Page 46 - GEORptNov21

8.1.3 NPLs
NPL ratio for Georgia’s banks doubles during 2020 to 8.4%
The Financial Stability Committee of the National Bank of Georgia (NBG) has announced that, against the background of the crisis of 2020, the volume of non-performing loans (NPLs) in the country has doubled compared to the previous year and accounts for 8.4% of the banking system’s loan portfolio.
According to NBG forecast, the NPL ratio in the banking system is expected to reach 10% in the first half of 2021.
As can be seen from the data released by NBG and quoted by Business Media, the NPL share is highest in Bidzina Ivanishvili's Cartu Bank, where 35% of the GEL900mn ($270mn) loan portfolio is formed by non-performing loans. The NPL ratio of Cartu rose by only 2.2pp y/y, meaning that even before the crisis, Cartu was leading in this regard.
Silk Road bank also posts a high NPL ratio of 26.7% after a 7.2pp rise over the past 12 months.
As for the highest annual growth, Pasha Bank and Silk Road Bank are the first place with the annual rise of their NPL ratios at 7.2pp.
The NPL ratios have increased by 4.8pp and 4.6pp in 2020 at the systemic banks, Bank of Georgia and TBC Bank, respectively. Their NPL ratios were 8.4% and 7.7% respectively.
According to the official classification in Georgia, "non-performing loans" are loans of "non-standard, doubtful and loss category".
8.1.4 Bank specific regulations, issues
Georgia’s central bank keeps countercyclical buffer at 0% despite strong lending
The Financial Stability Committee of the National Bank of Georgia (NBG) on June 16 left its countercyclical buffer unchanged at 0% after assessing the sharp rise in bank lending against the background of a faster than expected economic recovery.
It also estimated that the loan loss provisions created by banks in March 2020 adequately reflected the level of expected credit loss caused by the coronavirus pandemic, concluding that no additional negative impact was expected, according to a statement issued after a committee meeting.
Accordingly, the committee estimated that in 2021 the local banking sector would remain resilient and continue to lend to the economy smoothly. Finally, the central bank said that the Georgian financial sector has successfully passed a rather severe phase of the shock caused by the pandemic thanks to the financial stability policy it pursued last year.
As of April, the banks were maintaining healthy capital and liquidity ratios. Georgia's banks will start the recovery of the buffers released at the beginning of the crisis as of January 2022 and the process will continue for two years.
According to the decision of the Financial Stability Committee, the recovery of the buffers released at the banks will be given until January 1, 2023, to restore the credit risk buffer, and until January 1, 2024, to meet the capital conservation buffer requirement.
46 GEORGIA Country Report November 2021 www.intellinews.com