A successful implementation of an overall reform program will enable Georgian banks to provide intermediation and assist in the country's development from a weak market economy to a mature financial system. The changes for reform are better now than at any time during the last decade. Favorable economic and political conditions and changes in attitude among bank management have created an usual opportunities for development and growth. This study attempts to analyze the effects of financial liberalization and deregulation on competitive conditions and foreign investment in the banking industry of Georgia economies using firm-level data for the period 1999- 2010