Emergency Liquidity Assistance (ELA)
Lender of Last Resort / Emergency Liquidity Assistance – In addition to the loans permitted by the Organic Law of Georgia on the National Bank of Georgia, the NBG has the right to lend a last resort loan to commercial banks and micro-banks operating in Georgia.
The purpose of granting the ELA is to ensure the stability of the financial system, to prevent the possible development of systemic issues and financial crisis in the banking sector and/or to reduce their negative effects as much as possible.
The lending of the ELA is determined as per the Article 33 of the Organic Law of Georgia on the National Bank of Georgia, and the rule on granting and conditions of the ELA by the NBG.
The NBG will grant the ELA if it assesses that:
a) The bank is solvent and its business model is profitable and viable;
b) The bank has faced or may face a temporary acute shortage of liquid assets in the near future;
c) The bank has the ability to take necessary steps to improve liquidity within a reasonable timeframe, which should be reflected in the future action plan of the bank;
d) The bank no longer has the opportunity to receive alternative funding from other sources and can justify the need to take a loan and it is able to repay the loan fully in a timely manner.
Moreover, the NBG is authorized to grant the ELA to a commercial bank, which is failing or likely to fail, including a commercial bank under resolution, to ensure the stability of the financial system. In such case, an unconditional and irrevocable guarantee issued by the Ministry of Finance is a necessary condition for granting a loan.