Page 44 - GEORptMay21

Georgia’s central bank to provide liquidity with swaps
Georgian banks allowed to use part of buffer to cover losses, keep lending
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.
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”.
44 GEORGIA Country Report May 2021 www.intellinews.com