COVID - 19
The National Bank of Georgia has taken important measures to mitigate the negative impact of the COVID-19 pandemic on the financial sector and to promote the economy of the country. Emergency steps were taken to different fields: the smooth provision of liquidity to various sectors of the economy, to develop temporary supervisory plan, to extend the program of the International Monetary Fund (IMF) and to activate a new mechanism for currency interventions.
Temporary supervisory plan implies to use the capital and liquidity buffers of the banking sector during the financial stress. This implies lowering the current capital and liquidity requirements, which allows the banking sector to absorb potential losses through these buffers and continue ordinary business activities and funding the real economy.
It is noteworthy that Georgian banking sector is sound and has adequate buffers of capital and liquidity, which have been gradually accumulated as a result of consistent supervisory policy of the NBG.
In order to ensure the banking system with the liquid funds, the NBG activated the swap operations, through which will provide GEL liquidity to the system. The objective if these operations is to lower the liquidity risk in the system, to refrain the liquidity risk from turning into an obstructive factor for funding the economy. USD 200 million of the swap instrument will be distributed among the banks in proportion to their market share. Besides, in order to avoid excessive concentration, a limit of 25% of the total volume will be imposed on one organization, which will increase the availability of resources for small banks. The term of swap operations is set at 1 month, with the right to monthly renewal for the next 1 year. Moreover, the NBG activated the stand-by swap instrument, which enables banks to get the necessary GEL liquidity in exchange for the foreign currency, at a penalty rate.
Starting June 1 the National Bank of Georgia launched a new instrument to support SME financing. SME liquidity supply tool consists of two components. The first is for commercial banks, which have the opportunity to receive liquidity support from the National Bank against collateral of SME loan portfolio. The second tool is for microfinance institutions, which enables to attract funding from commercial banks with the support of the National Bank within the limits of their SME loan portfolios meeting the criteria established by the National Bank. The new liquidity management mechanism will operate until the end of 2023 (with a decreasing schedule from 2022), with the possibility of a monthly update, and the price will be determined by the TIBR1M one-month index
From May 1, 2020, within one year, the banks are able to use the foreign currency buffers for GEL liquidity management and by doing so, maintain the total liquidity demand. This allows the commercial banks to immediately acquire GEL resources with low costs and without additional risks through securing the foreign currency. The banks will get GEL resources through swap operations, if necessary.
The NBG takes into account the special role of microfinance organizations in providing financial services to businesses and population in the regions of Georgia. Accordingly, the NBG provides liquidity support for microfinance organizations with swap operations (200 million U.S. Dollars). As in the case of banks, in order to avoid excessive concentration, a limit of 25% of the total volume will be imposed on one organization, which will increase the availability of resources for small financial institutions. The term of swap operations is set at 1 month, with the right to monthly renewal for the next 1 year.
The National Bank will provide GEL liquidity to the European Reconstruction and Development Bank (EBRD) through swaps enabling the EBRD to secure reliable access to GEL liquidity and continue lending in local currency to firms that are experiencing temporary difficulties. The parties executed the first transaction on 24 April 2020.
To support FX market, in 2020 the NBG conducted 26 FX auctions selling 873.222 mln USD. Considering the rule-based interventions, during 2020 the NBG sold in total 916.1 million USD. So far in 2021 nine FX auction was conducted and the NBG supplied the FX market with 332.9 mln USD.
As of today the international foreign currency reserves of the National Bank of Georgia is totaled USD 3.5 billion that resulted from the building up policy of the previous years. The financial support received from the international financial institutions over the year will replenish the international reserves and increase the opportunities of the National Bank to provide the market with the necessary foreign currency through the FX interventions.
The capital requirements of the commercial banks have been lowered which implies the elimination of the capital conservation buffer (2.5% of the risk weighted assets) and the portion of the pillar 2 buffer (2/3 of the currency induced credit risk buffer). This supervisory relief can free GEL 1.6 billion of capital, which can be used for absorbance of potential losses or funding the real economy with GEL 16 billion.
Commercial banks offered three-months grace period on loans to their customers. Regarding to the grace period on loan repayment proposed by commercial banks, National Bank of Georgia significantly released regulatory requirements in order to give commercial banks maximum flexibility in the process of rescheduling payments for the borrowers. The part of the microfinance organizations also joined this initiative.
Regulation on Credit Concentration and Large Risks in Commercial Banks which should have been enacted from June 2020, has been postponed for 1 year. This will enable commercial banks to continue crediting the real economy with strict limits and keep working within the framework of the current rules. It is noteworthy that in case of enacting the regulation from June and consequently in case of Tier 1 capital calculation, 5 banks would breach the 25% limit on Top-1 largest group exposure totaled 109 million GEL.
The National Bank suspended the on-site inspection of the entities being under the NBG supervision (except for the money laundering inspections which are going on remotely at this stage). The crediting procedures have been simplified, according to which the real estate estimation temporarily does not require the on-site visit. The requirement related to the updating of the financial statement has been eased as well.
The temporary moratorium on developing and introducing the new supervisory requirements was announced in order to enable the banks to respond to challenges through mobilizing maximum resources.
Based on the impact of the current shock (currency rate depreciation, reserves/losses) NBG will not apply to the fine sanctions. This refers to the violations of the economic limits (coefficients) and does not refer to other kind of legislative violations.
In accordance with the decision of the National Bank submission of the financial reporting by the loan issuer entities and foreign exchange bureaus has been postponed until May 31, 2020 caused by extending of their reopening term. The introduction of the annual report 2019 for the accountable companies has been postponed for 45 days (until June 30 2020).
New rule on cash withdrawal service has been developed and approved. The service enables the clients to withdraw cash along with the ATM machines via the POS terminals as well at the retail space (pharmacy, grocery).
Prior to re-launching valid banknotes in circulation, the National Bank keeps the banknotes in cash volts for several weeks. Although there is no confirmed evidence that banknotes/coins are a more powerful source of virus transmission than any other surface that is used by the public. The National Bank is monitoring developments in the country as well as around the world and familiarizing with the researches, whether the virus is spreading through banknotes/coins. There are additional measures for borderline and quarantine regions. In this regard, the NBG is taking appropriate measures to protect employees of both the National Bank and commercial banks.
With the initiative of the National Bank of Georgia, a new currency trading mechanism has been launched, the Bloomberg Bmatch platform, where primarily interbank trading takes place, and soon non-bank private entities will be involved, allowing them to have direct access to foreign exchange resources. This platform will make the market more diversified, competitive and liquid.
The Money Museum in Kvareli stopped operating, along with the online shop of the Money Museum.
The National Bank is monitoring the ongoing events and is in constant communication with the financial sector and, if necessary, will continue to implement special measures.
The Georgian banking sector holds a leading position in the world regarding payment technologies. Numerous payment and banking services are available - contactless cards, mobile wallets, payment bracelets, barcodes, Internet banking, mobile banking, telephone banking, etc. Services can be used without physical contact with banknotes/coins. Despite the fact, that these services are more convenient, it is exceptionally important now, when it is so critically essential to maintain social distancing. In order for the country to be able to effectively fight the disease, we strongly recommend the use of Internet payment services.
At the same time, we urge citizens to pay special attention while using financial and personal data on the Internet.
Banks, lending entities, microfinance organizations and currency exchange bureaus are recommended to limit direct physical contact between their employees and customers in service centers, for ensuring the safety of their employees.
The data was updated - 30/09/2021