Expectations about  mitigation of bank regulations have not justified

Expectations about mitigation of bank regulations have not justified

access_time2019-06-10 10:02:08

The banking sector’s expectations have not justified six months after the regulations had been enacted - the government and the regulatory body are not going to mitigate regulations at this stage. Alexander Dzneladze, President of the Association of Banks of Georgia, says that as of the 2 quarters data published by the National Bank, the banking sector’s growth has significantly reduced in terms of consumer loans but still was not considered as  alarming. More or less growth is recorded in the mortgage loan portfolio.

Dzneladze says that the problems are observed only in the micro segment. Developers are very worried about mortgage loans but  a decline is not seen in the  mortgage portfolio that is still growing . There are serious problems in the technique houses where the sales have practically halved, however, it had been expected  in terms of consumer loans.

As Dzneladze says in conversation with Commersant, the full picture of the impact of the regulations will be clear in  9 months (in Q 3).

According to a new research by TBC Research, the growth rate of non-consumer loans was negative in March 2019 and amounted to -  1.9 percent. This is a 6-year low, which means that non-mortgage consumer lending to Pphysical persons  has virtually stopped growing. These are the loans that are used by the majority of the people such as  installments, credit cards and micro loans.

NBG President Koba Gvenetadze commented on the topic several weeks ago. He said that the growth of credit portfolio had slowed down and excluding the exchange rate effects made 13.1% in April.


In Gvenetadze’s words, if the credit portfolio growth is smaller  than expected, the central bank will take appropriate measures. At the same time Koba Gvenetadze noted that in 2018 the regulation  expectations had increased lending, so caution should be exercised when using this year's base.

According to NBC President, the central bank  doesn’t only assess the overall picture but pays particular attention to the mortgage lending and real estate operations.

Starting January 1 the National Bank introduced new regulations as part of a program to introduce responsible lending and reduce the excess indebtedness of the population.

From now on insolvent citizens will not be able to take loans. Apart from that,  loans will be issued based on the financial condition of borrowers - they will not be able to borrow more than they can pay.

The regulations introduce such concepts as the debt-to-income ratio - a certain percentage is set for income above which a loan cannot be issued. The limit differs depending on the level of income - if a borrower earns GEL 3,000 per month, the maximum loan amount should not be higher than that for which the loan repayment will require more than GEL 1,350 for 15 years, and GEL 1,650 for 5 years.

The same restrictions apply to all incomes and loan maturity.


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