Page 37 - GEORptDec20

8.1.4 ​Bank specific regulations, issues
Georgia’s central bank to streamline FX market as of October
Georgia’s central bank to provide liquidity with swaps
The National Bank of Georgia (NBG) has​ ​announced​ r​eforms aimed at providing more transparency and raising competition and liquidity in the foreign exchange market. The central bank said they would take effect as of October 1. ​The reforms are made up of two components: introducing the international currency code and launching the Bmatch platform of Bloomberg, Business Media​ ​reported​.
With the support of the United States Agency for International Development (USAID), international experts conducted training sessions for Georgian foreign exchange market participants and developed a new regulation. The regulation of foreign exchange market participants is based on the basic 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) 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.
37​ GEORGIA Country Report ​December 2020 ​ ​www.intellinews.com