Resolution

    The aftermath of the 2007-2008 global financial crisis exposed the need for structural reform to create an advanced model of financial system stability. To address one of the shortcomings identified, the EU adopted the Banking Recovery and Resolution Directive (BRRD) in 2014, which introduced a liquidation alternative - a rehabilitation mechanism to mitigate the expected adverse systemic impact from a distressed financial institution.

     

    In light of the Financial Sector Assessment Program (FSAP) in Georgia, bank recovery and resolution (BRR) framework was adopted based on the recommendations of the International Monetary Fund and the World Bank: "Key Elements of Effective Resolution Regimes for Financial Institutions" and the European Parliament and the Council of the European Union Directive 2014/59/EU on Bank Recovery and Resolution. Following the reform that entailed the introduction of the resolution mechanism, the National Bank acquired the resolution function for commercial banks. The resolution framework aims to raise the risk management culture in the banking sector, respond to the financial crisis timely, ensure the continuity of critical banking functions and maintain financial stability at the system level.