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 according to 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 days.
The minimum averaged reserves, which are 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 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 relevant 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%),
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 of the European Central Bank, instead of 0.2 p.p lower than the
policy rate on deposit of the European Central Bank before. The interest rate remunerated
on national currency reserves is equal to the monetary policy rate.
reserve requirements on funds attracted in the national currency amount to 5%,
and stand at 25% for funds attracted in a foreign currency. 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 10%. Capital, and funds equalized to capital, are exempt
from the required reserve norms.