Macroprudential policy aims to dampen pro-cyclicality in the financial sector, prevent the buildup of systemic risks (excessive credit growth and leverage, dollarization, high concentration, etc.) and increase the resilience of the financial system.

 

The main instruments of macroprudential policy employed by the National Bank of Georgia are capital buffers, which are introduced consistent with Basel III standards and the EU supervisory framework. In addition to capital buffers, the NBG also uses the payment-to-income ratio and loan-to-value ratio, sectoral risk weights and other instruments for macroprudential policy purposes.

 

Macroeconomic stress tests, used by the National Bank for assessing the resilience of financial institutions, are also part of macroprudential policy. The scenarios used for the stress tests have a countercyclical nature and take into account the effects of shocks on various sectors of the economy, which results in a more efficient assessment of financial system vulnerabilities.

 

The appropriateness and magnitude of changes to each macroprudential instrument are defined by the specific needs arising at the time in order to safeguard financial stability.