Financial stability, the state when financial system can provide crucial services to the market participants in good and bad times, is a cornerstone for sustainable development of an economy. Therefore, financial stability and its analysis are among the main tasks of central banks and the regulatory institutions of the financial sector.
Maintaining financial stability is one of the main tasks of the National Bank of Georgia (NBG). The NBG identifies, evaluates and monitors relevant risks and implements corresponding policies to mitigate those risks. To conduct financial stability policy, the NBG operates under the rights granted to it by the Organic Law of Georgia on the National Bank of Georgia and the Constitution of Georgia. In addition, the National Bank supports transparency of the financial sector and the protection of consumer and investor rights.
Financial stability is a condition where the financial system ensures long-run, sustainable economic development. For this purpose, financial intermediation and market infrastructure (payment systems) need to be efficient, the financial system should be resilient to shocks, and systematic risks need to be mitigated. A stable financial system also assumes the development and deepening of financial markets.
We assume that financial intermediation between savers and borrowers is efficient if it is carried out without any systematic disruptions. Furthermore, the pricing, ensuring and dispersing of risks are done efficiently; and the cost of regulation does not exceed the economic and social expenditures incurred in the event of financial stress.
A resilient financial system is one that is able to absorb shocks, if they occur, and continues to support the functioning of the economy. However, a sustainable financial system does not exclude the possibility of financial difficulties emerging in particular financial institutions.