De-dollarization measures
06 December, 2016
Increased Access to the Long Term lari loans
1. The commercial banks need enough liquid assets to transform short term deposits to long term loans. NBG will increase flexibility of the transmission mechanism and widen the list of eligible collateral;
2. According to IMF recommendation, NBG will introduce the Liquidity Coverage Ratio under Basel III with the national currency treated preferentially.
3. To develop capital markets, the companies shall be able to issue long term bonds and raise capital. The government together with NBG has elaborated a common strategy and that is being jointly implemented.
4. A developed local government securities market is a necessary precondition for the development of the capital market. The government together with NBG will continue to move to this direction. Namely, we will: a) issue so called “benchmark” bonds, main characteristic of which is predictability and a high liquidity. The market participants will know the calendar of its emission for the next 5 years; b) introduce the ‘primary dealers’ institute. This means that the banks participating in the primary auctions of the government securities will be required to ensure liquidity of the secondary market for every participant of the market.
5. The Implementation of Pension Reform will improve the social security provision and in the same time contribute to the economic growth by increasing the demand for long term instruments, which ultimately will ensure widening of the long term lari resource.
Adequate Sharing of FX Risks
6. In order the borrowers to be hedged against FX risks, amendments in legislation is to be implemented, according to which small size loans (loans below 100 thousand lari from Jan 17, 2017) will be issued only in local currency.
7. The GOG together with NBG developed a scheme to facilitate the conversion (to the local currency) of those loans that were issued before January 1, 2015 in US dollars. This will be a one-off social measure for those borrowers who were mostly hit by the depreciation of the exchange rate.
8. In line with IMF recommendation, in the cases of lending to the unhedged borrower, NBG will use the macro-prudential instruments to ensure the availability of adequate buffers.
Pricing in lari
9.
Amendments
are being prepared in the organic law on the National Bank of Georgia,
according to which pricing of every goods and services will be mandatory only
in lari. This amendment is expected to enter into force from July 1, 2017.
10. The GOG together with NBG, will promote the implementation of safe service for real estate transactions (so called “escrow” account service), which aims at avoiding risks and reduce cost of real estate transactions both for the sellers and buyers. The service will be implemented in cooperation with public registry and be optional for the consumers. This service will be additional stimulus for settlement of real estate operations in lari.
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