Moody’s Assesses Georgian Banking System

Economic recovery in Georgia supports development of the banking system, - notes Moody’s Investor Service. According to the agency, regulatory and legal reforms represent a long-term support for banking system.

The agency forecasts 4,3% economic growth in Georgia in the current year and 4,5% - next year.

“Georgia's economy is small, with low wealth levels, and remains vulnerable to external shocks, geopolitical risk and high levels of dollarization," said Alexios Philippides, an Assistant Vice President and analyst at Moody’s. According to Philippides, retail and small business loans will continue to drive credit growth for banks. "Large and creditworthy corporates are already well banked, and can now access capital markets directly", - states Moody’s analyst.

Moody’s state that the Georgian banking sector is well capitalized and additional capital requirements, especially for the larger systemic banks, will strengthen loss-absorption capacity and support system stability.

“In December 2017, Georgia's central bank announced additional capital requirements under pillar 2 of Basel III and designated three commercial banks as domestic systemically important banks. It also plans to introduce Basel III leverage ratio requirements by September 2018,” – reports the agency and adds that profitability of banks will remain strong.

“Although dollarization is moderating, it remains a major source of credit and funding risk for Georgia's banks. While the authorities 10-point "larization" plan will continue to reduce the level of dollarization, the process will be gradual and a drop in the value of the lari against the US currency would significantly affect banks' performance”.

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