Acting National Bank Governor says Georgia’s banking sector “healthy”

Natia Turnava, the Acting Governor of the National Bank of Georgia, on Monday highlighted the stability of the domestic banking sector while summarising the two-week visit of an International Monetary Fund mission in the country.

Speaking at a press briefing with Finance Minister Lasha Khutsishvili and Subir Lall, the Deputy Director at the Middle East and Central Asia Department of the IMF, Turnava said the banking sector had “fully recovered” the buffers used during the pandemic and was maintaining “healthy indicators” of capital and liquidity.

The quality of assets has improved, the level of non-performing loans is the lowest in recent decades. Against the background of reduced credit losses, 2023 was again positive for banks in terms of profitability. Taking into account the improved financial indicators, the stability of the banking sector against shocks has increased, and this is confirmed by the results of the stress test”, she said.

Credit activity remains at a sustainable level and the negative gap in the ratio of loans to gross domestic product is gradually closing. In addition, the main contributor to loan growth is business lending, which contributes to the growth of the productivity of our economy”, Turnava added.

In comments about challenges, which she said included “geopolitical risks”, the Acting Governor also noted high de-dollarisation, adding the National Bank was “actively pursuing” the de-dollarisation policy.

We have made a serious improvement in this regard - dollarisation has decreased on the side of deposits. However, the rate of dollarisation is still high, which is also noted by international rating agencies, and this gives us a reason to continue the de-dollarisation policy, the main goal of which is to protect borrowers who are not hedged against possible currency risks”, she said.

Turnava pointed out one of the latest decisions of the central bank - on imposition of additional requirements on regulated financial institutions - for mitigating risks caused by the dollarisation.

The initiative involves an increase of the limit on unhedged foreign currency loans to ₾300,000 ($113,222) from January 1, 2024.