Page 37 - GEORptFeb21

National Bank of Georgia has explored ways to help the local financial system
unchanged at 8.0%.
“According to the current estimates, a tight monetary policy may be necessary for longer, subject to inflation expectations and the dynamics of economic activity. Depending on the economic developments, the [monetary policy] Committee does not rule out the need for an increase in the interest rate in the future,” a press release read.
The National Bank of Georgia (NBG) together with local commercial banks ​have explored​ ​ways to help the financial system, including by cutting required reserve ratios for foreign currency liabilities.​ The NBG has presented a number of initiatives it is implementing with the aim of helping the financial sector face problems caused by the coronavirus crisis, major Georgia-based lender TBC Bank​ a​ nnounced​.
Considering the current level of uncertainty, both credit and liquidity risks have increased, which has been reflected in the growth of market interest rates.
To ensure that liquidity risk does not limit credit to the economy, the NBG introduced additional instruments to provide liquidity, through swap operations for both commercial banks and microfinance organisations.
The NBG took steps to defend liquidity in the market, put at risk by potential losses, by temporarily easing capital requirements. In the process, it made available to the banks some GEL1.6bn—more than the loan loss provisions set up so far for adverse impacts of the COVID-19 outbreak.
The easing of capital requirements for the banks involves the abolition of the capital conservation buffer (2.5% of weighted assets at risk) and the elimination of part of the Pillar 2 buffer (2/3 of the non-hedged credit risk buffer). As a result of these decisions made by the central bank, GEL1.6bn was released for the banking sector. According to the NBG, banks can apply for this exempted amount both to "neutralise potential losses" and to increase lending to the economy.
Besides, commercial banks received $600mn ($188mn) for long-term lending to mitigate the effects of the COVID-19 outbreak.
8.1.1​ Earnings
Georgian banks may end 2020 in black despite COVID-19 provisions
Georgian banks may end 2020 with a net profit of from Georgian lari (GEL) 50mn to GEL 100mn ($15mn to $30mn) despite the GEL1.2bn they set aside in loan loss provisions immediately after the coronavirus (COVID-19) crisis hit the country, according to central bank governor Koba Gvenetadze.
For comparison, in 2019 the country's 15 commercial banks boasted GEL953mn ($340mn) in aggregated profit.
As of the end of the first 10 months of this year, the banks posted GEL85.9mn ($26mn) in aggregated losses.
"On the instructions of the National Bank [central bank], in March 2020, banks assessed the possible impact of the pandemic on their loan portfolio. This assessment was made with different criteria and assumptions and we wanted the assessment to be as realistic as possible. Therefore, the industry proactively created a reserve of GEL1.2bn,” Gvenetadze recapped.
37​ GEORGIA Country Report​ February 2021 ​ ​www.intellinews.com