During a trip to Tbilisi, Dr Alexander Lehmann, financial sector expert of the German Economic Team (GET) Georgia, presented the second issue of the Financial Sector Monitor.
This product is consistently done in several countries in the region and reveals that the Georgian financial sector is a major asset in the investment environment. The publication analyses the sector in a regional context. It sketches the sector’s potential to further support growth and innovation in Georgia and to provide wider access to credit for households and enterprises. It also highlights the strengths and weaknesses of the banking sector for Georgia’s future development.
Key findings of the analysis are:
- The banking sector is well capitalised and profitable. Excess debt among households, and more recently enterprises, could emerge as a risk, with corporate FX exposures being the key vulnerability.
- The ‘responsible lending’ regulation by the National Bank of Georgia has helped to eliminate risky lending models among micro-finance institutions.
- Dollarisation remains the key vulnerability for banks and undermines the inflation targeting regime. Following the depreciation of the Lari, it has re-emerged as a policy concern, though prudential measures are already quite strict.
- At least three banks are ‘too-big-to-fail’ and hence prone to excess risk taking, relying on an implicit state subsidy. The new bank resolution regime will be a fundamental change, including for bank governance.
- Bond markets remain underdeveloped relative to other countries. Emerging pension fund investment and a more deliberate sovereign issuance strategy will stimulate this sector.
- Private equity should be the priority for risk capital.
On 4 December, Dr Lehmann presented the Financial Sector Monitor at the Business Roundtable of the American Chamber of Commerce. After the presentation, Davit Utiashvili, Head of Financial Stability Department at the NBG, commented on the topic. The event was attended by a high-profile audience. Ca 50 representatives of the corporate sector, commercial banks, international donor organisations and German institutions used the opportunity to discuss the topic.
To present the findings of the financial sector analysis also to a wider audience, the publication was additionally presented during a press conference at ISET, the partner institute of GET Georgia, on 4 December.
Please find the full publication under the following link: Link to Study