Tracking Georgia's Economic Recovery
NATIONAL BANK OF GEORGIA SUPERVISORY PLAN
National Bank of Georgia
In March 2020, NBG introduced an updated Supervisory Plan for the banking sector with immediate effect, aimed at alleviating the negative
financial and economic challenges created by the global COVID-19 pandemic. The measures were mainly focused on capital adequacy and
liquidity initiatives that allow banks to use existing regulatory capital buffers to support customers in the current financially stressed
circumstances, to continue normal business activities as far as possible, and to support the economy through ongoing lending operations.
Capital adequacy initiatives:
Combined buffer the conservation buffer requirement of 2.5% of risk-
weighted assets has been reduced to 0% indefinitely
Pillar 2 requirements:
Currency induced credit risk buffer (CICR) requirement reduced by
2/3rds indefinitely
The phase-in of additional credit portfolio concentration risk buffer
(HHI) and net GRAPE buffer requirements on CET1 and Tier 1 capital,
planned at the end of March 2020, has been postponed indefinitely
The possibility of fully or partially releasing the remaining requirements
of Pillar 2 buffers (HHI, CICR, net GRAPE), if necessary, remains open
During the period the banks are allowed to partially or fully use these
buffers, they are restricted to make capital distribution in any form
This supervisory relief frees up GEL 1.6 billion of capital, which can be used
for absorbance of potential losses or funding the real economy with GEL 16
billion. The banking sector has capital buffer of GEL 4 billion above the
minimum requirements, which can be fully released in case of necessity
General loan loss provisioning relating to COVID-19:
NBG requested the Georgian banks to create general provisions under the
local regulatory accounting basis used for calculation of capital adequacy
ratios in 1Q20. The specific quantum of the provision reflected the NBG's
current expectation of estimated credit losses on the lending book of the
banking system for the whole economic cycle, given current economic
expectations. The NBG considers the banking system capital ratios to be
sufficiently in excess of the expected minimum capital requirements, to be
able to absorb this upfront general provision, whilst maintaining sufficiently
comfortable buffers over the required minimum capital ratios
Liquidity initiatives
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Liquidity coverage ratio (LCR) requirements (for local and foreign
currency, as well as total requirement) may be revisited and reduced, if
necessary. On 1 May 2020, NBG temporarily cancelled the 75% LCR
requirement for local currency for a one-year period, or until further
communicated by NBG
Mandatory reserve requirements may be revisited and reduced, if
necessary
The eligibility criteria for repo-eligible securities has already been
extended by NBG and may be revisited further, if necessary, to support
GEL liquidity
Other initiatives
The deadline for submitting previously planned stress testing results to
NBG was postponed until the end of May, 2020
NBG will not impose any monetary sanctions in case of breach of
economic normatives and limits driven by external factors (e.g. reserves,
exchange rate depreciation)
NBG on-site audits, except for ongoing anti-money laundering reviews,
postponed indefinitely
All new regulatory changes and requirements postponed until September,
2020, or until further communicated by NBG. This does not apply to
regulations with regard to open banking, XBRL reporting and resolution
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