Press Release: Statement at the Conclusion of the IMF and World Bank FSAP Mission to Georgia

June 3, 2014

Press Release No. 14/257
June 3, 2014

A joint International Monetary Fund (IMF) and World Bank (WB) mission, led by Mr. Elias Kazarian (IMF) and Ms. Aurora Ferrari (WB), visited Tbilisi during May 20-June 3 to conduct an assessment under the Financial Sector Assessment Program (FSAP). The FSAP assessed financial sector strengths and vulnerabilities to systemic risks, reviewed the supervisory framework and the contingency arrangements, and measures to promote financial sector development. The mission met with Giorgi Kvirikashvili, Vice Prime Minister and Minister of Economy; Nodar Khaduri, Minister of Finance; Giorgi Kadagidze, Governor of the National Bank of Georgia (NBG); other senior government officials and NBG staff as well as private sector representatives.

At the conclusion of the mission, Mr. Kazarian and Ms. Ferrari issued the following statement:

“Georgia has successfully weathered a number of shocks, including the conflict with Russia, the global financial crisis, political transition, and regional instability. A positive medium-term outlook is emerging in light of the peaceful democratic transition, the planned signing EU Association Agreement, lower and stable sovereign yield spreads and declining banking sector dollarization.

“Georgia’s banking system has shown its resiliency in recent years, but also faces a number of risks and vulnerabilities that will need to be continuously closely monitored and managed. These include long-standing vulnerabilities that relate to dollarization, liquidity, and loan concentration, which could impair the system’s ability to cope with shocks, although they are currently largely mitigated.

“Considerable steps have been taken to strengthen banking regulation and supervision with regards to meeting international standards. The NBG has introduced an advanced risk-based supervisory regime, while maintaining a conservative approach, aimed at detecting risks at an early stage and allocating supervisory resources in the most efficient and effective manner. Despite this notable progress across the supervisory spectrum, further strengthening of the regulatory framework is warranted.

“Financial sector intermediation in Georgia will need to play a central role in promoting investment, employment and economic growth. While the banking sector plays an important role in providing finance to the private sector, a more comprehensive financial sector strategy and timely actions are needed to chart the development of a more balanced financial system structure, which is more supportive of investment and longer-term savings. The non-bank financial sector lacks the scale and financial capacity that are essential for their role to bridging the gap in small- and medium-sized enterprises (SME) financing and there are many unregulated financial service providers.

“The mission welcomes the Georgian authorities interest in developing a comprehensive financial sector development reform and action plan, to: (i) develop the non-bank financial sector and increase competition to bank financing for the lower segment of SME lending, and (ii) foster the recovery and development of the insurance sector and the securities market.

“The authorities have taken steps to improve the Anti-Money Laundering (AML) law and changed the institutional placements of the Financial Monitoring Service (FMS). It will be important to ensure the operational independence and effectiveness of the FMS, to address risks.”

The Financial Sector Assessment Program (FSAP), established in 1999, is an in-depth analysis of a country’s financial sector. FSAPs are done jointly by IMF and World Bank staff in developing and emerging market countries and by the IMF staff alone in advanced economies. FSAPs have two main components: the financial stability assessment and—in developing and emerging market countries—the financial development assessment. The stability assessment is the main responsibility of the Fund and covers an evaluation of three components: (1) the source, probability, and potential impact of the main risks to macro-financial stability in the near-term; (2) the country’s financial stability policy framework; and (3) the authorities’ capacity to manage and resolve a financial crisis should the risks materialize. The development assessment, the main responsibility of the Bank, cuts across different sectors and topics and focus on the medium- to long-term needs for the deepening and strengthening of the financial sector, addressing major weaknesses affecting the sector’s efficiency, soundness and contribution to long-term growth and social development. While FSAPs do not evaluate the health of individual financial institutions and cannot predict or prevent financial crises, they identify the main vulnerabilities that could trigger one. For more information, visit and


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