Page 46 - GEORptApr21

Georgia’s central bank to provide liquidity with swaps
Georgian banks allowed to use part of buffer to cover losses, keep lending
of their customers.
“In accordance with international best practice, banks will be required to make transparent, and publish, full service rates and other terms on their websites and process and execute assignments in the best interests of privacy and the client. In order to maintain high standards of operations on the foreign exchange market, banks must provide appropriate organisational arrangements and IT infrastructure", the NBG said.
The second component of the reforms will launch a new trading platform of Bloomberg, namely Bmatch, which provides automatic matching and execution of counterparty transactions.
The NBG said that the Bmatch platform was introduced in Georgia in March and was operating in test mode. At this stage, the platform is already used by 15 banks, four microfinance organisations, one large company and a foreign investment fund.
To support liquidity the National Bank of Georgia (NBG) has announced that it will provide Georgian lari (GEL) to commercial banks and microfinance organisations with swap operations conducted to a maximum limit of $400mn. The $400mn will be equally split between banks and microfinance institutions, the central bank said.
The total amount of the swaps will be distributed among participants in proportion to their market shares. However, to avoid excessive concentration, a limit of 25% of the total volume will be imposed per entity. That will increase the availability of resources for small financial institutions. The term of a swap operation is set at one month, with the right to a monthly renewal for the next year.
A second swap deal announced by the NBG suggests a broader back-to-back swap arrangement, under which the central bank is backed by the European Bank for Reconstruction and Development (EBRD) in supporting financial institutions’ liquidity.
According to a document published on the website of the NBG, in order to support the Georgian financial sector, the national lender will conclude a $200mn swap deal with the EBRD. The same document details swap operations to be carried out by NBG with commercial banks and microfinance institutions in Georgia.
Georgia’s central bank has relaxed regulatory requirements in moves that include the release of some Georgian lari (GEL) 1.6bn ($480mn) of a GEL4bn buffer held by its commercial banks above regulatory ratios, in order to allow the banking sector to neutralise potential losses and continue normal business operations and lending to the real economy amid the coronavirus (COVID-19) health and economic emergency.
The GEL1.6bn released to the banks is equivalent to 2.5% of the country’s GDP.
“To mitigate the negative impacts of the Coronavirus (COVID-19) pandemic and encourage the country's economy, the National Bank of Georgia has developed a temporary supervisory plan that fully complies with the
46 GEORGIA Country Report April 2021 www.intellinews.com