The NBG has set agenda for banks to accumulate countercyclical buffer
As of the decision of the Financial Stability Committee, banks are
required to accumulate a neutral countercyclical buffer according to
the following schedule: by March 15, 2024 - 0.25 percent, by March 15,
2025 - 0.5 percent, by March 15, 2026 - 0.75 percent, by March 15,
2027 - 1 percent. Additionally, the Monetary Policy Committee reduced
the upper limit of the reserve norm on short-term foreign currency
liabilities from 25 percent to 20 percent. This change will provide
the local market with additional liquidity in foreign currency and
more flexibility for buffer accumulation, which will somewhat mitigate
the impact of global tightening financial conditions on the financial
sector, and as a result, improve access to finance.The financial
system of Georgia maintains stability and continues to provide loans
to the economy without interruption. As of October 2023, banks have
healthy capital and liquidity ratios. Compared to last year, the
quality of assets has also improved. In October 2023, the annual
growth of loans, excluding the effect of the exchange rate, amounted
to 16.2%, which is largely due to the growth of business loans.
According to the data of the third quarter of 2023, the ratio of loans
to the gross domestic product continues to lag behind the long-term
trend, however, compared to the beginning of the year, the negative
gap of the ratio of loans to GDP is relatively reduced, which is a
reflection of the normalization of high economic growth and
sustainable credit activity. According to the committee's assessment,
if the current trend of credit activity and economic growth is
maintained, it is expected that the ratio of loans to GDP will
approach its long-term trend in 2024. Therefore, at the current stage,
there is no need to change the cyclical component of the capital
countercyclical buffer.In order to reduce the structural risks caused
by the high level of dollarization, the National Bank, in cooperation
with the banking sector, continues to actively work on a long-term
plan. The high level of dollarization and related risks remain an
important challenge for the Georgian financial sector. In order to
mitigate the risks, the NBG takes planned steps. The limit on unhedged
foreign currency loan was increased to 300,000 GEL at the last
committee. In order for the reduction of structural risks to continue
irreversibly in the future, the NBG, in agreement with the banks, will
gradually increase the limit taking into account the current
macroeconomic environment and risks.
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