Banking sector: good performance, but challenges remain
Georgia’s banking sector has served well the needs of a growing economy. The ratio of banking sector assets to GDP has steadily grown and the ratio of credit to the real sector is high in comparison to other countries in the region. The sector stands out for the concentration of assets in the three largest banks which may give rise to concerns about competition in the sector and non-banking activities by the owners of these banks. The two largest banks are listed on the London Stock Exchange and therefore comply with high governance standards. Unlike in many other countries in the emerging Europe region, the Georgian banking sector has not experienced any major instability in recent years. Bank liquidity and capital coverage are very high and should provide ample buffers to withstand future shocks. The authorities have rightly developed a strategy of dedollarisation, based on a monetary regime that targets inflation. There is a need to expand the capital markets which could offer funding at longer maturities in the local currency.