EBRD’s Role In Promoting
Corporate Governance
17 May - Tbilisi, Georgia
Irakli Managadze, Senior Policy
Advisor
Banking Systems at the Beginning of
Transition

Key banks largely state owned

Proliferation of banks, with many new small banks
most of them created to serve their shareholders’
other interests

High margins, limited lending to the real economy

No experience of credit assessment

Lack of confidence in banks, limited ability
to attract deposits
Continued
• Inadequate legal and regulatory framework
• Frequent government interference, including
directed lending
• Low asset quality
• Limited banking system capitalisation
• No “Fit and Proper” Criteria
• Very Weak Corporate Governance
• No Anti-Money Regulation
Much Has Been Achieved

Changes to the Central Bank and Commercial
Banking Laws and Regulations Strengthening the
Regulatory Authorities
– Implementation of IAS
– New Asset Classification and Loan Loss Provisioning
Regulations
– Internal Control/Conflict of Interest Regulation
– Fit and Proper Regulation
– AML/CFT Laws and Regulations
Much Has Been Achieved
• Substantial progress in reform and restructuring
process
• Average capitalisation has improved
• Macroeconomic environment has stabilised
• Banking Assets growing
• Number of Banks decreasing
Key challenges remain

Bankruptcy laws and judicial systems are still
often ineffective

Privatisation of State Owned Banks remains on
the agenda

Further Sector Consolidation/Too Many Banks

Enforcement of Regulations

Strengthening Corporate Governance
EBRD Objectives in the Financial
Sector
• Promote and support increase in the quality and quantity of
financial intermediation
• Build strong institutions
• Promote products that increase capacity to provide financing to
the real economy, with a particular focus on SME’s
• Work to improve regulatory environment and corporate behaviour
How to Get There
• Identify and work closely with banks whose
management and shareholders share EBRD’s
objectives and values
• Engage in policy dialogue to promote business
environment with effective regulatory framework &
supervision
• Support Institution Building through provision of
TC funding/Technical Advisors (credit, treasury,
operational)
• Promote Corporate Governance
What Is Corporate Governance?

Conduct and ethics

Application of regulations / laws and their transparency

Disclosure of facts / information
– › judicial process
– › financial information
– › ownership

Compliance with regulations / laws

Institutionalised decision-making
Why Practice Good Corporate Governance?

It creates value

Improves reputation

Protects against those who do not practice it

Allows corporation to grow

Gives peace of mind
Who is affected by Corporate Governance
JUDICIARY/ SHAREHOLDERS
REGULATORS
STAFF
GOOD CORPORATE
GOVERNANCE
&
PROFESSIONAL
STANDARDS
Creates Value
CUSTOMERS &
SUPPLIERS
LOCAL &
INTERNATIONAL
AUDIENCE
EBRD’s Commitment

Applies high standards

Requires commitment to achieve high
corporate governance

Prepared to work with stakeholders

Shares knowledge and experience
Corporate Governance in Banks

Transparency of ownership including
beneficial ownership

Know your customer disclosure

Financial disclosure

Transparency of decision-making process

Related party lending
EBRD’s Experience

Based on real-life situations

Increases quality of decision-making

Improve corporate culture and teamwork

Results in ownership of decisions

Adds value

Quality of Board is crucial