Georgian central bank announces plan to reduce negative effects of coronavirus on Georgian economy

In order to reduce the negative effects caused by the coronavirus pandemic and strengthen the Georgian economy, the National Bank of Georgia has developed a temporary supervisory plan, which is in full compliance with the recommendations of the International Monetary Fund, European Central Bank and other leading financial authorities, announces the NBG.

The plan of the NBG implies utilisation of the capital and liquidity buffers of banking sector during the financial stress. This implies lowering the capital and liquidity requirements, which allows banking sector to absorb potential losses and continue ordinary business activities and funding the real economy.

Banks will get relief on the capital requirements by reduction of the capital conservation buffer (2.5% of the risk weighted assets) and the portion of the pillar 2 buffer (2/3 of the currency induced credit risk buffer). This supervisory relief can free 1.6 billion GEL of capital, which can be used for absorbance of potential losses or funding the real economy with 16 billion GEL. The banking sector, above the minimum requirements has capital buffer of 4 billion GEL, which can be fully released in case of necessity", said NBG.

To note, commercial banks shall not use the relief on capital requirements for dividends, share buybacks, equity investments, increasing variable remuneration for management or other types of distributions and payments, which causes reduction of bank capital.

In addition, despite there is no liquidity problems, the NBG has full capacity to provide the economy with required amount of liquid resources. 

To achieve this goal the NBG has adequate amount of foreign currency reserves, which will be increased by foreign currency inflows expected from international financial institutions in the nearest future. Whereas the local currency will be provided in the required forms and amounts determined by the economy", said NBG.

NBG also announced that regarding to the grace period on loan repayment proposed by commercial banks, NBG significantly released regulatory requirements in order to give commercial banks maximum flexibility in the process of rescheduling payments for the borrowers.