Central bank’s decision to launch a probe into suspicious developments surrounding billionaire-turned-politician Bidzina Ivanishvili’s Cartu Bank has been unjustifiably and overly politicized, Giorgi Kadagidze, the President of National Bank of Georgia (NBG), said on October 20.

Kadagidze said that a sudden change of an entire top management of the Cartu Bank, combined with a suspicious transaction involving large amount of cash in foreign currency, done through “ignorance” of NBG, triggered the regulator to intervene and launch a probe.

Cartu Bank, which is the sixth largest bank by assets in Georgia (there are 19 commercial banks in the country), is wholly owned by Ivanishvili.

A long-time chairman of Cartu Bank’s supervisory board, Giorgi Chrdileli, who also was president of Cartu Group, had to resign immediately after Ivanishvili publicly accused him on October 12 of being the government’s “agent”. Several others from the bank’s top management, including general director and his deputies, also resigned in the wake of Chrdileli’s sacking.

Six days later, USD 2 million and EUR 1 million was seized from Cartu Bank after police raid on the bank’s cash delivery van in Tbilisi center on October 18. The Interior Ministry said seizure was related with a criminal investigation into alleged money laundering case.

Next day, on October 19, the central bank announced about launching a probe into the Cartu Bank, triggering allegations that the authorities were targeting Ivanishvili’s bank as part of their campaign against a political opponent.

Parallels have also been drawn with the case of Standard Bank, which was associated with late tycoon Badri Patarkatsishvili. In 2007 the central bank appointed a temporary administrator in the Standard Bank citing liquidity concerns; the private equity group, which owned the bank, alleged at the time that liquidity problems emerged after clients were pressured by the authorities to withdraw funds from the bank. After Patarkatsishvili’s death the bank was sold to an investment group from United Arab Emirates.

Nodar Javakhishvili, new director general of Cartu Bank, said that there were some signs of withdrawal of funds from the bank, adding that “several large clients have quit the bank.”

President of NBG, Giorgi Kadagidze, said that the only similarity between the two cases was that both of them were overly politicized.

“I rule out any possibility of the Cartu Bank’s bankruptcy or that it will face insolvency problem; if you look into the bank’s balance sheet you will see that it is simply impossible to happen,” Kadagidze said. “Allegations that the probe is being conducted with a purpose to hinder the bank’s operations or to cause its bankruptcy are ridiculous, not serious and politically-motivated.”
 
“We are not in any way going to restrict property rights [of the Cartu Bank’s owner] in any form or to hinder the bank’s operations; it has never been our intention,” he added.

Kadagidze said that the central bank was first alerted in connection to the Cartu Bank because of an unexpected resignation of the entire top management, which, he said, was in itself unusual development.

Transaction with large amount of cash in foreign currency without prior notification of the National Bank, Kadagidze said, made developments surrounding the Cartu Bank even “more vague”, which promoted “a logical reaction” by the central bank to launch an inspection.

General director of Cartu Bank, Nodar Javakhishvili, said shortly after the cash seizure incident that the bank needed cash for number of banking operations, including for covering staff salaries. The authorities seized on this latter reason cited by Javakhishvili, saying that this reason was making the transaction even more suspicious, because if the bank needed the cash for salaries it should have requested it in Lari not in foreign currency.

Cartu Bank has dismissed money laundering allegation as “incomprehensible”, saying in a written statement on October 19, that the confiscated money was intended for its daily cash needs and was obtained through a routine transition. There was no word of cash needed for salaries in the Cartu Bank’s written statement.

Kadagidze, however, insisted that it was “not an ordinary transaction” and the Cartu Bank should have notified the National Bank in advance. He also said that a similar transaction with the cash was done by Cartu Bank without any problems on October 20 after notifying about it the NBG. The amount in the recent case was much smaller than on October 18 and this time cash was withdrawn directly from the central bank, according to NBG.

He also said such inspection of a bank usually lasts for two months; he, however, also added that the probe would last as long as it was required for “receiving answers on all of our questions.”

“I want to welcome this statement by the President of National Bank [that Cartu Bank will not face any problems with operation] and I hope that it will remain the case; I want to believe that Mr. Kadagidze is sincere in his remarks,” Nodar Javakhishvili, director general of Cartu Bank, told Maestro TV late on October 20.