Copyright Page

IMF Country Report No. 21/220

GEORGIA

FINANCIAL SECTOR ASSESSMENT PROGRAM

TECHNICAL NOTE—MACROPRUDENTIAL POLICIES AND DE-DOLLARIZATION

September 2021

This paper on Georgia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on September 17, 2021.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623–7430 • Fax: (202) 623–7201

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2021 International Monetary Fund

Title page

GEORGIA

FINANCIAL SECTOR ASSESSMENT PROGRAM

September 17, 2021

TECHNICAL NOTE

MACROPRUDENTIAL POLICIES AND DE-DOLLARIZATION

Prepared By

Monetary and Capital Markets Department

This Technical Note was prepared by IMF staff in the context of the Financial Sector Assessment Program (FSAP) in Georgia. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP can be found at http://0-www-imf-org.library.svsu.edu/external/np/fsap/fssa.aspx

Contents

  • Glossary

  • EXECUTIVE SUMMARY

  • INSTITUTIONAL FRAMEWORK FOR MACROPRUDENTIAL POLICY

  • A. Willingness to Act

  • B. Ability to Act

  • C. Cooperation

  • D. Assessment and Recommendations

  • IMPLEMENTATION OF MACROPRUDENTIAL TOOLS

  • A Broad-based Measures

  • B. Sectoral Measures

  • C. Liquidity and Structural Measures

  • D. Assessment and Recommendations

  • DE-DOLLARIZATION POLICIES

  • A Context

  • B. Costs of Dollarization

  • C. Drivers of Deposit and Loan Dollarization

  • D. Policy Measures: Background and Assessment

  • E. Policy Recommendations

  • References

  • BOX

  • 1. Drivers of Dollarization

  • FIGURES

  • 1. Credit to GDP Gap at Current and Decomposition of Credit Growth

  • 2. Mortgage Loan Flows, Portfolio Quality and Real Estate Prices

  • 3. Liquidity Dynamics

  • 4. Trends in Dollarization

  • 5. Risks to Banking System from Exchange Rate Volatility

  • 6. Trends in Dollarization

  • 7. Drivers of Dollarization

  • 8. Impact of Policy Measures of Deposit Dollarization

  • TABLES

  • 1. Summary of Key Recommendations

  • 2. Macroprudential Measures ofthe NBG

  • APPENDIX

  • I. Regression Output for the Drivers of Dollarization

Glossary

CCyB

Countercyclical capital buffer

ESRB

European Systemic Risk Board

FSC

Financial Stability Committee

FSR

Financial Stability Report

ISDA

International Swaps and Derivatives Association

LCR

Liquidity coverage ratio

LTV

Loan-to-value

MoF

Ministry of Finance

MoU

Memorandum of Understanding

NBG

National Bank of Georgia

NSFR

Net stable funding ratio

PTI

Payment-to-income

Georgia: Financial Sector Assessment Program-Technical Note-Macroprudential Policies and De-Dollarization
Author: International Monetary Fund. Monetary and Capital Markets Department