Georgia - Bank Resolution Readiness Project

Overview & Synopsis

Georgia Bank Resolution Readiness Project for Georgia has the development objectives to strengthen the financing mechanism and the operational framework for bank resolution. Component: Provision of contributions to the Resolution Fund (RF) in case of occurrence of an eligible trigger event. This single component provides a pre-arranged contingent backstop through Investment Project Financing with Deferred Drawdown Option (IPF DDO) that can be drawn only after a formal decision by the National Bank of Georgia (NBG) to place one or more commercial banks into resolution, authorize the use of the RF, and define the additional contribution required to supplement the RF’s available balance. The component finances contributions to the RF strictly for legally permitted resolution expenditures, including support to implement resolution tools and measures such as providing loans and guarantees to a bank under resolution or a bridge bank, providing loans and guarantees to an acquiring institution to facilitate transfers, compensating the negative difference between transferred assets and liabilities, improving the liquidity of a bank under resolution where allowed by law, covering bail-in related expenses to restore net asset value to zero, and compensating creditors or shareholders where required under the no creditor worse off safeguard. The hierarchy of loss absorption is preserved so that shareholders and creditors bear losses before RF resources are deployed, consistent with the Bank Recovery and Resolution Directive and Financial Stability Board Key Attributes. The IPF DDO design allows rapid, rules-based fund flows via direct payment or reimbursement, supported by a verification protocol, post-use review by external auditors, and reporting through results indicators that track the RF funding ratio and continuity of access for insured depositors by end of next business day. Implementation arrangements place the Ministry of Finance as borrower and NBG as implementing agency, guided by a Project Operations Manual setting procedures for financial management, interagency coordination with the Deposit Insurance Agency and the Inter-agency Financial Stability Committee, environmental and social due diligence using existing exclusion lists and grievance mechanisms, integrity measures, and annual simulation exercises to test end-to-end activation, funding, and communications to sustain confidence and safeguard critical banking functions.