## Georgia: Financial Sector Assessment Program-Macroprudential Policy Framework-Technical Note

_IMF Staff Country Reports, January 8, 2015_

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**Canonical URL:** [Georgia: Financial Sector Assessment Program-Macroprudential Policy Framework-Technical Note](https://www.imf.org/en/publications/cr/issues/2016/12/31/georgia-financial-sector-assessment-program-macroprudential-policy-framework-technical-note-42588)

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## Bibliographic details
- Published: January 8, 2015
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498360296.002

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### Overview
- The National Bank of Georgia (NBG) has a broad mandate to safeguard financial stability in Georgia and has applied several measures that can be considered macroprudential.
- The NBG adjusted risk weights for foreign-currency (FX) loans to unhedged borrowers in a countercyclical manner in recent years.
- The NBG plans to introduce the Basel III countercyclical capital buffer regime for the banking system in 2015, which will require that it sets or releases the buffer on a regular basis, based on assessments of cyclical risks.
- Policymakers are advised to consider establishing a full-fledged macroprudential policy framework in line with international best practices because the current framework is too broad to support the effective and transparent use of macroprudential policy going forward.

### Findings on implemented measures and effects
- Asset-side measures:
  - Additional risk weights are applied to FX loans to unhedged borrowers.
- Liability-side measures:
  - Reserve requirements are higher for FX deposits and other borrowings.
  - Banks must hold more liquidity for nonresident deposits (of which 92 percent are in foreign currency as of end-2013), if those deposits exceed 10 percent of total deposits.
- Combined effects:
  - These FX-induced credit and liquidity measures, together with the general liquidity regulation, have increased banks’ capital and liquidity buffers.
  - The strengthening of banks’ risk buffers is evidenced by the results of the FSAP solvency and liquidity stress tests.

### Planned reforms and policy recommendations
- Institutional and legal framework:
  - Revise the legal framework to cement the use of a broad range of macroprudential instruments.
  - Establish a Financial Stability Committee at the NBG level.
  - Strengthen accountability and communication practices, including by the publication of regular reports on financial stability.
- Instrument set:
  - Expand the list of available macroprudential instruments beyond risk buffers to include measures that directly influence banks’ activities (for example, loan-to-value (LTV) or payment-to-income (PTI) caps).
- Capital buffers and systemic bank treatment:
  - Implement the countercyclical capital buffer and the capital surcharge for systemically important banks over the next few years.
  - The capital surcharge for systemically important banks would currently apply at least to the three largest banks by total assets; this is particularly important given the high market concentration in the banking sector.

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/georgia-financial-sector-assessment-program-macroprudential-policy-framework-technical-note-42588_