Minimum Reserve Requirements
The Monetary Policy Committee of the
National Bank of Georgia sets the norms for minimum reserve requirements, which
are determined separately for the national and foreign currencies based on the
average attracted funds (e.g. deposits in commercial banks, borrowed funds).
Banks are required to keep the amount on the correspondent accounts for 14
The minimum reserves calculated according to funds
attracted in the national currency are to be saved on correspondent accounts at
the NBG and kept for a fortnight as an average stock is not lower than the
amount of minimum reserve requirements.
The minimum reserve requirements for funds attracted
in a foreign currency are kept on foreign currency reserve accounts in the
National Bank of Georgia. Banks are obliged to fulfill reserve requirement
norms and have the required amount of funds on reserve accounts for 14 days.
During the maintenance period the required amount is blocked on reserve accounts.
By changing reserve requirements, the National Bank of
Georgia is able to influence banks' credit activities and interest rates. The
reserve requirements on foreign currency liabilities can be used to control the
interest rates on credits denominated in a foreign currency. For instance,
increasing the reserve requirement imposes the extra costs on local banks when
borrowing foreign currency resources and, as a result, they have to increase
the interest rates on the credits denominated in a foreign currency.
In case of meeting reserve requirements, the National
Bank of Georgia charges interest rates on them. From July 12, 2018, the
required reserves denominated in USD are remunerated at a rate equal to the
U.S. Federal Reserve System policy rate minus 2 percentage points (but not less
than 0%), instead of the U.S. Federal Reserve System policy rate minus 0.5
percentage points (p.p). The interest rates on euro reserves are 2 p.p lower
(but not less than -0.6%) compared to the policy rate on deposit facility of
the European Central Bank, instead of 0.2 p.p lower than the policy rate on
deposit facility of the European Central Bank before. The interest rate
remunerated on national currency reserves is equal to the monetary policy rate.
Currently the reserve requirements on funds attracted
in the national currency equal 5%. Meanwhile, reserve requirements for funds attracted
in a foreign currency stand at 30%. Borrowed funds with a remaining maturity of
over one year in the national currency, and over two years in a foreign
currency, are exempt from reserve requirements. For foreign currency
liabilities with a remaining maturity of 1-2 years the reserve requirement
amounts to 15%. Capital, and funds equalized to capital, are exempt from the
required reserve norms.