The Parliament’s Economic Policy Committee has supported a legislative package that, among other changes, lifts the restriction requiring microbanks to issue loans exclusively in the national currency
The Parliament’s Economic Policy Committee has supported a legislative package that, among other changes, lifts the restriction requiring microbanks to issue loans exclusively in the national currency. The draft legislation also provides for an increase in the maximum total amount of loans and other liabilities issued to a single borrower or a group of related borrowers from GEL 1 million to GEL 2 million.
The amendments, initiated by Georgian Dream MPs, concern the Laws on the Activities of Commercial Banks and the Activities of Microbanks. In addition to the Economic Policy Committee, the parliamentary Finance and Budget Committee is also scheduled to review the ruling majority’s legislative package today, after which the matter will be submitted to a parliamentary plenary session for consideration.
According to the initiators, lifting the restriction requiring microbanks to issue loans exclusively in the national currency will make them more competitive. It was also stated during the committee meeting that, if the amendments are adopted, microbanks will be subject to the same regulations governing loans and bank credits issued in both national and foreign currencies by lending institutions.
“Funds attracted by microbanks are primarily denominated in foreign currencies, while they are only authorised to issue loans in the national currency. As a result, microbanks are heavily dependent on hedging instruments and their associated rates, which are mainly provided by commercial banks. This, in turn, has a negative impact on the pricing and interest rates of credit products.
Under the proposed amendments, microbanks will be able to issue loans in foreign currencies using the foreign currency funds they have attracted. This is expected, on the one hand, to reduce microbanks’ foreign exchange risks and, on the other, to make them more competitive, including in terms of the pricing and interest rates of their credit products,” the explanatory note to the draft legislation states.
The authors and initiators of the draft legislation are Georgian Dream MPs Shota Berekashvili, Paata Kvizhinadze, Giorgi Barvenashvili, Levan Machavariani, Tornike Berekashvili and Anton Obolashvili.
