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capital is held in laris, making defaults among customers likely.
Moody's estimates that 60% of Georgian lenders' loan portfolios are 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 3.4% of total loan portfolio at end-2016, according to TBC bank’s disclosure. NPLs accounted for around 3.2% of total lending. Banks are well capitalised and positioned to absorb a moderate deterioration in their loan portfolios, Fitch ratings agency said in September 2016.
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.
Georgia's banking sector is dominated by TBC Bank and Bank of Georgia, which together hold over two- thirds of banking sector assets, and is comprised of 19 lenders in total.
8.1.5 Bank news
Georgia’s TBC Bank and EIB agree to make €94mn available on MSMEs
TBC Bank, the largest lender in Georgia, has signed two financing agreements worth €94mn with the European Investment Bank (EIB) for the financing of micro, small and medium sized enterprises (MSMEs), the bank announced in a press release on November 29.
The first agreement stipulates financing to the tune of €80mn for innovative MSMEs; under the second, TBC Bank would make small loans available to MSMEs.
According to Vakhtang Butskhrikidze, TBC Bank's CEO: "The size and
28 GEORGIA Country Report December 2017 www.intellinews.com