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Georgia’s central bank to provide liquidity with swaps
requirements of the international currency code, but at the same time takes into account the specifics of the local market.
The NBG said that both the international currency code and foreign exchange market stipulations aim to increase transparency and competition, establish fair, equitable conditions for market participants and better protect the interests of their customers.
“In accordance with international best practice, banks will be required to make transparent, and publish, full service rates and other terms on their websites and process and execute assignments in the best interests of privacy and the client. In order to maintain high standards of operations on the foreign exchange market, banks must provide appropriate organisational arrangements and IT infrastructure", the NBG said.
The second component of the reforms will launch a new trading platform of Bloomberg, namely Bmatch, which provides automatic matching and execution of counterparty transactions.
The NBG said that the Bmatch platform was introduced in Georgia in March and was operating in test mode. At this stage, the platform is already used by 15 banks, four microfinance organisations, one large company and a foreign investment fund.
To support liquidity the National Bank of Georgia (NBG) hasannounced 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 toa documentpublished 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 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.
39 GEORGIA Country Report August 2020 www.intellinews.com
