The National Bank of Georgia has relaxed requirements for bank deposits for Russians

The NATIONAL BANK of Georgia lowered from 80 to 40% the share of Russians’ deposits in foreign currency, which cannot be claimed immediately. The regulator emphasized that no significant outflow from the accounts of Russians is expected in the medium term

The National Bank of Georgia has softened the requirements for Russian citizens and lowered from 80 to 40% the share of their deposits in foreign currency, which cannot be claimed immediately. This is stated in the message of the National Bank of the country.

“According to some estimates and taking into account the geopolitical situation, a significant outflow from the accounts of [Russian citizens] is not expected in the medium term. Accordingly, the Financial Stability Committee decided to establish liquidity requirements for deposits in foreign currency placed by residents of RUSSIA (outflow rate -), equivalent to the liquidity requirements for deposits of other non-residents (about 40%),” the statement says.

Before this decision, Georgian banks were required to place at least 80% of Russian deposits exclusively in liquid assets and were able to allocate no more than 20% of the deposit to other assets, which limited the ability of banks to finance other lending activities from deposits of Russian citizens.

The regulator notes that after the outflow rate for Russians was increased to 80% from September last year, the volume of Russians’ accounts stabilized, and their share in total bank deposits decreased. “Banks store the bulk of this resource in liquid assets, and there is no replacement of long-term stable liabilities,” the National Bank clarified. The regulator also recommended that banks conduct regular analysis of the accounts of citizens of foreign countries.

The previous level of liquidity for Russian deposits of 80% was set by the National Bank of Georgia in May 2023. Then the regulator referred to the uncertainty regarding the terms of retention of deposits by Russians in local banks. “In the short time frame we are talking about, it could be a year or two years. If these funds replace long-term borrowed funds or go into long-term loans, then in the event of an outflow of these funds, this will create problems for the Georgian economy,” the acting acting DIRECTOR explained the decision at that time. President of the National Bank Archil Mestvrishvili.

After the start of the military operation, remittances from Russia to the CIS countries increased manifold. The peak amount was reached in October 2022 ($1.1 billion). Maximum annual growth rates were observed in February 2023 (225%) and October 2022 (210%).

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In the summer of 2023, transfers to neighboring countries began to decline sharply. One of the main reasons for the increase in remittances was the relocation of Russians. Now there is no single reason for the reduction in volumes, Egor Krivosheya, head of the blockchain and fintech laboratory at the Skolkovo management school, told RBC.

With Georgia, for example, the volume of remittances in January decreased by 3.9 times compared to January 2023, amounting to $67.6 million. At the same time, Russia is still in first place in the volume of remittances to Georgia, its share in January amounted to 25.68%.