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Section 7. Economics and management
https://doi.org/10.29013/ESR-21-1.2-51-54
Abutidze Gocha, PhD Student, the Faculty of Business Technologies Georgian Technical University E-mail: [email protected]
IMPACT OF THE COVID-19 PANDEMIC ON THE ACTIVITIES OF GEORGIAN BANKS
Abstract. Based on the newest references and factual materials, the article explores and analyzes the current situation and future prospects ofbanks in light of the constraints caused by the Covid-19 pandemic.
The current situation is a clear indication that the resilience of the country's economy to shocks is crucial. As a result of the reforms carried out in previous years, the National Bank of Georgia has effective monetary and macroprudential policy instruments. Georgia's financial sector is resilient and has accumulated buffers, which will help it overcome the crisis with fewer losses in the future.
Keywords: Pandemic, Financial stability, Banking system, National Bank of Georgia, Crisis.
Introduction. Georgia, as a small open econo- information was obtained through a survey (tele-
my, is highly sensitive to the global economic and phone interview). The questionnaire consists of 15
financial situation. Against the backdrop of the pan- questions. Both qualitative and quantitative studies
demic, the risks of financial stability have increased. were used. The survey was conducted from Novem-
This article is based on the data we have collected. ber 2020 to February 2021 inclusive. Of these eight
The purpose of the study is to assess the impact of the banks, three banks are of systemic importance. pandemic's restrictions on the operations ofbanks op- Results. When asked how the restrictions im-
erating in Georgia and make predictions for the future. posed due to the pandemic affected their bank, 45%
The purpose of the study is to assess the impact of of the respondents believe the restrictions had a
restrictions on decisions made during a pandemic, the positive or more positive than negative effect, 23%
effectiveness of remote work of employees, changes answered they had a negative or more negative than
in the channels of relationships with customers, etc., positive effect, while 32% felt the pandemic did not
and also to identify the main directions and accents of have a significant impact on their activities. banks' activities after the restrictions are lifted. The survey showed that 36% of bank employ-
The necessary data were obtained from 22 heads ees found it difficult to switch to remote work; 45% of corporate lending, retail lending, risk manage- found it easy to work remotely, and 19% of employment, information technology and operating sub- ees, however, find it difficult to get used to working divisions of eight banks operating in Georgia. The remotely.
After imposing restrictions and transferring employees to remote work, the majority of respondents consider the lack of remote work space at home as the key problem (41%), staff performance monitoring (23%), staff performance management (23%), lack of teamwork (9%).
According to the survey, 55% of respondents reported their bank had never remote work practice before the pandemic, 41% said they used it in certain cases, and only 4% confirmed they utilized this practice extensively.
Regarding the active use of remote channels after the pandemic, 14% of selected respondents
Keep the existing remote work system
Transfer of some employees to remote work
The respondents detailed which services switched to remote work relatively smoothly: HR (23%), IT (23%), Corporate Customer Service (23%), Financial Services and Accounting (18%), Risk Management Service (8%), other back office services (5%).
■ Finance department and accounting
■ Corporate customer service
■ Risk management
■ IT department
■ Human Resources Management Service
■ Other back office services
Figure 1.
indicated they would promptly return to their normal work schedule, 68% said that some employees would be transferred to remote work, and only 18% answered they would steadfastly maintain their current remote work style.
Returning to the usual work style
10 20 30 40 50 60 70
80
Figure 2.
According to the bank representatives, the main on changes in banking services and products (32%), efforts to adapt to unstable conditions were focused development of remote channels (23%), efficient
0
implementation of digital services (18%), risk management (9%) cost reduction (9%), payment optimization (5%), others (4%).
As the research shows, issues such as reducing the number of employees and optimizing wages were not an utmost priority for bank executives in the condition of restrictions.
Regarding the activities of physical branches/service centers, 50% of the respondents do not expect any cardinal changes in the near future, 23% believe consulting services and remote sales will be more active, 13% think the number of branches/service centers will decrease, and 14% think branches will switch to the latest customer service technologies.
When inquired what the most important steps need to be taken to entice customers and improve their services in the post-pandemic period, 32% of respondents mentioned the development of remote and digital channels. Yet 23% indicated the widespread introduction of voice messages, chat bots, virtual assistants, touch screens, and other innovations; 18% reported that in common was the successful introduction of innovative products/services and personal offers; 14% pointed to the reorganization of branches and 9% indicated improvement of the call center and consultants' work.
We also asked the respondents to what extent, in their opinion, the Georgian banking system was prepared for the pandemic, to which we received the following answers:
• Properly prepared-59%
• More or less prepared-27%
• Not properly prepared-14%
The measures taken by the National Bank in the context of a pandemic are assessed as follows:
• Successful-50%
• Good-32%
• More or less successful-18%
45% of respondents believe that in the post-pandemic period it is expected to intensify the merger / acquisition processes of banks; 23% consider the gradual replacement of traditional banks by elec-
tronic banks (neobanks) inevitable; a whopping 82% of respondents agrees that globalization and related processes pose a threat to the financial system of a sovereign country;72% of them believe that the banking system of Georgia is successfully coping with the Covid-19 pandemic.
When asked whether banks, like other risk management instruments, need to take responsibility for reducing climate change risk, 36% of respondents stated that it was necessary, 55% declared that it was not relevant, and 9% did not return the question.
Conclusions. The data obtained from the survey are significant for summarizing some preliminary results and setting guidelines.
The results show that in order to adapt to work in unstable conditions, the main efforts ofbanks are aimed at making changes in the provision of banking services and products and the development of remote channels. Issues such as downsizing and salary optimization were not absolute priorities for bank executives, which is absolutely welcome.
Only a small proportion of respondents believes that the restrictions imposed because of the pandemic have affected their bank negatively or more negatively than positively, which in common is a better result than expected.
As the pandemic has made it difficult for traditional banks to attract potential customers and provide services, they have turned to developing digital channels and delivering products and services through remote channels. Banks also pay great attention to introducing various types of innovations and providing customers with personalized offers.
There is also a tendency that despite the temporary closure of branches/service centers and the active switch to digital services, banks are not ready to cancel branches in the next few years. Simultaneously, part of the respondents confirmed that it is urgent to optimize the number of branches and introduce modern forms of services and technological innovations.
The study showed that the introduction of remote banking services is definitely not the closest reality for banks. Partial transfer of employees to remote work is possible, but still considerable importance is attached to face-to-face communication with customers and activation of consulting services.
After the transfer of employees to remote work, about 1/3 of them found it difficult to get used to remote work, and the biggest difficulty was to provide teamwork, control work and efficiency, as well as lack of work space at home, which is largely due to the lack of remote work experience and existing unsustainable environmental conditions.
Most of the structural units of the back office have moved to remote channels without much effort, especially IT service, corporate clients, financial service and accounting, which suggests that it is recommended transferring these services to part-time remote work.
Most do not adequately understand the risk posed by climate change and its management and believe that this risk is not relevant for banks today. We believe that banks in Georgia are not sufficiently informed and not motivated in this regard. Therefore, additional work is required in this direction.
It is noteworthy that the National Bank of Georgia and its activities in the conditions of a pandemic are trusted by the vast majority of respondents, which is undoubtedly the result of the enormous authority of the Bank and its timely and planned measures. Based on the above, respondents believe that the banking system withstood the first wave of the pandemic with relatively few losses and was prepared to meet external shocks. On top of that, according to the majority of respondents, the Georgian banking system is currently adequately addressing the challenges associated with the pandemic.
Globalization and its related threats are of immense importance to the part of the respondents; however, they do not consider the fact that the process of replacing traditional banks by electronic banks is relevant and real.
An absolute majority of respondents consider the banking system to be one of the chief factors for the stability of the country's economy. It should be emphasized that an important aspect emerges from the answers received - the management of the banks has a great responsibility in this regard.
Finally, there are certain expectations in the banking system of Georgia regarding the merger of banks, which is in line with the global trend.
References:
1. National Bank of Georgia. "Financial Stability Report 2020". NBG,- Tbilisi. 2021.
2. Mosiashvili V. Chelidze M. and Abutidze G. Banking,- Tbilisi: Dani. 2020.
3. Tsaava G. and Khantatze G. Banking: Theory, Methods and Practice.- Tbilisi: Dani. 2014.
4. National Bank of Georgia. "Emergency measures to COVID-19", NBG,- Tbilisi. 2021.
5. National Bank of Georgia - URL: https://www.nbg.gov.ge
