The BAG Finance Committee Conducting the Presentation about its Work
14 Apr '10
Finance Committee of the Business Association conducted presentation of its work and future plans at Courtyard Marriot Hotel on April 14.
The President and member companies, insurance and bank association's representatives, Vice President of the National Bank and invited guests attended the presentation.
In his speech, the Chairman of the Finance Committee Vakhtang Butskhrikidze mentioned that Committee's priorities at this stage deal with the following three areas:
Support the establishment and development of private pension scheme;
Support "Larization" policy declared by the NBG;
Support of leasing.
As stated by Mr. Butskhrikidze, pension system reform foresees the development of private pension funds which implies creation of pension scheme based on individual contributions. According to this vision, on the one hand the Government will encourage individual contributions in the form of tax exemptions and on the other hand state's duty on providing old age pension will reduce which in the long run will mitigate state budget burden. Among the features of new pension system, accumulation and succession of individual contributions was emphasized; pension amount will be determined on individual basis, proportionate to the accumulated contributions.
The reform aims at creation of solid social guarantees, increased actual pension, investment possibility in the long run and expansion of the scope of service. System reformation covers several stages, including: legislative amendments, drafting of pension fund regulatory standards, planning of financial indications and awareness campaign.
As for "Larization", according to the presenter, it first of all is the encouragement of development of national currency market and credit-giving in national monetary unit. The instruments of insurance of currency risks are only at the stage of introduction in Georgia and upon their full enactment Lari credibility will significantly improve and thus will the amount of loans issued in Lari. In addition the cost of the loan itself will reduce.
Finance Committee is intending to take proactive steps towards supporting the leasing activity by initiating relevant legislative amendments in the sector and sustaining the reforms.
As announced by NBG Vice President, Archil Mestvirishvili, NBG will enact all necessary instruments to enable the commercial banks to issue loans in Lari if requested so. "Larization" is a new opportunity for those who wish to reduce risks for not depending on fluctuating currency rate. Consequently, deposit in Lari is rather un-risky and predictable than in Dollar.
Increased issuance of loans in national currency under floating interest rate encourages the enactment of interest rate transmission mechanism which allows for the reduction of loan-related costs for the business by decreasing the policy rate. Finally the borrower will be maximally insured against currency risks.
Mr. Mestvirishvili stressed that for the National Bank it is extremely important to actively cooperate with Finance Committee and organize joint seminars or trainings for providing more information on "Larization" to make the process as much as transparent and clear. NBG, as a regulator in the sector is also actively planning to involve itself in the private pension reformation process.
In closing, the President of BAG, Giorgi Chirakadze noted that business involvement in the reformation process is counter productive and necessary. Achievement of real outcomes is time and labor consuming and in this regard it is important to implement reforms gradually, consistently. Furthermore he underlined the competent state authority's readiness for cooperation and added that awareness meetings on "Larization" will be conducted with joint organization of BAG and NBG in the nearest future.