The Georgian financial system remains resilient against potential shocks, announced the Financial Stability Committee of the National Bank of Georgia at today’s meeting.
The banking sector is highly capitalized and liquid, and maintains high profitability indicators, while the share of non-performing loans in total credit remains low,” says the NBG.
The committee has decided to leave the countercyclical buffer unchanged, at 0 per cent.
The countercyclical capital buffer is used to protect the banking sector from losses that can be caused by cyclical systemic risks. Countercyclical capital buffer requirement requires banks to add capital at times when credit is growing rapidly so that the buffer can be reduced when the financial cycle turns.
The countercyclical capital buffer is determined by analysing the credit-to-GDP ratio, trends in lending and characteristics of the country's domestic and external macro-financial environment.
If the countercyclical buffer rate is increased, capital requirements should be met within one year, however if the rate is decreased, the requirements should be met immediately.
The annual growth rate of credit portfolio in October 2019 amounted to 13.9 per cent (exchange rate effect excluded) which is mainly caused by growth of loans by legal entities, says the NBG.
The NBG says that Credit-to GDP ratio exceeds the long run trend because of the exchange rate effect and excessive credit growth. But the committee says that growth of lending will converge to its sustainable level in the medium-run.
The next meeting of the Financial Stability Committee will be held on February 26, 2020.