The document summarizes reserve requirements in Georgia as established by the National Bank of Georgia (NBG). It discusses the history and objectives of NBG's reserve requirement policy, including the rates that are currently set at 10% of liabilities in national currency and 15% for foreign currencies. The document also outlines how minimum reserve requirements are calculated and maintained, including accrual of interest paid on reserve balances. Key points covered include exemptions for longer term liabilities and a lower 5% rate for foreign currency liabilities with remaining maturities between 1-2 years.

1. International Black Sea University
Faculty of Business Management
Reserve requirement in Georgia
Presented by : Lika kibabidze
Nino Bazhunaishvili
Supervisor: Prof. Dr. Tatiana Papiashvili
IBSU. March20, 2013.

2. Contents
 Objectives of NBG and Monetary policy instruments
 History of reserve requirement policy
 The rate of monetary policy instruments
 Minimum reserve requirements
 Reserve Requirements for Foreign and National Currency
 Calculation of minimum reserves
 Maintenance of minimum reserve
 Reporting and Special Provision

3. Main objective of NBG
The National Bank of Georgia is the central bank of Georgia. Its
status is defined by the Constitution of Georgia. The main objective
of the National Bank is to ensure price stability. Furthermore, NBG
supports financial system stability and transparency, and promotes
country's economic growth, without prejudice to its main objective.

4. History of reserve requirement policy
• In 1998 the minimum reserve requirement was 12% until August.
• January 1, 1999 the reserve requirement was fulfilled by 85% and
funds deposited in the required reserve account amounted to 18
million GEL.
• After the remuneration of required reserve holdings, as a result of
which, 2 million GEL was paid in favor of commercial banks in
December 1998.
• At the beginning of 2000 reserve requirement for commercial banks
was set at 16%.
• As of January 2001 the total volume of required
reserves amounted to 38.9 million GEL constituting
92% compliance.

5. History of reserve requirement policy (Cont.)
•In 2002 NBG lowered reserve requirements for
commercial banks that was 14%.
•In 2003 to strengthen the central bank’s influence
on money supply and increase the monetization of
the economy, the minimum reserve requirement rate
for commercial banks was reduced from 14% to
13%.
Improvement of financial mediation in the national currency
in 2004 was contributed by changes in the minimum
required reserves for banks, expressed by the impressive
drop of the norm set for GEL denominated funds from 13 to
2%.

8. Deposits by Currency 2012
www.nbg.ge

9. Monetary Policy Instruments of NBG
Main objective of NBG:
is to maintain Price stability
Keep the inflation within the target level
Monetary Policy Instruments
 Refinancing Loans
 Certificates of Deposit
 Overnight loans & Overnight deposits
 Minimum Reserve Requirements

10. The rates of the monetary policy instruments
[Last update: 13.02.2013] Maturity Rate (%)
Refinancing loan 7 days 4.75%
Guaranteed refinancing loan 7 days (4.75+1) %
Overnight deposits 1 day (4.75-1.5) %
Overnight loans 1 day (4.75+1.5) %
Certificates of deposit 3/6 months Defined by auction
Treasury securities 1/2/5/10 years Defined by auction
Liabilities in
Liabilities in Foreign
National
Currency
Currency
Reserve requirements* 10.0% 15.0%

11. Minimum Reserve Requirements
Minimum Reserve Requirement is
one the monetary policy
instruments that is used by the
NBG to influence monetary
aggregates and money supply.
Currently, reserve requirements on funds attracted in national
currency amounts to 10% and on funds attracted in foreign
currency amounts to 15%. Borrowed funds by remaining
maturity over 1 year in national currency and over 2 years in
foreign currency are exempt from reserve requirements. For
foreign currency liabilities with remaining maturity 1-2 years
reserve requirements amounts to 5%.

12. Minimum Reserve Requirements (Cont.)
1. National Bank of Georgia (hereafter NBG) puts in place minimum
reserve requirements for the commercial banks licensed in Georgia and
the branches of foreign commercial banks (hereafter bank) in
compliance with the organic law on the National Bank of Georgia.
2. Minimum reserve requirements are put in place for the purposes of
monetary policy and to support monetary operations of NBG.
3. In compliance with this regulation, banks are required to have
respective amounts of minimum reserves on appropriate accounts at
NBG.
4. For the purposes of this regulation, the amounts of minimum reserve
requirements are rounded to the units of currency; less than half of a unit
will be disregarded, whereas half unit or more will be rounded
to one unit.

13. Reserve Requirements Reserve Requirements
Date of change
for National Currency for Foreign Currency
1992-1993 20% -
30-Dec-95 18% 18%
27-Aug-96 15% 15%
29-Aug-97 12% 12%
27-Nov-98 16% 16%
12-May-00 14% 14%
1-Feb-02 14% 14%
12-Sep-03 13% 13%
15-Sep-04 2% 13%
8-Aug-06 6% 13%
5-Mar-07* 13% 13%
7-Nov-08 5% 5%
20-Apr-10 10% 5%
20-Jan-11 10% 10%
17-Feb-11 10% 15%

14. Reserve Requirements for Reserve Requirements for
Date of change
National Currency Foreign Currency
10% 15%
15% - for liabilities with the
remaining maturity up to one
10% - for liabilities with the
year , 5% -
remaining maturity up to 1
for liabilities with the
27-Jul-11 year (liabilities with the
remaining maturity between
remaining maturity over 1
1-2 years (liabilities
year is exempt from reserve
with the remaining maturity
requirements)
over 2 years is exempt from
reserve requirements)
* Starting from this date, foreign currency reserves are kept on a separate account. As
for GEL reserve requirements, average stock on correspondent accounts for a
fortnight are considered.

15. The Ratio of Minimum Reserve Requirements
1. For the attracted funds in the national currency the ratio of minimum
reserve requirements is 10%
2. For the attracted funds in foreign currencies the ratio of minimum
reserve requirements is 15%, except for the borrowed funds with the
remaining maturities from 365 to no greater than 730 days.
3. For the attracted funds in foreign currencies with the remaining
maturities from 365 to no greater than 730 days the ratio of minimum
reserve requirements is 5%.

16. Accrual of Interest on Minimum Reserves
1. NBG will pay interest on balances of reserve accounts in foreign
currencies, but on no more than the amount of minimum reserves, to a
bank by the interest rate determined by NBG.
2. NBG will pay interest on balances or portion of
balances of reserve account in the national currency to
a bank
3. An amount equal to the accrued interest in the national currency
will be transferred to the settlement account of a bank at NBG no
later than two days after the end of the maintenance period. In case
of a foreign currency, the amount of interest payment is calculated
with the official exchange rate on the settlement day.

17. Bibliography
http://www.nbg.ge/index.php?m=539
http://www.nbg.ge/uploads/legalacts/monetarypolicy/2011/mrr_r
egulation_20110211_eng.pdf
http://www.nbg.ge/uploads/moneratypolicy/instruments/axalinbg
_monetary_instruments_20110711__eng.pdf
http://www.econbiz.de/en/search/detailed-view/doc/all/ngb-
national-bank-of-georgia/10005840081/?no_cache=1
http://www.nbg.ge/index.php?m=130

18. Questions