Secured credit discussed at ISET
By Mzia Kupunia
Wednesday, March 25The International School of Economics (ISET) and the Policy and Management Consulting Group (PMCG) held their fifth Public Policy Discussion Panel on Thursday. The subject was “When is secured credit really secured? – a lesson in current economic realities.” Panel host Yair Baranes, an international expert in secured financing, focused on three general issues: international practice involving the use of movable property as collateral, the international economic crisis and secured credit and an overview of reforms Georgia is making that increase the security of loans collateralized by movable property, and recommended next steps.
The presenter outlined the four main components of modern secured credit: risk assessment (the process of assessing the risk of the borrower not being able to repay the credit), a simple and transparent system of registering creditors’ claims against property (registering a security against the borrower’s assets), clear legal provisions regulating priorities among conflicting claims against the same property(establishing the order of priority of multiple creditors who might have claims against the same property, especially when the value of the collateral is less than the sum of the various debts it secures) and a fast and efficient enforcement mechanism, involving the right and ability of creditors to seize and dispose of property to cover the debt efficiently.
When speaking about present and future secure finance reform in Georgia, Baranes stated that “modernizing the secured financing regime will help Georgia make credit truly secure, attracting capital in a time of scarcity and contributing to economic development without risking financial sector stability.” Baranes said that for this to happen, the four components of secured credit must be in place in Georgia.
Baranes concluded that the availability and increase of affordable credit will continue to play a vital role for economic development in Georgia. “Modernizing each of the four components of Georgia’s secured lending regime not only increases access to credit, but improves the strength of the financial sector by helping to make sure that secured credit is really secure,” Baranes noted, adding that “real security of credit can be accomplished primarily by continuous dialogue with lenders to identify costs and risk and ongoing reforms to eliminate all ambiguity and inefficiency.”