The messenger logo

NBG launches the reform of Foreign Exchange Market

By Khatia Bzhalava
Tuesday, July 21
On July 20th, the president of the National Bank of Georgia, Koba Gvenetadze presented on the reform of the Foreign Exchange Market. According to the NBG’s official website, the new reform aims to increase competition in the foreign exchange market and make internetbank more accessible for non-bank participants; it also increases liquidity as well as transparency. The reform includes two important components and is based on the international best practice,” reads the statement of NBG.

The first component is an International Currency Code, which was created by a cooperation of central banks of the world’s leading countries, in 2017. Currency markets of more than 50 countries follow the principles of the code. As NBG states, compulsory compliance with the terms of currency code is recognised by, BIS – (Bank for International Settlements), Central Banks of 47 countries as well as more than 1000 financial institutions and companies including Central Banks and leading banking institutions of U.S, England, Europe, Japan, Canada and Australia.

The statement reads that with the initiative of National Bank and support from the United States Agency for International Development (USAID), international experts conducted training for Georgian foreign exchange market participants and developed a new regulation- The Rules for the Activities of Exchange Market Participants, which is based on the main requirements of international currency code, however, takes into account the specific of the global market at the same time.

“International currency Code, as well as Foreign Exchange Market regulations, aim to increase transparency and rivalry, establish fair and equal conditions for the market participants and to better protect the interests of their customers. In compliance with the International Best Practice, banks will be obliged to make it transparent and publish full service tariffs and other conditions on their websites,” reads the statement, adding that in order to maintain high standards of operations in Foreign Exchange Market, banks must provide appropriate organisational arrangements and IT facilities.

According to the NBG, as introduction of new approaches is followed by relevant infrastructural changes, the second component of the reform is an activation of Bloomberg’s new trading platform- Bmatch. The statement notes that the Bmatch platform has been operating successfully in more than 20 countries worldwide since 2016 and provides automatic matching and execution of counter transactions. Prior to the transaction, the identity of an author of the application is anonymous, which ensures confidentiality and impartiality. Moreover, counterparty risks in the program are managed with the limits defined by the participants and the transactions are executed according to the rules of the National Bank.

As NBG informs, Bmatch platform has been active in Georgia, since March and is operating successfully in test mode. As of now, the platform is used by 15 banks, 4 microfinance organisations, 1 large company and foreign investment fund.

According to the NBG, the rule of the currency market and new platform will come into force on October 1st, 2020, until then, the banks will be able to upgrade the infrastructure and the companies will be able to sign service contracts with one or more banks.