Page 43 - GEORptFeb21

Fitch cuts Georgian banks’ support ratings in wake of state passing bank resolution bill
ADB lends $3.7mn to Georgia’s Credo Bank for on-lending as farm loans
Fitch Ratings has ​downgraded its Support Ratings​ for Georgia's three largest and systemically important banks—TBC, Bank of Georgia and Liberty Bank— to '5' from '4' and revised the banks' Support Rating Floors (SRFs) to 'No Floor' from 'B'.
The rating actions follow the recent introduction of bank resolution legislation, which is in line with international practice and provides for the imputation of losses to creditors rather than taxpayers, in the case of the failure of a big bank.
Georgia's bank resolution framework provides a credible mechanism for the bail-in of senior creditors in the event of bank failures, Fitch commented.
“We believe that this legislation, combined with constraints on the ability of the authorities to provide support, mean that government bail-outs, although still possible, can no longer be relied upon,” the rating agency commented.
The regime does not provide for a mandatory senior creditor bail-in in the case of failure, but instead states that decisions on bail-in and/or support will be at the sole discretion of the authorities, based on such considerations as broader financial market stability and the ability of the bank to continue its key operations. Fitch said this suggested that support for senior creditors was still possible, but the adoption of the resolution framework, combined with constraints on support ability, mean that the support can no longer be relied upon in the ratings agency’s view.
The Asian Development Bank (ADB) has signed a Georgian lari (GEL) 12.3mn ($3.7mn) loan agreement with Credo Bank. ​Under the agreement, three-year financing denominated in local currency will be used to extend loans to low-income farms and women entrepreneurs of micro, small and medium sized enterprises (MSMEs).
The financing is aimed at helping recipients successfully manage challenges posed by the COVID-19 pandemic.
Including previous deals, the ADB has so far provided a total of GEL74mn in financial and technical assistance to Credo Bank and its customers.
"I am pleased that another strategically important transaction has taken place with a long-time partner, the Asian Development Bank. The resource is intended for farmers to facilitate the production of the upcoming spring works,'' said Credo Bank general director Zaza Pirtskhelava.
"Credo Bank will significantly mitigate the negative economic impact of the COVID-19 pandemic in the regions of Georgia by supporting the activities of micro and small agricultural enterprises and women entrepreneurs. This resource will significantly contribute to the smooth running of farms and enable them to continue to contribute to the country's food supply," said Christine Engstrom, ADB's private sector director.
8.2 ​Central Bank policy rate
Gerogia’s central bank sticks with hawkish key rate and forex injections
Georgia’s central bank (National Bank of Georgia, or NBG) on December 9 decided to keep its key refinancing rate unchanged at 8.0%.
Despite low inflation of 3.8%, which is not expected to budge much in coming quarters, the NBG rate-setters found grounds to keep the hawkish policy rate and even mentioned the option of further hiking it.
“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]
43​ GEORGIA Country Report​ February 2021 ​ ​www.intellinews.com