Page 42 - GEORptJun20

The global and thus Georgian economic environment is difficult and uncertain, TBC said in its press release. Bank economists' latest analyses forecast that the Georgian economy will contract in 2020, which will have a negative impact on many businesses and individuals in the country.
Therefore, in close co-ordination with the NBG, TBC has decided to create an "extra loan loss provision buffer" to prepare for the potential impact of the COVID-19 pandemic on the Georgian economy. As of 31 March 2020, TBC Bank decided to book additional provisions in accordance with local standards, at 3.0-3.3% of the loan book and resulting in an estimated up to 2.44% decrease in the CET1 capital adequacy ratio, according to the bank's press release.
8.1.3​ NPLs
Georgian​ banks have weathered the depreciation well, with non-performing loans (NPLs) at a manageable rate of 2.6% of total loan portfolio in 2019 and 2018​, compared with a ratio of 3.5% in 2016, according to the National Bank of Georgia. NPL to total gross loans was at 2.2% in the first quarter of 2020.
NPLs account for around 3% of total lending. Banks are well capitalised and positioned to absorb a moderate deterioration in their loan portfolios, according to Fitch ratings agency.
8.1.4 ​Bank specific regulations, issues
Georgia’s central bank to provide liquidity with swaps
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.
"Negotiations will be held with the European Bank for Reconstruction and Development and an agreement will be signed with them on a $200 million
42​ GEORGIA Country Report ​June 2020 ​ ​www.intellinews.com