The regulation issue of banking sector activities
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Date
2019
Authors
Journal Title
Journal ISSN
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Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
In recent decades of crises, most countries in the world give preference to financial stability to the detriment of effectiveness. It is also important to develop the banking sector management and regulatory methods that will make the banks get interested in implementing project financing, crediting the real sector as a counterweight to speculative operations.
The latest researches into the financial instability problem conducted abroad indicate the need to avoid a wide range of shocks on the economy and the financial sector, through the creation of megaregulator. A clear example of this is the new supervisory body ESRC (European Systemic Risk Council), which aims to monitor system risk.
In our view, NBG does not possess a tool for the impact on commercial banks and other financial intermediaries’ business-model, which will promote the attractiveness of long-term investments in the real sector of the economy. At the same me, the institutional structure of the model of contemporary Georgian financial sector requires attention to be paid. According to the Herfindahl-Hirschman Index (HHI), the concentration of bank assets in Georgia is one of the highest among European countries.
Due to the inappropriate development of various sectors of the Georgian economy and the significant influence of globalization process, the excessive use of monetary policy instruments in the Georgian financial sector, without control on commercial banks’ activities and supervision practice, can cause violation of the transmission mechanism having impact on the real economy of monetary policy.
In the management systems of developed countries economies there is acknowledged the need for determining the goals of monetary policy by the economic growth indicators and not only on the basis of the inflation rate.
Financial system in Georgia is oriented to banks. The efficiency indicators of the banking system are: the level of capitalization, the quality of assets, the diversification of operations, the existence of reserve buffers, the frequency of bankruptcies, the effective system of deposits insurance.
The central issue of the modernization of banking sector regulation is to organize activities of central banks and the boundaries of their mandate.
The efficiency of banking supervision is not determined so much as to what and how many bodies are carrying out it, but what instrumental tools they have, as well as their staff’s professionalism and organizational structure.
Description
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Keywords
Financial stability, monetary policy, economic growth, regulation of the banking sector
Citation
Economics and Business, №1, 2019, pp. 164-170