Development of the Banking System in Georgia

Abstract

Over fifteen years have passed since the beginning of the reconstruction of the transition countries' banking systems. The analysis of the development of commercial banking in Georgia and other transition countries points out several features, which are typical for the starting period of financial sector reforms. It turns out from this article that the success of the reconstruction of banking sector in certain countries differs substantially. Since the starting of reforms the Georgian banking sector has passed two development periods ending with banking success. The first period can be named as a "wild" and the second as a "naive-optimistic" banking period. The development cleared the banking sector of weaker links and showed both the central bank and the management of operating banks the directions for improving banking regulations and management international practices. In my article I do not deal only with the success of the reforms of a Georgian banking sector from the aspect of the growth of assets but also paid a lot of attention to the changes in quality. In this study I researched the extent of the growth of the Georgian banks' creditability, the stability of their working results, the conformity of services to clients' needs, the harmonization of banking regulations with the European Union's requirements and the implementation of good International banking practices in Georgia. For today the transition period in Georgian banking has been actually passed. The banks operate in accordance with modern market economy patterns in every respect. The cornerstones of the Georgian banking sector reforms success have been stable economic policy as well as stable currency and the central bank's policy incisiveness, which forces the reforms.