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In January, Transactions Involving the Purchase and Sale of Currency Brought Losses to Georgian Banks

After Georgian banks in December 2014 received a record profit from transactions involving the purchase and sale of currency,  in January 2015 the banking system suffered a loss in the same direction.

How to explain that in 2014 banks made a profit in the amount of GEL 117 million from the resale of currency and in January 2015 suffered  a 8- million loss?
According to the President  of the Association of Banks of Georgia Zurab Gvasalia, the main cause of loss was a sharp strengthening of the dollar against the euro on  the international market which had a negative effect on the transactions on these currencies in the Georgian market.

“These statistics completely refute preconceived opinions about the fact that in December gains were associated with currency speculation. In January the lari’s  fluctuations continued, and by this logic banks again had to make a profit. But it turned out that they suffered losses. Banks’ gains or losses from the purchase and sale of foreign currency are carried out by  the banks sometimes on behalf of clients, sometimes on their own initiative, apply not only to transactions in the lari  and dollar, but also in other currencies. They are also associated with the partner banks abroad, “- says Gvasalia.

In his words, there is nothing  unusual in the fact that in December the banks made a profit in the amount of GEL 23 million,  besides in December there  was also a significant demand for the purchase of foreign currency, respectively, banks’ profits increased in comparison with the previous month.

“To minimize the risks associated with currency fluctuations, banks have to balance their structure – in particular,  form the structure of assets and liabilities so as to reduce losses from changes in the exchange rate and cover them at the expense of other positions,” – Zurab Gvasalia notes.

He says that the world currencies fluctuations, which have brought losses to the banks in January 2015, is  a permanent  feature in the global currency market.

“Fluctuations in the global currency market is an ongoing process. In order not to depend on them too much, banks are obliged to observe the daily currency  limit. On the other hand, they are required to meet the demand for currency, otherwise, customers will be looking for an opportunity to purchase it elsewhere at a more  favorable exchange rate,”- President  of the Banks Association  adds.