New banking regulations referred to express loans and payment by installments, and in hypothec loans – new-built apartments. Based on the data collected in 2 months, in the last 4 years the construction sector was decreased for the first time and the decrease of sales amounted to 35%.
Despite of the fact that the new regulations hindered economic development of different sectors, the Minister of Economy and Sustainable Development considers that the key direction of the regulation shouldn’t be changed. According to Giorgi Kobulia, new enacted banking regulations serves to protection of the population, especially low-income citizens from unreasonable credits. The Minister added that the Ministry holds active consultations with public and banking sectors. Accordingly, he doesn’t exclude that insignificant corrections will be made in the banking regulations. However, he considers that it probably refers to more high-income citizens.
„For example, the same PTI coefficient may be mitigated for higher income bodies, or, if we have the obligatory installment at the rate 40% established for foreigners we will decrease it”, – stated the Ministry of Economy in his interview with the Forbes Week.
How does experts assess situation on the fourth month of enacting of the regulations, what are expectation from the viewpoint of mitigation of regulations and which categories of populations will be affected (proceeding from their incomes)?
The President of the Banking Association of Georgia Alexander Dzneladze states that the National Bank has not published the March data. Thus, without analyzing of the first quarter it is very early to speak about mitigation of regulations. According to him, it is noteworthy that we will see a complete picture created by enacted regulations in 9 months (3rd quarter).
Dzneladze adds that currently regulations don’t work completely as the systematic players might make the crediting more stringent, they might not issue definite products due to some issues pending. Thus, 3 months, and even 6 months for a complete analyzing is too short period.
As for the assumption that regulations will not mitigated within 9 months, e.g. in September-October, Dzneladze says that on the current state giving details on this issue is very early.
As for preliminary forecasts and expectations of commercial banks in connection of the rate of interest to be increased in incomes, profit or a number of issued loans, Dzneladze stated that this will not reflected on the profit and incomes with a direct proportion.
“The basis of it is that definite optimizing will be started, including optimization of the benefit. The profit will be impacted by it the next year. In case if the credit portfolio is not decreased in 2019, its results will be seen in 2020. This year we will have a rate of rise as in the last year and we may have even much more profit”, – says Dzneladze.
Regarding impact of the regulation on the construction sector and equipment market, we asked can prolongation of observing of figures for several months lead us to a catastrophe Dzneladze responded that this expectation had a place prior to entering of the regulation into force.
“Failure in selling of apartments by construction company for three months is not a directly proportional precondition of urgent mitigation of the regulation. I don’t want to make a comment which will contradict this postulate. The Regulations, in fact decreased sales of definite real estates but there is no basis to assume that this will lead to any collapse,” – says Dzneladze.
On the question whether the Banking Association shares the statement made by the Ministry of Economy Giorgi Kobulia in the part of possible mitigation of regulations on for high-income consumers, Dzneladze doesn’t give a clear answer and explains that reviewing of regulations is expressing of readiness from the Government and National Bank. Thus, if these authorities will see the danger, the regulations will be reviewed in any case.
Dzneladze states that similar regulations implemented in different states are changeable. Corrections referred to the reasons and expectations covered by the regulation.
On the question of “Commersant” about the extent of justification of possible mitigation of regulations only for high-income category especially in the terms when such layer in the country is miner, Dzneladze says that high-income layer in the state is only 40 000 and this figure is low. However, the President of the Banking Association states that on the current stage he has no opportunity to consider that a definite cosmetic change in the stated regulation will drastically change will not change the state.
“I don’t want to say definitely that if the regulation will be mitigated only for high-income citizens, it will abruptly correct/ not correct the state. Mitigation of this regulation simultaneously in all direction is an excessive measure. Thus, I don’t want to give a concrete answer on a concrete detail of your question; it may lead us to very complicated discussion that will take a lot of time,” – says Dzneladze.