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of Bidzina Ivanishvili, the oligarch who chairs the country’s ruling Georgia Dream party. Cartu reached a deal with the banks to absorb the loans in advance of last year’s presidential election. It allowed relieved households to enter into fresh borrowing.
Corporate leverage in Georgia has also increased, according to Berlin Economics. Some 56% of enterprise loans are denominated in foreign currency. They are clearly vulnerable to a further depreciation of the local currency, the Georgian lari. The insolvency law that has been introduced in parliament would allow a more orderly restructuring of overly indebted firms.
8.1.3​ NPLs
8.1.4 ​Bank specific issues, regulation
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. 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.
Georgia passes derivatives law
The Georgian parliament has passed a package of laws that regulate local financial markets and amend capital markets legislation, following close cooperation with the European Bank for Reconstruction and Development (EBRD). ​The new law provides for the enforceability of derivatives transactions, including netting, close-out netting and financial collateral.
The EBRD welcomed the move as amounting to an important new chapter in terms of developing Georgia’s capital markets.
The new laws went through with the EBRD’s technical assistance, provided to the National Bank of Georgia in the drafting of the package and capacity-building. Experts, funded by the EBRD-managed Shareholder Special Fund, worked with the National Bank of Georgia and local market participants on the legal reform. This project was also coordinated with, and supported by, the International Swaps and Derivatives Association (ISDA).
In the field of derivatives, the new legislation also reinforces key related concepts, such as settlement finality. It puts Georgia on the derivatives’ and netting map, allowing companies to safely and efficiently hedge their risk and exposure, including in foreign exchange and interest rates, contributing to the development of a local currency financial market.
8.1.5 ​Bank news
Georgia’s TBC obtains preliminary Uzbekistan banking licence
LSE-listed TBC Bank Group, one of Georgia’s two major bank groups, has ​announced​ that it has obtained a preliminary Uzbekistan banking licence as an essential step in the process of launching banking operations in the country in the near future.
TBC added that it aimed to obtain the final licence and start banking
34​ GEORGIA Country Report​ February 2020 ​ ​www.intellinews.com