The National Bank of Georgia (NBG) changes rules on the minimum reserve requirements for banks.
According to the model presented by the NBG today, the reserve requirement will depend on the volume of foreign currency deposits in the banks. The higher is the dollarization of bank deposits, the higher will be the minimum reserve requirements. With this model, the NBG plans to increase the larization of deposits in the banking system.
“Starting from July, the minimum reserve requirements for funds attracted in foreign currency will be determined individually, for each commercial bank, according to the deposit dollarization of each bank. In particular, unless the deposit dollarization rate exceeds 40%, the reserve requirement norm will be reduced from 25 to 10 %for funds borrowed in a foreign currency and with a remaining maturity of up to 1 year. If the deposit dollarization is 70% or above, reserve requirements will still be 25%.
Finally, for the deposit dollarization in the range of 40-70 percent, the reserve requirement norm will decrease linearly from 25 to 10 % along with a decrease in the deposit dollarization. Similarly, the reserve requirement will be reduced from 15 to 10 % for foreign currency-denominated funds with a remaining maturity of 1 to 2 years. This change will help to intensify competition in the GEL deposit market, gradually increase the demand for GEL and ease the pressure on the foreign exchange market”, the statement of the NBG reads.
