Page 33 - GEORptDec20

National Bank of Georgia has explored ways to help the local financial system
(IDRs).
The National Bank of Georgia (NBG) together with local commercial banks ​have explored​ ​ways to help the financial system, including by cutting required reserve ratios for foreign currency liabilities.​ The NBG has presented a number of initiatives it is implementing with the aim of helping the financial sector face problems caused by the coronavirus crisis, major Georgia-based lender TBC Bank​ a​ nnounced​.
Considering the current level of uncertainty, both credit and liquidity risks have increased, which has been reflected in the growth of market interest rates.
To ensure that liquidity risk does not limit credit to the economy, the NBG introduced additional instruments to provide liquidity, through swap operations for both commercial banks and microfinance organisations.
The NBG took steps to defend liquidity in the market, put at risk by potential losses, by temporarily easing capital requirements. In the process, it made available to the banks some GEL1.6bn—more than the loan loss provisions set up so far for adverse impacts of the COVID-19 outbreak.
The easing of capital requirements for the banks involves the abolition of the capital conservation buffer (2.5% of weighted assets at risk) and the elimination of part of the Pillar 2 buffer (2/3 of the non-hedged credit risk buffer). As a result of these decisions made by the central bank, GEL1.6bn was released for the banking sector. According to the NBG, banks can apply for this exempted amount both to "neutralise potential losses" and to increase lending to the economy.
Besides, commercial banks received $600mn ($188mn) for long-term lending to mitigate the effects of the COVID-19 outbreak.
8.1.1​ Earnings
Georgian banks post Q1 losses after making COVID-19 provisions
The 15 commercial banks operating in Georgia lost a total of Georgian lari (GEL) 747mn ($233mn) in the first quarter, according to financial statements submitted by the lenders to the country’s central bank.
The Georgian banking system's aggregate profit before reserves was GEL355mn ($110mn), or 0.71% of aggregate assets, resulting in a robust annualised return on assets of 2.8%.
The main reason for the recorded loss was the banks' designated reserves for possible losses due to the economic impact of the coronavirus (COVID-19) pandemic. In total, the commercial banks placed GEL1.22bn in the "possible losses of assets" buffer, reflecting the size of possible losses on loans due to the ongoing crisis. Prior to the provisioning, 14 of the 15 banks were in profit.
According to the financial statements, in the first quarter the largest net loss was recorded by TBC Bank. It amounted to GEL277.4mn. Its profit before the reserve was created, however, was GEL149.9mn. Bank of Georgia was in second place in the net loss column, posting GEL276mn, alongside a profit before the formation of the reserve of GEL135.7mn.
As for the banks' asset sizes, in this regard TBC Bank was also in first place,
33​ GEORGIA Country Report ​December 2020 ​ ​www.intellinews.com