The National Bank of Georgia publishes updated results of the interactive stress test presenting the capital dynamics of banks in case of various stressful scenarios. Interactive stress test is a tool promoting the financial transparency of commercial banks and it is subject to annual update. The interactive platform allows the public to choose a stress for each macroeconomic variable and see the evolution of banks’ capital ratio under the selected scenario. Consequently, this tool allows public and investors to evaluate the ability of banks to withstand macrofinancial shocks.

According to stress-test results, all banks remain resilient under moderate and severe stress scenarios. Currently, the banking sector is more capitalized compared to the previous year. Therefore, the resilience of banks to stress is increased, and the results of interactive stress test are improved. Even under the extreme scenario, only one bank needs additional capital, and for some banks Tier 1 capital remains close to the minimum requirement. The banking Sector remains solvent even under the extreme risk scenario. The detailed results of the interactive stress test for the various sets of macroeconomic scenarios can be found on the NBG’s website. It is important to note that the data from the second quarter of 2023 is used to conduct the interactive stress test simulation. After the change of reporting standards, starting from January 1st, 2023, parallel reporting in both local GAAP and IFRS 9 standards has only been available temporarily until June, 2023. The existing stress test methodology is based on GAAP standards. Therefore, the data in the second quarter of 2023, which is the latest available based on GAAP, is taken as an initial point.

It should be noted that the assumptions and scenarios underlying the stress-test are not and should not be interpreted as NBG’s forecasts. These assumptions represent only theoretical simulation and are used to assess the resilience of the financial sector if the scenarios were to realize. Based on the definition and purpose of stress-test, underlying assumptions should be reasonably severe, less likely, but plausible. It should be noted that the stress test does not assume any active response from banks to the shocks in the system nor any change to business models, which can mitigate the impact of the shock. A description of the key characteristics of stress-test can be found on NBG’s website.