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Archil Kontselidze

VTB Director: Raising Reserve Requirement Norm on USD-denominated Funds is Punitive Measure

VTB Bank director General Archil Kontselidze disapproves the fact that the minimum reserve requirement norm on foreign currency denominated funds has increased to 20% from 15%. Kontselidze made this statement for the Business Contact to comment on the decision by the National Bank of Georgia (NBG).

According to the mentioned decision, starting June 16, the minimum reserve requirement norm for 1-year GEL-denominated  resources made up 7%, instead of 10%, while the norm increased to 20% from 15% in case of foreign currency denominated funds.

“I do not like this decision. I believe this is not an instrument that will foster the larization process. Long-term LARI is more challenge. Consequently, if we want to tackle the problem, we should make focus on long GEL than to reduce long USD”, Kontselidze noted and added that the creation of the so-called Long GEL resource will promote the Larization process and the government is working on the mentioned issue.

At the same time, the NBG decision will increase the USD loan prime cost and consequently, the GEL loan in relation to USD will become more competitive, Archil Kontselidze said.

“Therefore, the population will give preference to GEL compared to USD, because the USD value will slightly increase. However this decision is a certain punitive instrument than promoting mechanism and I always prefer promotion mechanisms. Therefore, I do not back and support any punitive instrument”, the VTB Bank director general noted.