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How to Obtain a Non-Banking Deposit and Lending Licence in Georgia: Rules and Procedure

Irakli

RegHub Georgia Specialist

Plenty of foreign investors set out to obtain a licence for non-banking deposit and lending activity in Georgia, drawn by the country’s steady economic climb and the plain terms on which business is done here. Free movement of capital and a tax system stripped of clutter keep foreign money flowing into the local fintech scene. Financial regulation in Georgia is exacting yet see-through, shielding investments behind rules everyone can read.

Official oversight of financial activity in Georgia rests with a single watchdog. The country’s National Bank hands out permits, keeps risk in check and guards the safety of depositors’ money. No one becomes a lawful player on this market without clearing a strict vetting. Detailed regulation of financial services leans on full transparency of who owns the company.

This article works through the regulatory rulebook in detail and sets out the stages one has to pass to stand a lawful financial business up on the Georgian market.

What counts as non-banking deposit and lending activity in Georgia

The law draws a line between ordinary commercial lending out of one’s own funds and the placing of capital gathered from the public. Taking repayable money from a broad circle of people is treated as the exclusive preserve of state-controlled institutions. A lawful non-banking deposit institution in Georgia has to clear state registration and win the supervisor’s nod. Pulling in resources without that special standing carries criminal liability and a forced wind-down of the business. A dedicated licence to take deposits in Georgia is what separates a plain finance company from a fully fledged financial institution.

Operations that fall under regulated financial services in Georgia

The right to run a financial business means carrying out a strictly drawn set of transactions. Each licensable line of activity is written into the wording of the permit itself.

A full licence for financial services in Georgia clears the way for the following:

• taking term deposits and demand deposits from individuals and legal persons;

• issuing secured and unsecured consumer, commercial and mortgage loans;

• opening and running settlement and savings accounts to serve clients;

• carrying out cash-and-settlement operations in the national and foreign currencies;

• issuing and servicing debit payment cards;

• buying and selling foreign currency in cash and cashless form;

• providing safe-deposit boxes for storing valuables.

Drawing the line: classic bank, micro-bank and credit union in Georgia

Which business model fits turns on the volumes planned and the audience aimed at. To settle it, the financial statuses on offer on the Georgian market are weighed against each other side by side. The National Bank of Georgia’s official requirements for financial organisations differ markedly between commercial banks, micro-banks and cooperative unions:

A run of the comparison shows that a micro-finance organisation licence in Georgia no longer lets a firm pull in public deposits. To win that ability back calls for a switch into a micro-bank. A credit union licence in Georgia suits closed regional or professional communities. A commercial fintech project most often lands on the micro-bank model.

The regulatory framework for non-banking deposit and lending activity in Georgia

Building a lawful business calls for tight adherence to the country’s body of rules. The financial-sector licensing now in force in Georgia leans on a bundle of legal acts that split the rules of play across the different types of organisation. Control and oversight of the market run on the following legal levers:

• regulatory rules for large financial institutions, setting the general standards for handling public deposits at scale;

• dedicated decrees for cooperative bodies, fixing the bounds within which closed financial communities operate;

• the state’s anti-money-laundering regulations, aimed at blocking dubious capital and countering unlawful income;

• circulars, methodological guidance and operational orders from the single supervisor.

A platform of rules kept constantly up to date underpins steady licensing of lending activity in Georgia. A step-by-step drawing-together of local standards with European directives keeps the financial markets highly transparent.

The chief controlling body on the market is the single state regulator. Every licence for non-banking financial activity in Georgia is issued by this agency and no other. The law vests inspectors with the right to run on-site and remote checks of companies. A breach of liquidity norms draws heavy fines. The regulator may bar management from running the business outright. In the worst cases the permit already issued is withdrawn. Steady financial supervision in Georgia keeps grey schemes off the market.

Shielding a business from a forced closure means building a hard-edged system against the laundering of unlawful income. Naming a separate certified officer is a must for meeting the AML requirements in force for financial organisations in Georgia. Sign-off on the internal control rules comes before any formal approach to the state regulator. Running every transaction through analysis rules out deals with no plain economic sense. An immediate freeze hits any suspect transfer. The gathering and processing of data on capital movement is something the state services do without pause.

Obtaining a non-banking deposit and lending licence in Georgia: core requirements for applicants

The law sets exacting demands on the legal standing and financial transparency of the would-be owners. An official licence for non-banking financial activity in Georgia goes only to structures able to bear out the lawful origin of their funds and a spotless business past.

Legal form and the particulars of company registration in Georgia

Setting up a financial company in Georgia begins, by rule, with raising a legal entity solely as a joint-stock company (JSC). The corporate side runs through the Entrepreneurial Register at the House of Justice, where the charter is recorded and a temporary accumulation account is opened. Financial-activity licensing in Georgia rules out any other legal form altogether, on the strength of the need for a transparent split of stakes among investors. Slips in drafting the founding agreement or the management structure bring the licensing process to a dead stop at the regulator’s hand.

Requirements for the founders, beneficiaries and top management of a micro-bank in Georgia

Clearing a detailed Fit and Proper test against international standards is a must for every shareholder and officer of the organisation. A thorough vetting of beneficiaries takes in their business past over the last ten years, the absence of bankruptcies in the record and of convictions on economic charges. An official financial licence in Georgia goes to structures whose directors hold a higher degree in economics or law, a proven managerial track in the banking sector of three years and up, and who have come through a personal interview with the regulator’s panel.

Source of capital and structural transparency for a financial licence in Georgia

Full disclosure of the corporate ownership chain right down to the ultimate natural persons is a hard rule, one that rules out the use of nominee holders. A lawful source of the capital is borne out by tax returns, the holding’s audited statements or asset purchase-and-sale agreements. The legal support of licensing carried out in Georgia calls for real money to be credited to accounts at resident banks, with the use of short-term loans to form the charter fund forbidden.

Limits on foreign applicants and document legalisation for a licence in Georgia

The law grants local and foreign investors equal rights, yet an international financial services license in Georgia is out of reach for beneficiaries from offshore or sanctioned zones. All corporate papers of foreign holdings are subject to mandatory translation into Georgian and certification by apostille or consular legalisation. The compliance-control procedure for foreign investors makes the opening of personal accounts at local financial institutions obligatory. This requirement is a step that cannot be skipped; without it, preparing the documents for a licence in Georgia will not let the applicants’ verification close.

Criteria and standards for licensing a micro-bank in Georgia

Launching a commercial financial institution of the new type calls for a fit against tough economic and operational parameters. The state lays these rules down to keep the system stable and protect depositors’ capital. A working licence for deposit and lending activity in Georgia loads the company with duties to keep within limits and safety standards.

Minimum capital and the target shape of the loan book under a micro-bank licence in Georgia

The supervisor signs an application off only on the full payment of starting capital of GEL 10,000,000. That sum is placed in full on a special account at the state regulator until operations begin. The official requirements for getting a financial licence in Georgia hold a firm condition on how the funds lent out are spread. Channelling at least 70% of the total loan book into small business, entrepreneurship and the agricultural sector is mandatory. Falling short of this proportion brings a suspension of the permit.

Limits on taking retail deposits under a deposit licence in Georgia

The law brings in specific limits on working with retail liabilities to keep systemic risk down. A licence to take deposits in Georgia allows citizens’ funds to be pooled while a fixed price floor is held. Taking small savings is barred. A single deposit from one individual or sole trader has to run to no less than GEL 100,000. Pulling in resources for smaller sums stays the exclusive right of classic commercial banks.

Corporate governance of a financial organisation in Georgia and director qualifications

Building a transparent administrative structure is a make-or-break condition for clearing the check. Sound corporate governance means a mandatory split of functions and the setting-up of a Supervisory Board. The seats of general director and management-board members may go to people with a proven three-year track of leadership in the banking sphere. The National Bank of Georgia weighs how genuinely the directors are drawn into the operational processes. Foreign specialists may lead from a distance, provided unbroken risk control is kept in place.

Internal control of a financial organisation in Georgia and AML policies

Heading off the risk of the company being drawn into dubious transactions is secured by setting up an autonomous audit service. A sound internal control runs apart from the executive leadership and reports straight to the board of directors. Modern financial-monitoring standards are woven in at the software-development stage. The AML requirements in force for financial organisations in Georgia oblige the instant passing of data on suspect operations to the state analytical services.

Physical office and operational IT infrastructure for a deposit institution in Georgia

Fitting out the head branch has to square fully with the technical safety standards. Every non-banking deposit institution in Georgia is bound to certify its cash nodes and kit out an isolated vault for valuables. The regulator checks the architecture of the automated banking systems (Core Banking) in detail for how well it stands up to cyberattacks. Unbroken risk control at a financial company is secured by the mandatory mirroring of servers and the holding of a disaster-recovery plan for the data.

An alternative format: licensing credit unions in Georgia

For certain business models, raising a closed financial association turns out to be the canny move. This format rules out classic commercial dealings on the open market. The official licensing of lending activity in Georgia for such structures carries a marked social bent.

The law frames this type of organisation as a non-profit legal person, raised for mutual financing. A dedicated credit union licence in Georgia tightly bounds the circle of people with access to the financial services. Taking money deposits and issuing loans run solely among the shareholders who are members of the cooperative. Carrying out transactions with outside individuals or legal persons is barred altogether. The regulation of credit unions in force in Georgia is aimed at meeting the members’ internal needs, with no view to drawing corporate profit.

What documents you need for a licence in Georgia

An official approach to the regulator calls for a detailed and legally flawless dossier. Each document passes a multi-tier check across the supervisor’s specialist departments. A sound preparation of the documents for a licence in Georgia rules out the use of rough templates or partial information on the business. Below is an exhaustive list of the documentation needed to set the review of the application in motion.

The mandatory pack takes in the following items:

• founding documents (a notarised charter of the joint-stock company, an extract from the Entrepreneurial Register and the resolution appointing directors);

• a business plan for the financial organisation (a detailed strategy for the company’s growth over the next three years, with the IT architecture and the marketing plan set out);

• a financial model and macroeconomic forecasts (balance-sheet calculations, planned liquidity figures and stress tests of resilience to risk);

• beneficiary papers (Fit and Proper questionnaires, certificates of no criminal record, passport copies and extracts from the holdings’ shareholder registers);

• proof of the source of funds (tax returns, audited reports, asset-sale agreements bearing out the lawfulness of the starting capital);

• internal policies and procedures (the rulebook of the financial-monitoring service, the loan-issuing rules and the AML/KYC mechanisms).

Moving on to the stage of personally interviewing the company’s management becomes possible once the dossier supplied has been checked in detail. Turning up the smallest mismatch in the calculated figures or the owners’ biographical questionnaires brings an immediate return of the documents to the applicant. Well-drawn documents for getting a financial licence in Georgia keep the process from dragging at the initial-analysis stage.

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Step-by-step route to founding and state authorisation of a micro-finance business in Georgia

Passing every stage of dealing with the regulator calls for a strict hold on the time sequence. Breaking the order of steps, or trying to fold stages together, drags the review of the application out. The official order for getting a financial licence in Georgia runs through the following steps in turn:

1. Preliminary legal groundwork. A deep audit of the ownership structure and a first pass at gauging beneficiaries against the Fit and Proper rules. Drawing up the project concept and holding preliminary consultations with the supervisor’s representatives.

2. Company registration in Georgia. Filing the documents with the Entrepreneurial Register through the House of Justice to raise a legal entity as a joint-stock company. Corporate accounts are opened at local commercial banks and a legal address is registered for the future office.

3. Forming the capital. The full crediting of money to a temporary accumulation account, no less than GEL 10,000,000. The money must be transferred solely from founders cleared by the regulator who have supplied a lawful source of the capital’s origin.

4. Preparing the licensing pack. Translation into Georgian and notarisation of all the holding’s foreign documents. A business plan for the financial organisation, a three-year financial model, the internal-control rules and the anti-money-laundering regulations are drawn up.

5. Filing the application with the National Bank of Georgia. Putting the final licensing dossier together and sending the formal request to the regulator’s office. The set state fee for reviewing the documents is paid.

6. Dealing with the regulator. Answering inspectors’ further written queries as they study the documents supplied. At this stage the top managers go through personal interviews at the supervisory agency to bear out their qualifications.

7. Checking the ownership structure and compliance. The regulator runs a deep analysis of the beneficiary chain, drawing on international analytical databases. An on-site inspection of the office is carried out to check the safety of cash desks and server equipment.

8. Getting the licence and starting up. The regulator’s Board hands down a positive decision and the company is entered into the publicly available register of lawful financial institutions. The IT systems are switched on and integration with the state financial-monitoring services follows.

Budgeting and scheduling the project’s launch has to lean on precise economic figures. The state lays down clear time bounds and fixed fees for applicants. The timeframe for getting a financial licence in Georgia turns on how well the corporate documents are prepared and on the beneficiaries’ citizenship. Below are the average time costs and the main cost items the business’s organisers will face in passing every stage of the check.

Coming through every check successfully ends with the organisation being entered into the official state register. Compliance support of a financial licence in Georgia helps sidestep unforeseen costs tied to re-gathering certificates. An investor has to reckon with the need to keep the company operationally ready across the whole stretch of waiting on the regulator’s decision. The final drawing-up of the permit for financial activity in Georgia opens lawful access to the market for deposits and commercial lending.

In summary: a financial licence in Georgia

Standing a lawful financial business up as a micro-bank or a credit union opens wide room for scaling capital over the long haul on the stable market of the Caucasus region. Coming through every stage of the regulatory sift and licensing financial activity in Georgia successfully bears out the organisation’s high international standing and opens access to direct settlements with European counterparties. A strict hold on prudential norms and anti-money-laundering rules secures a firm shield for investments against regulatory sanctions. Well-built internal processes and a transparent ownership structure let a company take a solid footing in the country’s fast-growing fintech sector.