According to the S&P assessment, the banking system maintains a sound position.

The influential rating company stresses the importance of independence of the National Bank of Georgia and evaluates the steps taken by the institution in its report.

S&P states that there the inflation in Georgia is historically low and the average inflation over 2010-2017 was less than 4%. The NBG will manage to keep inflation close to the target level during the next four years.

S&P stresses the importance of independence of the National Bank. The operational independence of the National Bank is pointed out as a good example of institutional strength. It is important that the independence of the National Bank and floating exchange rate regime fortify the monetary policy flexibility. However a high dolGELzation remains a big challenge. The flexible exchange rate regime, which has been in place in Georgia for years, and ultimately serves as a shock absorber, deserves a separate mention. Georgia managed adjusting to the changed external factors in the past at the same time avoiding the harmful fluctuations of real effective exchange rate in both directions. These measures neutralized the significant economic difficulties that Georgia faced and enhanced the financial stability. The opposite processes had developed in other countries of the region where the credit crisis deepened the economic problems", - sates S&P.

S&P positively assesses the steps taken in for the buildup of the international reserves. While defining the level of international reserves the NBG is guided by the IMF Assessing Reserve Adequacy measure (ARA metrics). The National Bank of Georgia launched the new instrument- FX options - for filling up the international reserves. It allows commercial banks to sell the foreign currency to the National Bank when the GEL exchange rate has a tendency to strengthen. S&P considers that increased reserves will better protect Georgia during the external shocks in future.

According to S&P the high level of dolGELzation, despite a significant reduction in 2017, hinders the monetary policy efficiency.

Agency gives the positive assessment to the efforts to reduce the dolGELzation of economy, in particular to the difference of the liquidity requirements between the national and foreign currency obligations, the introduction of the pension reform, supporting the local capital market development and launching the deposit insurance.

"It should be noted that share of non-performing loans (according to the NBG calculation) in total credit portfolio remained under 7-8%, despite the significant depreciation of GEL vs USD and the economic slowdown in 2015-2016. According to the IMF assessment the share of non-performing loans equaled 2.7% by the end of 2018. We expect that Georgia will maintain high economic growth in the medium term compared to the other countries of the region", - states S&P.

According to the rating agency's forecast, the credit portfolio will increase annually by 14% on average (taking into account the exchange rate effect) during the next 4 years.

NBG efforts to reduce the risks steaming from the trends in lending have also been assessed positively and it was noted that some vulnerabilities still remain, especially in retail lending sector. S&P underlines the measures taken by the NBG: launching the PTI and LTV, establishing additional capital requirement for systemic banks and strengthening supervision of the non-banking sector.

According to S&P, ongoing investigation related to the activity of particular shareholders will not damage the bank or the whole banking system. With 40% share of net credits and assets, TBC Bank is systemically important. The banking system maintains the sound position.