The capital requirements for the Georgian banking sector are based on the Basel III standard, Regulation 575/2013 of 26 June 2013 and Directive 2013/36/EU of the European Parliament and of the Council (CRR-CRD package).
The minimum capital requirements are defined in the Regulations on Capital Adequacy Requirements for Commercial Banks, which says that, under Pillar 1, the minimum requirements are defined as follows:
In addition to the Pillar 1 minimum capital requirements determined by the “Regulation on Capital Adequacy Requirements for Commercial Banks”, banks shall also observe additional capital buffer requirements for those risks that are not covered under Pillar I, including market and credit risks those are not covered under Pillar I, as well as concentration risk, interest rate, liquidity, strategic and reputational risks, etc. As a response to the risks identified through the supervisory review and evaluation, the National Bank of Georgia sets the additional capital requirements, which is determined under the “Rule on Additional Capital Buffer Requirements for Commercial Banks” within Pillar 2. Pillar 2 requirements include the following buffers:
Additionally, commercial banks are required to have a combined capital buffer consisting of a capital conservation buffer (up to 2.5%), a countercyclical buffer (within 0-2.5%), and a systemic buffer.
Under Pillar 3, commercial banks are subject to disclosure requirements which are meant to strengthen market discipline.