Page 29 - GEORptMay18

denominated in dollars, and that the two largest lenders in the country - TBC Bank and Bank of Georgia, accounting for two thirds of sector assets - have awarded some 40% of their loans in dollars to borrowers that do not have dollar incomes. Georgian banks nevertheless remain cushioned against potential risks by the central bank's 175% risk weight for foreign-currency-denominated loans to unhedged borrowers, the ratings agency concludes.
8.1.3 NPLs
8.1.4 Banks specific issues
Georgian banks have weathered the depreciation well, with non-performing loans (NPLs) at a manageable rate of 2.8% of total loan portfolio at end-2017 , compared with a ratio of 3.4% at end-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.
Georgian central bank to up minimum regulatory capital requirement fourfold
The Georgian central bank will gradually increase the minimum capital requirement for lenders from GEL12mn (€4.5mn) to GEL50mn by the end of 2018, the regulator announced on May 5. The reason for the move is to strengthen the financial sector and prevent institutions with insufficient capitalisation from entering it.
The increase will be implemented in three stages. Banks will be asked to increase their regulatory capital to GEL30mn by end-2017, to GEL40mn by June 2018 and by GEL50mn by end-2018.
The decision will likely affect small lenders, and may result in increased activity on the Georgian Stock Exchange, with banks seeking to raise financing by issuing debt.
8.1.5 Bank news
BSTD lends Bank of Georgia GEL70mn for SME financing
The Black Sea Trade and Development Bank (BSTDB), a regional development bank, and Bank of Georgia, the second largest lender in the country, have signed a GEL70mn (€25mn) medium-term loan for the financing of small and medium sized enterprises (SMEs), the former announced in a press release on March 29. This is the second agreement of its kind between the two banks; the first , signed in 2016, consisted of BSTDB's GEL60mn bond issuance, which Bank of Georgia used for onlending to 700 SMEs.
Both Bank of Georgia and its main competitor, TBC Bank, have taken advantage of the availability of financing mechanisms from Georgia's multilateral lending partners, primarily the World Bank and the European Bank for Reconstruction and Development (EBRD), to finance SMEs in the country. Igor Leshukov, BSTDB's vice president for banking, said that the bank was "delighted to expand our successful partnership with Bank of Georgia, now are largest client in the country, to jointly offer much-needed financing solutions to the Georgian SME sector and to contribute to the de-dollarisation programme in the banking sector initiated by the Georgian government".
29 GEORGIA Country Report May 2018 www.intellinews.com