Capital buffers may be eased for commercial banks operating in Georgia, National Bank President Koba Gvenetadze said at a parliamentary hearing, stating that the decision will depend on the macroeconomic situation in the country.
NBG President Koba Gvenetadze talks about capital buffers for commercial banks
By Nika Gamtsemlidze
Monday, December 28
The President of NBG also talked about the spring, when the National Bank cut the capital buffers to increase the liquidity for commercial banks.
The President of the NBG said that the country was well-prepared for the pandemic thanks to the steps taken before. He states that before the pandemic, the level of liquidity for banks was in very good shape. He added that this is the reason why the banks managed to maintain adequate levels of liquidity, even though there was a financial crisis around the world. Gvenetadze added that the NBG has direct contact with the commercial banks to make sure that the National Bank is well-informed about the overall financial situation.
In early 2020, commercial banks eased their capital requirements by abolishing the capital conservation buffer (2.5% of risk-weighted assets) and the Pillar 2 buffer portion (2/3 of non-hedged credit risk buffer).
The decisions that were made by the NBG have released as much as 1.6 billion GEL to the banking sector. The sum was used by the commercial banks to create some type of reserve for future losses. During the crisis, banks will use the funds to finance the overlooked debts.
The National Bank of Georgia has restricted the banks' ability to use the released financial resources. In particular, they cannot use the 1.6 billion GEL for dividends, redemption of shares, or increase the management bonuses.
Gvenetadze claims that the National Bank has enough reserves, which it will use purposefully to minimize the impact of the GEL's depreciation on the population. “We are very careful about the intervention of each dollar. It is important that we use it as effectively as possible,” stated Gvenetadze.