Page 43 - GEORptJun20

Georgian banks allowed to use part of buffer to cover losses, keep lending
Central bank introduces more flexible retail lending regulations
foreign exchange swap operation. The terms of the currency swap transactions shall be determined by agreement between the parties,” the board of the central bank said in a statement​.
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 recommendations of the IMF, the European Central Bank and other leading financial institutions,” the NBG said in a press release.
However, the decision of the National Bank has one condition: banks should not apply for the proceeds to issue management bonuses and dividends to shareholders. Also, with the aforementioned amount, banks should not finance repurchase operations of their own shares on the stock exchange.
Regarding the loan repayment grace period, a common measure enforced by countries these days, the central bank said that it “significantly softened the supervisory requirements in order to give the banks maximum flexibility in deferring the installments”.
Georgia’s central bank, the National Bank of Georgia (NBG), has approved changes to lending regulations for individual borrowers that will come into force on April 15. ​The amendments aim to simplify the process of borrowing for solvent borrowers, reduce bureaucratic burdens, increase flexibility and, as a result, make the lending process more efficient.
The NBG said that an objective of the changes was to move from “a rule-based approach to a more principles-based” approach. Such an approach required less interference in the management of lending, something which would “increase the role of the financial institution's risk management function and increase access to finance for the solvent population”, read an NBG statement.
Under a key amendment, an analysis of a potential borrower's earnings will still be mandatory, but the financial institution will be able to itself define procedures.
The limit on the loan servicing ratio (payment-to-income, or PTI) will be cancelled. The PTI ratio will remain different for foreign currency loans, with the aim of protecting the borrower and fluctuations of the foreign exchange rate of the financial system from risks.
Mortgage maturity limits will increase: the maximum maturity for mortgages in the national currency, the lari, will increase from 15 to 20 years.
43​ GEORGIA Country Report ​June 2020 ​ ​www.intellinews.com