The National Bank of Georgia said on November 27 that it had appointed a temporary administrator to Standard Bank because of liquidity concerns.
Business and media tycoon Badri Patarkatsishvili has, as his lawyers put it, "indirect interests" in the bank. Salford Capital, a company which manages Patarkatsishvili's USD 100 million investment portfolio in Georgia, said the seizure of Standard Bank was part of a systematic campaign by the authorities to target Patarkatsishvili's assets in Georgia.
The move against Standard Bank comes after the authorities shut down Imedi TV and radio stations and seized a Patarkatsishvili-owned amusement park in Tbilisi. The Revenue Services has also carried out a financial probe into the Georgian Glass and Mineral Water Company - the producer of Borjomi mineral water - and an internet provider company, Telenet.
Standard Bank had been claiming to be the fastest growing bank in Georgia. It was the 7th largest bank in the country in terms of assets.
The National Bank of Georgia said that clients of Standard Bank had started at the beginning of the month to withdraw funds from the bank, which was the cause of the Bank’s liquidity concerns.
Irakli Rukhadze, the chief executive of Salford Georgia, confirmed that some clients had indeed withdrawn deposits in recent weeks. He said, however, that he had "a justified suspicion" that they had done so following “pressure by the authorities.”
The state-run Georgian Railways, KazTransGaz-Tbilisi, a Kazakh company distributing gas in the capital city and Telasi, a Russian company distributing electricity in Tbilisi, were among the Bank’s clients.
“We strongly believe that Standard Bank customers were under pressure since November 8 to withdraw their funds from the bank and transfer them to other banks,” Rukhadze said at a news conference on November 27. “State agencies which were our clients have also withdrawn funds from the bank. It was done in order to artificially reduce Standard Bank’s liquidity ratios.”
He said that in the last two weeks the bank had paid out 25% of its assets in cash. Despite this, he said, Standard Bank’s monthly average liquidity ratios were above the minimum required by the law.
“I want to make something clear: when the National Bank of Georgia took control of Standard Bank, we had no liquidity problems,” he said.
Meanwhile, Rukhadze, an American citizen, is himself the subject of a legal investigation. He is suspected of “exercising influence” on a National Bank official for “materialistic gains.”
New York-based law firm Debevoise & Plimpton LLP, which has been hired by Patarkatsishvili to defend his interests, said the charges were “insubstantial.”
Lord Goldsmith, a former UK Attorney General and now head of Debevoise & Plimpton’s European litigations, visited Tbilisi last week to look into the detail of the matter.
In a letter sent to the recently appointed Georgian prime minister, Lado Gurgenidze, on November 27, Debevoise & Plimpton said that the seizure of Standard Bank by the authorities was “an unsupported pretext for politically motivated effort to target Mr. Patarkatsishvili for his opposition to the Administration.”
It also said that actions against Standard Bank violated Georgia’s obligations under the 1994 U.S.-Georgian treaty on reciprocal protection of investments, as some shareholders of the bank are U.S. citizens.
Salford Capital’s top executives met with PM Lado Gurgenidze on November 26 to discuss the issue. Gurgenidze is himself the former head of one of the country's leading banks, the Bank of Georgia.
Salford, however, said in a statement on November 27: “Our efforts to seek resolution fell on deaf ears.”