The Deposit insurance in conjunction with the prudential regulation, liquidity support and effective supervision represents an important component of financial stability and safety and protects depositors from incurring losses (within the set limit) in the event of the commencement of liquidation proceedings in any of the commercial banks (according to the Law of Georgia on Activities of Commercial Bank). The purpose of implementing this system in Georgia is to support the stability of financial system in the country, encourage savings, facilitate economic development and mitigate internal and external shocks through increasing public confidence in commercial banks.
Initially, when the system was launched, the coverage level was set at 5,000 GEL. As from July the 1st, 2020 the coverage level increased up to 15,000 GEL. Increasing the level up to 15,000 GEL is first important step toward improvement of coverage rate. At the same time it will strengthen overall credibility of the system and its role in financial safety net.
Meanwhile, according to the Georgian Law on “Deposit Insurance Agency”, from January the 1st, 2021 the system moved to calculating risk based individual premiums for the commercial banks. Particularly, the Deposit Insurance Agency, in cooperation with the National Bank of Georgia, on yearly basis determines individual risk based monthly premiums for each commercial bank, which is confidential. Herewith, the individual rate for monthly regular insurance premiums of insured deposits should not exceed the limit set under the Georgian Law on “Deposit Insurance System” (0.067% for GEL deposits, 0.1% for FX deposits).
The Deposit Insurance System initially covered Individuals’ deposits, but from January the 1st 2022, the deposits of Legal Entities are also insured. Expansion of the coverage scope brings the system closer to the best international practice and principles of EU Directive on “Deposit Guarantee Schemes”.
All types of deposits of resident and non-resident individuals, including current accounts and deposits are insured. Insurance does not apply to deposits of those individuals whose right to access the deposit is restricted according to the Georgian legislation. In addition, the deposits of commercial bank administrators and their family members, as well as the deposits of shareholders holding at least 5% or more of the bank’s capital and the deposits of their family members are excluded from insurance.
The introduction of the System does not imply additional costs for the depositors.
The Introduction of the System was envisaged under the Social - Economic Development Strategy - Georgia 2020 and the EU-Georgia Association Agreement.