possible risk of the loss of the assets of commercial bank;

b) the readiness and the resources of the commercial bank to eliminate the grounds determined by Articles 30 and 30 ^{​ 1} of this Law. For this purpose, the National Bank shall at least evaluate the capability of the administrators of commercial bank to reveal and assess, monitor and manage the risks of commercial bank. It shall also evaluate, how effectively are eliminated the grounds determined by the same articles and to what extent the commercial bank, its administrators and controlling persons cooperate with the National Bank;

c) to what extent is there a threat to the stability and effective functioning of the financial sector. For this purpose, the National Bank shall evaluate and consider the systemicity and size of a commercial bank, as well as its interrelation with other representatives of the financial sector, the substitutability, field of activity and complexity of the functions of commercial bank.

2. This article shall not apply to the application of the supervisory measure, sanction (monetary fine) and early intervention measure in the cases when the legislation on facilitating the prevention of money laundering is applied.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Chapter VII – Resolution and Liquidation

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 31 – (Deleted)

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

 

Article 32 – Principles of resolution

The National Bank shall implement the resolution mode in accordance with the following principles of the resolution:

a) the shareholders of the commercial bank shall experience first loss. The equal protection of interests shall be ensured;

b) the creditors of commercial bank shall experience loss after shareholders in the reverse order of the observance of requirements for liquidation, except for the cases provided for by Article 37 ^{​ 11} of this Law.

c) the equal protection of the interests of the creditors of the same order shall be ensured, except for the cases provided for by Article 37 ^{​ 11} of this Law.

d) the shareholders and creditors of commercial bank shall not experience more loss by the final result of resolution than in the case of liquidation, taking into account the opportunity of compensation provided for by Article 37 ^{​ 11} (4) of this Law;

e) the members of the Supervisory Board and Directorate of commercial bank shall be dismissed, except for the cases when, taking into account the existing circumstances, the National Bank believes that it is necessary to keep on the position;

f) the deposits determined by the Law of Georgia on Deposits Insurance System shall be protected;

g) decision made while developing the resolution plan, decision on applying resolution mode to commercial bank, decisions made during the resolution mode of commercial bank, including decisions on applying resolution tools, shall be proportional in order to achieve resolution purposes determined by Article 55 ^{​ 1} (1) of the Organic Law of Georgia on the National Bank of Georgia.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 33 – Resolution plan

1. The National Bank evaluates the possibility of the application of the effective resolution mode to each commercial bank. The National Bank shall, while determining the possibility of the effective resolution of commercial bank, evaluate the appropriateness of the application of resolution mode to commercial bank or the beginning of the process of the liquidation of commercial bank in the case of the existence of the grounds provided for by the legislation of Georgia.

2. The National Bank shall establish resolution plans for commercial banks in the case of the existence of the grounds established by the legislation of Georgia, when instead of liquidation it is appropriate to apply a resolution mode. The resolution plan shall include respective resolution tools and resolution powers which shall be used by a commercial bank during the resolution mode.

3. If the National Bank identifies substantial circumstances that hinder the implementation of the resolution of a commercial bank, the National Banks is authorised to demand the commercial bank to submit a plan for the elimination of these circumstances. If a plan submitted by a commercial bank shall not ensure the elimination of the above-mentioned circumstances, the National Bank shall give the commercial bank specific directions to achieve this goal and determine relevant time limit for their implementation. A commercial bank shall be obliged to apply all measures to fulfil the above-mentioned directions. The directions of the National Bank may include the following measures:

a) the limitation of the maximum individual general risk positions of a commercial bank;

b) the requirement of the additional information for the purposes of resolution;

c) the requirement of the alienation of specific assets;

d) the limitation or cancellation of the current and/or planned activity/product of a commercial bank;

e) the requirement of making changes in the operational activity, organisational structure and/or possession structure of a commercial bank/banking group which may also include the simplification of the possession structure and/or the establishment of a parent company or subsidiary enterprise on the territory of Georgia for the purpose of ensuring continuity of the critical functions of a commercial bank/banking group in the process of resolution;

f) the requirement of protecting the relevant amount of authorised capital for the purpose of issuing new assets or other property instruments during the resolution process;

g) the establishment and observance of the permitted liabilities and capital instruments provided for by Article 37 ^{​ 10} (16).

4. The National Bank shall review the resolution plan annually and if applicable, update it. The resolution plan shall be updated if the activity and/or organisational structure or financial status of a commercial bank has changed and it may have a significant influence on the content and/or implementation of the resolution plan.

5. Every commercial bank and banking group shall be obliged to cooperate with the National Bank and support it in the process of the development of resolution plan that also includes the submission of any requested information.

6. The National Bank shall be authorised to establish additional and/or simplified requirements and procedures related to resolution planning by a legal act. The National Bank shall also be authorised to determine the relevant criteria for commercial banks which, taking into account their size, system and risk profile, may be offered simplified/different requirements.

7. The resolution plan shall not prevent the National Bank from acting differently from this plan.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 6306 of 25 May 2012 – website, 12.6.2012

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 880 of 2 August 2021 – website, 4.8.2021

 

Article 34 – Resolution conditions and decision on applying the resolution mode to a commercial bank

1. The National Bank shall be authorised to make a decision on applying resolution mode to a commercial bank in the case of the existence of one or more grounds of the cancellation of banking licence provided for by Article 7 of this Law (except for the cases provided for by sub-paragraphs (c), (d), (f), (h) and (o) of the same Law) and/or in the case provided for by Article 30(2)(q) of this Law if the application of resolution mode is necessary for the resolution purposes determined by Article 55 ^{​ 1} (1) of the Organic Law of Georgia on the National Bank of Georgia. Before applying resolution mode, the National Bank shall, taking into account time and other relevant circumstances, evaluate the existence of the possibility of the complete elimination of the resolution grounds provided for by this paragraph by private sector and/or early intervention measure and/or supervisory measures.

2. Before making decision provided for by paragraph 1 of this article the National Bank shall, within the time limit determined by the National Bank, be authorised to hear the proposals of a commercial bank on the elimination of the grounds for the resolution mode if, taking into account all relevant circumstances, including the exigent nature of the issue, by evaluation of the National bank, this does not pose a threat on the achievement of the resolution purpose determined by Article 55 ^{​ 1} (1) of the Organic Law of Georgia on the National Bank of Georgia.

3. The use of the early intervention measure and/or supervisory measures provided for by Articles 30 and 30 ^{​ 1} of this Law by the National Bank shall not be a necessary prerequisite for the application of the resolution mode.

4. The resolution mode shall be applied to a commercial bank from the moment of the publication of the decision of the National Bank on the official website of the national Bank. The decision of the National Bank of the application of the resolution mode to a commercial bank shall include the information on the grounds of the application of the resolution mode. A commercial bank and interagency financial stability committee provided for by the Organic Law of Georgia on the National Bank of Georgia shall be immediately notified on the above-mentioned decision. The decision on the application of the resolution mode to a commercial bank shall be published on the website of the Legislative Herald of Georgia. Other information on this decision shall be published on the official website of the National Bank in accordance with the procedure of confidentiality. From the moment of the publication of the decision on the application of the resolution mode to a commercial bank on the website of the National Bank the relevant information shall be considered as delivered to the interested persons.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 6306 of 25 May 2012 – website, 12.6.2012

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 35 – Duration and termination of the resolution mode of a commercial bank

1. The resolution mode shall be applied for not more than 12 months. The National Bank shall be authorised to extend this time limit for not more than 12 months. The decision of the National Bank on the extension of the time limit of the resolution mode shall include the grounds for its extension. This decision shall be published on the websites of the Legislative Herald of Georgia and the National Bank in accordance with the procedure for confidentiality.

2. The resolution mode of a commercial bank shall be terminated:

a) if the time limit determined by paragraph 1 of this article expires;

b) by the decision of the National bank, in the case of the elimination of the grounds for the application of the resolution mode;

c) in the case of the cancellation of the banking licence of a commercial bank.

3. In the case of the beginning of the liquidation process of a commercial bank being in the resolution mode, Article 37 ^{​ 12} (7) shall not apply to the decision made in accordance with this chapter.

4. This article shall not ally to the interim bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 36 – (Deleted)

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

 

Article 37 – Special manager

1. The National Bank shall be authorised to directly carry out the resolution powers granted by this Law or appoint one or more special managers. An employee of the National Bank may be appointed as a special manager. A special manager shall comply with the fit and proper criteria established by the National Bank.

2. The National Bank shall determine the powers and responsibilities of a special manager within which a special manager may exercise full control over a commercial bank and all powers of all bodies of a commercial bank may be transferred to a special manager.

3. Except for the actions/transactions carried out on the basis of the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives, and the actions/transactions related to the programme provided for in the Law of Georgia on Mortgage-backed Bonds, a special manager of a commercial bank shall be authorised to file a lawsuit and contest an action or transaction carried out by an administrator of the commercial bank within 1 year before the appointment of the special manager, and request the annulment thereof, if as a result of such action/transaction the person associated with the commercial bank had received material benefits from the commercial bank or enjoyed any advantages, privileges or benefits that incurred damage to the commercial bank or its creditors.

4. A special manager shall act within the frames of the legislation of Georgia and the instructions and directions of the National Bank. A special manager shall be accountable only to the National Bank. A special manager shall, in accordance with the procedure and manner, and time limit established by the National Bank, submit a report on his/her activities regularly and/or on demand.

5. The National bank shall be authorised to dismiss a special manager any time with any reason and appoint another person as a special manager in accordance with the procedures established by the National Bank. The responsibility of a special manager and the issues of the conflict of interests shall be regulated by the Organic Law of Georgia on the National Bank and in accordance with the procedures established by the National Bank. A special manager shall receive a remuneration determined by the National Bank. All costs, including the remuneration of a special manager, incurred by a special manager when performing his/her activities shall be borne by a commercial bank in the resolution mode.

6. By the decision of the National Bank, if a commercial bank in the resolution mode is cancelled a banking licence and its liquidation process begins, a special manager may be appointed as a liquidator of a commercial bank.

Law of Georgia No 1115 of 23 October 2001 – LHG I, No 32, 7.11.2001, Art. 125

Law of Georgia No 2787 of 17 March 2006 – LHG I, No 8, 24.3.2006, Art. 59

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

Law of Georgia No 2830 of 23 March 2010 – LHG I, No 19, 13.4.2010, Art. 104

Law of Georgia No 5002 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 6306 of 25 May 2012 – website, 12.6.2012

Law of Georgia No 4189 of 3 September 2015 – website, 10.9.2015

Law of Georgia No 439 of 10 March 2017 – website, 22.3.2017

Law of Georgia No 853 of 17 May 2017 – website, 02.6.2017

Law of Georgia No 1895 of 23 December 2017 – website, 11.1.2018

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

 

Article 37 ^{​ 1} – Controlling a commercial bank in the resolution mode

1. After applying a resolution mode all powers of all bodies of a commercial bank shall be transferred to the National Bank. The National Bank shall be authorised to impose an obligation of carrying out certain actions on the bodies of a commercial bank in accordance with this Law. Every decision/action made/carried out by a commercial bank, special manager or in the name of a commercial bank in the resolution mode shall be considered invalid if it is not made/carried out in the frame of the powers granted by the National Bank.

2. Immediately after applying resolution mode to a commercial bank the National Bank shall have an unlimited access to the assets, accounting reposts and records of a commercial bank. The National Bank shall be authorised to apply all measures necessary for ensuring their accessibility, including the cancellation or limitation of the permission of a person to act in the name of a commercial bank.

3. Directly upon the introduction of a resolution mode, any action on behalf of a commercial bank shall be carried out only with the consent of a special manager and/or the National Bank, except for the cases provided for by the Law of Georgia on Payment Systems and Payment Services, the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives, and the Law of Georgia on Mortgage-backed Bonds.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

 

Article 37 ^{​ 2} – Suspension of payments and restriction of legal procedures in the resolution mode

1. The National Bank shall be authorised to suspend the distribution of the capital to the shareholders of a commercial bank in the process of resolution mode, as well as to suspend the payment of the remuneration to the administrators (except for the remuneration payable for services required by the National Bank during the resolution mode).

2. The National Bank shall be authorised to introduce a moratorium on outstanding payments of a commercial bank or a part of them, except for the payments related to the insured deposits, as well as the payments to the tax and reporting systems or the participants of these systems, the payments derived from the participation in the tax system, the payments derived from the mortgage-backed bonds and refinancing instruments as provided for by the Law of Georgia on Mortgage-backed Bonds, and the payments to the National Bank. The time limit of a moratorium shall not exceed 90 calendar days.

3. The National Bank shall be authorised to apply to the court with the request of the suspension of proceedings against a commercial bank in the resolution mode and/or in the case of the beginning of the proceedings, to apply to the court with the request of the deferral of the hearing of the case. The above mentioned suspension/deferral shall not exceed 90 calendar days.

4. On the basis of the application of the National Bank, any compulsory enforcement measure shall be suspended and/or shall not be used against a commercial bank in the resolution mode (including the measures of the security of a claim and the measures of ensuring the enforcement of a decision), as well as the means of ensuring the requirements provided for by the Tax Code of Georgia and the Civil Code of Georgia (including measures to secure payment of tax debts, pledge and mortgage) during 90 calendar days.

5. The application of the resolution mode or exercising any of the resolution powers shall not be the reason for cancellation, change and/or expedition of the contractual rights or obligations of the contracting party of a commercial bank in the resolution mode. The application of the resolution mode or exercising any of the resolution powers shall not be the reason for financial collateral in accordance with the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives if a commercial bank in the resolution mode fulfils its obligations properly.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

 

Article 37 ^{​ 3} – Evaluation of assets and liabilities of a commercial bank

1. For the purpose of making decision on the application of a resolution mode to a commercial bank, in particular, to determine the existence of the grounds for cancellation of the banking licence provided for by Article 34(1) of this Law, the National Bank shall keep the record of the assets and liabilities of a commercial bank in accordance with the accounting and prudential supervisory requirements. The National Bank shall be authorised to carry out the evaluation of the value of the assets and liabilities. The non-existence of the independent evaluation shall not prevent the National Bank from making a decision provided for by Article 34 of this Law.

2. For the purpose of the application of the appropriate resolution powers and tools, as well as for the purpose of determining measures for the use of these tools, together with the record provided for by paragraph 1 of this article, the evaluation (complete evaluation) of the assets of a commercial bank, including the accrued loss and liabilities shall be carried out. In the case of some evaluation methods, the method that results in the lowest evaluation value shall be used (conservative approach).

3. The evaluation provided for by paragraph 2 of this article shall also include the information on the amount of loss in the case of the liquidation of a commercial bank borne by the owners of the first capital tools (shareholders) and the list of creditors determined by Article 37 ^{​ 12} of this Law. The above-mentioned evaluation shall not be used to determine the amount of compensation which may be paid to the shareholders and/or creditors if this evaluation proves that the shareholders and/or creditors are less affected by the liquidation of a commercial bank than by the application of a resolution mode.

4. The National Bank shall appoint an independent appraiser to carry out the evaluation provided for by this article. The National Bank shall be authorised to carry out the evaluation provided for by this article if carrying out the evaluation by an independent appraiser is impossible because of the relevant circumstances, including the exigent nature of the issue, or the achievement of the resolution goals determined by Article 55 ^{​ 1} (1) of the Organic Law of Georgia on the National Bank of Georgia is at risk. The National Bank shall be authorised to apply a resolution mode, make a decision on the application of any resolution tool and carry out resolution powers on the basis of an interim evaluation. If an interim evaluation is carried out in accordance with the purpose determined in paragraph 2 of this article, the National Bank shall consider a reserve for additional losses together with the relevant substantiation.

5. After carrying out any evaluation determined by this article, including an interim evaluation, the National Bank shall be obliged to ensure the evaluation by an independent appraiser as soon as possible. The National Bank shall be authorised to carry out additional resolution powers with the consideration of the results of the independent evaluation, in particular, enhance the loss of the shareholder and creditors of a commercial bank, restore a part of the requirements written off, carry out an additional transfer of assets and/or liabilities or return previously transferred assets and/or liabilities, increase or decrease the amount which has been paid for shares, assets and/or liabilities or for the alienation of an interim bank.

6. The National Bank shall establish the rules, procedures and methodology for the evaluation of the value of the assets and liabilities of a commercial bank provided for by this article, including the conservative stipulations that have to be considered by an independent appraiser and the qualification requirements of an independent appraiser.

7. The evaluation provided for by this article shall be a part of the decision on appying resolution tools and/or resolution powers and against it may be appealed in accordance with the requirements of Article 68 of the Organic Law of Georgia on the National Bank of Georgia.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 4} – Recapitalisation of shares and/or supervisory capital of a commercial bank in the resolution mode by writing them off or by converting them into shares or other property instruments

1. The National Bank shall be authorised to write off the assets and/or other instruments of supervisory capital of a commercial bank in a resolution mode or convert the mentioned instruments into shares of a commercial bank or other property instruments. This power may be exercised independently or together with other resolution tools.

2. For the purpose of the fulfilment of principles determined by Article 32(a) and (b), the writing off of the shares and/or other instruments of supervisory capital or the conversion of the mentioned instruments into shares shall be carried out before the application of the resolution tools by using which the creditors (except for the shareholders and owners of other instruments of supervisory capital) shall bare the first loss. The National Bank may not apply this power if the assets and/or liabilities of a commercial bank are partially transferred and the value of the assets and other instruments of supervisory capital left on the balance of a commercial bank covers the existing loss.

3. The writing off of the instruments of supervisory capital or their conversion into shares shall be based on the evaluation of the assets and liabilities of a commercial bank in accordance with Article 37 ^{​ 3} (2) of this Law.

4. In the process of exercising the powers provided for by this article, the National Bank shall follow the reverse procedure of liquidation requirements to ensure:

a) the decrease of the nominal value of the core capital instruments in proportion to the loss and/or cancellation and/or transfer of the supervisory capital instruments

b) in addition to the instruments provided for by sub-paragraph (a) of this paragraph, the decrease of the nominal value of other supervisory capital instruments and/or conversion into ordinary shares or other property instruments of a commercial bank.

5. The decision of the National Bank on wiring off the supervisory capital instruments or their conversion into the shares of a commercial bank shall enter into force immediately.

6. The National Bank shall, on its own terms, before carrying out temporary state financing and/or using other cash amount accumulated in the resolution fund, be authorised to require from a commercial bank to emit ordinary shares so that the owners of the relevant capital instruments acquire them.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 3950 of 15 December 2023 – website, 28.12.2023

 

Article 37 ^{​ 5} – Resolution tools of the National Bank

1. When exercising its powers, the National Bank may apply one or more of the following resolution tools:

a) commercial bank merger;

b) the alienation of the shares, assets and/or liabilities of a commercial bank;

c) the transfer of the shares, assets and/or liabilities of a commercial bank to an interim bank;

d) the recapitalisation of a commercial bank by the emission of new shares;

e) the recapitalisation of a commercial bank by writing off or converting its liabilities.

2. The application of the resolution tools by the National Bank shall not require the consent of the shareholders, debtors, and creditors of a commercial bank. In addition, before applying the resolution tools by the National Bank, prior notification, publication and/or approval of issue prospectus in the cases determined by the Law of Georgia on Securities Market shall not be required.

3. Legal norms regulating the activities of a commercial bank as a legal entity may not be taken into account in order to prevent the interruption of the resolution mode.

4. For the resolution purposes, the National Bank shall be authorised to establish the simplified procedures of giving a consent in the supervisory process provided for by this Law in order to effectively use resolution tools.

5. The National Bank shall be authorised to make changes to the decisions related to the resolution tools or make a decision on the application of other resolution tools anytime.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 6} – Commercial bank merger

The National Bank shall be authorised to carry out a merger of a commercial bank in a resolution mode with another commercial bank. The decision of the National Bank on the mentioned merger shall become effective notwithstanding the requirements/procedures established by the legislation of Georgia.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 7} – Alienation of the shares, assets and/or liabilities of a commercial bank

1. The National Bank shall be authorised to alienate the shares, assets and/or liabilities of a commercial bank in resolution mode in full or in part to the purchaser (except for an interim bank).

2. The National Bank shall be authorised to apply the resolution tool provided for by paragraph 1 of this article multiple times, as well as request the alienated shares, assets and/or liabilities of a commercial bank in the resolution mode form the purchaser by his/her consent and return them to a commercial bank in the resolution mode.

3. The amount received from the alienation of the shares, assets and/or liabilities of a commercial bank in the resolution mode shall be given to the shareholders of this commercial bank or to the commercial bank in the resolution mode after the reimbursement of the expenses (if any) of the resolution fund provided for by the Organic Law of Georgia on the National bank of Georgia.

4. The decision on the alienation of the shares, assets and/or liabilities of a commercial bank shall become effective immediately notwithstanding the requirements/procedures established by the legislation of Georgia. A purchaser of the shares of a commercial bank in the resolution mode shall be the shareholder of this commercial bank, and the purchaser of the assets and/or liabilities of a commercial bank in the resolution mode shall be the successor in title of a commercial bank in the resolution mode in respect of each alienated asset and liability. If the purchaser does not meet the criteria for participation in payment, clearing and settlement systems or for access to the stock market, by the decision of the National Bank, the purchaser may be granted an access to the above-mentioned systems/stock exchange for not more than 24 months.

5. The shareholders and creditors of a commercial bank in the resolution mode, as well as the third parties whose shares, assets and/or liabilities have not been alienated, shall have no right on the alienated shares, assets and/or liabilities.

6. In the supervision process the purchaser shall be obliged to obtain every consent provided for by this Law from the National Bank. In the case of the transfer of deposits to the purchaser, he/she shall possess a current banking licence.

7. If the direct/indirect participation of the purchaser (including the beneficial owner) in the capital of a commercial bank exceeds 10, 25 or 50 percent as a consequence of the alienation of the shares, assets and/or liabilities of a commercial bank in the resolution mode, the National Bank shall review the application on the acquisition of the significant share of the mentioned commercial bank in a simplified procedure established by Article 8 ^{​ 1} of this Law in order not to hinder the resolution mode. If the resolution tool provided for in this article needs to be applied immediately in order to speed up the resolution mode, the National Bank shall be authorised to alienate shares, assets and/or liabilities of a commercial bank without the evaluation of the transaction of purchasing the significant share and limit the voting shares before the evaluation by the National Bank and/or make a decision on using the voting rights by the National Bank. On the basis of the results of the above evaluation the National Bank shall be authorised to request the purchaser to alienate shares if the purchaser does not meet the fit and proper criteria established by the legislation of Georgia.

8. The process of the alienation of the shares, assets and/or liabilities of a commercial bank in the resolution mode shall be transparent, impartial and non-discriminatory and this process shall ensure that the alienation value is increased maximally and the conflict of interests is eliminated. This shall not exclude the authority of the National Bank to alienate the shares, assets and/or liabilities of a commercial bank in the resolution mode by making an offer to one person if otherwise the effectiveness of the resolution mode may be hindered and the achievement of the resolution purposes jeopardised.

9. The information disclosure requirements provided for by the legislation of Georgia regulating the securities market may be postponed or observed when using the resolution tool provided for by this Article.

10. The shares of a commercial bank shall be alienated in proportion to the equity participation of its shareholders.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 8} – Interim Bank

1. In order to ensure continuity of the critical functions of a commercial bank in the resolution mode, the National Bank shall be authorised to make a decision of transferring the shares, assets and/or liabilities of a commercial bank in the resolution mode, fully or partially, to an interim bank.

2. The Ministry of Finance of Georgia shall establish an interim bank for the purpose of providing the resolution tools provided for by this Article for the subsequent alienation of the transferred shares, assets and/or liabilities. Before the application of a resolution mode the Ministry of Finance of Georgia shall be authorised to establish a joint stock company which shall operate as an interim bank directly after granting the banking licence by the National Bank. The relevant authorities and registration bodies shall take all measures necessary to complete the process of establishing the interim bank in time.

3. The amount of liabilities transferred to the interim bank shall not exceed the sum of the assets transferred by a commercial bank in the resolution mode or the sum of the assets transferred by other sources.

4. If some shares, assets and/or liabilities of a commercial bank in the resolution mode transferred to an interim bank do not comply with the criteria established by the decision on their transfer, by the decision of the National Bank the above shares, assets and/or liabilities may be returned to a commercial bank in the resolution mode.

5. Upon the request of the Ministry of Finance of Georgia, the National Bank shall, as soon as possible but not later than one month, make a decision on granting a licence to an interim bank. This decision shall specify the types of activities permitted to an interim bank. The National Bank shall be authorised to establish the procedure for licencing an interim bank, including the simplified procedures and the list of the documents which may be filed after granting a banking licence to an interim bank.

6. An interim bank shall comply with criteria established by the legislation of Georgia. In the interest of financial sector stability, the National Bank shall be authorised to exempt an interim bank from the requirement of the minimal amount of the supervisory capital for a period not exceeding 6 months from the date of issuance of banking licence.

7. Founding documents of an interim bank, strategy and risk profile, as well as the remuneration and duties of the administrators of an interim bank shall be agreed with the National Bank.

8. An interim bank shall be managed on the basis of professional and commercial grounds. An interim bank shall not be a permanent tool and its shares, assets and/or liabilities shall be alienated as soon as possible. For this purpose, an interim bank shall, on the basis of the instructions and directions of the National Bank, develop and implement the banking market exit plan according to which an interim bank may be merged with another commercial bank, the shares, assets and/or liabilities of an interim bank may be alienated in full or in part, an interim bank may be recapitalised, including by writing off or converting the liabilities.

9. Except for the cases provided for by Article 7 of this Law, by the decision of the National Bank, an interim bank shall be cancelled banking licence after executing the banking market exit plan and completely writing off its rest assets and/or liabilities.

10. The shareholders of an interim bank shall receive the proceeds after the execution of the banking market exit plan.

11. When transferring the assets and/or liabilities of a commercial bank in the resolution mode to an interim bank, a procedure established by Article 37 ^{​ 7} shall be applied, except for the requirements determined by paragraphs 7 and 8 of the same article.

12. Legal norms regulating the activity of a commercial bank shall apply to an interim bank unless otherwise provided for by the Organic Law of Georgia on the National Bank of Georgia, this Law or the legal act of the National Bank.

13. The National Bank shall be authorised to determine additional requirements regulating the activity of an interim bank by a legal act, as well as the procedures and terms of development and implementation of the banking market exit plan.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 9} – Recapitalisation of a commercial bank by the emission of new shares

1. The National Bank shall, in order to increase the supervisory capital of a commercial bank in the resolution mode and ensuring its healthy functioning, be authorised to make a decision on the emission of new shares by this bank and their sale.

2. The National Bank shall, in order to quickly finish the resolution mode, be authorised to offer the shareholders of a commercial bank in a resolution mode the new shares emitted by this bank if they meet the fit and proper criteria established by the legislation of Georgia and have not violated the requirements and directions of the National Bank.

3. Following the principle of resolution that the shareholders and owners of other supervisory capital instruments of a commercial bank in resolution mode receive the first loss, the National Bank shall, before emitting the new shares by this bank, write off the supervisory capital instruments of this commercial bank or convert them in accordance with Article 37 ^{​ 4} of this Law.

4. The National Bank shall, by a legal act, be authorised to establish the terms of recapitalisation by the emission of new shares, as well as the time limit for their capital contributions which shall not exceed 10 working days. These contributions shall be paid in full. By the decision of the National Bank this obligation may be extended for no more than 10 days.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

 

Article 37 ^{​ 10} – Recapitalisation of a commercial bank by writing off or converting its liabilities

1. The National Bank shall be authorised to apply recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode for:

a) recapitalisation of a commercial bank in the resolution mode;

b) recapitalisation of an interim bank when applying resolution tool.

2. The recapitalisation instrument by writing off or converting the liabilities of a commercial bank shall be applied on the basis of the evaluation provided for by Article 37 ^{​ 3} of this Law.

3. When applying a recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode writing off or conversion of the liabilities shall be carried out in the reverse order to the requirements established for liquidation taking into account the requirements of the paragraphs 5 and 6 of this article. If the respective order of the creditor liabilities of a commercial bank in a resolution mode is not a subject to full write-off or conversion, their wirting off or conversion shall be carried out in proportion to the claim amount of each creditor in the order listed.

4. Before applying a recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode, writing off or conversion of those liabilities shall be carried out first, the contractual terms of which explicitly provide for an obligation to write off or convert the liabilities into ordinary shares of a commercial bank.

5. Recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode shall not be applied to:

a) insured deposits provided for by the Law of Georgia on Deposits Insurance System;

b) contributions provided for by the Law of Georgia on Deposits Insurance System;

c) liabilities to tax and social security authorities;

d) any liability arising from the ownership of the assets of client;

e) liability secured by right in rem (including liabilities towards the programme creditors secured in accordance with the Law of Georgia on Mortgage-backed Bonds), within the value of the respective assets used for securing them;

f) liability to the employee of a commercial bank, except for the non-salary remuneration of the administrator of a commercial bank;

g) liabilities to tax, clearing and payment systems with a validity of less than 7 days;

h) liabilities to other commercial banks (except for the commercial banks of the same group) with a validity of less than 7 days;

i) liabilities to the creditors of a commercial bank which arise from the provision of such products and services (including information technology, utility, lease or other technical services) to a commercial bank which are critical to the daily activities of a commercial bank.

6. The National Bank shall be authorised to eliminate other liabilities, in full or in part, from the scope of recapitalisation instruments by writing off or conversion of the liabilities of a commercial bank in the resolution mode, except for the liabilities determined by paragraph 5 of this article if, by the evaluation of the National Bank, one or more conditions provided for by Article 37 ^{​ 11} (3) exist.

7. Writing off or conversion of the liabilities arising from derivatives may be carried out only after their mutual offset.

8. When applying a recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode, the National Bank shall be authorised to carry out the following activities in relation to the shareholders and/or owners of other property instruments:

a) cancel the existing shares and/or other property instruments or transfer them to the creditors against who the instrument provided for by this article have been applied;

b) convert the supervisory capital and/or liabilities into the ordinary shares or other property instruments of a commercial bank in the case of the positive share capital to maximally reduce the interest of shareholders of this commercial bank.

9. Recapitalisation instrument by writing off or converting the liabilities of a commercial bank in a resolution mode may be applied to the shares provided for by paragraph 4 of this article if the conversion of liabilities into shares has been carried out before the application of resolution mode or after writing off or conversion of the shares and/or supervisory capital instruments of a commercial bank in the resolution mode on the basis of Article 37 ^{​ 4} of this Law.

10. To apply a recapitalisation instrument by writing off or converting liabilities of a commercial bank in the resolution mode, the National Bank shall determine the amount of a supervisory capital which is necessary to observe the established coefficient of the primary capital of the commercial bank, and in the case of an interim bank – the established coefficient of capital. In the case provided for by this paragraph, when determining the amount of the supervisory capital, the cash amount accumulated in the resolution fund, and if necessary, the amount of temporary state financing, and the resources necessary to build confidence in the commercial bank/interim bank and to meet the licence requirements of the commercial bank/interim bank for at least the next 1 year, shall be taken into account.

11. By writing off or converting liabilities of a commercial bank in the resolution mode, within the recapitalisation instrument the National Bank shall:

a) reduce the value of the shares and/or other instruments of supervisory capital and/or liabilities to zero in the reverse order of compliance with the order requirements established for liquidation, to the limit when the share capital of a bank reaches zero. The liabilities shall be reduced by maximum amount;

b) convert the liabilities of this commercial bank into ordinary shares or other property instruments of a commercial bank in order to achieve the compliance provided for by paragraph 10 of this article.

12. If, as a result of applying the recapitalisation instrument by writing off or converting liabilities of a commercial bank in the resolution mode, the compliance provided for by paragraph 10 of this article is not reached, the resolution may be financed from other cash amount accumulated in the resolution fund and/or a temporary state financing provided for by the Organic Law of Georgia on the National Bank of Georgia. The resolution may be financed in one or both of the following ways:

a) in order to reduce to zero the share capital of a commercial bank in a resolution mode, other cash amount accumulated in the resolution fund shall be used to compensate for the damage that could not have been compensated by using the instruments provided for by this article. If the cash amount accumulated in the resolution fund is not enough, the damage shall be compensated by the Ministry of Finance of Georgia within the framework of temporary state financing, through the resolution fund;

b) the Ministry of Finance of Georgia shall acquire the shares or other supervisory capital instruments of the commercial bank in a resolution mode.

13. The decision on the application of the recapitalisation instrument by writing of or converting liabilities of a commercial bank in the resolution mode shall come into force immediately and its execution shall be mandatory for a commercial bank, interim bank and the shareholders and creditors of a commercial bank and an interim bank. A liability of a commercial bank in a resolution mode or any requirement related to this liability which has not been accrued yet shall be cancelled and never restored. In the case of the partial write-off of the liability of a commercial bank in the resolution mode the agreement which is the basis for this liability shall continue to apply to the other half. The other half of the above agreement shall be a subject to changes in accordance with the requirement of the National Bank.

14. If as a result of the application of a recapitalisation instrument by writing off or converting liabilities of a commercial bank the direct/indirect participation of a person or a group of partners (shareholders) acting together or beneficial owner in the bank capital exceeds 10, 25 or 50 percent, the National bank shall review the application on the acquisition of the significant share in an expedited manner in accordance with the procedure established by Article 8 ^{​ 1} of this Law.

15. The National Bank shall be authorised to demand a commercial bank to develop and implement an acting plan which shall include measures for improving the long-term financial status of a commercial bank. The above plan shall be agreed with the National Bank. A commercial bank shall regularly report to the National Bank on the implementation of the action plan.

16. The National Bank shall be authorised to establish procedures and terms related to the application of a recapitalisation instrument by writing off or converting the liabilities of a commercial bank, including the issues of calculation, evaluation, determination of conversion rates of the allowed liabilities and capital instruments, development, approval and implementation of the action plan necessary to achieve compliance provided for by paragraph 10 of this article.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

Law of Georgia No 3950 of 15 December 2023 – website, 28.12.2023

 

Article 37 ^{​ 11} – Legal guarantees of resolution

1. When applying resolution tools, the National Bank shall apply the order of priority to satisfy the requirements established for liquidation taking into account the exceptions provided for by paragraph 37 ^{​ 10} (5) of this Law. The National Bank shall be authorised not to adhere to this principle in the cases provided for by paragraph 3 of this article.

2. When carrying out resolution powers the National Bank shall ensure the observance of the principle of equal treatment of the creditors of the same order taking into account the exceptions of liability requirements determined by Article 37 ^{​ 10} (5) of this Law. The National Bank shall be authorised not to adhere to this principle in the cases provided for by paragraph 3 of this article.

3. When applying resolution tools provided for by Articles 37 ^{​ 7} or 37 ^{​ 8} of this Law and in the cases provided for by Article 37 ^{​ 10} (6) the National Bank shall be authorised not to adhere to the principles determined by paragraphs 1 and 2 of this article if one or more of the following conditions exist:

a) notwithstanding the efforts of the National Bank, application of the resolution tool within a reasonable time is impossible;

b) it is necessary and proportionate for supporting the essential functions and main activities of a commercial bank in resolution mode in order to ensure the continuity of the main operations, services and transactions of this commercial bank;

c) it is necessary and proportionate for reducing the risks of the distribution of financial difficulties and threats on other participants of the financial sector;

d) other creditors are affected more than in the case of the adherence to the principles provided for by paragraphs 1 and 2 of this article.

4. The shareholders and creditors of a commercial bank in the resolution mode shall not be affected more than they would be affected in the case of liquidation of a commercial bank. This principle shall be observed by the final result of resolution. If as the result of the evaluation made after the completion of the resolution mode it is confirmed that the shareholders and/or creditors of a commercial bank in the resolution mode would be affected less in the case of liquidation than they have been affected in the case of the application of the resolution mode to this commercial bank, they shall have right to claim monetary compensation. The monetary compensation shall be paid from the resolution fund.

5. For the evaluation of the right to compensation of the shareholders and/or creditors and determining its amount the evaluation shall be carried out by an independent appraiser after the application of the resolution powers till the completion of the resolution mode. The mentioned evaluation shall differ from the evaluation provided for by Article 37 ^{​ 3} of this Law. The National Bank shall establish the rules, procedures and methodology of the evaluation provided for by this paragraph, including the qualification requirements of an independent appraiser. In the frame of this evaluation any type of the existing and potential financial support of the State as well as of the National Bank shall be excluded (except for the cases when a commercial bank might take a loan in accordance with Articles 31 and 33(1) of the Organic Law of Georgia on the National Bank of Georgia).

6. In the case of transferring a liability, the separation of a liability and its security (including secured liabilities towards the programme creditors and the respective cover assets determined by the Law of Georgia on Mortgage-backed Bonds) shall be inadmissible. In particular cases, for the purpose of effective resolution, the National Bank is authorised to separate liability from its security provided that the security is substituted by a security of the same type and value, and/or financial compensation is paid. Financial collateral agreements and netting agreements, which have the same contracting parties and are subject to the mutual offset of the same liability, shall not be separated except for the case when it is necessary for the resolution purposes.

7. The National Bank shall be authorised to limit the early termination right of the financial collateral agreement or mutual offset agreement provided that the observance of the following conditions is ensured:

a) only the rights which arose from the terms of these agreements as a result of the application of the resolution mode and/or implementation of the resolution powers shall be limited;

b) the limitation shall be carried out only for 2 working days;

c) when transferring these agreements to the acquiring part, resulting from the mentioned agreements, their early termination right continue to apply to the acquiring party in the case of failure to properly fulfil its contractual obligations;

d) the contracting party shall have right to carry out an early termination right as soon as the limitation determined by this article is finished or in the case if the National Bank notifies that the above agreements shall not be transferred to the third party.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

 

Article 37 ^{​ 12} – Liquidation of a commercial bank

1. A commercial bank shall be liquidated when a banking licence is revoked. The purpose of liquidation is to support the stable functioning of financial sector, protection of insured deposits in accordance with the Law of Georgia on Deposits Insurance System and maximal satisfaction of the requirements of creditors. A person appointed by the National Bank shall act as a liquidator of a commercial bank as determined by the National Bank. A person connected to the commercial bank may not be appointed as a liquidator. Compulsory enforcement shall be terminated as soon as the liquidation process starts.

2. If a commercial bank, which is in the process of liquidation, was a payment system operator and/or a settlement agent, the liquidator of the commercial bank shall, upon appointment, execute the transfer orders accepted by the payment system before the liquidator began the performance of his/her functions, determine the settlement positions of the payment system participants, and/or perform settlements in accordance with the Law of Georgia on Payment System and Payment Services.

2¹. If a commercial bank, which is in the process of liquidation, was an intermediary as determined by the Law of Georgia on the Ownership of Dematerialised Securities, the liquidator shall act in compliance with the requirements set out in Article 7 of the same law.

3. The liquidator of a commercial bank shall be obliged, within three months after appointment, to prepare a list of assets and liabilities and submit a copy to the National Bank. The commercial bank liquidator shall be accountable to the National Bank in accordance with the procedure established by the National Bank.

4. A commercial bank liquidator shall be authorised to sell bank assets at a public auction, or choose another form of their realisation with the approval of the National bank, or to transfer the right of demand for assets to creditors according to their priority, or transfer the right of demand of loans or other financial assets to other commercial banks and arrange for the transfer of liabilities to these banks.

5. When transferring assets and liabilities provided for by paragraph 4 of this article, the consent of the creditors of a commercial bank to transfer assets or liabilities to another commercial bank shall not be required.

6. The commercial bank liquidator shall be authorised to terminate:

a) a deal for recruiting a bank employee;

b) contracts for services in the provision of which the bank was taking part;

c) any liability of the bank as a real property lessee, unless a lessor (who must be notified 60 days in advance that the bank intends to cancel the lease agreement) has any claims on the lease payment, except for the amount that has accrued until the lease cancellation date and unless the lessor requires compensation for damages incurred due to cancelling the lease.

d) bank guarantees issued by a commercial bank and transfer them with the same terms to another commercial bank or micro-bank. A consent from the bank guarantee beneficiary or principal is not required for such transfer. The liquidator of the commercial bank shall inform the bank guarantee beneficiary and the principal about transferring the said bank guarantees to another commercial bank or micro-bank.

7. Except for the actions/transactions carried out on the basis of the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives, and the actions/transactions related to the programme provided for in the Law of Georgia on Mortgage-backed Bonds, a liquidator of a commercial bank shall be authorised to file a lawsuit and contest an action/transaction carried out by an administrator of the commercial bank within 1 year, and if the opposing party to the rescission is a person connected to the bank, within 1 years, before the appointment of the liquidator, and request the annulment thereof, if such action/transaction has damaged the creditors. An action/transaction carried out by the commercial bank administrator for the purpose of inflicting damage on the creditors may become voidable, if it had been carried out within 3 years prior to the date of appointment of the liquidator of the commercial bank.

8. The commercial bank liquidator must:

a) take all necessary measures to terminate all functions of a fiduciary person that were performed by the institution, return all assets and property held by the company as a fiduciary person to their owners and settle all accounts of the fiduciary;

b) send statements of requirement types and amounts according to the bank's accounting documents to all depositors, the rest of its creditors, customers who store valuables in the bank’s safes; also to the depositors of the property administered by the company. The statement shall indicate that claims may be submitted to the liquidator within one month after receiving the letter and that the customers can receive their valuables back.

c) require from the borrowers and other debtors of a commercial bank to cover all existing liabilities against a commercial bank within the time limit set by a liquidator; for the purpose of maximal seizure of assets, with the agreement of the National Bank, achieve the restructuring of the debts of those borrowers and other debtors (including the forgiveness of penalties and fines) who do not have sufficient funds and material means to pay off the debts completely and within the time limit required by liquidator.

9. Any property that is stored on a commercial bank premises and which is not claimed within the time frame indicated in the statement, any unclaimed financial resources and property remaining on the bank’s balance sheet under an agreement, shall be considered as unclaimed resources and shall become the property of the National Bank in order for it to identify the owners. Unclaimed financial resources are kept on the account of unclaimed funds.

10. When liquidating a commercial bank, the taker of a financial collateral shall have a preferential right to the satisfaction of its claim secured by the financial collateral (within the limits of the value of the financial collateral), and the programme creditors determined by the Law of Georgia on Mortgage-backed Bonds shall have a preferential right to the satisfaction from the cover assets of the claims determined by the same Law.

10¹. The secured claim of a secured creditor of a commercial bank (including a tax authority), except for the person provided for in paragraph 10 of this Article, shall be satisfied by way of sale of the collateral, in the order of registration of the measures for securing the claims (including the measures for securing a tax lien/mortgage). Upon the request of the secured creditor of the commercial bank, whose claim could not be satisfied due to an insufficient amount of the proceeds of the sale of the collateral, the unsatisfied part of the claim shall be included in the queue of claims referred to in paragraph 10 ^{​ 2} of this Article, as provided for by Article 276(2) and Article 301(1¹) of the Civil Code of Georgia.

10². The claims against a commercial bank, that are not provided for in paragraphs 10 and 10¹ of this article, shall be satisfied in the following order:

a) expenses related to the process of liquidation of the commercial bank;

b) a creditor to whom a loan obligation of the commercial bank has arisen after the revocation of its banking licence, as well as the National Bank. In addition, tax liabilities arising after the revocation of the banking licence of the commercial bank shall be satisfied in accordance with sub-paragraph (i) of this paragraph;

c) the resolution fund, the Ministry of Finance of Georgia, except for the claims provided for in sub-paragraph (i) of this paragraph, within the framework of financing determined by the Organic Law of Georgia on the National Bank of Georgia (except for temporary state financing carried out by means of the resolution fund);

d) insured deposits within the limits established by the Law of Georgia on Deposits Insurance System or the claims of the Legal Entity under Public Law called the Deposits Insurance Agency, including the claims determined by Article 20(2) of the Law of Georgia on Deposits Insurance System;

e) the amounts on the accounts of natural persons, legal persons, and entities without a legal status, that exceed the limits of compensable amounts determined by the Law of Georgia on Deposits Insurance System, but not more than GEL 100 000 (one hundred thousand) or its equivalent in the foreign currency;

f) claims in favour of the funded pension scheme determined by the Law of Georgia on Funded Pension;

g) the amounts on the accounts of natural persons, legal persons, and entities without a legal status, that have not been paid in accordance with sub-paragraphs (d)-(f) of this paragraph, except for the claims provided for in sub-paragraph (h) of this paragraph;

h) deposits held in the name of the commercial bank administrators, deposits of the shareholders holding 5 per cent or more of the capital of the commercial bank, deposits held by the family members of such persons, or third parties acting on their behalf, as defined by the Organic Law of Georgia on the National Bank of Georgia, as well as deposits of financial institutions;

i) budgetary liabilities and debts;

j) other claims against the commercial bank (including unsecured claims of programme creditors as provided for by the Law of Georgia on Mortgage-backed Bonds), except for the claims provided for in sub-paragraphs (k)-(o) of this paragraph;

k) loan liability of the commercial bank to its direct and indirect owners, except for the claims provided for in sub-paragraphs (l)-(o) of this paragraph;

l) subordinated debt of the commercial bank which is not a supervisory capital instrument;

m) the liabilities of the commercial bank which shall be written off or converted into the regulatory capital in accordance with an agreement, except for the claims provided for in sub-paragraphs (n)-(p) of this paragraph;

n) secondary capital instruments of the commercial bank;

o) additional initial capital instruments of the commercial bank;

p) other liabilities of the commercial bank to its direct and indirect owners.

11. If the existing amount of money is not sufficient to completely satisfy the claims determined by paragraph 10² of this article, all respective claims shall be satisfied in proportion to the claim amount of each creditor in the order listed.

12. The claim of each following order shall be satisfied after the claims of a preceding order are satisfied.

13. In the case of failing to submit a request for the withdrawal of own funds by a depositor of a commercial bank within the time limit set by the liquidator of a commercial bank, such funds shall be transferred to an account opened at the National Bank for unclaimed funds for the purpose of revealing the owner.

14. For the purpose of the timely completion of the liquidation process of a commercial bank, a liquidator shall, in agreement with the National Bank, be authorised to transfer accounts existing in the commercial bank, to which the legal restrictions and/or provisional measures provided for by the legislation of Georgia apply, unchanged to another commercial bank, micro-bank and/or the National Bank, without breaching the existing order of the legal restrictions and/or provisional measures of the commercial bank under the liquidation process, as provided for by the National Bank.

15. After seizing an asset which was a commercial bank asset before an administrative-legal act on completion of a liquidation process was issued, it shall automatically be considered as the liquidated commercial bank’s asset, the right of the management of which shall be granted to the National Bank. If the seized asset of the liquidated commercial bank is monetary funds, they must be transferred to an account opened at the National Bank for the liquidated bank’s unclaimed funds. The monetary funds must be distributed according to the final and verified order of liabilities submitted by the liquidator in accordance with the procedure established by the National Bank. If a non-monetary material asset is seized, in order to manage it, the National Bank shall issue an individual administrative-legal act to determine the procedure for management of the seized asset to satisfy the liquidated bank’s liabilities.

Law of Georgia No 5655 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

Law of Georgia No 2603 of 22 February 2023 – website, 10.3.2023

Law of Georgia No 3729 of 16 November 2023 – website, 7.12.2023

Law of Georgia No 3950 of 15 December 2023 – website, 28.12.2023

 

Article 37 ^{​ 13} – Mutual Offset and Final Offset

A mutual offset carried out on the basis of the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives as well as a final offset carried out on the basis of the mutual offset agreement entered between the parties and the operations on its basis shall not be disputed by third parties, administrative and regulatory/supervisory bodies, the liquidator of a commercial bank, guardian, bankruptcy commissioner, temporary administrator, the special manager of a commercial bank, anyone else performing similar functions.

Law of Georgia No 5682 of 20 December 2019 – website, 31.12.2019

 

Article 37¹⁴ – Commercial banks in the resolution/liquidation mode that issue mortgage bonds

If a commercial bank, which is in the resolution/liquidation mode, is at the same time an issuer of mortgage bonds or a debtor of a refinancing bank as provided for by the Law of Georgia on Mortgage-backed Bonds, the process of resolution/liquidation with respect to such commercial bank shall be carried out taking into consideration the special provisions of the same Law.

Law of Georgia No 2115 of 29 November 2022 – website, 16.12.2022

 

Article 37 ^{​ 1 ​ 5} – Securities held by the clients of a commercial bank in the resolution mode

1. If a commercial bank in the resolution mode was an intermediary as determined by the Law of Georgia on the Ownership of Dematerialised Securities, the special manager shall act in compliance with the requirements set out in Article 7 of the same law and immediately take one of the following actions:

a) restitute dematerialised securities by transferring them to a securities account opened with another intermediary;

b) transfer the dematerialised securities of account holders to another intermediary within the framework of alienation of the shares, assets and/or liabilities of the commercial bank as provided for in Article 37 ^{​ 7} of this Law, or of the use of the resolution tools of an interim bank as provided for in Article 37 ⁸ of this Law;

c) ensure unhindered access of account holders to dematerialised securities.

2. The consent of the account holders shall not be required when exercising the powers determined by paragraph 1 of this Article.

Law of Georgia No 3729 of 16 November 2023 – website, 7.12.2023

 

Article 37 ^{​ 1 6} – Resolution or Liquidation Proceedings against an Originator Determined by the Law of Georgia on Securitisation

If a commercial bank in the resolution or liquidation mode is at the same time an originator as determined by the Law of Georgia on Securitisation, the resolution or liquidation proceedings against the commercial bank shall be carried out taking into consideration the special provisions set out in Articles 18, 20 and 22 of the same law.

Law of Georgia No 3932 of 15 December 2023 – website, 27.12.2023

 

Chapter VIII – Transitional Provisions

 

Article 38 – (Deleted)

Law of Georgia No 5909 of 14 March 2008 – LHG I, No 7, 26.3.2008, Art. 29

Law of Georgia No 1677 of 24 September 2009 – LHG I, No 29, 12.10.2009, Art. 160

 

Article 38 ^{​ 1} – Legal regulation during transition period in relation to persons declared as legally incompetent by court before 1 April 2015

A person may be a commercial bank administrator if he/she:

a) is not a person declared as legally incompetent by the court before 1 April 2015;

b) has no criminal records for a serious or particularly serious crime, or for financing terrorism, and/or legalising illicit income, or other economic crimes;

c) has appropriate education and/or experience;

d) at the same time is not an administrator of another commercial bank, except when holding the position of an administrator in a bank under control of this bank, or in a bank that controls this commercial bank;

Law of Georgia No 3392 of 20 March 2015 – website, 31.3.2015

 

Article 39 – Requirements towards subsidiaries established or acquired by commercial banks

A commercial bank, which established or acquired, before Article 10 ^{​ 1} of this Law was effected, a subsidiary that conducts activities outside Georgia as provided for by the legislation of Georgia for persons carrying out monitoring under the Law of Georgia on Facilitating the Prevention of Illicit Income Legalisation, shall submit documents under Article 10 ^{​ 1} of this Law to the National Bank within six months after this Law takes effect.

Law of Georgia No 2830 of 23 March 2010 – LHG I, No 19, 13.4.2010, Art. 104

 

 

President of Georgia                                                    Eduard Shevardnadze

Tbilisi

23 February 1996

No 121-II ს