DOI: 10.52340/ekonomisti.2026.01.08

Expanded Summary

 The paper presents decisions regarding macro prudential governance in the banking sector based on documents, policies, and strategies adopted by the International Monetary Fund (IMF), the National Bank of Georgia, the Basel Committee, and others. Due to ongoing global financial crises, it became essential to develop a policy and governance system within the banking sector that minimizes risks and ensures the stability of the financial environment. Discussions on these issues began in the 20th century with the development of initial frameworks, moving into a more active phase in the 21st century.

The article discusses and analyzes numerical data both in general and in relation to three specific Systemically Important Banks (SIBs) identified by the National Bank: JSC "TBC Bank," JSC "Bank of Georgia," and JSC "Liberty Bank." It further provides an analysis of the additional capital surcharges (buffers) required for these institutions. 

evaluates the evolution of risk management systems designed to minimize systemic threats and ensure financial stability. By analyzing the transition from 20th-century frameworks to 21st-century standards—driven by the World Bank, IMF, and EBRD—the study details the implementation of Georgia’s Macroprudential Policy Strategy (2019). Key focus areas include the Countercyclical Capital Buffer (CCyB), IFRS 9 transition, and the role of the Financial Stability Committee (FSC) and the Interagency Financial Stability Council (IFSC).

The Evolution of Financial Stability.Global financial crises have necessitated the development of policy and governance systems in the banking sector aimed at risk minimization and environmental stability. While these discussions began in the late 20th century, active global involvement from the World Bank, IMF, and European Central Bank accelerated in the 21st century.

In response to these needs, the Financial Stability Committee (FSC) was established on October 17, 2014. The FSC meets quarterly to analyze systemic risks and evaluate the cyclical state of the financial sector. The committee advises the Governor of the National Bank of Georgia (NBG) on the Countercyclical Capital Buffer (CCyB) and other macroprudential tools, though final decision-making authority rests with the Governor.

Strategic and Institutional Framework.On May 29, 2019, the NBG adopted the Macroprudential Policy Strategy for Georgia. This document aligns with the recommendations of the European Systemic Risk Board (ESRB/2013/1) and aims to enhance communication, transparency, and predictability for market participants.

To implement this strategy, the Interagency Financial Stability Council (IFSC) was established in 2020. Its members include:

• The Minister of Finance (Chair)
• The President of the National Bank
• The Head of the Deposit Insurance Agency
• The Head of the Insurance State Supervision Service

The IFSC’s primary mandate is the development of crisis management mechanisms to ensure the stable functioning of the financial system.

Capital Adequacy and Buffer Frameworks (Basel III). Introduced under the Basel III framework, the CCyB is designed to be met using Common Equity Tier 1 (CET1) capital, ranging from 0% to 2.5% of risk-weighted assets.

• Current Trajectory: As of March 15, 2024, the CCyB rate increased from 0% to 1%.
• Neutral Buffer Schedule: To ensure resilience during "normal" periods, the FSC established a phase-in for the 1% neutral buffer:
• 0.25% by March 15, 2024
• 0.5% by March 15, 2025
• 0.75% by March 15, 2026
• 1.0% by March 15, 2027

Conservation and Leverage Ratios.Since 2013, Georgian banks have adhered to Basel III capital adequacy. By 2016, minimum capital ratios (7%, 8.5%, and 10.5%) included a 2.5% Capital Conservation Buffer (CCoB). During the COVID-19 pandemic (April 1, 2020), the NBG temporarily reduced this to 0%, with a full restoration required by January 1, 2024. Currently, all 15 operating banks have restored these requirements. The Leverage Ratio for all banks is set at 5%.

Expected Credit Loss and IFRS 9 Implementation.A significant shift occurred with the introduction of IFRS 9 guidelines in 2018. This moved the sector from a "past-due" model to a Forward-Looking Expected Credit Loss (ECL) model.

• Implementation: Full transition was mandated by 2022/2023.
• Key Components: The framework uses Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD) to categorize risks into three stages.

Borrower-Side Constraints and Loan Limits.The NBG has implemented strict Loan-to-Value (LTV) and Payment-to-Income (PTI) limits to prevent household over-indebtedness:

• LTV Limits: 85% for GEL-denominated loans; 70% for foreign currency (FX) loans.
• PTI/DSTI Limits: Differentiated by income and currency. For monthly incomes < 1500 GEL, the PTI limit is 25% (local currency) or 20% (FX).
• Maturity Limits: * Mortgages: 15–20 years (GEL) vs. 10 years (FX).
• Consumer Loans: 3 years (unsecured) to 4 years.

 De-dollarization and FX Risk Management.To reduce currency-induced credit risk (CICR), the NBG limits FX lending to retail borrowers: Minimum Thresholds: As of 2025, the minimum threshold for issuing an unhedged FX loan is 500,000 GEL (increased gradually from 100,000 GEL in 2017).

• Liquidity Coverage Ratio (LCR): Banks must maintain 100% LCR for FX and 75% for

GEL.

Systemically Important Banks(SIB).The NBG imposes additional capital surcharges on the three identified SIBs (TBC Bank, Bank of Georgia, and Liberty Bank) to mitigate the "Too Big to Fail" risk. As of 2023/2024, the surcharges are:

• TBC & Bank of Georgia: 2.5% CET1 add-on.
• Liberty Bank: 1.5% CET1 add-on.

Table 1: Borrower-Side Macroprudential Requirements in Georgia (LTV & PTI)

Keywords: Banking sector; Research; Macro prudential strategy and policy; Systemically Important Banks (SIBs), Financial Stability, Georgia, Basel III, CCyB, IFRS 9.