The National Bank of Georgia has ordered the shareholders of TBC Bank Group PLC, which owns their namesake Georgian bank, to remove their Chair, Mamuka Khazaradze, and Deputy Chair, Badri Japaridze, from their board within two months. The National Bank also revoked the signature authority of both.

The National Bank has the legal right to suspend a bank’s administrator’s right of signature and demand a commercial bank’s board temporarily remove or dismiss them if a violation of the law is discovered.

In a statement on Thursday, the National Bank cited ‘violations’ of laws regulating conflicts of interest which were discovered in transactions from 2007–2008.

In January, the Georgian Prosecutor’s Office said they had launched a probe in May 2018 into $17 million worth of loans that were fast-tracked to two companies in 2008. Following this, Khazaradze and Japaridze took loans of the same amount from these two companies, according to authorities, which was followed by TBC writing off those debts.

On 15 February, the prosecutor’s office told the Georgian Public Broadcaster that in an earlier statement, Khazaradze had claimed he did not know the origin of the money he withdrew as a loan.

The National Bank underlined that TBC, one of Georgia’s two biggest banks, was ‘one of the leading financial organisations’ in Georgia and that their decision was ‘not directed’ at the bank itself.

Later that day, TBC Bank notified the London Stock Exchange and the Georgian public of the news, indicating that Khazaradze and Japaridze were staying in their positions and had vowed to mount a legal challenge of the National Bank’s decision.

In a post on Facebook, Khazaradze called it a ‘culmination of an eight-month campaign’ targeting their reputation. He claimed he and TBC would fight to defend his and shareholders’ rights.

Khazaradze’s lawyer, Zviad Kordzadze, said that the banker planned to sue the National Bank over their decision.

Khazaradze insisted that the 2007–2008 transactions were thoroughly scrutinised by international legal giant Dentons, who he said found no conflict of interest. Following January’s announcement of an investigation, Khazaradze claimed that the National Bank had also already looked into the case and found no fault with TBC.

The prosecutor’s office has not yet concluded the investigation into the case.

‘Attack on banks’

In the same Facebook post, Khazaradze said that the National Bank’s ‘speedy ruling and deliberate campaign against’ them, coincided with his bank’s bid to build a deep-sea port in Anaklia.

The port is set to be developed by the Anaklia Development Consortium, which is owned by  TBC Holding, another subsidiary of the TBC Bank Group.

The Consortium won the bid to develop Anaklia City in 2015, together with the US-based Conti Group LLC. UK-based international transport and logistics company Wondernet Express, American port operator SSA Marine, and Bulgarian G-Star are also involved in the Anaklia project.

Several local media outlets speculated that Anaklia Development Consortium winning the bid was the primary reason for a fallout between Giorgi Kvirikashvili, who became Georgia’s Prime Minister that year, and Georgian Dream founder Bidzina Ivanishvili, who was Prime Minister from 2012 to 2013.

Ivanishvili returned to formal politics in May 2018 as chairperson of Georgian Dream, three years after the tender. Kvirikashvili resigned as prime minister in June 2018, citing differences with Ivanishvili over economic policy.

In July, Ivanishvili lashed out at TBC accusing them, and the Bank of Georgia, of ‘eating up the whole country’. The billionaire urged people not to ‘misinterpret’ his words as an attack on banks.

Both the National Bank and the government have differentiated in their statements between TBC and the bank’s chair and the deputy chair.

However, Zurab Chiaberashvili of the opposition European Georgia Party accused Ivanishvili of ‘attacking’ TBC Bank and Khazaradze.

‘There are people in Georgia who are aggressive towards banks, but we have to understand that attacks on economic entities like this worsen the economic situation, resulting in greater poverty’, Chiaberashvili told journalists on 15 February.

Georgian Economy Minister Giorgi Kobulia disagreed, stating that there was ‘no political pressure’ on banks and that ‘grave’ and ‘serious’ allegations over possible financial crimes needed to be investigated fully by the Prosecutor’s Office.

Speaking to journalists on Friday, François Painchaud, the IMF Resident Representative in Georgia, said that a failure for the National Bank to act ‘when there is a legal basis for it’ would damage their regulatory credibility.