Business associations have warned that a bill that would strip the Georgian National Bank of supervisory functions of financial institutions and transfer them to a separate agency will put the country’s banking sector in jeopardy.

In a joint statement the business associations in Georgia said that the proposed bill poses a threat not only to the banking system, but also to the country’s business and investment climate.

The statement was issued by the Business Association of Georgia, the American Chamber of Commerce, the Georgian International Chamber of Commerce, the EU-Georgian Business Council, the Georgia Employers Association and the Association of Banks of Georgia.

The bill in question was drafted by two lawmakers from the Georgian Dream ruling coalition and was submitted to the Parliament for consideration on May 21, less than a week after Energy Minister and Deputy PM Kakha Kaladze speculated that currency transactions by some commercial banks might be one of the reasons causing the depreciation of the Georgian lari. Kaladze complained that under the law the government has no access to information on such transactions. The central bank chief Giorgi Kadagidze dismissed such speculations on May 16 as “conspiracy theories.”

The proposed bill envisages the setting up of the Financial Supervisory Agency from July 1, 2015, which will be in charge of monitoring and supervising the banking sector and other financial institutions. These supervisory functions are currently carried out by departments within the Central Bank.

According to the bill, the Financial Supervisory Agency will have a seven-member board. The Central Bank’s governor will be an ex-officio member of the board, but will have no right to serve as a chairperson of the board simultaneously. The remaining six members of the board will be elected by Parliament. The chairperson of the board will have the right to appoint the head of the agency.

Members of the central bank’s board “do not reflect at all interests of those forces, which are currently in power,” said MP Tamaz Mechiauri, the co-sponsor of the bill who chairs the Parliamentary Committee for Budgetary and Financial Issues.

“Separation of this [banking supervisory] agency from their [leadership of the central bank] subordination will at least discourage some to make use of currency exchange rate fluctuations,” said MP Mechiauri, echoing speculation voiced earlier by Energy Minister Kakha Kaladze.

The business associations said in their joint statement on May 23 that such “unfounded” speculation “can be perceived as an attempt to mislead” the people who have been affected by the depreciation of the national currency lari, as well as to make the country’s banking sector “a scapegoat” for the lari’s troubles that originate from “economic problems, caused by number of external and internal factors.”

The business lobby groups also said that in light of recent allegations voiced by some government officials, the proposed legislative amendment can also be perceived as “the threat to the banking secrecy guarantees, which represent the cornerstone of success for not only Georgian, but also for any other country’s banking system.”

“For more than two years, the business sector has been talking about the need for significant reforms to stimulate the economy, such as the abolition of income tax, reform of the private pension system, development of stock markets, support for capital markets etc.” reads the statement. “Against this background, draft of amendments to the organic law on the National Bank, initiated in the Parliament, is completely incomprehensible for us.”

“We hope that before adopting the relevant decisions, the current situation will be thoroughly analyzed in order to avoid hasty decisions and find other rational ways to solve problems,” reads the joint statement issued by business associations.

The proposed bill has also been criticized by the President’s office. The President’s economic adviser, Giorgi Abashishvili, said on May 22 that the proposal can have adverse effects as planned reform seems to be motivated by political rather than economic reasons. He also hinted that if approved the bill might be vetoed by the President.

Economy Minister Giorgi Kvirikashvili said on May 23 that the proposed bill requires thorough consideration.

“Discussions are ongoing – there are arguments on the both side, so we will weigh all the arguments and take final position,” Kvirikashvili said.