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BANK OF GEORGIA GROUP PLC Annual Report 2022
01
Annual Report 2022 Bank of Georgia Group PLC
About us
Bank of Georgia Group PLC
Bank of Georgia Group PLC (the ‘Company’ – LSE: BGEO LN) is a FTSE-250 company. Its core entity is JSC Bank
of Georgia (‘Bank of Georgia’, ‘ BOG’, or the ‘Bank’), a digital banking leader in Georgia, serving more than 1.6 million
monthly active retail customers and more than 81 thousand monthly active business clients. Enabled by high levels of
customer satisfaction and the strength of our customer franchise, we have consistently delivered a return on average
equity above 20%.
We focus on customer relationships – supporting our clients at every step of their journeys, creating products and
services that fulfil their needs and delivering positive experiences across touchpoints. We are committed to creating
shared opportunities and building long-term value – underpinned by the highest standards of corporate governance
and a strong risk management framework and guided by our purpose.
Helping
People Achieve
More of Their
Potential
02
Annual Report 2022 Bank of Georgia Group PLC
Contents
Strategic Report 04–167
Overview
History ............................................................................................................................................................................................................................... 04
Track record of strong performance ........................................................................................................................................................................... 05
Financial highlights ......................................................................................................................................................................................................... 06
Non-financial highlights ................................................................................................................................................................................................. 07
Chairman’s statement ...................................................................................................................................................................................................08
Chief Executive Officer’s statement ............................................................................................................................................................................10
Performance
Overview of financial results .......................................................................................................................................................................................154
Strategy
Macro overview ................................................................................................................................................................................................................. 12
Strategy and performance ............................................................................................................................................................................................ 17
Our purpose and strategy framework ...................................................................................................................................................................18
Engaging with our stakeholders for shared success .......................................................................................................................................... 20
Year in review – empowering individuals ...............................................................................................................................................................22
Year in review – empowering businesses ...............................................................................................................................................................34
Segment snapshot .....................................................................................................................................................................................................44
Digital area snapshot ................................................................................................................................................................................................46
Key enablers of value creation ....................................................................................................................................................................................... 47
Key performance indicators .......................................................................................................................................................................................... 50
Risk management ............................................................................................................................................................................................................56
Principal risks and uncertainties ...................................................................................................................................................................................62
Going concern and viability statements ..................................................................................................................................................................... 82
Sustainable business ...................................................................................................................................................................................................... 84
ESG review – Environmental ....................................................................................................................................................................................95
ESG review – Social .................................................................................................................................................................................................. 118
ESG review – Governance .......................................................................................................................................................................................139
Section 172(1) statement ..............................................................................................................................................................................................149
03
Annual Report 2022 Bank of Georgia Group PLC
Additional information 343–350
Financial statements 228–342
Independent auditor’s report .......................................................................................................................................................................................229
Consolidated statement of financial position .........................................................................................................................................................239
Consolidated income statement ............................................................................................................................................................................... 240
Consolidated statement of comprehensive income ............................................................................................................................................... 241
Consolidated statement of changes in equity .........................................................................................................................................................242
Consolidated statement of cash flows .....................................................................................................................................................................243
Separate statement of financial position ................................................................................................................................................................ 244
Separate statement of changes in equity ............................................................................................................................................................... 245
Separate statement of cash flows ........................................................................................................................................................................... 246
Notes to consolidated financial statements ............................................................................................................................................................247
GRI content index .......................................................................................................................................................................................................... 344
References ...................................................................................................................................................................................................................... 348
Glossary ........................................................................................................................................................................................................................... 349
Shareholder information .............................................................................................................................................................................................350
Goverance at a glance ..................................................................................................................................................................................................169
Directors’ Governance statement ...............................................................................................................................................................................171
Board of Directors ......................................................................................................................................................................................................... 179
Management Team ........................................................................................................................................................................................................182
Nomination Committee report ...................................................................................................................................................................................186
Audit Committee report ............................................................................................................................................................................................... 192
Risk Committee report .................................................................................................................................................................................................198
Directors’ Remuneration report ................................................................................................................................................................................. 202
Statement of Directors’ responsibilities ...................................................................................................................................................................223
Directors’ report .............................................................................................................................................................................................................224
Governance 168–227
Annual Report 2022 Bank of Georgia Group PLC
04
1.1bn
Profit
1
(GEL)
2022
58
NPS
4Q22
1.1m
Monthly active digital users
Dec-22
History
2018
• BGEO Group PLC
demerged into two
separate companies –
Bank of Georgia Group
PLC and Georgia Capital
PLC.
2019
• The new management
team started to execute
the Group’s new
strategy, focusing on
customer and employee
experience and digital
transformation.
• We released a brand
new business internet
banking platform
(Business iBank) for our
MSME and corporate
clients.
• We issued an inaugural
US$ 100 million
Additional Tier 1 Capital
Perpetual Subordinated
Notes.
2020
• We added a number
of innovative features
to our financial mobile
application, including
peer-to-peer payments,
bill split and money
request, and digital card.
• We embedded a leading
customer experience
management software
platform, Medallia, and
started to collaborate
with Salesforce,
a world’s leading
customer relationship
management platform,
to have a more holistic
view of customer needs,
wants, and behaviours
across channels.
• During the pandemic
we focused on customer
and employee safety,
offered loan payment
holidays to clients and
ensured the Group’s
capital and liquidity
positions remained at
adequate levels.
2021
• We strengthened
our focus on ESG,
undertaking an ESG
materiality assessment
and launching a climate
action programme.
• We rolled out digital
onboarding, enabling
individuals to open a
bank account without
a branch visit.
• We launched two
new products –
loan instalments in
e-commerce and retail
brokerage – Investments
– directly in our retail
mobile application.
• We fully redesigned
consumer lending and
deposit activation flow
in our mobile application,
resulting in increased
product sales in digital
channels.
• We launched a mobile
application for our
business clients.
• We rolled out a new
debit card – PLUS –
with American Express,
its second debit card
project worldwide and
its first in EMEA.
2022
• We rolled out sCoolApp,
a mobile application for
school students.
• We added an insurance
marketplace to our
mobile application.
• We launched new
subscription sets for
mass retail clients.
• Monthly active digital
users surpassed one
million.
1. Profit has been adjusted for a one-off GEL 391.1 million other income due to the settlement of an outstanding legacy claim, and a one-off GEL 79.3 million tax expense
due to an amendment of the corporate taxation model in Georgia.
05
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
267267
188
72
80
98
102
122
124
184
84
267
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
539
257
73
35%
2
36%
PAYOUT
RATIO
33% 34% 32% 30% 30% 37%
2
GEL 5.80 per
share to be
recommended
at the AGM
32.4%
25.8%
13.0%
26.1%
26.4%
2021 2022202020192018
20192018 2021 20222020
13.9%
4.3%
21.4%
27.0%
18.9%
19.8%
12.9%
10.2%
22.0%
19.0%
Track record of strong performance
1. 2018 ROAE adjusted for GEL 30.3m demerger-related costs, a GEL 8.0m demerger-related corporate income tax gain, a GEL 30.3m one-off impact of re-measurement
of deferred tax balances and a GEL 3.9m (net of income tax) termination costs of former CEO.
2019 ROAE adjusted for GEL 14.2m (net of income tax) termination costs of former CEO and executive management.
2022 ROAE adjusted for a GEL 391.1 million one-off other income due to the settlement of an outstanding legacy claim and a GEL 79.3 million one-off expense due to
an amendment to the corporate taxation model in Georgia applicable to financial institutions.
2. For the purpose of payout ratio calculation, total buyback amount is divided by outstanding shares before the beginning of the programme for the respective year.
Delivering on medium-term targets
Interim dividend of GEL 1.85 per ordinary share in respect of the period ended 30 June 2022 was paid on 20 October 2022.
At the 2023 Annual General Meeting, the Board intends to recommend a final dividend for 2022 of GEL 5.80 per ordinary share
payable in British Pounds at the prevailing rate, making a total dividend for 2022 of GEL 7.65 per share.
In 2022 the Group completed the GEL 112.7 million Share Buyback and Cancellation Programme (‘Programme’). Since the launch of
the Programme the Group has purchased and cancelled 1,670,446 ordinary shares. As at 31 December 2022, the total number of shares
with voting rights was 47,498,982. In February 2023, the Group announced an increase of the Programme by up to GEL 148 million.
Share buyback (GEL millions)
Total dividend paid for the year (GEL millions)
ROAE
1
Target
20%+
2022 result
32.4%
Loan book growth
Target
c.10% y-o-y
2022 result
12.9%
On a constant currency basis
Capital distribution
Target
30-50%
dividend/share buyback
2022 result
37%
Constant currency basis (y-o-y)Nominal (y-o-y)
Annual Report 2022 Bank of Georgia Group PLC
06
Net loans
2
16,861.7
+4.3% y-o-y
+12.9% y-o-y on a constant
currency basis
Operating income before
cost of risk
1,752.7
+105.2% y-o-y
ROAE
41.4%
+15.6 ppts y-o-y
Operating income before
cost of risk
1
1,361.6
+59.4% y-o-y
Net interest income
1,182.3
+23.9% y-o-y
Cost to income ratio
1
32.0%
-5.2 ppts y-o-y
Net interest margin
5.4%
+0.5 ppts y-o-y
CET1 capital adequacy ratio
(NBG, Basel III)
14.7%
Minimum regulatory requirement
at 31 December 2022 – 11.6%
Profit
1
1,132.2
+55.7% y-o-y
Net non-interest income
1,210.8
+194.1% y-o-y
Cost to income ratio
26.8%
-10.4 ppts y-o-y
Net non-interest income
1
819.7
+99.1% y-o-y
Client deposits
18,261.4
+30.1% y-o-y
+43.2% y-o-y on a constant
currency basis
Profit
1,444.0
+98.6% y-o-y
Cost of credit risk ratio
0.8%
+0.8 ppts y-o-y
ROAE
1
32.4%
+6.6 ppts y-o-y
Liquidity coverage ratio
(NBG, Basel III)
132.4%
Minimum regulatory requirement
at 31 December 2022 – 100%
All data in GEL million unless otherwise stated
Financial highlights
1. Figures adjusted for a one-off GEL 391.1 million other income due to the settlement of an outstanding legacy claim, and a one-off GEL 79.3 million tax expense due to an
amendment to the corporate taxation model in Georgia.
2. Throughout the Strategic Report, gross loans to customers and respective allowance for impairment are presented net of expected credit loss (ECL) on contractually
accrued interest income. These do not have an effect on the net loans to customers balance. Management believes that netted-off balances provide the best representation
of the Group’s loan portfolio position.
Reported figures and ratios for 2022 under IFRS
07
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
Non-financial highlights
Figures given for JSC Bank of Georgia standalone
Monthly active individual clients
(thousands)
1,632
+17.1% y-o-y
Daily active digital individual users (DAU)
(thousands)
533
+41.4% y-o-y
Share of products activated through
digital channels (Dec-22)
44.1%
+13.6 ppts y-o-y
Volume of payment transactions in BOG’s
acquiring in 2022 (GEL million)
10,213
+48.9% y-o-y
Monthly active business clients
(thousands)
81
+25.7% y-o-y
Monthly active card users (Payments MAU)
(thousands)
1,040
+33.0% y-o-y
Net Promoter Score (NPS)
1
58
+3.0 ppts y-o-y
Monthly active digital individual users (MAU)
(thousands)
1,121
+31.5% y-o-y
DAU/MAU
47.6%
+3.4 ppts y-o-y
Share of transactions through
mBank and iBank (4Q22)
58.2%
+7.4 ppts y-o-y
Acquiring market share (Dec-22)
51.3%
+6.7 ppts y-o-y
Monthly active digital users (thousands)
(Business mBank/iBank)
58
39.0% y-o-y
Number of clients who exchanged loyalty
points at least once during 2022 (thousands)
487
+28.4% y-o-y
Employee Net Promoter Score (eNPS)
2
53
-8.0 ppts y-o-y
1. Based on an external survey by an independent third-party provider.
2. Based on an internal survey.
08
Annual Report 2022 Bank of Georgia Group PLC
Chairman’s statement
Mel Carvill
Chairman
My first annual statement to shareholders
comes at the end of what proved to be
another extraordinary year. The world
faced a combination of Russia’s war in
Ukraine, high levels of global inflation,
volatile energy prices, and the continuing
impact of the COVID-19 pandemic. Despite
these considerable global challenges, the
Group proved resilient and produced very
strong results, whilst making a difference
by supporting its customers and employees.
We ended the year with operating income
(adjusted for one-off items) of GEL 2,002
million, up 46.6% year-on-year
1
. This was
driven by a strong performance across core
revenue lines, with a higher-than-expected
increase in net foreign currency gains on
the back of migrant inflows, and increased
transactional activity.
Strategic progress
The Bank continues to make significant
progress against its key medium-term
strategic targets: to deliver c10% customer
lending growth; to achieve a return on
equity in excess of 20%; and to return
capital to shareholders via a dividend/share
buyback pay-out ratio of between 30-50%.
In 2022, these objectives were achieved, or
exceeded, despite the external challenges
we have faced.
Archil Gachechiladze will talk about the
business and our progress in greater
detail in the next few pages, but first
I want to highlight the key metrics that
stood out as I reflected on our recent
performance. Firstly, over the past 12
months we increased our monthly active
customer base by around a quarter of
a million people or 17.1%. Secondly, the
number of monthly active retail digital
users exceeded one million up 31.5% y-o-y.
And, thirdly, we ended the year with
a high NPS of 58 – up from 55 in 2021
and 46 in 2020. These figures represent
a great performance by the team, and
fundamentally underpin the excellent top-
line revenue growth that drove our strong
earnings performance.
This is a clear demonstration of the
significant progress the Group has made in
its digital and cultural transformation over
the past three years. These numbers are
a testimony to the quality of the Group’s
Management Team and my predecessor,
Neil Janin, as well as to the Board’s
continuing focus on purpose, customer-
centricity and digitalisation to deliver
high-quality services that contribute to
the advancement of Georgian people and
the economy. My strong first impressions
when joining the Group a year ago have
been completely affirmed, this is a high-
performing organisation, with dedicated
leaders and employees.
The Georgian economy
and the banking sector
The Bank’s performance was supported
by the strong growth, around 10%, of
the Georgian economy in 2022. This
was driven by high levels of external
inflows, including FX inflows boosted
by the inbound migration of people
and relocation of capital from nearby
countries, and increased activity in the
transportation sector, as the rerouting
of cargo from Central Asia amplified
Georgia’s position as an important
transport, trading and logistics corridor.
These factors also boosted fiscal revenues
and significantly narrowed the current
account deficit.
From a banking sector perspective,
I have been impressed by the low
systemic banking risk. This is supported
by prudent regulation and conservative
oversight from a high quality regulator,
the National Bank of Georgia (NBG),
which consistently ensures the resilience
of the sector to potential external
shocks. As a result of recent financial
stability policy measures implemented
by the NBG, the sector continued to lend
and support the Georgian economy in
2022 without difficulty. This stability,
aligned with a strong monetary policy,
continues to underpin the strength of
the Georgian Lari and support a positive
credit environment.
Strong internal
capital generation
and capital distribution
2022 saw excellent internal capital
generation. Beyond the needs of a strong
balance sheet and supporting future
growth requirements, capital is available
for distribution to shareholders and the
Board intends to recommend a final
dividend for 2022 of GEL 5.80 per share,
making a total annual dividend of GEL
7.65 per share. In addition, the Board
has increased the share buyback and
cancellation programme by up to GEL 148
million. This represents an overall dividend
and share buyback pay-out ratio for the
year ended 31 December 2022 of 37%, in
line with our published capital distribution
policy. Further strong internal capital
generation, and the surplus cash we have
on our balance sheet, will be deployed in
the growth of the Group, or returned to
shareholders over time.
1. Figure adjusted for a one-off GEL 391.1 million other income due to the settlement of and outstanding legacy claim.
09
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
ESG
The Group’s approach to ESG has
been informed by the views of our key
stakeholders through a formal materiality
assessment. We create value together
with our stakeholders, and when they
succeed, we succeed as well. The Board
places a high level of importance on
achieving positive outcomes for the
Group’s stakeholders, but this means
that we often need to balance between
the views and the interests of different
stakeholders to make decisions that
we believe are fair and promote the
longer-term value of the Company.
Bank of Georgia has a strong focus on
feedback culture, which goes beyond
giving and receiving feedback within the
organisation, and involves continuous
research and dialogue with a variety of
groups. We are regularly informed of
and discuss what the Group’s customers,
employees, people in communities,
investors and regulators want, need
and expect from us, and this guides our
thinking and decision-making.
Banks matter. They support productive
activity and encourage economic growth
and development. Banks move, lend,
invest and protect money for customers
and, through these activities, the Bank
of Georgia plays a leading role in the
development of Georgia, which has
limited capital markets. The Bank also
supports financial inclusion by delivering
easily accessible, useful, affordable
financial products and services that
meet the needs of the entire Georgian
population in all socio-economic brackets
and throughout the country in rural and
well as urban communities. The Bank
supports financial literacy, too, through
various initiatives, including the recent
development of the first financial app
for school students, detailed later in this
Annual Report.
The Board also sees climate change as a
global challenge and monitors the ways in
which the Group develops its approaches
to managing climate-related risks and
opportunities. The approach has been
evolving and we know there is much more
to learn and to implement going forward.
On pages 84 to 148 of this report,
you will see our ESG disclosures. The
Board is closely involved in the ongoing
development of the ESG strategy and is
delighted with the progress the business
has achieved.
Outlook
Overall, Bank of Georgia has continued
to deliver an excellent performance –
enabled by continuously improving digital
and data analytics capabilities, and an
ongoing systematic focus on customer
satisfaction and employee empowerment.
We have a great team in place, and we’re
focused on attracting and retaining top
talent, especially in tech-related fields.
The Board considers that the growth
prospects of the Group remain very
positive, despite market uncertainty
resulting from geopolitical events.
While economic growth in Georgia is
expected to ease in 2023, the economy
is still expected to deliver c.5% real GDP
growth. Georgia’s strong prospects
and the benefits of the Bank’s strong
customer franchise leave the Group
well-positioned for the future.
Finally, I would like to express my
sincerest thanks to all of our employees
and colleagues – we would not have
been able to achieve such results without
their continued support.
Mel Carvill
Chairman
23 March 2023
Section 172 Statement
In discharging its duty to act
in good faith and in a way
that is most likely to promote
the long-term success of the
Company, Directors must take
into consideration the interests
of the various stakeholders of
the Company. Throughout this
report, we detail how we have
identified and given consideration
to our key stakeholders. See
pages 149 to 153 for our Section
172(1) statement which details
how the Board has engaged with
our key stakeholders and provides
examples of how stakeholder
interests have been considered
in principal decisions taken by
the Board during the year.
10
Annual Report 2022 Bank of Georgia Group PLC
Chief Executive
Officer’s statement
Archil Gachechiladze
Chief Executive Officer
2022 was an unprecedented year – which
started with the war in Ukraine, which
shocked us all, and which, sadly, remains
ongoing. Our thoughts and prayers
remain with the Ukrainian people, and I
hope this horrible human suffering ends
with a speedy resolution, however difficult
that is to imagine at times.
The resilient Georgian
macroeconomic
environment
Despite the high levels of uncertainty and
volatility during the year, however, the
Georgian economy demonstrated strong
growth momentum. We saw strong
nominal GDP growth, a reduced current
account deficit to around 3.1% of GDP,
a reduced fiscal deficit to 3.1% of GDP,
and a significant strengthening of GEL
– which appreciated by 12.5% against
the US dollar during 2022. Inflation and
tight monetary policy are still the main
challenges, but Georgia’s macroeconomic
risks overall reduced significantly – public
debt decreased to 39.6% of GDP, from
49.7% in 2021, and banking sector loans to
GDP also decreased to 62.7%, from 71.5%
a year ago. In addition, gross international
reserves increased by 14.7% in 2022 to
US$ 4.9 billion.
Our digital
transformation and
customer-centricity
Over the past few years, we have invested
significantly in our customer franchise
and the payments business and, as a
result, are now delivering significant
growth across our key performance
metrics. Our monthly active retail clients
grew to 1.6 million – a great result in a
country of 3.7 million people. Importantly,
the number of monthly active digital
users was up 31.5% year-on-year, reaching
1.1 million and representing 68.7% of our
monthly active customers, compared
to 61.1% a year ago. During the fourth
quarter of 2022, we launched the first
financial mobile application for school
students in Georgia – Bank of Georgia’s
sCoolApp – ending December with 33,167
monthly active users. Financial inclusion
is one of our main focus areas, and
we aim to enable children to improve
their financial literacy skills through
engagement with the app and the
educational content we plan to embed
into this channel.
Our payments business also continued
to excel, with the volume of transactions
through Bank of Georgia’s acquiring up
48.9% year-on-year. More than one million
people use our cards for payments at
least monthly, a 33.0% increase over
the past 12 months.
Product offloading to digital channels
increased year-on-year by more than
11 ppts to 40%, and by 6 ppts in the final
quarter of the year alone. This is also an
area where we continue to see upside
potential as we work on designing better
end-to-end product journeys across our
digital channels.
Our digital transformation over the
past few years has run in parallel with
our efforts to redesign our customer
experience. Our ambition is to be a
truly customer-centric organisation,
with innovation inspired and driven by
customer feedback, and we have been
consistent in our efforts to improve
customer satisfaction. Our customer
NPS of 58 is a wonderful achievement
by the team.
Strong earnings
momentum at
Bank of Georgia
The strength of the Georgian economy
underpinned the recent growth
momentum of Bank of Georgia. Our
market-leading digital channels and
payments solutions – coupled with
top-of-mind customer franchise and a
dedicated team with a strong customer-
centric culture – ensured we were well-
positioned to benefit from greater-than-
expected economic growth.
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We continued to build significant
momentum throughout the year,
culminating in an excellent full-year
performance with operating income
(adjusted for one-off items) up 46.6%,
profit (adjusted for one-off items) up
55.7% to GEL 1,132 million, and full-year
return on average equity standing at
32.4%
1
. We maintained a strong balance
sheet and continued to invest in building
the business. Full-year basic earnings per
share more than doubled to GEL 30.99,
and book value per share increased by
43.3% to GEL 94.07.
The most pleasing aspect of our recent
performance has been our top-line and
franchise growth. This is most evident in
the progress in net fee and commission
income growth and net foreign currency
gains – driven by the recent exchange
rate volatility and client-driven flows
as Georgia has seen strong inflows
of tourists and migrants from nearby
countries. The performance underpins our
recent strategic focus and investment
in our payment services capabilities and
digital transformation.
Net interest income increased 23.9% year-
on-year, supported by solid loan growth
and by a 50 bps year-on-year increase
in the net interest margin. Net fee and
commission income also grew significantly
– by 36.6% year-on-year – and the
regional tourist and migrant inflows also
led to exceptional levels of client-driven
foreign currency gains and commissions.
On the portfolio side, our loan book
increased by 12.9% year-on-year on a
constant currency basis, and deposit
growth was outstanding, at 43.2% year-
on-year on a constant currency basis.
This was not only supported by migrant
inflows, but also by high levels of local
economic activity, reflecting the strength
of our brand and customer franchise.
Strong capital position
and capital distribution
policy
Good profitability and the improved
GEL resulted in a strong capital position,
with historically high levels of capital
buffers. The CET1 ratio stood at
14.7% at 31 December 2022, more than
300 bps above the minimum requirement.
In addition, the one-off gain of GEL 391.1
million, recorded in the fourth quarter of
the year, arose at the holding company
level and is therefore not reflected in the
Bank’s capital ratios, which are calculated
within the regulated Bank – JSC Bank
of Georgia.
Our remarkable people
Our people are critical to the enduring
success of our organisation and, over the
past few years, we have implemented
talent development strategies that
have enabled us to build a strong talent
pipeline. We measure the effectiveness
of our human capital development
practices internally using the employee
NPS, and finished 2022 with a high
eNPS of 53. While this is slightly lower
than the all-time high at the end of
2021, it is higher than the 50 score in
April 2022 – reflecting the impact of
global inflationary pressures for many
of our workforce during the year, and
some organisational changes, including
the return to hybrid working. We listen
to our employees’ concerns and take
relevant action to create better outcomes
throughout the organisation – which in
2022 included implementing pay increases
for many of our lower-paid employees
in front office mass positions. I want to
thank all of our remarkable employees for
their commitment during what has been
an incredibly challenging year.
Outlook
Although risks remain, given the
importance of the South Caucasian
corridor for the Central Asian economies,
going forward we expect Georgia’s role
in the region to strengthen – bringing in
additional investments and economic
activity in the energy, transport and
logistics sectors over the next few
years. The Bank remains well-positioned
to capture the benefits of increased
economic activity in the country, and to
sustainably deliver strong growth and
high profitability.
Archil Gachechiladze
Chief Executive Officer
23 March 2023
1. Figures adjusted for a one-off GEL 391.1 million other income due to the settlement of an outstanding legacy claim, and a one-off GEL 79.3 million tax expense due to an
amendment to the corporate taxation model in Georgia.
This Strategic Report, as set out
on pages 4 to 167, was approved
by the Board of Directors on
23 March 2023 and signed on its
behalf by
Archil Gachechiladze
Chief Executive Officer
23 March 2023
12
Annual Report 2022 Bank of Georgia Group PLC
MACRO
OVERVIEW
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Annual Report 2022 Bank of Georgia Group PLC
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Georgia in key figures
Duty-free access to 2.3 billion-person market: Free Trade Agreements with EU, China,
Turkey, EFTA, UK, Ukraine, and CIS
Ease of doing business and low level of corruption
Open budget index
#1
Business bribery index
#33
Out of 194 countries Out of 180 countries
Out of 177 countries
Corruption perception index
#41
Economic freedom index
#26
Steady ratings and improved outlook from global rating agencies
Agency: Fitch
Rating: BB
Outlook: Positive
Date: Jan 2023
Agency: S&P
Rating: BB
Outlook: Stable
Date: Feb 2022
Agency: Moody’s
Rating: Ba2
Outlook: Negative
Date: Apr 2022
Prudent macroeconomic policy
Fiscal deficit as % of GDP
in 2022
3.1%
-3.0 ppts y-o-y
Public debt as % of GDP
in 2022
39.6%
-10.1 ppts y-o-y
Gross international reserves in
months of goods and services
imports in 2022
3.5 months
+14.7% nominal growth y-o-y
Source: Ministry of Finance of Georgia Source: Ministry of Finance of Georgia Source: National Bank of Georgia, GeoStat
Out of 120 countries
Source: International Budget Partnership
Source: TRACE Association Source: Transparency International
Source: The Heritage Foundation
Annual Report 2022 Bank of Georgia Group PLC
14
2022 was a challenging year. As the
region was recovering from the impact
of the Covid-19 pandemic, it was hit by
another major shock – Russia’s war in
Ukraine. Amid the geopolitical turbulence,
supply chain disruptions intensified and
commodity prices spiked. Businesses
started to relocate from the affected
regions and international trade flows
were rerouted. The Georgian economy
has demonstrated resilience thanks to a
safe and business-friendly environment
and its convenient geographical location.
Consequently, a considerable number
of highly skilled regional migrants and
international companies relocated or set
up operations in Georgia. Georgia also
attracted international cargo forwarders,
providing a convenient transport and
logistics corridor for international
trade flows. Given the growing interest
towards the country, external inflows
surged, international trade expanded
and investment activity started to gain
momentum. While the global economy
is slowing amid elevated prices, energy
shortages and tightened financial
conditions, the Georgian economy is
operating close to full capacity to meet
the increased demand. Although the
demand is largely cyclical, the increased
investment and relocation of capital
should contribute to improved growth
prospects in the medium term.
Increased consumption and investment
spending coupled with strong external
inflows underpinned Georgia’s double-digit
real GDP growth during the last two years.
On the back of increased export proceeds,
surging remittances and a steady recovery
in tourism revenues, external balance
improved further, supporting a stronger
Georgian Lari. The appreciation of the Lari,
accompanied by rapid growth in revenues,
resulted in a reduced debt burden of the
private sector – below 2019 levels. In 2022,
unemployment decreased by 3.4 ppts to
17.3% and fiscal parameters improved
thanks to strong economic activity.
The strong track record of the Georgian
economy and solid support of international
institutions contributed to rising interest
among international investors, with
FDI inflows reaching a record high of
US$ 2.0 billion in 2022.
2022 macro review
Export of goods
+31.8% y-o-y
US$ 5.6 B
Net money transfers
+98.2% y-o-y
US$ 4.0 B
Import of goods
+33.2% y-o-y
US$ 13.5 B
International tourism revenue
+182.5% y-o-y
US$ 3.5 B
External sector of the Georgian economy in 2022
Source: GeoStat, NBG
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Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
5.0%
10.5%
10.1%
-6.8%
2019 2020 2021 2022E
-5.9%
-3.1%
-12.5%
2019 2020 2021 2022E
64.8%
71.8%
62.6%
77.6%
2019 2020 2021 2022E
The Georgian economy
maintained strong growth
momentum in 2022 …
… while external balance
improved further, surpassing
the 2019 level …
… and debt burden continued
to ease, dropping below the
2019 level.
Real GDP growth, year-on-year Current account as % of GDP Total bank loans as % of GDP
Source: GeoStat, NBG
Inflation remained elevated in 2022,
mostly driven by food and energy prices,
with some demand-side pressures as
inbound migration and the lifting of
pandemic-related restrictions boosted
demand for housing. Inflation started
to soften in the second half of the year
due to reduction in global commodity
prices and appreciation of GEL, with
headline CPI inflation retreating to 9.8%
in December 2022 and averaging at
11.9% for the full year 2022. In response
to persistent price pressures, the National
Bank of Georgia (‘NBG’) maintained tight
monetary policy with the refinancing
rate at 11.0% since March 2022, having
gradually increased the rate by 300
bps since March 2021. Given the tight
monetary policy and strong external
inflows, GEL strengthened against the
US dollar by 12.5% in 2022. The strong
external sector also enabled the NBG
to accumulate international reserves,
which amounted to US$ 4.9 billion
at 31 December 2022.
Annual Report 2022 Bank of Georgia Group PLC
16
6.7%
5.5%
5.2%
4.9%
3.7%
3.0%
2.8%
2.4%
2.2%
2.1%
1.9%
1.7%
1.6%
1.0%
0.5%
Lithuania
Estonia
Czech Rep.
Georgia
Slovakia
Latvia
Turkey
Poland
Romania
Hungary
Croatia
Belarus
Bosnia & Herz.
Moldova
Slovenia
75%
70%
65%
60%
55%
50%
45%
40%
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
The banking sector is one of the fastest-
growing segments of the Georgian
economy, fully privately owned, with the
two largest banks accounting for 77%
of total banking assets at 31 December
2022. Prudent regulation by the NBG
has ensured the resilience of the banking
sector to various shocks. Adequate liquidity
and capitalisation levels accumulated
in the pre-pandemic period allowed the
banking sector to overcome the Covid-19
pandemic without interruptions to the flow
of credit to the economy.
Following the economic rebound, demand
for credit increased, supporting economic
recovery. Commercial banks restored
capital buffers, which were released
during the pandemic, before the date set
by the NBG.
Tightening local and global financial
conditions, coupled with the new local
regulation reducing the maximum
consumer loan term to three years,
have impacted lending growth, which
slowed to a 12.1% y-o-y growth on a
constant currency basis in 2022 after a
18.2% y-o-y growth in the previous year.
Credit growth was mainly driven by local
currency lending, leading to reduced loan
dollarisation – at 44.8% at 31 December
2022 (-5.9 ppts y-o-y). Deposit
dollarisation also continued to decrease
to 56.1% (-3.8 ppts y-o-y). The banking
sector maintained high profitability with
a 27.2% return on equity (ROE) in 2022,
while loan book quality remained strong
with non-performing loan (NPL) ratio at
1.7% based on the International Monetary
Fund (IMF)’s methodology.
The Georgian banking sector has
intensified efforts to ensure compliance
with relevant anti-money laundering
(AML) regulations and the sanctions
adopted by Western countries against
Russia. The US Department of State
has noted that the NBG along with
Georgian financial institutions acts fully
in accordance with the financial sanctions
imposed by the US and other countries
on Russia.
1
Furthermore, according to the
IMF, prompt and appropriate action by
the NBG has helped mitigate the impact
of the regional instability on the Georgian
financial sector.
2
The international
credibility and sound performance of
the Georgian financial sector makes it
attractive to international investors.
Indeed, the financial sector was one of
the largest FDI recipients in 2022.
The strong economic activity recorded in
2021-2022 is expected to be sustained in
2023, however, the growth momentum
is likely to slow due to the base effect.
Consumption is expected to be the main
growth driver despite the anticipated
slowdown in lending and the reduction
in fiscal deficit. Investment spending
should also remain strong with positive
contribution to growth on the back
of improved investor sentiments. The
contribution of net exports is projected
to decrease as external inflows stabilise.
As commodity prices abate and the
relocation of capital concludes, external
flows are expected to moderate. However,
significant headroom remains for growth
in tourism inflows with only partial
recovery in the number of visitors in 2022
compared with pre-pandemic levels. As
a result of the anticipated moderation
of external inflows, the current account
deficit may widen slightly in 2023, but is
expected to be financed mostly by FDI.
G&T forecasts a 4.8% real GDP growth in
2023, slightly above the 4.0% projection
by the IMF. Ongoing war in Ukraine, global
recession and high inflation are downside
risks. On the upside, the lasting impact of
migration, stronger tourism inflows and
higher investment spending could deliver
higher-than-expected growth.
Consumer price inflation is expected
to soften starting from early 2023.
As the Lari remains strong and global
commodity prices stabilise, price
pressures will moderate, with expected
average inflation at 5.2% in 2023. The
NBG remains concerned about inflation
risks and intends to maintain tight
monetary policy throughout 2023.
Prudently managed banking sector
Macro outlook
NPLs to total gross loans
in selected countries, 1H22
Financial dollarisation in Georgia
Source: NBG Source: IMF
Bank loan dollarisation
Bank deposit dollarisation
1. US Department of State, 2022 Investment Climate Statements: Georgia.
2. IMF Press Release NO. 22/374, IMF Reaches Staff-Level Agreement on First Review for Georgia’s Stand-By Arrangement.
17
Annual Report 2022 Bank of Georgia Group PLC
OUR
STRATEGY
Annual Report 2022 Bank of Georgia Group PLC
18
We are guided by our purpose
Helping people achieve more of their potential
We regularly engage with our
key stakeholders and consider
their views and feedback
We focus on
our strategic priorities
• Becoming increasingly relevant in our customers’ daily lives through our
payments and financial super app
• Further improving customer engagement across all business segments
• Harnessing the potential of our payments business
• Continuing to deliver an excellent customer experience
We are enabled by
We create positive impact
through our main focus areas
Our purpose and strategy framework
Financial inclusion
Employee empowerment
Education for communities
Customers
Employees
Investors Communities
Regulators
Effective risk management
Customer-centricity Data and AI
People and culture Brand strength
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Our purpose
Our stakeholders
Our strategic priorities and enablers
Our positive impact
Employee empowerment
We are committed to being the employer of choice for top talent, providing equal opportunities for development and ensuring
best employee experience underpinned by our values and business principles.
Education for communities
We have made increasing access to quality educational infrastructure and opportunities one of our priorities when designing
community initiatives.
Helping People Achieve More of Their
Potential – puts people at the heart of
our strategy and guides everything we do.
We aspire to support people at different
stages of their lives – empowering our
customers with an integrated ecosystem
of products and services, empowering
our employees with fair and inclusive
workplace and opportunities for
personal and professional growth, and
empowering people in our communities
by fostering financial inclusion and
education with our core products and
services as well as with our community
projects. Our purpose enables us to
deliver sustainable returns for our
shareholders and build long-term
shared value.
We aim to balance the different interests of our key stakeholders – customers, employees, communities, investors, and regulators –
in our decision-making. We believe that transparency and openness are key to sustainable value creation, and we regularly engage
with our stakeholders to hear their feedback.
We aim to deliver on our purpose and
drive sustainable returns to shareholders
by focusing on our strategic priorities.
Our strategic priorities are what we aim
to achieve and the strategic enablers are
the ‘how’ behind them.
Over the past few years, we have invested
significantly in customer experience,
people development, and our information
technology (IT) and data capabilities,
and we continue to maintain our focus
on these areas as the core foundation for
future growth.
Bank of Georgia is the top-of-mind
and the most trusted bank in Georgia
1
,
and maintaining the trust and brand
recognition is a top priority, ensuring
that we continue our strong customer
franchise growth.
1. Based on an independent research by IPM Georgia conducted in autumn 2022.
We recognise the huge responsibilities
that our role brings – from supporting
the needs of customers to the positive
impacts we can have on people as one
of the biggest employers in Georgia and
on the wider communities as a motivator,
partnership builder and a donor. We have
identified three focus areas where we
believe we can now make a meaningful
contribution and build long-term value
in our business:
Financial inclusion
We use the power of technology and product innovation to provide accessible and affordable financial services to our communities,
and we use the power of our outreach to increase financial literacy through digital content as well as personal interactions with
our customers.
20
Annual Report 2022 Bank of Georgia Group PLC
Engaging with our stakeholders for shared success
Customers
Customer-centricity is one of our business
principles and one of the key enablers of
our success. We are committed to serving
our customers responsibly, considering
their best interests, fulfilling a variety of
their needs, delivering positive experiences
across touch points, and engaging
with them regularly to learn from their
feedback.
What do they tell us?
How do we respond to them?
We engage with our customers in a
variety of ways, including:
• Running regular surveys – telephone
surveys, e-mail surveys, focus groups
and NPS surveys (internal and external).
• Analysing real-time feedback received
in Medallia – a leading customer
experience management software we
have been using since 2019.
• Analysing customer complaints and
interacting with clients during the
‘close-the-loop’ process.
• Our bankers and relationship
managers interacting with our clients
and supporting them with advice on
financial wellbeing and different banking
products or services. Such interactions
also provide insight into customer
wants, concerns and expectations.
Customers want:
• A smooth, fast and secure payment
process, including payments through
POS, self-service terminals or digital
channels.
• Simplicity of procedures, products and
services.
• More services and actions available in
digital channels.
We continue to enhance our digital value
propositions by simplifying and improving
the user experience and functionality of
our retail mobile app and internet banking
platforms. To increase and simplify digital
interactions we use chatbots and live
chats. We continue to add new products
and functionalities relevant for our clients,
and to simplify the daily banking process
so they can do what they need in a few
clicks – wherever they are. We also invest
in our payments business, and in 2022
Google Pay was introduced. To improve
the experience for our merchant clients,
we rolled out an instant settlement
process so that payments are now
instantly reflected on merchant accounts.
This functionality is used by 97% of our
merchants.
Employees
Our employees drive the success of
our organisation, and we aim to be
employer of choice for top talent –
ensuring fair employee practices and
equal opportunities for personal and
professional development, and building
the kind of culture that underpins long-
term value creation.
What do they tell us?
How do we respond to them?
We have a variety of communication
channels to ensure we listen and consider
different perspectives in decision-
making, including employee satisfaction
and engagement surveys, and personal
interviews. We also ensure our employees
can directly and openly communicate
with the Bank’s senior leadership and the
Supervisory Board, including through:
• town hall meetings with the CEO and
Executive Management;
• CEO vlog on Workplace and periodic
live sessions with Q&As on current
developments; and
• Employee Voice meetings with the
Supervisory Board, held since 2018.
In 2022 we ran the Korn Ferry survey:
• 78% would recommend our company as
a good place to work.
• 81% believe the Company values and
promotes employee diversity.
• Overall, employee engagement was 70%
and employee enablement was 73%, in
line with high-performing organisations
benchmarks.
Employees also shared what they would
like to see us improve:
• 29% would like to receive clear and
regular feedback on how well they do
their work, and want opportunities
to achieve their career goals at the
Company.
• 23% would like to have better training to
enable new hires to succeed in their roles
In 2022 we undertook several initiatives,
including:
• job levelling and career mapping
completed for all positions at the Bank;
• hybrid work made available for back
office employees;
• Key performance indicator (KPI) module
integrated into the employee portal
to strengthen the feedback culture
and make decision-making more
transparent; and
• training on effective feedback delivered
to managers.
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Communities
Delivering long-term value depends on our
continuous engagement with different
individuals and groups that represent
our communities.
What do they tell us?
How do we respond to them?
We interact with a wide range of
stakeholders in our communities, both
face-to-face and via social media. We
use ‘Ideathecas’ – the multifunctional
libraries in schools designed with Bank
of Georgia’s support – to meet school
children and teachers in remote areas. We
sponsor various scholarship and education
competitions, where we have a chance to
meet hundreds of young people. Social
media activities enable us to receive
feedback from the wider population.
As access to education in communities is
one of our impact focus areas, we receive
many inquiries regarding educational
opportunities for students. As a leading
organisation in Georgia, we are expected
to support people in the communities
where we operate.
Additionally, in 2022, people asked us to
provide a simpler way to help Ukrainian
people.
To provide access to books and modern
technology to students living in Georgia’s
remote areas, we continue to open
multifunctional libraries (Ideathecas)
across Georgia, adding seven new
Ideathecas in 2022. We have continued
to sponsor scholarships, including the
Fulbright and Chevening scholarships.
To support Ukrainian people, we enabled
everyone to donate money without a
banking commission. The donations were
transferred to the Red Cross. More than
GEL 1.8 million was donated, out of which
Bank of Georgia’s contribution amounted
to GEL 500,000.
Investors
Our ongoing engagement programme
with both equity and fixed income
investors is instrumental in understanding
our owners’ and lenders’ priorities. We
aim to align our long-term strategic
priorities with those of our investors, and
minimise the cost of our equity and debt
funding. Maintaining transparent and
regular communication is a fundamental
part of our investor engagement process.
What do they tell us?
How do we respond to them?
Our Chief Executive, Archil Gachechiladze,
met with our largest institutional
shareholders, highlighting the Bank’s
leading position in digital banking and
its focus on customer-centricity, the high
quality of the Bank’s balance sheet, and
its strong profitability.
Our business growth and profitability
enabled the Group to enhance its capital
repatriation policy, in line with investor
wishes, to include the introduction
of a share buyback and cancellation
programme, which started in 2022.
Mel Carvill, our new Chairman,
participated in a number of introductory
meetings with some of our largest
shareholders.
We also continued to develop our ESG
agenda, building on our 2021 ESG
materiality assessment and the launch
of the Bank’s climate action programme.
We have a comprehensive investor
engagement programme. In 2022, this
included the Chairman, Independent
Board Directors, the Chief Executive
Officer, the Chief Financial Officer, and
other senior members of management
and the Investor Relations team.
Throughout the year we engaged with
more than 350 institutional equity and
fixed income investors, and participated
in more than 20 investor conferences
and roadshows. A number of topics were
top of mind for the Group’s investors,
including:
• The impact of the regional geopolitical
and macroeconomic environment on
Georgia and Bank of Georgia. As events
evolved, investors asked about the
impact of the relocation of a significant
number of individuals and businesses
to Georgia, which supported the
unexpectedly strong macroeconomic
growth during 2022.
• The Group’s approach to capital
allocation, balancing growth
expectations with potential capital
returns to shareholders.
• The development of customer franchise
and how Bank of Georgia’s leading
digital and payments capabilities
supported the Group’s competitive
position.
• ESG matters, the management of
climate-related risks, and the Group’s
social impacts.
22
Annual Report 2022 Bank of Georgia Group PLC
YEAR IN REVIEW
– EMPOWERING
INDIVIDUALS
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Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Savings
Investments
Insurance
Rewards
Lifestyle
Daily Banking
Payments
Credit
ON EVERY STEP OF
THE CUSTOMER
JOURNEY
INDIVIDUAL
Fulfilling customers’ financial and lifestyle needs
We serve a diverse retail customer
base – from school students, university
students and young professionals to self-
employed, mass affluent and high-net-
worth individuals – and are now playing
an even bigger part in people’s lives.
We enable the fulfilment of their daily
financial and lifestyle needs through a
suite of products and offerings embedded
into our financial super app (mBank) –
the one app customers use to manage
their entire financial lives – and provide
tailored solutions and guidance during
key moments.
Customer needs evolve and change with
time, and different customer segments
have different priorities. A school student
wants to do a quick money request, while
a young professional starts thinking
about buying an apartment and investing
for the future. And, while priorities and
preferences differ from client to client,
they all expect transparency in the way
we communicate with them and a great
customer experience.
During 2022 we enriched our products
and offerings and continued to focus
on providing an excellent customer
experience across channels, but with
a strong focus on the app as the go-to
channel of the future.
We grew the number of monthly active
retail clients by 17.1% y-o-y to 1.6 million
as of 31 December 2022, with the share
of active clients using our mobile and
internet banking platforms at 69%,
up from 61% a year ago.
1.6M
Monthly active individuals
+17.1% y-o-y
1.5M
Mass Retail
+16.4% y-o-y
91.5K
Premium Banking
(SOLO and WM)
+30.5% y-o-y
Annual Report 2022 Bank of Georgia Group PLC
24
Our financial super app (mBank)
Our financial mobile app – mBank – is a highly rated and popular financial application in Georgia, with more than one million
monthly and more than half a million daily active users.
For detailed KPIs of our digital channels,
see page 54.
Sometimes it is more convenient for our retail customers to do things at their desktops, and for this, we continuously develop our
internet banking platform – iBank – which mostly reflects the features and products of the mobile application.
4.8 4.8
Customer satisfaction score (4Q22)
89
(87 in 4Q21)
Works without WiFi and mobile data
Quick customer digital onboarding process
Highly rated among global fintechs
What we did in 2022
New service bundles for Mass Retail customers launched and made available in the mobile application.
SOLO clients can now view their subscription package and all the benefits in the mobile application.
Artificial intelligence (AI)-based virtual assistant with enhanced functionality, capable of conducting more
than 20 tasks, including exporting account statements, checking balance, and blocking and unblocking
cards. Closes around a third of all customer inquiries. In addition, we have a chatbot on our internet
banking platform.
AI-based engine that analyses customer behaviour and detects potential fraud.
Selection of travel insurance offers from four insurance providers.
SUBSCRIPTIONS
CHATBOT
FRAUD MANAGEMENT
SOFTWARE
TRAVEL INSURANCE
25
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Our objective is to ensure our mobile app and internet banking platform are our main sales channels, and we are focused on
improving the user experience and simplifying processes so that it is easy and convenient to use these channels for product
activations. Although we increased the share of product sales through digital channels to 44.1% in December 2022 compared with
30.5% in December 2021, thanks, in part, to redesigned deposit products, we still have further upside in this area, and this is one of
the KPIs that we will continue to monitor closely during 2023. Currently we are working on improving the card activation process
in the app and internet bank. Customers can receive a digital card instantly, but many customers still prefer to get a physical card,
and they tend to use branches to collect their cards. We are aiming to improve the card delivery process so that the convenience of
walking to a local branch is substituted with an instant mobile experience.
Our vision of the financial super app we are building revolves around customers’ needs, which go beyond daily transactional banking
and core banking products such as deposits and loans. Over the past two years, we have added a number of non-banking financial
products to our mobile app that has supported the strong growth of digital customers. However, we are yet to unlock more benefits
of these products and increase their adoption in areas such as the insurance marketplace or retail brokerage. 2023 will be the year
of increasing focus on customer engagement within our mobile app.
The quality of our mobile application and superior user experience have been recognised globally. We won Global Finance’s
World’s Best Consumer Digital Bank 2022 category. Our super app initiative has also been named Best Digital Initiative by the
InformaConnect Banking Tech Awards.
Customers can link any BOG card to a public transportation package and use their card to ride on public
transport.
PUBLIC TRANSPORTATION
World’s Best Consumer
Digital Bank
Best Online Deposit, Card
and Investment Product
Offerings in Central and
Eastern Europe 2022
(Consumer)
Best Mobile Banking App in
Central and Eastern Europe
2022 (Consumer)
Best in Lending in Central
and Eastern Europe 2022
(Consumer)
Global Finance
InformaConnect Banking Tech Awards
Winner: Best Digital Initiative: Bank of Georgia
– SuperApp
Highly commended: Best UX/CX in Finance Initiative:
Bank of Georgia – Design System
Added a dedicated space for Buy Now, Pay Later (BNPL) offers. Customers can now view and activate
their BNPL limits through the mobile application.
BUY NOW, PAY LATER
Annual Report 2022 Bank of Georgia Group PLC
26
Bank of Georgia is a leader in retail
daily banking solutions, with more
than half a million people using our
mobile application and internet banking
platform every day and thousands of
payments executed with our cards and
in our acquiring network every hour. We
continuously develop our products and
services to turn daily interactions with
our clients into positive experiences that
are fast, straightforward, and hassle-
free. Our digital platforms enable clients
to perform a variety of daily tasks –
including sending or receiving money,
paying bills, tracking spending, setting up
automated payments and doing currency
conversions.
In 2022, we launched subscription sets
and a payments webpage – bogpay.ge –
to make daily banking even more
convenient.
Daily banking
Subscription sets
bogpay.ge
In 2022, we introduced subscription sets for our Mass Retail customers, tailored to their needs and behaviours. A subscription
set gives customers a bundle of products and daily banking services for a fixed monthly fee – avoiding the hassle of tracking and
understanding individual transaction fees and increasing transparency of use.
In 2022, we created bogpay.ge – an
online version of our physical BOG Pay
terminals, enabling people to pay for up
to 500 services. Customers can pay online
using any Georgian bank card – as well
as Bank of Georgia’s PLUS points – and
the payment is reflected on a provider’s
account instantly.
We offer three types of subscription sets,
with the main difference between them
being the free transactions limits.
Clients can activate, upgrade or disable
a subscription set through mBank/iBank.
We launched this product by the end of
November 2022, and as at 31 December
2022, 39K clients had an active
subscription set.
Our SOLO business model has always
been subscription-based, bundling
financial and lifestyle services for clients
for a fixed monthly fee. Until 2023, SOLO
offered two options: SOLO and SOLO
Club at a higher monthly fee, which
includes additional privileges such as a
personal assistant service. In early 2023,
we launched a third option: SOLO X,
tailored to those clients who want to
benefit from SOLO’s lifestyle proposition
without needing the full-blown
SOLO service and a personal banker.
These clients are comfortable doing
transactions digitally without additional
support. With SOLO X, we believe we can
serve a larger customer pool and provide
lifestyle benefits to more clients.
The bundle includes:
• A multi-currency account.
• Free plastic and/or digital card.
• Free mBank/iBank services.
• Free SMS services.
• Automated payments and transfers.
• Free digital transfers, payments
and ATM withdrawals within the
predefined limit, depending on the
type of subscription.
27
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Contact and
contactless card
payments
Apple Pay / Google Pay QR
Payment with
loyalty points
(PLUS and MR)
BNPL
Our clients want a fast and frictionless
payments experience – where they can
simply tap to pay in-store or use their
loyalty points to pay in-store and online.
We believe cashless payments benefit
people – not just because it is easier and
safer when you do not handle cash, but
also because paying with a card opens up
other possibilities, including:
For our retail clients, we offer a variety of payment methods:
Payments
• Rewards such as cashback, discounts, and more loyalty points.
• Greater visibility of our customers’ needs and preferences, enabling us to make more personalised offers.
• Greater control over personal finances, giving people a clear and full view of where and how they spend their money – so they can
better manage personal finances. The Personal Finance Manager is available in our financial mobile app.
Google Pay was introduced in Georgia
in November 2022. Our customers can
activate a free digital card instantly
through our mobile app or our internet
banking platform. They can add the
card to their wallet and start making
payments right away.
Last year we noted that one of the
metrics we track to understand the use
of cashless payments is what we refer
to as Payment MAU – customers who
used our cards for payment at least once
during a month.
We have increased not only the absolute
number of monthly card users, but also
the share of such customers in total
active individual clients – from 48% two
years ago to 64% in December 2022.
We also track the share of income
received by our customers that is being
cashed out. In 2022 this figure was 61%,
versus 39% for card transactions. Our
goal is to increase the share of income
that customers spend with cards
versus cash.
To incentivise cashless payments, we
enrich our payments solutions to give
our customers a smoother payment
experience and more benefits.
In 2021, we rolled out PLUS – the first
American Express debit card project in
EMEA and the second globally. The PLUS
card lets us transfer more benefits to
our customers (for example, more
cashback and discounts), especially
in daily spend categories, thanks to lower
transaction costs.
During 2022 we also enhanced our
Buy Now, Pay Later (BNPL) offering for
online shopping. We rebranded BNPL as
a payment method and redesigned the
product activation flow. Our customers
can now activate and see their BNPL
limits in the mobile app, and see the list of
merchants where they can use BNPL. As
at 31 December 2022, BOG’s BNPL was
offered at more than 50 merchants for
online shopping.
609K
Dec-20
782K
Dec-21
1,040K
Dec-22
Annual Report 2022 Bank of Georgia Group PLC
28
One of the key enablers of increasing
cashless payments and customer
stickiness is Bank of Georgia’s loyalty
programme, within which our clients
accumulate PLUS points as they pay in
BOG’s acquiring network (physical POS
and online). Clients get different status
levels depending on their activity with
the Bank, and higher status level means
greater benefits.
We changed the programme in 2021 to
enable customers to upgrade their status
if they carry out more payments. Before
this, only product use counted towards
status upgrades, and our objective was to
incentivise cashless payments and make
the programme benefits more accessible
to more clients.
Our objective is to increase the use of
PLUS points. During 2022 we expanded
our network of partner merchants where
PLUS points could be used as a payment
method. In our mobile app we also added
the GEL equivalent below PLUS points,
so clients know right away how much
‘money’ they have available to spend.
As at 31 December 2022, around 8,000
partner merchants accepted PLUS points,
compared with around 250 at the start
of the year. In total, Bank of Georgia had
14.5K active merchants in its acquiring
network at the end of December 2022.
We offer a variety of benefits to our
loyalty programme members – discounts,
cashback and PLUS points. One of the
main aspects of the value proposition
is the personalisation of lifestyle offers.
Throughout 2022, we had around 300
PLUS card-related offers and more than
200 offers tailored to sCool Card and
Student Card holders.
During 2022 we continued to enhance the
Offers Hub – a dedicated single space for
lifestyle offers from partner merchants
in our financial mobile app. The Offers
Hub is powered by our recommendation
engine, which automatically analyses
customers’ preferences based on their
behaviour across different touchpoints
and delivers relevant offers. The Offers
Hub is one of our key tools for growing
customer engagement.
Bank of Georgia’s lifestyle offers are
tailored to the needs and preferences of
specific segments, and we have special
offers for sCool Card holders, Student
card holders, and Premium Banking
(SOLO) clients.
In 2022 we launched a dedicated web
page – offers.bog.ge – so customers can
look for offers based on their interests,
and filter based on card and offer type.
Lifestyle and rewards
A snapshot of 2022 lifestyle offers from our partners
738
Total offers (excl.
SOLO-specific ones)
683
SOLO-specific offers
Unique customers who
exchanged PLUS points at
least once
486,761
+28.4% y-o-y
Unique customers who
exchanged MR points at least
once
15,551
+11.3% y-o-y
Value of PLUS points exchanged
GEL 25,212,509
+82.8% y-o-y
Value of MR points exchanged
GEL 4,913,114
+22.7% y-o-y
29
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
In addition to lifestyle offers from
our partners, SOLO’s unique value
proposition includes lifestyle experiences
for our premium segment customers. We
continuously expand SOLO lifestyle offers
in the travel, entertainment, education,
and wellbeing categories to sustain
customer stickiness and the strength
of the SOLO brand.
During 2022, we held around two SOLO
events per week – 92 in total. More than
2,000 SOLO customers participated in
these events.
Through SOLO we give access to exclusive
products and the finest concierge-style
environment at our 11 specially designed
SOLO lounges located across Georgia.
SOLO is a unique banking concept in
one space, combining privileged financial
and advisory services and unlimited
lifestyle experiences. At SOLO lounges,
personal bankers serve our clients and,
in addition to providing banking solutions,
offer luxury goods and other lifestyle
experiences, such as exclusive events,
concerts of world-famous artists, special
travel tours, the SOLO boutique, exclusive
benefits, and other hand-picked lifestyle
products and services. This unique blend
of banking and lifestyle offerings sustains
the strong interest in the SOLO brand.
As at 31 December 2022, SOLO served
around 90K active customers, up 30.7%
y-o-y, reflecting the ongoing popularity
of this brand. SOLO Club, a membership
group within SOLO, which was launched
in 2017, offers exclusive access to SOLO’s
products and offerings ahead of other
SOLO clients, at a higher fee. One such
exclusive product is American Express
Platinum card, available only to SOLO
Club members. Since 2019, SOLO Club
members have also enjoyed the benefits
of a personal assistant service for
lifestyle offerings.
Lifestyle experiences for SOLO clients
Unique experiences for SOLOs
37
SOLO Talks
13
SOLO Hobby
2
SOLO Workshop
31
SOLO Kids
9
SOLO One to One
Annual Report 2022 Bank of Georgia Group PLC
30
INVESTMENTS IN MOBILE BANK
www.investiciebi.ge
To promote investing and general
financial literacy in 2022, we primarily
used three channels: media, our own
social networks, and events. We
collaborate with leading business media
companies in Georgia that enable us to
actively provide educational content and
an overview of financial and economic
developments, including updates on
global financial markets. G&T also
frequently publishes financial articles
on its website, written by its analysts.
During 2022 we hosted events, including
SOLO talks, to discuss investments.
We also held interactive sessions at
Georgian universities. We will continue to
collaborate with various outlets to help
develop financial and investment literacy
among our customers and the wider
population.
We launched insurance marketplace in
2022 in our mobile application, enabling
our customers to choose among third-
party insurance offerings and purchase
insurance in the app.
We now have two types of insurance
offerings: third-party auto insurance and
travel insurance.
During 2022, the share of digital
activation of these two types of plans
stood at 19%.
At the end of 2021, Bank of Georgia,
together with the Group’s subsidiary JSC
Galt & Taggart (G&T) and in partnership
with a US brokerage house DriveWealth
LLC, launched a retail brokerage platform
– BOG Investments – in Bank of Georgia’s
mobile application, enabling access to the
US stock market. BOG Investments offers
our retail customers low-cost trading and
even fractional trading options. In 2023
we aim to enhance existing functionalities
and add new features that will give
clients tools to manage their savings
more effectively.
In addition to BOG Investments, G&T
offers brokerage solutions through two
accounts: execution brokerage – an
offline brokerage account with personal
broker services, and G&T Trading solution
through trader.ge – a white label solution
in partnership with Saxo Bank. Through
these accounts we provide access to
more complex products to affluent and
high-net-worth individuals and more
experienced investors, including
legal entities.
We see substantial potential in retail
brokerage in Georgia over the medium
term as the share of investment securities
in households’ financial assets is below
5%. However, this type of product is new
to the market. Since its launch, we have
mostly focused on increasing awareness
of investments, the associated risks and
benefits, and other financial topics. Going
forward, we will continue the distribution
of educational content and work on
enhancing the functionalities of the
product itself to increase its adoption.
Insurance marketplace
Investments
Media Social network Events
1.2K
Written pieces
120 TV
Business channel visits
170
Posts
2.1M
People reached
25+
Events
31
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Bank of Georgia’s core business activity
is lending. We aim to create simpler
end-to-end customer journeys for loans,
increasing access to finance while doing
so responsibility, in line with the Bank’s
risk appetite and underpinned by prudent
risk management practices.
In 2021 we redesigned the unsecured
consumer lending flow in digital channels,
and the share of these loans sold digitally
increased from 37% in December 2020
to 64% in December 2022.
Throughout 2022 we worked on a number
of lending process improvements. One
of the major changes happened in the
lending process for individuals with
income sources from self-employment
or unofficial employment. While this
type of individuals mostly behave as
typical retail customers, we did not
have a straightforward process to serve
this segment and did not offer typical
retail products, such as consumer loans
or instalments, to them. In 2022 we
redesigned the process so that self-
employed individuals can now access
a broad range of credit products in
digital channels.
The process of income validation is also
fast and simple – we determine the
amount of income using a predetermined
matrix, and the professional activity is
being validated by a video call or/and, if
necessary, a site visit and a more detailed
study of the field of activity.
Given that self-employed people often
have seasonal income, we can offer
income-based payment schedules to
help our customers with loan servicing.
As at 31 December 2022, we had 46K
self-employed borrower clients. Our goal
is to increase access to finance among
self-employed individuals. By the end of
2023, we aim to have 57K self-employed
borrower clients.
During 2022 we changed the terms for
some of our savings products to make
them more flexible and accessible for our
customers and to incentivise the use of
our digital channels:
• We removed the minimum opening
amount on demand deposits.
• We removed the deposit opening fee
in digital channels.
In 2022, we also added a money box
(digital piggy-bank) as a separate
product to our digital channels. Previously,
customers could have a money box only
linked to a deposit. Now, customers can
open a money box independently of a
deposit. It can be a current account where
our clients can save some money from
every payment they make. Money box
can be de-activated and activated at
any time.
To incentivise the use of digital channels,
we are offering higher rates on deposits
opened through our mobile application.
The share of deposits activated digitally
was 39.1% in December 2022, compared
with 29.0% a year ago.
For Premium Banking (SOLO) customers
we have an upgraded savings product,
‘Premium.’ SOLO clients receive a higher
return on this deposit, with rates linked
to the monetary policy rate.
As at 31 December 2022, 286K Mass
Retail and Premium Banking clients had
an active time deposit, up 1.9% y-o-y.
As at 31 December 2022, 119K customers
had an active money box as a standalone
product.
Credit
Savings
Annual Report 2022 Bank of Georgia Group PLC
32
We believe financial inclusion starts in
childhood.
Around 625K school students live in
Georgia – more than 50% of them live
outside of Georgia’s capital, Tbilisi. Our
priority is to onboard more of these
young people, making sure they become
part of the formal financial system,
teaching them financial literacy skills,
and supporting them with simple daily
banking solutions and a variety of
relevant lifestyle offers. We offer a free
account and a daily banking card, sCool
Card, to school students, complete with a
recently launched mobile app – sCoolApp.
sCoolApp is the first financial application for young people in Georgia. Launched in October 2022, it keeps young people safe with
our end-to-end security, spending alerts, custom limits and in-app card controls.
sCoolApp is becoming popular, with 33,167 monthly active users in December 2022. Our target is to finish 2023 with 70,000 monthly
active users.
Empowering young people
Money box (digital ‘piggy bank’)
Money request
Special offers
Different skins for app
sCoolApp
Special offers: discounts, cashback,
more loyalty points at select partner
merchants.
We usually have around 30 active lifestyle
offers for school students each month.
Some are education-related, including
discounts on educational courses/
trainings, special offers from book shops
and publishing houses. In 2022, more than
14K school students used educational
offers.
Active users of sCool Card
for payments (Dec-22)
64K
+179.0% y-o-y
Active sCool Card holders
(Dec-22)
88K
+118.0% y-o-y
Can be ordered on our website or through the app
Free card
Free SMS, mobile and internet banking
Free public transportation in Tbilisi and Rustavi;
discounts in Zugdidi and Batumi
No fee on BOG ATM withdrawal
Loyalty programme: accumulation of sCool points
sCool Card
33
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
68%
47%
32%
Onboarding and increasing engagement
with university students in Georgia is one
of our priorities. Our value proposition
for students includes a free Student
Card and daily banking services, public
transport benefits, and special offers
throughout the year from partner
merchants.
According to an independent third-party
research, we are the most trusted and
top-of-mind bank for young people aged
18-24 in Georgia
1
. Everyone in this age
group is aware of Bank of Georgia.
Ten Georgian universities are enrolled in
Bank of Georgia’s payroll programme.
Bank of Georgia’s partnerships with
universities enables us to reach more
students and involves different activities,
including:
• Distributing student cards directly
from university buildings.
• Financial support in organising student
graduations and anniversaries.
• Designing student spaces.
• Short-term internship programmes
for students, along with ‘Leaderator’ –
Bank of Georgia’s flagship programme
for motivated undergraduates.
Students
Monthly active Student
Card holders
(Dec-22)
169K
+25.7% y-o-y
Monthly active digital
users
(Dec-22)
161K
+26.9% y-o-y
Monthly active users of
Student Card for payments
(Dec-22)
125K
+26.9% y-o-y
Reaching school students in Georgia’s regions
To increase financial literacy among the
youth, together with the National Bank of
Georgia, we participate in Global Money
Week Challenge – where we have reached
more than 4,500 children. We have
also held talks on financial topics in
Ideathecas – multifunctional libraries
we sponsored in Georgia’s regions.
In 2022, we also sponsored the Komarovi
School STEM camp, which included
lessons on economic topics in different
schools. In 2023, we plan to expand
our focus on financial education and
will create video tutorials and instant
experiences of banking products, as well
as guides and savings recommendations.
Tbilisi
Share of total number of pupils having a sCool Card
Rustavi Batumi
1. Based on fall 2022 independent research by IPM Georgia.
34
Annual Report 2022 Bank of Georgia Group PLC
YEAR IN REVIEW
– EMPOWERING
BUSINESSES
35
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
BUSINESS
Daily business
operations
Sales
Business growth
and development
Process
optimisation
Fulfilling business customers’ needs
We serve a variety of business clients,
including micro businesses, small and
medium-sized enterprises, and large
corporations. We understand that there is
no ‘one-size-fits-all’ approach to address
the needs of each business client because
business needs and attributes differ,
depending on the business model, size,
complexity of operations, operating and
financial environment and a variety of
other micro factors. Needs also evolve
as businesses grow and develop. Bank of
Georgia aims to be a 360° trusted partner
for businesses in Georgia, support them
at different stages of their development
through a suite of products and services,
including third-party solutions, and
deepen customer relationships and
engagement.
Bank of Georgia provides not just
financial services, but also value-added
services, including consulting and access
to education. We engage with our
business clients in a variety of ways,
from dedicated relationship managers
and a dedicated business branch, 4B,
to our digital channels – Business mBank
and iBank.
Throughout 2022, we enhanced our
processes, providing our clients with
faster access to finance, fostering
their growth, and offering tailor-made
solutions. As a result, we have grown the
number of active business clients during
2022 by 26%.
81K
Monthly active business clients
+25.7% y-o-y
3K
Corporate Banking
+17.0% y-o-y
78K
MSME
+26.2% y-o-y
Annual Report 2022 Bank of Georgia Group PLC
36
We serve our business clients through
multiple channels and touchpoints, aiming
to provide a superior digital experience
and excellent customer care.
For MSME clients, we have dedicated
relationship managers who take a
holistic view on clients and are focused
on providing end-to-end support for
business development or bankers covering
a portfolio of clients, focused more on
supporting clients in their banking needs.
Based on certain criteria, other clients are
served by remote bankers, or fully through
digital channels. In 2020, we opened a
special business branch, 4B, designed
to create unique experiences, including
events and networking opportunities,
for our business customers.
For big corporate clients, we have an
established proactive customer coverage
model led by a relationship manager. Our
relationship managers are highly skilled
professionals fully equipped with financial
structuring tools and deep sector-specific
knowledge, able to offer quality advisory
service. Strengthening sector-specific
expertise is one of Corporate Banking’s
top priorities. In 2022 we created a
construction sector-specific team in
Corporate Banking (CB) that monitors
development and construction projects
on-site. The formation of this team has
led to improved oversight of ongoing
projects and better financing of the
real estate sector.
While face-to-face interactions and
relationships are often key to driving
shared success in this customer segment,
we continuously develop our digital
platforms so that clients can carry out
daily tasks quickly and on their own,
leaving more time for tailored advice and
business support that they receive from
the Bank.
In addition to support provided at the
Bank, our business clients, especially
big corporates, benefit from corporate
advisory services of the Group’s fully-
owned subsidiary, G&T.
Coverage of business clients
Corporate Banking gross loans by sector
1
:
4B
CALL CENTRE &
CHAT
RETAIL
BRANCHES
REMOTE
BANKERS
BUSINESS
BANKERS
RELATIONSHIP
MANAGERS
DIGITAL
CHANNELS
MAIN TOUCHPOINTS
WITH BUSINESS
CLIENTS
Manufacturing
14.8%
4.5%
Real estate
15.4%
Trade
8.7%
Agriculture,
hunting and forestry
12.1%
Construction
4.9%
Electricity, gas
and water supply
9.1%
Hospitality
12.6%
Other
18.0%
Financial
intermediation
Individual
entrepreneurs
58.1%
Other
7.6%
Trade
12.0%
Manufacturing
6.0%
Construction
5.9%
Real estate
3.4%
Agriculture, hunting
and forestry
2.6%
Hospitality
4.4%
MSME Banking gross loans by sector
1
:
1. As at 31 December 2022.
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Financial Statements Additional Information
The most effective way to support our
business clients, MSMEs and bigger
corporates, is by pairing financial support
with value-added services that drive
success. This includes tailored one-on-one
support, especially relevant in CB, where
dedicated bankers with strong sector-
specific expertise provide a portfolio of
clients with expert advice and end-to-end
support. For MSMEs, we have different
coverage models for different clients –
some are served by dedicated relationship
managers, while others are served
remotely.
Irrespective of business size, we run
a number of initiatives supporting
clients in different ways – including
capability-building programmes (for
example, enhancing digital, marketing
and leadership skills), advice from
experts on how to navigate the market,
and introductions and networking
opportunities. We believe that education,
information sharing and professional
network development are crucial during
the entire business lifecycle.
Advisory services, business education and support
We have built a network of quality advisory service providers, available to our clients for free or at a significant discount.
70 professional consulting firms involved.
171 MSME clients benefitted.
We continued to develop our educational
platform – businesscourse.ge.
31 courses are now available on this
platform. 14 new courses were added
in 2022.
Courses cover topics including ESG,
human capital development, digital
marketing, exports, sales, finance and
accounting.
9,000 business managers used the
content on this platform.
A snapshot of our support in 2022
Advisory
Information sharing
Education
Business development
Business advice
In 2022 we started a social media series called
Business Advice
. In short videos, business managers share their insights and
experience. We published five videos in 2022 and plan to continue this series in 2023.
Webinars
18 webinars attended by around 4,000 businesses, covering relevant macroeconomic and business topics including financing options,
export strategies, accounting practices, digital accounting, human resources (HR) strategy. Webinars were open to all Bank of
Georgia customers.
Export and sales programme (together with USAID)
We organised a trade mission in Uzbekistan for 11 Georgian ICT companies interested in exporting their services, and they had the
opportunity to network with more 50 Uzbek companies.
Galt & Taggart research:
G&T publishes weekly, monthly and
quarterly insights and analyses related
to global and local macroeconomic
development as well as sector-specific
reports. G&T also provides reports
tailored to clients’ needs, including
analyses on investment opportunities.
In 2022, G&T enhanced its weekly global
equity markets analysis, providing
weekly updates on developments in key
economies and global equity markets, and
organised several conferences/meetings
for clients.
G&T published more than 100 reports
(available at https://galtandtaggart.com/
en), reaching 8,000 unique subscribers,
and enlarged its custom research client-
base – with projects commissioned by
international development organisations.
Annual Report 2022 Bank of Georgia Group PLC
38
Digitalisation
We continued our partnership with Visa
and a Group’s subsidiary JSC Digital Area,
helping 40 women-owned businesses
digitise inventory management and sell
on e-commerce marketplace extra.ge
(60 businesses participated in this
programme in 2021).
85 of participating businesses (most of
them operating in production of jewellery,
toys, clothes and crafts) still continue to
use these digital platforms.
In the beginning of 2022 we signed a
memorandum with the United Nations
Development Programme (UNDP),
committing to individually coach 200
women entrepreneurs. Throughout the
year 70 women entrepreneurs from the
production, education, HORECA, and
healthcare sectors – 85% of which had a
registered business – were involved in the
programme. It comprised online trainings,
five-day offline sessions in marketing,
digital marketing, financial management,
leadership, sales management, and
individual coaching.
In December 2022, together with the
European Fund for Southeast Europe
(EFSE), we started a new project
for women entrepreneurs, in which
successful women entrepreneurs share
their experience. We had a session in
digital sales and marketing moderated
by the founder of Phubber – a digital
marketplace connecting buyers and seller
of fashion items and a 500-Georgia
participant – and we plan to continue
the project in 2023, inviting speakers
to empower women to digitise their
businesses.
G&T provides financial advisory services
to private and public companies, private
equity houses, and high net-worth
individuals in both domestic and cross-
border transactions. In 2022, G&T’s
corporate advisory unit was involved in
the Capital Market Support Programme
funded by the European Union (EU) and
implemented by the European Bank
for Reconstruction and Development
(EBRD)’s Capital & Financial Markets
Development team. This programme
intended to raise awareness of capital
markets, develop incentives for companies
to access capital markets, and implement
a mechanism to co-finance costs related
to capital markets access. During the
year, more than ten webinars and boot
camps were organised on capital market
topics. In addition, 21 companies from
12 different sectors were registered –
15 are potential new issuers, tapping the
capital market for the first time. G&T
also obtained M&A mandates for large
local corporates in the real estate,
FMCG, hospitality, and retail sectors.
G&T’s DCM/ECM services include
support in accessing local, regional and
international debt, and equity capital
markets. During the past ten years, the
team has assisted local corporates and
International Financial Institutions (IFIs)
in raising GEL 3.2 billion bonds through
the local capital market. G&T has also
acted as a co-manager for more than
US$ 2.3 billion Eurobonds since 2016.
In 2022, G&T acted as a placement agent
for seven corporate bonds amounting
to around GEL 500 million – five of
these corporates were Bank of Georgia’s
CB clients – and an IFI bond of GEL
100 million.
Empowering women entrepreneurs
Corporate advisory and DCM/ECM support through Galt & Taggart
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Financial Statements Additional Information
145 MSMEs have already participated in
our Accounting Development Programme
since it was introduced in 2022. The
programme has three core components:
1. Digitalisation – giving our business
clients discounted access to accounting
software.
2. Full accounting services – helping our
business clients partner with top local
service providers to outsource their
accounting.
3. Quick sharing of financial information
with the Bank – integrating clients’
accounting software with the Bank’s
internal systems.
This initiative has raised awareness of
the role proper accounting software plays
in facilitating business operations and,
together with Visa and USAID, we have
made two accounting software packages
available for businesses that could not
otherwise afford them.
We have also collaborated with Georgia’s
top accounting firms to provide special
opportunities to our clients.
Within the scope of our partnerships,
Japan International Cooperation
Agency (JICA) has enabled ten women
entrepreneurs to implement good
accounting practices in their companies,
while Nexia TA helped them digitise their
accounting, develop individual policies
and minimise tax risks – eight of these
women-owned companies have continued
to collaborate with Nexia TA following the
programme’s completion.
Primary production in Georgia is VAT-
exempt, and the lack of tax obligation
can translate into lack of reporting –
leading to low transparency for both
businesses and financial institutions.
We have partnered with EFSE and
Nexia's Georgian representatives to help
streamline the accounting process for
19 clients in the agricultural sector.
Most of these businesses were startups,
owned by young entrepreneurs. In
collaboration with EFSE and Nexia,
we helped train owners and managers
on sound accounting practices, and five of
these companies have continued working
with Nexia following the programme’s
completion.
One of the biggest obstacles MSMEs
face when they need access to finance
is a lack of proper accounting. Bank of
Georgia runs an Accounting Development
Programme to help such businesses
implement proper accounting practices
– enabling the Bank to access relevant
financial information quickly for faster,
more efficient decision-making.
Fostering financial inclusion for MSMEs
Accounting Development Programme:
Agro accounting
Annual Report 2022 Bank of Georgia Group PLC
40
Business mobile application and
internet banking platform
MAU (Dec-22)
58K
+39.0% y-o-y
Number of transactions
14.8M
+37.9% y-o-y
Customer satisfaction score (mBank)
85 (4Q22)
(79 in 4Q21)
Customer satisfaction score (iBank)
82 (4Q22)
(73 in 4Q21)
1. As at December 2022.
What we did in 2022
Merchant view of all POS operations (online and offline) available in digital channels – piloted.
Businesses can now apply for and activate a credit limit in Business iBank.
AI-based personalised offers for businesses available in Business internet bank.
POS TRANSACTIONS
SME CREDIT LIMIT
ACTIVATION
PERSONALISED
FINANCIAL OFFERS
71% of our monthly active business
customers are monthly active users of
our business mobile application and
internet banking platform. More than
a third of monthly active digital users
log into mBank and iBank daily
1
. For
business users, iBank has been a more
popular platform because people who
actually do the operations have preferred
desktop views, but Business mBank has
also gained traction and is particularly
relevant for business owners who want
to have a full view of their business
on the go.
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Financial Statements Additional Information
Businesses can link other bank accounts to BOG’s internet bank and get a 360°
view of their financial assets.
Digital business card is available and can be activated instantly from internet and mobile bank.
Businesses can prepay loans directly from Business mBank and iBank.
AI-based engine that analyses customer behaviour and detects potential fraud.
OPEN BANKING
DIGITAL CARDS
LOAN PREPAYMENTS
FRAUD MANAGEMENT
SOFTWARE
The Best Mobile Banking App in Central and Eastern Europe for 2022 (Corporate)
Global Finance
Annual Report 2022 Bank of Georgia Group PLC
42
We enable thousands of businesses in
Georgia to grow their business in-store
and online by accepting payments through
a variety of innovative methods. Bank of
Georgia has more than a 50% market
share in terms of volume of payments
processed throughout the country.
In 2022 we focused on enhancing the
user experience and service quality for
our merchants by providing solutions to
the key issues they face – as shown in the
table below. A better customer experience
will lead to more merchants using our
services to accept cashless payments,
helping facilitate the cashless economy
and growing e-commerce in Georgia.
Merchant issues How Bank of Georgia solved them
Complex onboarding process
with cumbersome paperwork
Quick and frictionless onboarding – c.90% of merchants are on-boarded
online, with POS equipment in most cases delivered within one business day.
Settlement delay
Instant settlement. 97% of merchants use this functionality to receive funds
in real time.
Technical hardware and
software glitches
Continuous SLA control to ensure proper functioning of our terminals.
We measure merchants’ satisfaction quarterly:
POS terminal CSAT was 76% in 4Q22 (up from 69% in 1Q22);
E-commerce CSAT was 73% in 4Q22 (up from 63% in 1Q22).
Lack of data and analysis to
inform business decisions
We piloted a payments manager platform – simplifying and digitising daily
operations to give merchants a full picture of transactions statistics –
and a campaigns manager platform, helping businesses set up campaigns
targeting preferred customer segments.
Complex online payments
integration
Ready-made plugins for popular web platforms, allowing integration of
payment methods within a few hours.
We offer a variety of online and offline payment solutions:
Merchant solutions
In store
POS terminal
(standard, Android-based)
Diversity of payment methods including
Apple Pay, Google Pay, all international
payment cards, BNPL and loyalty points
(PLUS/MR).
POS terminal with
cash register
Two-in-one solution – cash register is
integrated with POS terminal.
Soft POS terminal on any Android NFC device
Fully certified application for any Android phone, with ‘PIN on glass’ functionality and
no monthly fee (we use a transaction-based fee model).
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Financial Statements Additional Information
All international cards
Loyalty points
(PLUS and MR)
Apple Pay Google Pay
BNPL
Instalments
Recurring payments
E-invoicing
Lending is one of the key enablers of
profitable growth for our MSME banking
business, and we have focused on digitising
the customer journey and reducing touch-
time to improve operational efficiency and
customer satisfaction. We are continuously
developing and improving our products and
processes so we can make decisions faster
and more effectively, and are moving more
lending-related activity to digital channels.
In 2022 we started a project to incorporate
pre-approved credit limits to our digital
channels for our business customers, so
that SME clients could see existing credit
limits and activate a so-called fast loan
digitally. Over the past few years, business
clients have increasingly been using our
mobile and internet banking platforms
for transactional banking, however, unlike
in retail segments, the loan disbursement
process happened offline through the
branches. We are now moving away from
a traditional way of loan disbursements
and aim to increase product activations
through our business digital channels.
The addition of credit limits is our first
and important step in this direction that
will allow us to increase efficiency and
customer satisfaction. In 2023, we will
focus on enhancing this process and
adapting it, as required, to specific needs
of our clients in different economic sectors.
Other improvements throughout 2022
included the addition of a digital credit line
activation functionality, so our SME clients
do not need to call a banker or visit a
branch now. Customers can also pay their
loans in advance through digital channels.
Within the framework of the Accounting
Development Programme, we are working
on integrating our internal systems with
clients’ accounting software to enable
faster sharing of financial information,
which will speed up the decision-making
process.
Lending
Online
Highlights of 2022
14.5K
Active merchants
(total)
+26.8% y-o-y
467
Active e-commerce
merchants
+30.4% y-o-y
GEL 10.2B
Volume of transactions in
BOG’s acquiring in 2022 (total)
+48.9% y-o-y
51.3% market share (Dec-22)
+6.7 ppts y-o-y
State and special programmes
Bank of Georgia participates in a number
of state-supported programmes enabling
MSMEs to access credit products tailored
to their needs, including the ‘Preferential
Agrocredit Project’ and ‘Produce in
Georgia’, which are based on the co-
financing of an interest, and the ‘State
Guarantee Scheme’, which provides
credit guarantees.
We also partner with IFIs to fund lending
to local businesses. Funding mechanisms
include offering cashback and guarantees,
and are aimed at supporting business
development.
As at 31 December 2022, the outstanding
loan portfolio under state and special
programmes was GEL 623 million.
Annual Report 2022 Bank of Georgia Group PLC
44
Net loans
GEL 3.8 BN
+8.9% y-o-y
Net loans
GEL 3.2 BN
+6.2% y-o-y
Client deposits
GEL 4.7 BN
+19.9% y-o-y
Client deposits
GEL 6.3 BN
+38.6% y-o-y
Profit
3
GEL 194 M
+124.9% y-o-y
Profit
3
GEL 208 M
+57.9% y-o-y
NPS
2
(4Q22 average)
77
(76 – 4Q21 average)
NPS
2
(SOLO)
78
(79 in 4Q21)
NPS
2
(WM)
83
(70 in 4Q20)
(latest available)
Wealth Management AUM
GEL 2.0 BN
+30.0% y-o-y
ROAE
3
31.8%
(17.9% in 2021)
ROAE
3
35.7%
(25.5% in 2021)
Share of active customers using
mBank/iBank
67.4%
+7.0 ppts y-o-y
Share of active customers using
mBank/iBank
91.0%
+1.5 ppts y-o-y
Segment snapshot
Mass Retail
1
Premium Banking
1
1. Figures given for JSC Bank of Georgia standalone.
2. NPS is a monthly average during the fourth quarter.
3. Figures were adjusted for one-off items. Mass Retail, Premium Banking, and MSME figures were adjusted for a one-off income tax expense, and Corporate
and Investment Banking figures were adjusted for a one-off other income and a one-off income tax expense.
Best Private Bank in Georgia Global Finance 2023
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Financial Statements Additional Information
Net loans
GEL 4.4 BN
+13.5% y-o-y
Net loans
GEL 4.9 BN
-3.4% y-o-y
Client deposits
GEL 1.5 BN
+30.9% y-o-y
Client deposits
GEL 4.8 BN
+20.2% y-o-y
Profit
3
GEL 159 M
+24.8% y-o-y
Profit
3
GEL 494 M
+35.0% y-o-y
NPS
2
(SME)
78
(77 in 4Q21)
NPS
2
(Micro)
76
(77 in 4Q21)
NPS
2
(CB)
85
(85 in 4Q21)
Galt & Taggart AUM
GEL 1.5 BN
+0.8% y-o-y
1. Figures given for JSC Bank of Georgia standalone.
2. NPS is a monthly average during the fourth quarter.
3. Figures were adjusted for one-off items. Mass Retail, Premium Banking, and MSME figures were adjusted for a one-off income tax expense, and Corporate
and Investment Banking figures were adjusted for a one-off other income and a one-off income tax expense.
ROAE
3
23.5%
(22.4% in 2021)
ROAE
3
39.1%
(34.6% in 2021)
Share of active customers using
mBank/iBank
70.0%
+6.9 ppts y-o-y
Share of active customers (CB)
using mBank/iBank
92.7%
+1.1 ppts y-o-y
MSME
1
Corporate and Investment Banking
Best SME Banking in Central and Eastern Europe Global Finance 2022
Annual Report 2022 Bank of Georgia Group PLC
46
Digital Area snapshot
Digital Area is a group of companies within our Group that includes an e-commerce marketplace extra.ge and other beyond-banking
offerings for businesses.
Merchants
2,050
+97.1% y-o-y
Number of transactions
12.7M
+135.2% y-o-y
GMV
GEL 135M
+141.9% y-o-y
In 2022, Extra.ge redesigned its website and improved
its mobile application in response to customer feedback.
The redesigned user experience and user interface and better
operational processes are reflected in an NPS of 86 at the end
of 2022 (versus 84 in 2021).
Merchants
500+
Products (SKUs)
100K+
Annual gross merchandise
value (GMV) growth
+42.3% y-o-y
MAU
350K
(up 5.1% y-o-y)
Extra.ge
Moitane.ge
Optimo
Moitane is an on-demand daily goods
delivery platform, offering a variety of
products, including groceries, packaged
food, healthcare products, beauty
products and gifts, all delivered within
30 minutes. In the fourth quarter of 2022,
JSC Digital Area became a partner of
the company, having invested growth
capital that will enable Moitane’s further
development.
Optimo is an inventory and sales
management software for traditional
retail and e-commerce businesses.
Optimo’s digital inventory management
and POS solution with integrated
software and a variety of functions
and analytical tools enable businesses
to easily manage sales and inventory.
Clients can access data and insights on
sales transactions, inventory, revenues,
and profitability, anytime and anywhere,
so they can make timely decisions with
relevant information at hand. Optimo
covers two main business lines: software
as a service and data monetisation.
47
Annual Report 2022 Bank of Georgia Group PLC
KEY ENABLERS
OF VALUE
CREATION
Annual Report 2022 Bank of Georgia Group PLC
48
53
50
61
60
58
46
Nov-20Nov-19 Nov-21 Apr-22 Dec-22Apr-21
Oct-17
May-18
Sep-19
Jun-19
Nov-19
Feb-20
Aug-20
Dec-20
Mar-21
J un-21
Sep-21
Dec-21
Mar-22
J un-22
Sep-22
Dec-22
33 33
39
38
37
42
46
49
43
47
55
54
52
60
34
58
Our people drive our shared success. We
want to recruit, retain, and engage talented
people with different perspectives and life
and career experiences, providing a safe
and inclusive environment that enables
personal and professional development
and teamwork, supporting our longer-
term success. We are committed to
equal opportunities and do not tolerate
discrimination, bullying, harassment or
victimisation based on any grounds.
We are focused on hiring people with
the skills and competencies to support
our strategic priorities. We have strong
relationships with local talent pools and
continue to upskill local students through
our special, rotation-based internship
programme – Leaderator.
We aim to cultivate a culture of feedback
and lifelong learning and work on providing
a wide range of development opportunities
to our employees, including semi-annual
development reviews, personal coaching
and leadership programmes.
With help from our Employee Experience
Management (EXM) team, we proactively
engage with our employees and place an
equal weight on listening to our people
and on keeping them informed. We also
run employee surveys throughout the
year and consider the results during the
conversations at the Board and Executive
Management levels. These surveys help
us assess our culture and how we run
our organisation.
During 2022, the Bank’s eNPS score
decreased to 53 (from 61 at the end of
2021), slightly below our targeted range
of 54-62 for 2022. We aim to have eNPS
in the range of 54 – 62 during 2023.
The decrease was mainly driven by the
adverse impact of inflationary pressures
on our lower paid employees, especially
those in front office roles, as well as by
some dissatisfaction with workplace
arrangements as we moved back office
staff to a hybrid working model in 2022,
following a fully remote work mode
during the Covid-19 pandemic. As our
staff increases, we recognise the need to
have comfortable work spaces to support
employee wellbeing and productivity, and
we are working on adding and renovating
new office space to address the concerns
raised by some of our colleagues. We
also continue to monitor the labour
market and remuneration practices at
comparable companies to ensure that
we remain a competitive employer of top
talent and to adjust our remuneration
practices if and when necessary.
Our people and culture
eNPS
We believe the success and sustainability
of our organisation depend on
maintaining a positive customer
experience as people interact with
Bank of Georgia across touch points.
We have become a truly customer-
centric organisation by implementing
the organisation-wide processes,
including management-level regular
CX reviews, and KPIs to monitor and
act on customer feedback.
A key metric that we monitor is the Bank-
wide NPS, measured by an independent
third party – interviewing people who may
not be our active clients. During the past
few years, we have seen a substantial
increase in customer satisfaction, and we
aim to keep improving our service and the
overall experience with the Bank.
Customer-centricity
NPS
In 2019, we purchased a leading customer
experience management platform,
Medallia, to support the Bank’s team
in optimising customer experience
management practices, capturing and
prioritising large amounts of customer
feedback in real time, sharing valuable
insights across teams, and driving actions
to improve the overall customer experience
across all segments and channels.
We collect feedback in real-time across
digital channels (mBank, iBank, Business
iBank and Business mBank, website) via
pop-up questionnaires, and we use SMS
surveys to connect with customers who
have used our call centre or a retail branch.
We monitor the feedback received and
customer satisfaction with different
channels, and analyse data by segments,
using Medallia dashboards.
We use ‘alerts’ for customers who were
not fully satisfied with our channels or
services to ‘close the loop’ efficiently:
we provide immediate help and support –
get in touch with them, answer questions
and resolve their issues. We also use
the ‘close-the-loop’ process to identify
actionable insights and then work
closely with various teams to implement
systemic improvements.
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Financial Statements Additional Information
Since launch, we have added Medallia to all key channels
During 2022 we continued to strengthen
the Bank’s advanced analytics and
AI capabilities to enable better decision-
making, efficiency, and customer
engagement and satisfaction. We use
machine learning models to anticipate
financial and lifestyle needs, wants and
behaviours so we can offer services
tailored to each customer’s unique
context and positive experiences across
diverse physical and online ecosystems.
As a customer-centric organisation, we
aim to offer highly personalised solutions
facilitated by intuitive, simple, and
fast interactions.
Data and AI-powered business
Our data team
More than 100 data professionals, including more than 40 data scientists.
Data lab
Our data research lab focuses on speech,
reasoning and vision technologies, which
provide vital components to smart virtual
assistants and decision engines. Currently,
we are developing Georgian Natural
Language Understanding (Georgian
NLU), Georgian Speech-to-Text (Georgian
S2T), Answer Retriever (Georgian AR),
Topic Modelling and Sentiment Analysis,
based on cutting-edge algorithms and
technologies.
The NLU component is already present
in Bank of Georgia’s chatbot, which is
responsible for dynamic understanding
of customer intents and needs as
conversations progress. We have also
matured Georgian S2T technology and
plan to operationalise it during 2023 –
one of the use cases will be automatically
transcribing customer calls for quality
monitoring and flagging for reviews,
enabling offloading from human agents
and faster discovery and resolution of
customers’ pain points.
Data culture
A strong data culture is key to our long-
term growth and value creation, and we
aim to foster continuous improvement
and innovation to differentiate the
customer and employee experience.
We want more people to use data to
support their day-to-day work and
decision-making, so our data teams
collaborate with others across the
business daily, as well as have monthly
syncs – exchanging ideas and sharing
feedback to keep this top-of-mind.
One of our main objectives is to create
a culture that will attract top talent in
data and related fields.
The Bank’s internship programme –
Leaderator – attracts the best students
from Georgian universities. We offer three
tracks: data science, data engineering
and data product testers. Around 90%
of our Leaderator participants are later
hired full-time.
To popularise Bank of Georgia as an
employer of choice for data professionals,
in 2022 we organised two Data
Challenges asking people to find solutions
for various machine learning problems.
The prize pool was GEL 50,000 – at least
five times the sums usually offered at
similar competitions in Georgia. This has
attracted a great selection of potential
employees, and we have successfully hired
outstanding participants.
In 2023, we plan to concentrate on
maturing our data analytics function
and translating analytics results into
business impact. We plan to focus on
strengthening collaboration between
business and data analytics teams
and introducing a standardised way of
measuring business impact of analytical
products. On the talent development side,
we plan to define clearer career paths
for professionals and managers, build
competence development programmes,
and help our analytics leaders develop
their leadership skills.
550K+
Customer responses were
collected and analysed
44K+
Customers engaged during the
‘close-the-loop’ process (when a client
was not satisfied or left a comment)
48% (Dec-22)
of total product sales
enabled by AI
47% (Dec-21)
37% (Dec-22)
of inquiries handled
by chatbot
1
end-to-end
25% (Dec-21)
96% (Dec-22)
automation rate
in consumer lending
91% (Dec-21)
1. The average value of the last week of December.
50
Annual Report 2022 Bank of Georgia Group PLC
KEY
PERFORMANCE
INDICATORS
51
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Financial Statements Additional Information
2022
2021
2020
1,132.2
727.1
294.9
2022
2021
2020
32.0%
37. 2%
39.7%
2022
2021
2020
32.4%
25.8%
13.0%
2022
2021
2020
5.4%
4.9%
4.6%
2022
2021
2020
1,444.0
727.1
294.9
2022
2021
2020
26.8%
37. 2%
39.7%
2022
2021
2020
41.4%
25.8%
13.0%
2022
2021
2020
30.99
15.22
6.17
We track and analyse a broad range
of financial and non-financial metrics
that reflect our strategic priorities to
assess the success of our strategy and
ensure that we are aligned with our
medium-term objectives. Some of these
performance metrics are also linked to
the way we pay our employees, including
at executive management level. For
more information, please see Directors’
Remuneration Report on pages 202
to 222. Key metrics used in the 2022
assessment include the metrics presented
here as well as the broader discussion of
our performance in this report, including
in the Sustainable Business section.
Financial KPIs
Profitability KPIs
Efficiency KPIs
The Group posted a profit (adjusted for one-off items) of GEL 1,132.2 million in 2022, reflecting strong franchise growth and the
growth momentum of the Georgian economy.
In 2022 the cost to income ratio (adjusted for one-off items) improved to 32.0% vs. 37.2% in prior year, reflecting strong revenue
growth and efficient cost control.
The 2022 profit is adjusted for a one-off GEL 391.1 million other income
due to the settlement of an outstanding legacy claim, and a one-off
GEL 79.3 million tax expense due to an amendment to the corporate
taxation model in Georgia.
Net interest income for the year divided by monthly average interest
earning assets, excluding cash, for the same year.
ROAE has been adjusted based on the adjusted profit as described above.
Profit is calculated in accordance with IFRS and represents operating
income and profit (loss) from associates, less operating expenses,
cost of risk, non-recurring items and income tax expense.
Profit attributable to shareholders divided by weighted average
number of outstanding shares less treasury shares.
The 2022 adjusted cost to income ratio excludes a one-off GEL 391.1 million
other income due to the settlement of an outstanding legacy claim.
Operating expenses divided by operating income.
Profit attributable to shareholders divided by monthly average
total equity attributable to shareholders. Total equity attributable
to shareholders comprises share capital, additional paid-in capital,
treasury shares, retained earnings, and other reserves.
Profit (adjusted)
(GEL million)
1,132.2
+55.7% y-o-y
Return on average equity
(adjusted)
32.4%
+6.6 ppts y-o-y
Cost to income ratio
(adjusted)
32.0%
-5.2 ppts y-o-y
Cost to income ratio
(reported)
26.8%
-10.4 ppts y-o-y
Net interest margin
5.4%
+0.5 ppts y-o-y
Return on average equity
(reported)
41.4%
+15.6 ppts y-o-y
Profit (reported)
(GEL million)
1,444.0
+98.6% y-o-y
Basic earnings per share
(GEL)
30.99
+103.6% y-o-y
Annual Report 2022 Bank of Georgia Group PLC
52
2022
2021
2020
4.3
15.9
18.9
2022
2021
2020
30.1%
0.1%
39.1%
2022
2021
2020
2.7%
2.4%
3.7%
2022
2021
2020
12.9%
19.8%
10.2%
2022
2021
2020
43.2%
12.5%
28.6%
2022
2021
2020
0.8%
0.0%
1.8%
Growth KPIs
Asset quality KPIs
On a constant currency basis, loan portfolio was up by 12.9% y-o-y, and in nominal terms, it increased by 4.3% y-o-y as at
31 December 2022. The main drivers of the nominal growth were Retail Banking’s consumer loans and SME loans. During 2022
we had a significant growth of client deposits and notes, reflecting increased client and migrant inflows and the strength of
Bank of Georgia’s customer franchise.
Cost of credit risk ratio for the full year 2022 was 0.8%, driven by Retail Banking.
NPLs to gross loans increased from 2.4% at 31 December 2021 to 2.7% at 31 December 2022, and the NPL coverage ratio decreased
from 95.5% at 31 December 2021 to 66.4% at 31 December 2022. The increase of NPL ratio and the decrease of NPL coverage ratio
were driven by a one-off methodological change as we are aligning our internal NPL definitions more closely to IFRS Stage 3 definitions.
Net loans to customers and finance lease receivables at the end of the
year compared with the end of the previous year.
NPL ratio equals non-performing loans divided by total gross loans.
Client deposits and notes at the end of the year compared with
the end of the previous year.
Net loans to customers and finance lease receivables at the end of the
year compared with the end of the previous year, excluding the foreign
exchange rate effect.
Cost of credit risk ratio equals expected credit loss on loans to
customers and finance lease receivables for the year divided by monthly
average gross loans to customers and finance lease receivables for the
same year.
Client deposits and notes at the end of the year compared with the
end of the previous year, excluding the foreign exchange rate effect.
Net loan book growth
(nominal)
4.3%
Deposits growth
(nominal)
30.1%
NPL
ratio
2.7%
+0.3 ppts y-o-y
Net loan book growth
(constant currency)
12.9%
Deposits growth
(constant currency)
43.2%
Cost of credit
risk ratio
0.8%
+0.8 ppts y-o-y
53
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
2022
2021
2020
14.7%
13.2%
10.4%
2022
2021
2020
132.4%
124.0%
138.6%
2022
2021
2020
5.8
6.6
7.6
2022
2021
2020
131.9%
132.5%
137.5%
Capital and liquidity KPIs
As at 31 December 2022, the Bank’s Basel III Common Equity Tier 1, Tier 1, and Total capital adequacy ratios stood at 14.7%,
16.7%, and 19.8%, respectively, all comfortably above the minimum requirements of 11.6%, 13.8% and 17.2%, respectively.
The Bank’s risk-weighted assets increased by 12.8% y-o-y as at 31 December 2022.
Bank of Georgia also maintained strong liquidity and funding positions throughout the year.
NBG (Basel III) CET1 capital adequacy ratio equals CET1 capital divided
by total risk-weighted assets, both calculated in accordance with the
requirements of the National Bank of Georgia.
NBG (Basel III) liquidity coverage ratio equals high-quality liquid assets
divided by net cash outflows over the next 30 days, both calculated in
accordance with the requirements of the National Bank of Georgia.
Leverage (times) equals total liabilities divided by total equity.
NBG (Basel III) net stable funding ratio equals available amount of
stable funding divided by the required amount of stable funding, both
calculated in accordance with the requirements of the National Bank
of Georgia.
CET1 capital adequacy ratio
(NBG, Basel III)
14.7%
+1.5 ppts y-o-y
Liquidity coverage ratio
(NBG, Basel III)
132.4%
+8.4 ppts y-o-y
Leverage
(times)
5.8
Net stable funding ratio
(NBG, Basel III)
131.9%
-0.6 ppts y-o-y
Annual Report 2022 Bank of Georgia Group PLC
54
2022
2021
2020
58
55
46
1,632.4
1,394.5
1,270.4
Dec-2022
Dec-2021
Dec-2020
533.3
37 7. 2
275.3
Dec-2022
Dec-2021
Dec-2020
2022
2021
2020
53
61
58
1,121.4
852.7
698.8
Dec-2022
Dec-2021
Dec-2020
47.6%
44 .2%
39.4%
Dec-2022
Dec-2021
Dec-2020
Number of active retail customers and digital engagement
The monthly active clients grew 17.1% y-o-y and amounted to 1.6 million individuals as of 31 December 2022. Growth rates of digital
MAU and daily active digital users DAU were even higher, 31.5% and 41.4%, respectively, reflecting increasing digital uptake. DAU/
MAU stood at 47.6%, up by 3.4 ppts, reflecting greater daily engagement of our clients.
An individual who meets pre-defined activity criteria.
Average number of daily active mBank and iBank users by logins within
the past month.
An individual who logged in to mBank/iBank at least once within the
past month.
Daily active digital users divided by monthly active digital users.
Non-financial KPIs
Customer satisfaction and employee empowerment
We regularly analyse customer satisfaction across channels through Medallia and also through external and internal surveys. We use
customer feedback to identify root causes of problems and improve our products and processes. As a customer-centric organisation,
we invest in technology and advanced-analytics capabilities to deliver more positive and personalised customer experiences. The Bank’s
NPS, measured quarterly by an independent third-party agency, was 58 by the end of 2022.
We know we cannot have happy clients without engaged and empowered employees. Since 2019 we have been measuring eNPS at
least twice a year. In November 2022 eNPS was 53, up from 50 in April 2022, but slightly down from the highest result of 61 recorded
in November 2021.
Non-financial figures are given for JSC Bank of Georgia standalone.
NPS asks: on a scale of 0-10, how likely is it that you would recommend
our Bank to a friend or a colleague?
The responses: 9 and 10 – are promoters; 7 and 8 – are neutral; 1 to 6 –
are detractors. The final score equals the percentage of the promoters
minus the percentage of the detractors.
eNPS asks: on a scale of 0-10, how likely is it that you, as an employee,
would recommend our Bank as an employer to a friend or a colleague?
The responses: 9 and 10 – are promoters; 7 and 8 – are neutral; 1 to
6 – are detractors. The final score equals to the percentage of the
promoters minus the percentage of the detractors.
Net Promoter Score
(NPS) – latest
58
+3.0 points y-o-y
Monthly active individual clients
(thousands)
1,632.4
+17.1% y-o-y
DAU (individuals)
(thousands)
533.3
+41.4% y-o-y
Employee Net Promoter Score
(eNPS) – latest
53.0
-8.0 points y-o-y
Digital MAU (individuals)
(thousands)
1,121.4
+31.5% y-o-y
DAU/MAU
47.6%
+3.4 ppts y-o-y
55
Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Dec-2022
Dec-2021
Dec-2020
44.1%
30.5%
23.6%
2022
2021
2020
10,212.8
6,858.7
4,370.6
2022
2021
2020
1,039.8
781.9
608.9
2022
2021
2020
81.3
64.7
55.2
4Q22
4Q21
4Q20
58.2%
50.8%
39.7%
Dec-2022
Dec-2021
Dec-2020
51.3%
44.6%
37.6%
2022
2021
2020
486.8
379.0
354. 2
2022
2021
2020
57.6
41.4
27. 3
Acquiring
Bank of Georgia is the leader in the acquiring business in Georgia, with more than 50% of all payments going through BOG’s POS
and e-commerce terminals. As at 31 December 2022, the Bank had 34.9K active terminals (in-store and online) at 14.5K active
merchants (up 27.2% and 26.8% y-o-y, respectively).
Volume of POS and e-commerce payment transactions executed in
BOG’s POS terminals (in-store and online).
Number of products activated through digital channels divided by total
product activations for the period.
Number of transactions through mBank and iBank divided by total
number of transactions for the same period.
Volume of payment transactions in BOG’s terminals (in-store and
online) divided by total volume of payment transactions in POS and
e-commerce terminals on the local market.
Loyalty
Number of active business clients and digitalisation
In 2022 the number of monthly active card users exceeded 1 million. With our loyalty programme benefits, we incentivise our
customers to be ‘cashless’ and use cards for payments. More than 486 thousand clients – almost 50% of active loyalty programme
members – exchanged PLUS points during 2022.
Our business clients are also becoming more digital, and we are focused on building product activation capabilities into our
digital channels.
A business client that meets pre-defined activity criteria. A business client that logged in to Business mBank/iBank at least once
within the past month.
An individual who used a BOG card for payments at least once within
the past month.
Number of customers who exchanged PLUS points during the past
year.
Share of products activated through
digital channels (Dec-22)
44.1%
+13.6 ppts y-o-y
Volume of payment transactions
in BOG acquiring
(GEL billions)
10,212.8
+48.9% y-o-y
Payments MAU (individuals)
(thousands)
1,039.8
+33.0% y-o-y
Number of active business clients
(thousands)
81.3
+25.7% y-o-y
Share of transactions through
mBank and iBank (4Q22)
58.2%
+7.4 ppts y-o-y
Acquiring market share
(December)
51.3%
+6.7 ppts y-o-y
Clients who exchanged
loyalty points
(thousands)
486.8
+28.4% y-o-y
Monthly active digital users
(business mBank/iBank)
(thousands)
57.6
+39.0% y-o-y
Digitalisation
We continue to launch new products and features in our mobile app and internet banking platform to promote increasing use of the
Bank’s digital channels for daily banking as well as product activations.
56
Annual Report 2022 Bank of Georgia Group PLC
RISK
MANAGEMENT
57
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Financial Statements Additional Information
Overview
Management of risk is critical in
the successful execution of the
Group’s strategy – material risks and
uncertainties across business lines
and portfolios are key focus areas for
management and the Board. We identify,
assess, mitigate, and monitor risks
through an integrated risk management
and control framework, supported
by formal policies and procedures,
clearly delegated authority levels and
comprehensive reporting. The Board
confirms our framework has been in
place throughout the year under review
and as of the date of approval of this
Annual Report, and that it is integrated
into both our business planning and
viability assessment processes. The
Board, supported by its Audit and Risk
Committees and Executive Management
(EM), is ultimately responsible for
the Group’s risk management and
internal controls.
Our framework
We operate an Enterprise Risk
Management (ERM) framework,
ensuring the governance, capabilities
and methods are in place to facilitate
risk management across the Group. By
setting out the standards and objectives
for risk management and defining the
roles and responsibilities, the framework
allows the Group to take a holistic
view and establishes a routine for risk
management, providing visibility of the
relationships between the various risk
types, a portfolio view of all significant
risks, a risk profile, and guiding principles
for the treatment of risk.
The framework incorporates risk
governance, the ‘three lines of defence’
model and the Risk function’s mandate.
It aims to continuously assess risks
throughout the lifecycle of key operations,
and comprises the following steps:
• a bottom-up risk identification,
assessment, and measurement
through relevant key risk indicators;
• a risk appetite framework, cascaded
down through sets of operational
limits;
• risk treatment through mitigation
activities (where appropriate); and
• risk monitoring and reporting through
ongoing monitoring and control,
allowing timely adaptation to any
significant changes in the underlying
assumptions and/or conditions on
which the risk assessments were
based. Any identified issues are
escalated as needed.
Each business line engages in the risk
management process by identifying key
risks that are an inherent part of our
activity and may significantly influence
the Group’s performance or prospects.
The principal risks and uncertainties faced
by the Group are identified through this
bottom-up process.
A description of these Principal Risks and
Uncertainties, including outlook, recent
drivers and mitigation efforts, can be
found on pages 62 to 81.
Risk identification
Risk identification is performed regularly
and is a joint effort of the business and
the risk management functions. The
main goal is to detect potential risks in
a timely manner and to avoid potential
harm those risks would bring. In case
of material internal or external change,
additional ad hoc risk identification can
be performed. The Board of Directors also
regularly discusses and debates key risks
and management’s approach to manage
those risks.
Risk assessment and
measurement
Each identified risk is assessed based
on its likelihood and potential financial
and non-financial impacts, before being
compared to our overall risk appetite
and specific limits or triggers. We then
prioritise risks and decide which need
immediate risk response strategies
to align identified exposures with the
Group’s risk tolerances.
Risk treatment
Risk mitigating activities are developed
and implemented to reduce the potential
impact of a particular risk. When
evaluating possible mitigating actions,
costs and benefits, residual risks (those
that are retained) and secondary risks
(those arising from risk mitigation itself)
are also considered. All key controls are
recorded and reviewed on a regular basis.
When a control is not working effectively,
root causes are analysed and action
plans are developed and implemented
to improve the control design.
Risk monitoring
and reporting
The Group monitors if appropriate
actions are taken in a timely, consistent
and systematic manner. Executive
Management assesses the effectiveness
of the implementation of the risk
management and internal control policies
and procedures, and periodically reviews
the output from the bottom-up process.
Key risks are escalated to the appropriate
level of authority. Any significant changes
and developments affecting our risks
and respective mitigating actions are
reviewed quarterly (of more often,
if necessary) by the Audit and Risk
Committees and reported to the Board
of Directors. In addition, monthly risk
reporting provides senior management
with the information they need to
manage risks.
Risk appetite framework
Risk appetite (RA) is the type and level of
risk the Group is willing to take in pursuit
of its strategic objectives and business
plans. The risk appetite framework is a
key component of the ERM framework
and supports effective risk management
by promoting sound risk-taking within
agreed limits. The Group has established
risk appetite limits for principal risks to
ensure it can meet its strategic objectives
and medium-term targets even during
challenging economic and operating
environments.
The risk appetite limits are reviewed
and approved annually by the Board of
Directors. Our Risk Appetite Statement
details the risk parameters within which
the Group operates. The risk profile
relative to risk appetite is monitored
and reported monthly to Executive
Management and quarterly to the
Board of Directors.
Risk management
Annual Report 2022 Bank of Georgia Group PLC
58
Identify and
assess risks
Approval of RA
by the Board
Monitor and
manage risk limits
Define risk appetite
(RA)
Risk management continued
Risk culture
Risk culture is at the heart of the
Group’s risk management framework
and risk management practice. A strong
culture, starting with the Board of
Directors, supports the Group in ensuring
ethical business operations and that
performance, risk and reward are aligned.
Our risk culture aims to ensure that
all employees: (i) understand the risks
associated with individual roles; (ii)
consider risks and consult with the Risk
function during the development of
new products, procedures, policies and
systems; (iii) align risk appetite and
decision-making; (iv) identify, escalate
and proactively manage risk matters, in
accordance with the risk management
framework; and (v) report and
communicate risks transparently.
Learning
Enabling employees to have the
awareness and capabilities to manage
risk is core to the Group’s learning
strategy. We provide a wide range of
training programmes to our employees
across the risk disciplines – some are
mandatory for all employees, while
others are role-specific or part of
individual development plans. Mandatory
learning is accessible online and ensures
we keep our customers, employees
and the whole organisation safe. The
system allows monitoring at all levels
to ensure completion of mandatory
training which is now also a KPI in
relevant job descriptions. Topics covered
in the mandatory programme include
operational risks, business continuity,
information security and data protection,
health and safety, corporate security,
business ethics, and financial crime risks.
The completion rate of the risks and
compliance training programme at the
end of 2022 was 86%.
Our Code and
Whistleblowing Policy
The Code of Conduct and Ethics and the
Whistleblowing Policy are the primary
documents governing culture and ethics.
Our Code of Conduct clearly sets the
expectation that all employees act legally,
ethically, and transparently in all their
dealings.
Our whistleblowing tool allows employees
to report any concern confidentially.
Responsibility for the Whistleblowing
Policy resides with the Board who,
together with Audit Committee, receive
reports on its operation quarterly.
Through our grievance mechanism,
which is part of our Human Rights
and Grievance Policy, employees can
communicate legitimate concerns about
illegal, unethical or questionable practices,
confidentially, if necessary, and without
risk of retaliation.
Internal controls
Our Board is responsible for reviewing
and approving the Group’s system of
internal controls, and its adequacy and
effectiveness. Controls are reviewed
to ensure effective management of
the risks we face. Certain matters –
such as the approval of major capital
expenditures, significant acquisitions
or disposals, and major contracts – are
reserved exclusively for the Board. The full
schedule of matters specifically reserved
for the Board can be found on our
website at https://bankofgeorgiagroup.
com/governance/documents. For other
matters, the Board is often assisted by
both the Audit and Risk Committees.
With respect to internal controls
over financial reporting, including the
Group’s consolidation process, our
financial procedures include a range of
system, transactional and management
oversight controls. The Group prepares
detailed monthly management reports
that include analyses of results,
comparisons, relevant strategic plans,
budgets, forecasts and prior results.
These are presented to, and reviewed
by, the Executive Management. Each
quarter, the Bank’s Chief Financial
Officer and other members of the
Finance team discuss financial reporting
and associated internal controls with
the Audit Committee, which reports
significant findings to the Board. The
Audit Committee also reviews quarterly,
half-year and full-year financial
statements and corresponding results
announcements, and advises the Board.
The external and internal auditors attend
each Audit Committee meeting, and the
Audit Committee meets them regularly
both with and without the presence of
the Executive Management.
Risk appetite framework process
59
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Financial Statements Additional Information
• Identifying, assessing, managing,
monitoring and reporting risks of products,
activities, processes and systems under
their management.
• Designing and implementing controls to
effectively manage risks.
• Integrating risk appetite and risk culture
into daily activities.
• Reflecting risk management roles and
responsibilities in the Risk Owners’ job
descriptions and incentivising/rewarding
expected risk management behaviours.
Revenue-generating,
customer-facing and
cupport functions
First line of defence
• Developing policies, methods and
procedures.
• Developing and implementing the risk
appetite framework, including setting
the limits.
• Providing independent expert advice
and guidance.
• Conducting follow-up on implementation
of controls and action plans.
• Supporting and challenging first-line
risk management.
• Providing assurance on regulatory
compliance and effectiveness of
key controls.
Risk function
(organised under the
Chief Risk Officer)
Second line of defence
• Providing independent assurance.
• Assessing the consistency and
effectiveness of the Group’s internal
control system.
• Reviewing the overall risk management
framework to ensure alignment to
regulatory expectations and industry
standards.
Internal audit
Third line of defence
Risk management structure
Our Audit and Risk Committees monitor
internal controls over operational and
compliance risks. The Bank’s Chief Risk
Officer and Chief Financial Officer, Head
of AML, Head of Compliance, Head
of Internal Audit and other Executive
Management members report to the
Audit and Risk Committees on a quarterly
basis. Any key issues identified are
escalated to the Board. The Board also
receives regular reports directly from the
head of each risk function of the Bank,
in which principal risks and internal
control issues are addressed.
Effectiveness review
Each year we review the effectiveness
of our risk management processes and
internal controls, with the assistance
of the Audit and Risk Committees.
This review covers all material systems,
including financial, operational and
compliance controls. The latest
review covered the financial year
ended 31 December 2022 and
obtained assurance from the Executive
Management and Internal Audit.
The Board concludes with reasonable
assurance that the appropriate internal
controls and risk management systems
were maintained and operated effectively
during 2022, and that these systems
continued to operate effectively up to the
date of approval of this Annual Report.
The review did not identify any significant
weaknesses or failures in the systems.
We are satisfied that our risk management
processes and internal control systems
comply with the UK Corporate Governance
Code 2018 and the Financial Reporting
Council (FRC)’s guidance on Risk
Management, Internal Control and
Related Financial and Business Reporting.
Committee reports
The Audit and Risk Committees play
key roles in implementing effective
risk management and internal control
systems. Each Committee has described
its work in its Committee Report, which
can be found on pages 192 to 197 for the
Audit Committee and 198 to 201 for the
Risk Committee.
Viability statement
The Board has undertaken an assessment
of the Group’s prospects to meet its
liabilities by considering its current
financial position and principal risks.
The Group’s going concern and viability
statements are on page 83.
Risk management structure
The Group’s risk management
framework is based on the industry-
standard ‘three lines of defence’ model
for risk management. All roles below
the CEO fall within one of the three
lines. All employees are responsible for
understanding and managing risks within
their individual roles and responsibilities.
Annual Report 2022 Bank of Georgia Group PLC
60
Risk management continued
Risk management bodies
Bank of Georgia is the principal driver
of the Group’s revenue and operates
in the financial services sector. The
work undertaken by the Bank’s risk
management bodies feeds back
directly to the Group. The main risk
management bodies of the Bank are the
Supervisory Board, Audit Committee,
Risk Committee, Executive Management,
Credit Committee, Asset and Liability
Management Committee (ALCO),
and Environmental and Social Impact
Committee. The Supervisory Board, Audit
Committee and Risk Committee mirror
the Group Board, Group Audit Committee
and Group Risk Committee.
The Executive Management has overall
responsibility for the Bank’s asset,
liability and risk management activities,
policies and procedures. To effectively
implement the risk management system,
the Executive Management delegates
individual risk management functions
to each of the Bank’s various decision-
making and execution bodies.
The Group Internal Audit function is an
internal independent, objective assurance
and consulting provider designed to
add value and improve the Group’s
operations through independent and
objective assessment of the effectiveness
and the adequacy of Group-wide
processes, controls, governance and risk
management, as the third line of defence.
The Head of Internal Audit, also known
as Chief Auditor, is appointed by Non-
executive Board members and reports
directly to the Audit Committee and
administratively to the Chief Executive
Officer. The Internal Audit function
evaluates the Group’s risk management,
control and governance practices based
on a systematic, disciplined, and risk-
based approach. The Chief Auditor
reports to the Audit Committee at least
quarterly on significant risk exposures and
control issues if any are identified through
audit engagements.
The Bank has five Credit Committees,
each responsible for managing the
Bank’s credit risk across loan portfolios
in all businesses.
The Credit Committee for retail loans
comprises three tiers of subcommittees;
for micro loans one tier; for SME loans
three tiers; for corporate loans three tiers;
and for corporate recovery one tier.
The Corporate Recovery Committee is
chaired by the Bank’s Chief Risk Officer
and is responsible for monitoring all the
Bank’s exposures to loans managed by
the Corporate Banking and Recovery
department. The Corporate Banking
and Recovery department reports to
the Bank’s Deputy CEO – Corporate
and Investment Banking.
Lower-tier subcommittees meet on a
daily basis, whereas higher tier ones meet
as needed – typically once or twice a
week. Each subcommittee of the Credit
Committees makes its decisions by
a majority vote of its members.
Another committee managing the
Bank’s credit risk is the Credit Assets
Management Committee, which
comprises three tiers of subcommittees
and is chaired by either the Head of the
Credit Assets Management department,
the Bank’s Chief Operations Officer,
or the Bank’s Chief Risk Officer. The
Credit Assets Management department
manages the Bank’s exposures to problem
loans and reports to the Bank’s Chief
Operations Officer.
The ALCO is the core asset liability
management (ALM) and financial risk
management body establishing policies
and guidelines with respect to capital
adequacy, market risks, funding liquidity
risk, interest rate and prepayment risks
and respective limits, money market
general terms, and credit exposure limits.
The ALCO reviews scenario analyses
and stress tests, regularly monitors
compliance with the pre-set risk limits,
and approves treasury deals with
non-standard terms. Specifically,
the ALCO:
• sets and monitors credit exposure/
lending limits;
• sets and monitors open currency
position limits with respect to
overnight and intra-day positions;
• monitors compliance with the
established risk limits for capital,
FX, interest rate and funding and
liquidity risks;
• sets standard rates for different
maturity loans and deposits;
• approves certain non-standard loans
and deposits;
• sets ranges of interest rates for
different maturities at which the Bank
may place its liquid assets and attract
funding; and
• reviews capital and liquidity forecasts,
scenario analyses and stress tests
prepared by the Finance function, the
ALM unit and the Capital Adequacy
and Financial Risk Management
(CFRM) unit.
The ALCO is chaired by the Bank’s
CEO and meets on an ad hoc basis,
with decisions made by a majority vote
of its members. The ALCO members
include the Bank’s CEO, Chief Financial
Officer, Chief Risk Officer, the Head of
the ALM unit, the Head of the Treasury
department and the Head of the CFRM
unit. The Head of the Finance function
acts as secretary to the ALCO. Other
Executive Management members
attend meetings and vote as required.
The ALCO approves financial risk policies
prior to approval by the Supervisory
Board. The Committee reviews the
Financial Risk Appetite report once a
month and, in case of breaches, reviews
and approves mitigation strategies
proposed by the ALM unit. In addition
to monthly reports, the ALCO reviews
capital and liquidity forecasts, budgets
and stress scenarios.
Risk management bodies of Bank of Georgia
Supervisory Board of Bank of Georgia
Audit Committee
Risk Committee
Remuneration
Committee
Nomination
Committee
Credit Committees
Asset and Liability
Management
Committee
Environmental
and Social Impact
Committee
Board-level
Committees
Management-level
Committees
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The management-level Environmental
and Social Impact Committee is
responsible for the development and
implementation of the Bank’s ESG
strategy, including its climate risk and
opportunity management strategy.
It includes members of Executive
Management and senior management,
and the CEO is its Chairman. The
Committee manages the Bank’s climate,
environmental and social impacts,
focusing primarily on those associated
with its lending activities. The Committee
reports on the Bank’s ESG objectives and
performance to the Supervisory Board
twice a year.
Stress testing
Stress testing and scenario analysis is
an important risk management tool
providing input for strategic decision-
making and planning. The aim of stress
testing is to assess the impact of
plausible but severe stress scenarios
relating to the Group’s liquidity and
capital positions. We regularly assess the
vulnerabilities of our portfolios regarding
adverse macroeconomic factors, financial
market stresses and geo (political)
developments. Portfolio sensitivities are
fed into the impact assessment of profit
and loss (P&L), liquidity and capital.
We perform different types of
stress tests:
• Viability stress tests – scenario
assumptions for all relevant
macroeconomic and financial market
variables are set, and potential
impacts are assessed against
the viability of the Group. These
stress tests include reverse stress
testing, where the Group identifies
circumstances that may lead to
business failure. This type of test
is performed at least annually and
reported to to the Board of Directors.
• Risk-specific stress tests – depending
on the tendencies on the market,
specific portfolios are tested for
various market-wide scenarios. In
2022, the Bank performed interest
rate stress tests as a response to rising
market interest rates. The impact of
various shocks was assessed against
portfolio quality, profitability, liquidity
and capital.
• Idiosyncratic stress-tests – these are
conducted on an ad hoc basis, based
on certain idiosyncratic factors that
may arise in the business over time.
• Regulatory stress tests – these
are mandated by the central bank,
which also provides the context and
methodology for stress tests.
Stress test methodologies vary by type
and objective. Depending on the risk type,
respective risk management units are
responsible for performing the analysis.
If unacceptably high risks are identified,
risk units adopt measures to mitigate
them and reflect those measures in their
strategic plans. The ERM department
is responsible for results aggregation,
analysis and reporting.
Emerging risks
Information compiled from all the
businesses is examined and processed
to identify, assess and manage emerging
risks. This information is presented
and discussed with the Executive
Management and the head of each
business division as appropriate. We also
consider wider macroeconomic risks and
escalate these to the Supervisory Board
or Board of Directors, as appropriate,
in regular presentations.
The Group has identified climate risk as
an emerging risk. We continue to assess
climate-related risks, both transition and
physical, for our client base and determine
potential impacts on the Bank. We are
describing and managing climate-related
risks in line with recommendations
from the Task Force on Climate-related
Financial Disclosures (TCFD). See more
details on the Group’s planned actions on
this matter on pages 103 to 107.
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PRINCIPAL
RISKS AND
UNCERTAINTIES
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We outline the principal and emerging risks
and uncertainties most likely to have an
impact on our business model, strategic
objectives, operations, future performance,
solvency and liquidity. We also disclose
the potential impact, the key drivers and
outlook associated with these risks, and
the actions we take to mitigate them.
The order in which the principal risks and
uncertainties appear does not denote
their priority. It is not possible to fully
mitigate all our risks. Any system of
risk management and internal control
is designed to manage – rather than
eliminate – the risk of failure to achieve
business objectives, and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
The Group is exposed to risks wider
than those listed. Additional risks and
uncertainties, including those the Group
is currently not aware of or deems
immaterial, may also result in decreased
revenues, incurred expenses or other
events that could result in a decline in
the value of the Group’s securities. We
disclose the risks we believe are likely
to have had the greatest impact on our
business, and which have been discussed
in depth at the Group’s recent Board,
Audit or Risk Committee meetings.
Principal risks and uncertainties
Macro risk
Principal risk/
uncertainty
Macro risk is the risk of deterioration of the business’s financial position due to macroeconomic and political
factors related to Georgia.
Key drivers and
developments
The Group’s operations are primarily located in, and most of its revenue is sourced from, Georgia. Key sources of macro
risk related to Georgia are changes in GDP, inflation, interest rates, exchange rates, and political events. These factors
may have a material impact on our business by affecting the Group’s financial performance and position.
According to a preliminary estimate published by Geostat, real GDP growth in Georgia was 10.1% in 2022 –
driven by robust consumption spending, increased investment expenditure, and strong external inflows. Despite
the lingering uncertainty around the Russia-Ukraine war, the growth outlook for 2023, which according to IMF
is estimated at 4% of real GDP growth, is underpinned by the lasting impact of inbound migration, continued
recovery in tourism inflows and improved investor sentiment.
High inflation remains a challenge for Georgia as the war in Ukraine and related supply disruptions have
exacerbated global commodity price pressures. Average CPI inflation in Georgia was 11.9% in 2022, significantly
above the 3.0% target. Although inflation was mainly driven by supply-side factors, demand pressures have also
intensified – higher rent being paid on houses on the back of inbound migration and the complete elimination of
pandemic-related restrictions. In response to persistently high inflation, the NBG increased the refinancing rate by
an additional 50 bps to 11.0% in March 2022. Given the tight monetary policy and the transitory nature of supply-
side price pressures, inflation is expected to move towards the 3.0% target in 2023.
In response to increasing inflation pressures globally, western central banks hiked interest rates during 2022. As of
31 December 2022, since the beginning of the year the Federal Reserve had increased the fed funds rate by 425 bps
and the European Central Bank (ECB) had increased its key interest rate by 250 bps. As inflation remains elevated
in western economies, central banks are expected to deliver further interest rates hikes, leading to tighter global
financial conditions. Emerging markets and developing economies, such as Georgia, are particularly vulnerable
to tighter global financial conditions as a considerable share of their debt is denominated in foreign currency.
Furthermore, such conditions may induce capital outflows and result in depreciation pressures on local currencies.
Tight monetary policy and strong external inflows have supported GEL in 2022. As at 31 December 2022, the
Georgian currency had gained 12.5% against the US dollar year to date. Going forward, the GEL exchange rate
may be influenced by the dynamics of external inflows, monetary policy developments, and changes in market
sentiment. Volatility of the Lari may adversely affect the quality of our loan book and increase ECL provisions – and
thus the cost of credit risk. At 31 December 2022, 33.6% of Bank of Georgia’s gross Retail Banking loans and 73.2%
of its Corporate Banking loans were denominated in foreign currency. 4.8% of Retail Banking gross loans and 39.0%
of Corporate Banking gross loans were issued in foreign currency, with minimal exposure to foreign currency risk.
Overall, business and investment conditions are sound, and Georgia favorably compares to the regional peers.
However, the concerns regarding the integrity of the judicial appointment process and the capacity of the courts to
deliver quality outcomes continue to affect investor confidence in the court system. This issue was also highlighted
by the European Commission, which stated that it was ready to grant the status of candidate country to Georgia
once certain priorities specified in the Commission’s opinion on Georgia’s EU membership application have been
addressed. One of the priorities is adopting and implementing a transparent and effective judicial reform by
ensuring the proper functioning and integrity of all judicial and prosecutorial institutions. The Government of
Georgia has already initiated a strategy and action plan and a subsequent draft law to reform the judiciary.
A complex reform of the judiciary may take time, however, demonstrating a positive trajectory to the EU will be
important. Furthermore, one of the main hindrances to the fulfilment of the European Commission’s conditions
is promoting political depolarisation by reducing political tensions between the ruling party and the opposition.
If ongoing tensions escalate, this may negatively affect market sentiment and the growth outlook.
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64
Principal risks and uncertainties continued
Macro risk continued
Mitigation The Group continuously monitors macroeconomic conditions and performs stress and scenario analyses to test
its position under adverse economic conditions, including adverse currency movements. We assess sensitivities
of certain portfolios towards macroeconomic factors and geopolitical situations, which feeds into the impact
assessment of P&L, liquidity, and capital. Scenarios include assumptions about GDP growth, changes in loan
interest rates – both in domestic and foreign currencies – and changes in inflation and exchange rates. This helps
us take portfolio-related actions where necessary, including enhanced monitoring and amending our credit risk
appetite. We regularly review key portfolios to assess risk and ensure our ability to manage the level of facilities
offered through any downturn is appropriate.
Due to local legislation, loans of up to GEL 200,000 are issued only in Lari. Additionally, the NBG determined a
currency induced credit risk (CICR) capital buffer that aims to reduce systemic risks caused by dollarisation. This
buffer is created for risk positions denominated in a currency different from that used to cover those positions. For
individuals’ loans, the NBG’s payment-to-income (PTI) and loan-to-value (LTV) requirements are more conservative
for foreign currency loans – mitigating borrower-level exchange rate-induced credit risk. Versus those denominated
in Lari, PTI requirements for foreign currency loans are tighter: 5 ppts higher for income below GEL 1,500; 20 ppts
higher for income above GEL 1,500. The LTV requirement for foreign currency mortgage loans is 15 ppts tighter
than those issued in Lari.
In addition, the Bank’s open currency position limits set by the Supervisory Board are currently more conservative
than those imposed by the NBG. The open currency position on a day-to-day basis is managed by the Treasury
department and monitored by the CFRM unit.
The Group continues to closely monitor the local political situation, related risks, and the Georgian Government’s
response. The Board of Directors is updated quarterly on major political and macroeconomic developments and
their potential impacts on the Group.
Geopolitical risk
Principal risk/
uncertainty
Geopolitical risk is the risk that the Group will be unable to execute its business strategy, which will result in
a deterioration of its financial position due to regional tensions and ensuing economic instability.
The Group’s operations are primarily located in, and most of its revenue is sourced from, Georgia. One of our
subsidiaries is located in Belarus (JSC Belarusky Narodny Bank (BNB)), but it only accounted for 3.2% of the
Group’s total equity as at 31 December 2022. The Georgian economy is well-diversified with no significant
dependency on a single country. Georgia’s key trading partners among others are Russia, Turkey, Azerbaijan,
and Armenia. The Group’s ability to deliver its strategy may be impacted by conflicts in the region, especially
due to the ongoing Russia-Ukraine war.
Key drivers and
developments
International government sanctions against Russia have been evolving, impacting strategic sectors of the Russian
economy and increasing sanction compliance risk for the financial sector. The current situation highlighted the need to
focus more heavily on compliance with sanctions, especially given the level of exposure and associated penalties. The
NBG and Georgian financial institutions act fully in accordance with the financial sanctions imposed on the Russian
Federation. At 31 December 2022, the Bank did not have any exposure to the Russian banks impacted by the US, UK,
or EU sanctions. The Group has significantly expanded resources dedicated to enhancing sanctions compliance.
Another risk driver that has emerged in the context of the Russia-Ukraine war is the expansion of sanctions against
Belarus. There is an expectation of further limitations on business activity of companies operating in Belarus. In
November 2022, the government of Canada sanctioned additional individuals and entities, including BNB. BNB did
not have exposure to Canada, therefore we did not experience any significant impact on BNB’s operations or financial
position. The Group has actively engaged with Global Affairs Canada to investigate the reasons – as of today, these
are solely due to the fact BNB is located in Belarus, and the Group is actively seeking delisting of its subsidiary from
the Canadian sanctions list, on the basis of no grounds existing for sanctioning it under the relevant regulations.
The exposure of the Georgian economy to the Russian and Ukrainian markets is considerable, but manageable.
Despite the unprecedented regional disruption, Georgia’s external inflows have remained resilient. Tourism has
recovered and commodity-led export revenues increased on the back of higher commodity prices. Furthermore,
remittances increased significantly by 86.1% in 2022, mostly reflecting the inflows related to tourists and migrants
from the region. Further expansion of international sanctions across the region can have a detrimental effect on
the ability to transact and correspondingly on the economic activity.
Russian troops continue to occupy Abkhazia and the Tskhinvali/South Ossetia region. Russia is opposed to the
eastward expansion of NATO to include its neighbours, such as Georgia. Georgia’s progression towards integration
with the EU and NATO may intensify tensions between Georgia and Russia.
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Geopolitical risk continued
Mitigation The Group actively monitors the situation around the Russia-Ukraine war and its repercussions for the region,
especially Georgia and Belarus. The Group conducts stress testing analysis to ensure early risk indicators are
identified and mitigation plans implemented in a timely manner. Georgia’s resilience to external shocks has been
supported by a stable macroeconomic environment, prudent monetary and fiscal policies, a business-friendly
environment, and a healthy banking sector. The NBG has claimed that it would act to mitigate the impact of
market turbulence, if needed. The Belarus market is more vulnerable towards the Russia-Ukraine war, therefore
we conduct more active analysis in this regard.
We do not expect a significant negative impact on our business due to the ongoing war. Our CB loan portfolio is
well-diversified. Our wine producer clients, who export to Russia and Ukraine, have healthy equity and working capital
structure, and we believe this would enable them to manage through the potentially challenging external environment.
Another sector that may be affected by regional instability is hospitality. However, during 2022 tourism recovered,
which started in the second half of 2021, supported by migrant inflows and Georgia’s positioning as an affordable and
attractive destination. Notably, in 2022 tourism revenues increased, surpassing 2019 levels by 7.6%.
Despite the ongoing war and the sanctions directly or indirectly imposed on BNB, the Bank is operating with strong
financial results. BNB has demonstrated resilience and a focus on maintaining solid liquidity and capital positions.
At 31 December 2022, BNB’s Tier 1 and Total capital adequacy ratios stood at 9.5% and 16.7%, respectively, above
the National Bank of the Republic or Belarus (NBRB)’s minimum requirements of 7.0% and 12.5%, respectively.
We are closely monitoring the risks and paying close attention to the portfolio. We monitor current sanction
developments and are prepared for possible scenarios. In line with the Group’s zero tolerance policies with respect
to sanctions risk, the BNB is operating in compliance with the local and international sanction laws, therefore we do
not expect further sanction extensions.
With the fast-growing list of sanctions imposed against Russia and Belarus, it is important for us to stay on top of
the latest developments to navigate and mitigate risk while doing business and increase scrutiny on third parties
to manage compliance with the US, UK, and EU sanctions. We, as part of our Know Your Customer (KYC) and
compliance risk governance and procedures, are monitoring the situation daily to be aware of all relevant updates
and adapt the Group’s operations in accordance with the changing requirements. The changes have resulted in
increasing expenses related to sanctions compliance. The Group has limited risk appetite in relation to customers
from Russia and Belarus and transactions related to these countries. Therefore, customers from Russia and Belarus
are subject to the appropriate enhanced due diligence measures, while transactions related to these jurisdictions
are subject to enhanced sanctions screening.
The Board of Directors is regularly updated on major regional developments and on their potential impact on the Group.
Credit risk
Principal risk/
uncertainty
Credit risk is the risk that the Group will incur a financial loss because its customers or counterparties fail to meet
their contractual obligations. Credit risk arises mainly in the context of the Bank’s lending activities.
Key sources of credit risk are:
• the inability of borrowers to make scheduled principal and interest payments;
• portfolio concentration risk; and
• collateral devaluation.
Key drivers and
developments
ECL and, in turn, the Bank’s cost of credit risk, could increase if an idiosyncratic risk for any single large borrower
materialises, or a sectorial or systemic event causes the default of a substantial group of borrowers. In addition,
if the fair value of the collateral declines significantly in the future, the Bank may be required to post additional
provisions and may experience lower-than-expected recovery levels on collateralised loans. Furthermore, changes
to laws or regulations may lead to collateral impairment.
Redesigned lending processes in digital channels resulted in an increase in unsecured consumer loans and a higher-than-
normal ECL in the Retail Banking segment. As a result, the Group’s cost of credit risk ratio was 0.8% in 2022, versus
0.0% in 2021. At 31 December 2022, the NPL-to-gross-loans ratio stood at 2.7%, versus 2.4% at 31 December 2021.
Mitigation The Bank has implemented Credit Policies which outline credit risk control and monitoring procedures and the
Bank’s credit risk management systems. They are reviewed annually or more frequently, if necessary. The credit
risk appetite statement and supporting limits help the Bank mitigate credit risk, and is approved by the
Supervisory Board. The statement consists of quantitative limits that monitor and control the overall quality
of the Bank’s portfolios.
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66
Credit risk continued
Mitigation
continued
Evaluation of customer creditworthiness: Prior to disbursing loans to customers, the Bank performs a rigorous
assessment of their debt-paying ability – assessing relevant quantitative and qualitative measures (including PTI,
LTV, debt to EBITDA and other ratios), including the limits defined by the NBG. The assessment process differs
depending on transaction complexity: corporate, SME and larger retail and micro loans are assessed individually;
smaller retail and micro loan decisions are largely automated. The performance of all models used in credit risk is
monitored in line with the Bank’s model risk management framework – see model risk on page 79.
During the year a new model of unsecured consumer loans was developed, resulting in a better predictive
performance and reducing retail segment portfolio risk. Furthermore, the Bank had initiated project with global
management consulting company McKinsey & Company, who assessed unsecured consumer lending process and
its risks, helping us to transform processes in digital channels.
In the case of loans individual assessment, the risk manager ensures all risks and mitigating factors are identified,
and that the loan is properly structured. The loan is then reviewed and approved by multi-tiered credit committees,
with different approval loan limits to consider the customer’s overall risk profile.
The Bank also reviews external credit rating scores when available, and otherwise assigns internal ratings. The Bank
has developed internal scoring models for evaluating the creditworthiness of Retail and MSME customers.
Loan portfolio quality monitoring: The Bank actively monitors the credit risk of its loan portfolio. Processes and
controls are in place to ensure macro and micro developments are identified in a timely manner. Monitoring includes
a full assessment against risk appetite limits, supported by a series of key risk and early warning indicators to
identify areas of the portfolio with potentially increasing credit risk. The Bank’s Chief Risk Officer and the Credit
Risk Management departments review the credit quality of the portfolio monthly.
Retail and MSME loans are subject to periodic reviews, and the Bank monitors exposures to identify customers
with signs of potential financial difficulty. We have initiated the development of internal behaviour scoring models
for MSME customers to predict their debt-repaying ability.
For CB loans above US$ 5 million, the Bank updates the financial information of borrowers and reviews significant
non-financial changes quarterly. Exposures up to US$ 5 million are monitored semi-annually, or as needed if signs
of credit stress are detected.
The Bank strictly adheres to customer exposure limits set by the NBG for CB loans and limits set internally,
monitors the level of concentration in the loan portfolio and the financial performance of its largest borrowers,
and maintains a well-diversified loan book. The Bank’s top ten borrowers accounted for 5.9% of gross loans to
customers and finance lease receivables at 31 December 2022, versus 8.3% at 31 December 2021.
The Bank provides monthly updates to the Board of Directors on the Bank’s exposures and loan portfolio quality,
and detailed information on its largest Corporate and Investment Banking borrowers.
Collateral valuation: Property and other security arrangements are used to mitigate credit risk across portfolios.
The main forms of collateral in Corporate and Investment Banking and MSME segments are liens over real
estate, property, plant, equipment, inventory, transportation equipment, corporate guarantees, and deposits
and securities. The most common form of collateral in Retail Banking for loans to individuals is a lien over residential
property. As at 31 December 2022, 82.3% of the Group’s gross loans were collateralised.
The Bank monitors the market value of collateral during reviews of the adequacy of the allowance for ECL.
When evaluating collateral for provisioning purposes, the Bank discounts the market value of assets to reflect the
liquidation value of collateral. An evaluation report of the proposed collateral is prepared by the Asset Evaluation
department, or by a reputable third-party asset appraisal company, and submitted to the appropriate Credit
Committee alongside a loan application and credit risk manager’s report.
Restructuring and collections: The Bank provides solutions to help borrowers experiencing financial difficulties to
meet contractual obligations. Cases are managed on an individual basis, with the circumstances of each customer
considered separately. The Bank may initiate a loan restructuring process, modifying the contractual payment
terms, to support customers and transfer loans back to the performing category. Helping the customer return
to financial health and restoring a normal banking relationship is always the preferred outcome. However, where
a solvent outcome is not possible, insolvency may be considered as a last resort.
Collection and recovery processes are initiated when a borrower enters default on their lending facility and the
Bank demands full repayment. The main aim is to negotiate a loan recovery strategy with the borrower by offering
acceptable terms for cash payments, or to negotiate repayment through collateral sale or repossession. If the
Bank and the borrower cannot agree acceptable terms, the collateral repossession process is initiated, which may
include court, arbitration or notary procedures.
Principal risks and uncertainties continued
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Credit risk continued
Mitigation
continued
ECL measurement: Under IFRS requirements, allowance for credit losses is based on ECL associated with the
probability of default in the next 12 months, unless there has been a significant increase in credit risk since loan
origination – in such cases, allowance is based on ECL over the lifetime of an asset. Allowance for credit losses is based
on forward-looking information, considering past events, current conditions and forecasts of economic parameters.
The Bank uses a three-stage model for ECL measurement and classifies its borrowers in three stages:
• The Bank classifies its exposures as Stage 1 if, at the reporting date, it is not credit-impaired and credit risk has
not increased significantly since initial recognition.
• The exposure is classified as Stage 2 if, at the reporting date, it is not credit-impaired and credit risk has
increased significantly since initial recognition.
• The exposure is classified as Stage 3 if, at the reporting date, it is credit-impaired.
The Bank determines ECL of financial assets on a collective basis, and for individually significant loans on an
individual basis, when a financial asset or a group of financial assets is impaired. The Bank creates ECL provisions
considering a borrower’s financial condition, days past due, changes in credit risk since loan origination, forecasts
of adverse changes in commercial, financial or economic conditions affecting the creditworthiness of the borrower,
and other qualitative indicators – such as external market or general economic conditions. If ECL subsequently
decreases, the previously recognised loss is reversed by an adjusted ECL account.
Under the Bank’s internal credit loss allowance methodology, which is based on IFRS requirements, the Bank
categorises its loan portfolio into significant and non-significant loans. Credit Risk Management departments assess
all defaulted significant loans individually. Non-defaulted significant loans are given a collective assessment rate.
For provisioning purposes, all loans are divided into different groups (such as mortgage, consumer, and micro loans).
Loans up to US$ 1 million secured by real estate are subject to a write-off once overdue for more than 1,460 days.
Unsecured loans and those secured by collateral other than real estate are subject to a write-off once overdue for
more than 150 days. Corporate loans and those above US$ 1 million secured by real estate may be written off as
assessed by the Bank’s Chief Risk Officer and the Credit Risk Management departments.
Counterparty risk: By performing banking services, including lending on the inter-bank money market, settling
a transaction on the inter-bank FX market, entering into inter-bank transactions related to trade finance, or
investing in securities, the Bank is exposed to the risk of loss due to failure of a counterparty to meet its contractual
obligations. To manage counterparty risk, the Bank defines limits on an individual basis for each counterparty based
on an external credit rating and overall risk profile, as well as country limits to manage concentration. Counterparty
credit risk exposures are monitored daily and any breaches are escalated in line with escalation policies to senior
management. As at 31 December 2022, 92.0% of the Bank’s inter-bank exposure was to ‘Investment Grade’ banks
(based on Fitch, Moody’s and Standard and Poor’s assessments).
Other products: The Bank also offers guarantees and letters of credit, which may require that the Bank makes
payments on customers’ behalf. Such payments are collected from customers based on the terms of the product.
These products pose risks similar to loans, and those risks are managed and mitigated with the same policies and
controls as loan-related risks.
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Liquidity and funding risks
Principal risk/
uncertainty
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under
normal and stress circumstances.
Funding risk is the risk that the Group will not be able to access stable and diversified funding at an
acceptable cost.
Key drivers and
developments
The availability of funding in emerging markets is significantly influenced by the level of investor confidence and
thus any factors that affect investor confidence – including a downgrade in credit ratings, state interventions,
or debt restructurings in a relevant industry – could affect the price and/or availability of funding for the Group’s
companies operating in any of these markets.
The Group’s current liquidity may be affected by unfavourable financial market conditions. If assets held by the
Group to provide liquidity become illiquid or their value drops substantially, the Group may be required – or may
choose – to rely on other sources of funding to finance its operations and future growth. However, only a limited
amount of funding is available on the Georgian inter-bank market, and recourse to other funding sources may pose
additional risks – including the possibility that other funding sources are more expensive and less flexible.
The Group is also exposed to the risk of unexpected, rapid withdrawal of large volumes of deposits by its customers
and/or drawing on off-balance sheet commitments, adversely impacting the Group’s business, financial position
and performance. This may happen in the case of severe economic downturn or a period of political, social, and
economic instability, a major deterioration in consumer confidence, or an erosion of trust in financial institutions.
Mitigation Liquidity risk is managed through the ALCO-approved liquidity risk management framework, which models the
ability of the Group to meet its payment obligations under both normal and stress conditions. The framework is
reviewed regularly to ensure its appropriateness given the Group’s current and planned activities, and encompasses
sets of limits on various liquidity indicators, closely monitored by the ALCO. The Group performs weekly liquidity
forecasts and applies scenario analysis and stress testing to ensure it holds adequate stock of liquidity. Additionally,
the Bank has developed a liquidity contingency plan defining risk indicators for different scenarios and mitigation
actions to identify emerging liquidity concerns at an early stage.
The concentration of funds by currency, maturity, commodity, and counterparty is monitored regularly and, where
concentrations do exist, is managed as part of the planning process and limited by the internal funding and liquidity
risk management framework, with analysis regularly provided to the ALCO.
Liquidity and funding risk is managed by the Treasury department and ALM unit. The CFRM unit is responsible for
developing and maintaining standards and guidelines on funding and liquidity risk management, and for setting the
risk appetite. Furthermore, the CFRM is responsible for conducting risk profile reviews and communicating results
to the ALCO.
The Bank maintains a comfortable buffer on top of the liquidity coverage ratio (LCR) requirement of 100%
mandated by the NBG. A strong LCR enhances the Group’s short-term resilience. The Bank also holds a comfortable
buffer on top of the net stable funding ratio (NSFR) requirement of 100%, providing stable funding sources
over a longer time span. This approach is designed to ensure the funding framework is sufficiently flexible to
secure liquidity under a wide range of market conditions. Notably, the LCR and NSFR measures as implemented
by the NBG are already more conservative than the minimum levels required under the Basel III framework. At
31 December 2022, the Bank’s LCR ratio stood at 132.4% (versus 124.0% at 31 December 2021) and its NSFR ratio
was 131.9% (versus 132.5% at 31 December 2021).
The Group maintains a diverse funding base comprising short-term sources of funding (including Retail Banking
and Corporate and Investment Banking customer deposits, inter-bank borrowings and borrowings from the
NBG) and longer-term sources (including Retail Banking and Corporate and Investment Banking term deposits,
borrowings from international credit institutions, and long-term debt securities). At 31 December 2022, 51.0%,
40.2% and 8.8% of the Group’s long-term funding sources were deposits, amounts owned to credit institutions,
and debt securities respectively.
Client deposits and notes are one of the key sources of funding. At 31 December 2022 and 31 December 2021, 90.3%
and 88.8% of client deposits and notes respectively had contractual maturities of one year or less, of which 66.8%
and 56.1% respectively were payable on demand. As of the same dates, the ratio of net loans to client deposits
and notes was 92.3% and 115.2% respectively, and the ratio of net loans to client deposits and notes and DFIs was
83.8% and 100.0% respectively.
The Bank has strong support from IFIs. The Bank signed a number of new local and foreign currency long-term
borrowings during 2021 and 2022 – approximately US$ 400 million in total, part of which was drawn down during
2021 and 2022. At 31 December 2022, the Bank had approximately GEL 689 million undrawn long-term facilities
from DFIs with maturity of up to 12 years, as well as a strong pipeline to secure resources needed for the next
12 months.
Principal risks and uncertainties continued
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Financial Statements Additional Information
Capital risk
Principal risk/
uncertainty
Capital risk is the risk of failure to deliver business objectives, or meet regulatory requirements or market
expectations due to insufficient capital.
Key drivers and
developments
Bank of Georgia is subject to the NBG’s capital adequacy regulation, which is based on Basel III guidelines with
regulatory discretion applied by the NBG. Current capital requirements include Pillar 1 requirements, combined
buffer (systemic, countercyclical and conservation buffers) and Pillar 2 buffers (concentration, GRAPE, CICR and
stress-test buffers). Increased capital requirements are phased in gradually, with fully loaded capital adequacy
requirements effective by the end of March 2023.
Our ability to comply with existing or amended NBG requirements may be affected by several factors, including
those outside our control, such as an increase in risk-weighted assets, our ability to raise capital, losses resulting
from the deterioration of asset quality, and a reduction in income levels and/or an increase in expenses and local
currency depreciation.
Mitigation The Bank maintains an actively managed, robust capital base to cover the risks inherent to its business. As part
of our capital adequacy management framework we continuously monitor market conditions and perform stress
testing to test our position under adverse economic conditions and market and regulatory developments. Capital
risk management is underpinned by a Capital Management Policy outlining key principles of capital management,
monitoring and control, defining roles and responsibilities of the three lines of defence, and defining capital
mitigation plans in line with the risk appetite framework. The ALM unit executes daily capital risk management
decision-making, while the CFRM establishes the capital risk management framework and challenges its effective
implementation. The Bank’s capital position and capital planning is continuously monitored by the Board of
Directors to ensure prudent management and timely actions when necessary.
The Bank actively monitors early-warning indicators as part of the Risk Committee-approved risk appetite
framework and the regulatory recovery plan, which are designed to identify emerging capital concerns at an early
stage so mitigating actions can be taken in a timely manner. The Bank sets internal capital management buffers
above regulatory requirements, both at the Supervisory Board and the ALCO level.
The Bank regularly undergoes capital optimisation exercises to strengthen its capital position and enable the
realisation of potential upsides. In May 2022, the Bank signed a US$ 50 million Additional Tier 1 Capital Perpetual
Subordinated Syndicated Facility with EBRD and Swedfund International AB (Swedfund).
In 2022 the Group delivered strong operating performance, with strong top- and bottom-line growth, reduced cost-
to-income ratio and robust asset quality, resulting in a ROAE (adjusted for one-off other income and one-off tax
expense) of 32.4%. The Bank maintained capital adequacy ratios well above the minimum regulatory requirements.
Given the Group’s strong performance and capital position during 2022, the Group paid an interim dividend of GEL
1.85 per ordinary share in respect of the period ended 30 June 2022. In addition, during 2022 the Group commenced
a share buyback and cancellation programme, having repurchased and cancelled 1,670,446 ordinary shares. The
total cost of the programme was GEL 112.7 million. In February the Board has approved an increase of the share
buyback and cancellation programme by up to GEL 148 million. In addition, at the 2023 AGM, the Board also intends
to recommend for shareholder approval a final dividend for 2022 of GEL 5.80 per share payable in Pounds Sterling
at the prevailing rate. This would make a total dividend paid, from the profits of JSC Bank of Georgia, in respect of
the Group’s 2022 earnings of GEL 7.65 per share.
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Market risk
Principal risk/
uncertainty
Market risk is the risk of financial loss due to fluctuations in fair value or future cash flows of financial instruments
due to changes in market variables.
Market risk exposure arises from mismatches of maturity or currency between assets and liabilities, all of which
are exposed to market fluctuations.
Key drivers and
developments
The volatility of the Lari may adversely affect the Bank’s financial position. The Bank’s currency exchange risk is
calculated as an aggregate of open positions and is limited by the NBG to 20% of regulatory capital.
The Bank has exposure to interest rate risk due to lending at fixed and floating interest rates in amounts and
for periods that differ from those of term borrowings. Interest margins on assets and liabilities having different
maturities may increase or decrease as a result of changes in market interest rates.
Mitigation General principles of the Bank’s market risk management policy are set by the ALCO. The ALCO sets limits on
market risk exposures by currencies and closely monitors compliance with the Bank’s risk appetite framework.
Exposures and risk metrics are regularly tested for various plausible scenarios.
Currency exchange rate: The Bank’s currency risk is calculated as an aggregate of open positions and is controlled
by daily monitoring of open currency positions and the value-at-risk (VAR) historical simulation method based
on 400-business-day statistical data. In addition, open positions in all currencies except for Lari are limited to a
maximum of 1% of the Bank’s total regulatory capital as defined by the NBG. The open currency position is also
limited by the ALCO to an annual VAR limit of GEL 50 million with a 98.0% ‘tolerance threshold’.
Interest rate: To minimise interest rate risk, the Bank monitors its interest rate (re-pricing) gap and maintains an
interest rate margin (NII before impairment of interest-earning assets divided by average interest-earning assets)
sufficient to cover operational expenses and risk premium.
Within limits approved by the Bank’s Supervisory Board, ALCO approves ranges of interest rates for different
maturities at which the Bank may place assets and attract liabilities. As per a regulatory requirement, the Bank
assesses the impact of interest rate shock scenarios on economic value of equity (EVE) and NII. The Bank’s
EVE sensitivity with respect to Tier 1 capital remains comfortably below the maximum regulatory limit.
At 31 December 2022, the Bank’s EVE ratio stood at 5.9%, below the maximum limit of 15.0%. EVE and NII
sensitivities are further limited by the Supervisory Board risk appetite. In addition, the ALCO sets limits on EVE
and NII ratios by currency with respect to CET1 capital and monitors those monthly.
In the wake of upward trends in market interest rates, the Bank actively performs various stress tests and scenario
analyses to assess the potential impacts of interest rate shocks on portfolio quality and profitability.
Prepayments: The Bank reviews prior history of early repayments by calculating the weighted average effective
rate of early repayments across each credit product individually, applying the historical rates to the outstanding
carrying amount of each loan product as of the reporting date, and then multiplying the product by its weighted
average effective annual interest rate. This allows the Bank to calculate the expected amount of unforeseen losses
in the case of early repayments.
Principal risks and uncertainties continued
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Financial Statements Additional Information
Regulatory and legal risk
Principal risk/
uncertainty
Regulatory and legal risk is the risk of financial loss, regulatory censure, criminal or civil enforcement action or
damage to the reputation as a result of failure to identify, assess, correctly interpret, comply with, or manage
regulatory and/or legal requirements.
Key drivers and
developments
The Group is subject to increasing legal and regulatory requirements, and the competitive landscape in which
we operate may change as a result – the extent and impact of which may not be fully predicted.
Since the Group is listed on the London Stock Exchange (LSE)’s main market for listed securities, it is subject to
the UK Financial Conduct Authority’s regulations and listing rules. The Group’s core entity, JSC Bank of Georgia,
is also subject to laws of Georgia and regulatory oversight of the NBG. Furthermore, Group companies are subject
to relevant laws and regulations in Georgia, and the banking subsidiary in Belarus, BNB, is subject to the laws of
Belarus and regulatory oversight of the NBRB.
Mitigation The Group undertakes the following key mitigating actions to manage regulatory and legal risk:
Compliance policies: The Group maintains compliance policies and procedures enabling the integration of
compliance risk management principles across the operations in line with relevant regulations. These policies set the
principles and standards for managing compliance risks across the Group and define key roles and responsibilities
of an independent compliance function. Our compliance risk management framework and policies are subject
to review by the Bank’s Internal Audit function. Adherence to the policies is mandatory for all employees and, to
increase awareness, the Bank runs a mandatory compliance training programme. The completion rate of the
programme at the end of 2022 was 86%. The trainings are easily accessed online and assigned to each person
according to their role. The compliance programme is integrated with our HR management system, and each
manager has daily access to their staff’s compliance trainings status as well as the team’s overall KPI. Reminders
are sent regularly to employees who do not complete trainings timely. Additionally, relevant process owners receive
quarterly Bank-wide reports and, when needed, escalate issues accordingly.
Regulatory change management: In line with our integrated control framework, we carefully evaluate the impact
of legislative and regulatory changes during our formal risk identification and assessment processes. Our legislative
and regulatory change management system is designed such that changes in laws and regulations are proactively
identified by the Legal and Compliance departments. In addition, we maintain a standardised process to design
and implement appropriate changes by generating workflows, assignments, tasks, and automated follow-ups.
As part of the regulatory change management process, we engage in constructive dialogue with legislative and
regulatory bodies where possible, and seek external advice on potential changes in legislation. We have a formal
link and a coordinated communication process with the NBG. Significant regulatory and legal changes as well as
material regulatory inspections are regularly discussed with the Group’s Audit Committee.
Related party transactions monitoring: The Group ensures related party transactions are identified, assessed and
monitored in line with the requirements of the NBG. Controls are defined and the process is organised based on the
three lines of defence.
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Conduct risk
Principal risk/
uncertainty
Conduct risk is the risk that the conduct of the Group and its employees towards customers will lead to poor
or unfair customer outcomes or adversely affect market integrity, will damage the Group’s reputation and
competitive position.
Key drivers and
developments
Conduct risks can impact our customers directly or indirectly and could arise from a number of areas:
• insufficient business and strategic planning that does not consider customer needs;
• ineffective development, management and monitoring of products, their distribution (including the
sales process, fair value assessment) and post-sales service, including the management of customers in
financial difficulties;
• unclear, unfair or untimely customer communications; and
• ineffective management and resolution of customers’ complaints or claims.
Mitigation To effectively mitigate conduct risks the Group remains focused on delivering a leading customer experience,
and undertakes the following actions:
Treating customers fairly: Our Code of Conduct and Ethics and Customer Protection Standard covers all stages
of the product and services lifecycle, and includes requirements related to transparent product offerings and clear
and accurate communications to enable customers to make informed decisions. The Customer Rights Protection
unit serves as a second line of defence, ensuring the Bank’s processes are compliant with applicable laws and
regulations and in line with internal policies and procedures.
We disclose all features and terms and conditions for our products and services so our customers can make
informed decisions. The Legal function serves as a second line of defence and reviews the Bank’s marketing
communications as well as the compliance of products and services from a legal and regulatory perspective.
Customer claims management: We have a Customer Claims Management procedure to effectively handle
customer complaints and concerns. The Customer Claims Management and Support Centre function reviews and
manages all incoming claims. Claims related to the Code of Conduct and Ethics violations are reviewed by the
Compliance Committee to ensure they are properly handled and remediation plans are in place. Furthermore, the
Compliance department reviews all customer complaints. Recurring claims potentially indicating a systemic issue
and reports received through the whistleblowing platform are investigated and reported on a quarterly basis to
the Audit Committee.
Financial crime risk
Principal risk/
uncertainty
Financial crime risk is the risk of knowingly or unknowingly facilitating illegal activity, including money laundering,
fraud, bribery and corruption, tax evasion, sanctions evasion, the financing of terrorism and proliferation, through
the Group.
Key drivers and
developments
Financial crime risks continue to evolve globally, and the Group faces stringent regulatory and supervisory
requirements related to its management. Failure to comply with these requirements may lead to enforcement
action by the regulator, leading to financial loss and/or damage to the Group’s reputation.
The main sources of financial crime risk are:
• an inherent risk related to providing products and services to customers that may expose the Group to
financial crime;
• inadequate controls to detect risk and/or reduce the residual impact and likelihood of financial crime risk; and
• business activities with an unacceptable level of risk exposure that may not be adequately managed.
Globally, increased volume and speed of transactions together with increasing digital transformation in financial
services are fuelling the following trends in financial crime risk management:
• as transactions are being executed more quickly, the Group needs to use more advanced detection techniques
and data to mitigate risks;
• the number of identity frauds, account takeovers and fabricated customer accounts is expected to rise globally.
The Group will need to combine the breadth of available information with more advanced data analytics and
machine learning capabilities to mitigate the risk;
Principal risks and uncertainties continued
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Financial Statements Additional Information
Financial crime risk continued
Key drivers and
developments
continued
• diagnosis products (new and non-traditional) for money laundering. Criminals are more likely to shift their
attention to non-traditional products, including trade finance, securities and transaction laundering, crypto-
currencies and the Group will need to implement more advanced technological solutions and comprehensive
policies to prevent and detect money laundering;
• the financial crime risks related to the use of innovative fintech are not yet fully understood, while the changing
sanctions and regulatory landscape presents execution challenges; and
• recent events around the Russia-Ukraine war have raised sanctions compliance risks.
Mitigation The Group’s financial crime risk management programme aims to ensure all business units, support functions
and subsidiaries consider the impact of their activities on the risk profile and take effective measures to ensure
alignment with the Group’s risk-taking approach for financial crime. We aim to prevent harm to customers and the
economy caused by criminals and terrorists, and actively monitor our exposure to financial crime risks, reporting all
issues in a timely and proactive manner.
Anti-money laundering: We have an AML/counter-terrorist financing (CTF) framework that reflects a risk-based
approach towards money laundering / financial terrorism (ML/FT) risks. The framework complies with the local
legislation, international standards (Financial Action Task Force recommendations) and international financial
sanctions programmes. Annual training on ML/FT policies and procedures is mandatory for all relevant employees
and the completion rate for AML training was 85% at the end of 2022. The progress of completion is being
monitored. We make sure that the employees cover the training material according to the timeline.
To mitigate risks related to ML/FT, we have established a risk governance structure based on the three lines of
defence model. To strengthen our ability to detect and prevent financial crime, we continue to enhance our ML/
FT risk management function. We have updated policies and procedures to make our ML/FT risk management
activities more robust, and we have invested significant resources to improve our ML/FT risk management
capabilities, including implementing screening and filtering tools supported by advanced analytics and transaction
monitoring solutions, as well as reinforcing the staff dedicated to the AML function.
Bribery and corruption: We are committed to preventing bribery and corruption by implementing appropriate policies,
processes and effective controls. We expect all our employees to adhere to our Code of Conduct and Ethics. The Group
has zero tolerance towards non-compliance with anti-bribery and anti-corruption policies and procedures.
All employees receive annual mandatory training on anti-bribery and anti-corruption policies and procedures,
including information on how to use the Bank’s anonymous whistleblowing channel. The completion rate for anti-
bribery/anti-corruption training was 88% at the end of 2022. Reminders are sent regularly to employees who did
not complete trainings timely and completion is monitored by relevant managers.
Sanctions compliance: The Group has a robust sanctions compliance policy, which requires strict adherence to the
relevant prohibitions and restrictions provided in the US, UK, EU and other relevant sanctions programmes. Russia
and Belarus were designated as high-risk jurisdictions, meaning that the Group has limited risk appetite in relation
to customers from and transactions related to these countries. In particular, customers from Russia and Belarus
are subject to enhanced due diligence measures, while transactions related to these jurisdictions are subject to
enhanced sanctions screening. We have also enhanced our cooperation with the Regulator and other relevant
Government authorities and partner financial institutions in Georgia to monitor and mitigate sanctions-related
risks both at the sectorial and country levels.
Due diligence: The Group continues to improve customer due diligence practices and transaction monitoring
capabilities, including monitoring supported by risk-based scenarios, handling alerts and reporting suspicious
activities where required. Our KYC procedures for customer screening and transaction monitoring ensure
compliance with international financial and economic sanctions regulations as well as procedures for verifying
customer identity to protect the Group against money laundering and terrorism financing. High-risk clients,
including politically exposed persons and virtual asset service providers, those subject to adverse media coverage or
performing unusual or crypto currency-related transactions, or those living and working in countries or sectors with
an inherently higher risk of financial crime, undergo additional due diligence.
Fraud risk: To mitigate fraud risk we have implemented the following measures:
• Know Your Employee procedures, which include screening requirements at recruitment, employment and
departure stages of employment, allow us to have a clear understanding of an employee’s background and
actual or potential conflicts of interest;
• mandatory training for all new employees to increase awareness regarding fraud risk; and
• communication channels to inform our customers about fraud risk.
The Bank’s Internal Audit function, utilising a risk-based approach, provides assurance on the adequacy and
effectiveness of our risk management, internal controls and systems. Financial crime risks are on the regular
agenda of the Joint Audit and Risk Committees.
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Information security and data protection risks
Principal risk/
uncertainty
Information security risk is the risk of loss of confidentiality, integrity, or availability of information, data,
or information systems, and reflects the potential adverse impacts to operations.
Data protection risk is the risk presented by personal data processing, such as accidental or unlawful destruction,
loss, alteration, unauthorised disclosure of, or access to, personal data stored or otherwise processed, which may
result in financial loss, reputational damage, or other significant economic or social adverse impacts.
Key drivers and
developments
Information security risk is a top risk globally for organisations, especially in financial services. The Bank remains
a subject to attempts to compromise its information security. The external threat profile is continuously changing,
and we expect threats to increase. Alongside the human toll, the invasion of Ukraine is a salient reminder of the
omnipresent danger of state-sponsored cyber attacks that aim to disrupt and disable IT systems.
In light of the ever-evolving hostile cyber threat environment, we understand the importance of continuously
investing in administrative and technical controls that help prevent, detect, and respond to existing and potential
threats. Nevertheless, opportunities remain for malicious actors, with respect to:
• zero-day attacks, which exploit a previously unknown vulnerability;
• brand impersonation attacks, which use sophisticated techniques;
• cases where we do not have direct control over the cybersecurity of the systems targeted (such as those of our
customers and third-party service providers), limiting our ability to effectively defend against certain threats;
and
• failure by employees to adhere to our policies, procedures and technical controls.
On 1 January 2022, as a result of legislative amendments, the Bank was recognised as one of Georgia’s critical
information system subjects, which means that its uninterrupted operation of the information system is essential
to the defence and/or economic security of the country, as well as to the maintenance of state authority and/or
public life. Current legislation imposed a considerable number of obligations on the Bank, leading to the need for
minor amendments to existing procedural documents and established practices.
Mitigation The following controls enable us to mitigate information security and data protection risks:
Zero-day attacks: We regularly monitor zero-day vulnerability announcements that may affect our systems. If such
a vulnerability is detected, the designated team ensures it is attended to as soon as possible. Moreover, we employ
a ‘defence in depth’ approach, meaning we have multiple complementary security layers. If one mechanism fails,
another will be activated immediately to prevent an attack doing damage.
Customer-targeted phishing: Malicious actors may carry out successful customer-targeted phishing attacks
through fake websites, social networks, emails and other channels. We focus on improving our information security
controls to detect unauthorised access to customers’ accounts, and run awareness-raising campaigns to help our
customers and the wider public recognise phishing and respond appropriately.
Supply chain cyber-attack: Malicious actors may gain unauthorised access to our third-party service providers’
systems. The Bank focuses on mitigating this risk by:
• integrating information security and data protection due diligence in the third-party service provider’s selection
process, to determine the level of risk posed by a potential third-party service provider;
• ensuring necessary contractual and technical controls are implemented to mitigate identified risks, prior to
engaging with third-party service providers; and
• monitoring existing third-party service providers at least annually to assess the fulfilment of agreed information
security and data protection requirements. The termination of a relationship is subject to exit procedures to
ensure the protection of the confidentiality, integrity and availability of the Bank’s information.
Failure by employees to adhere to our policies, procedures and technical controls: Employee training is one of the
key components of information security and data protection risk management across the Bank. We continuously
focus on equipping our employees with relevant knowledge and the right tools to prevent, identify, mitigate and
report information security incidents.
Annual information security and data protection training is mandatory for all relevant employees, and includes a
tailored course on mitigating information security risks while working remotely. We provide continuous, role-based
data protection training to keep employees aware of data protection risks and to explain their role in mitigation.
We initiate quarterly phishing campaigns to test our employees’ ability to detect phishing and respond
appropriately. Periodically, we send awareness emails and share posts on current information security threats
through internal communication channels. Although there have been phishing attempts against employees,
there have been no major incidents.
Principal risks and uncertainties continued
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Information security and data protection risks continued
Mitigation
continued
Finally, we recognise that, regardless of our efforts to enhance information security controls Bank-wide, in limited
cases there may be a justified business need for controlled exceptions to existing policies, procedures and technical
controls. To this end, we have improved our approach to information security exception management, which allows
noted flexibility, a holistic view of overall risks resulting from the exceptions, and their proactive management.
Access management: We have role-based access control, which contributes to the automation of employee
onboarding and existing employee rotation processes, enables the restriction of network access based on the roles of
individual users, and thus is in line with the principle of least privilege, which the Bank follows. We also conduct a semi-
annual privileged user evaluation process. We monitor and update access rights on an annual basis in each department.
The Bank does not allow the granting of privileged access rights to third parties without a valid and justified business
need. Even in such cases, third parties with privileged access rights are required to use multi-factor authentication,
and the Bank manages and monitors their activities through a privileged access management solution.
Information security incident response: To successfully mitigate the above-mentioned key risks we have further
aligned our incident response plan with the industry standard and accepted best practices as provided by the
National Institute of Standards and Technology in its Computer Security Incident Handling Guide. We also conduct
continuous breach and attack simulations, which allow us to see our network through the eyes of malicious actors,
verify our defences and security configuration, and continuously monitor and improve our defensive posture.
We are also in the process of refining our information security incident response plans. We use additional metrics
such as mean time to detect, mean time to respond, and false positive ratio, to better track the performance
of our Security Operations Centre. These metrics are tracked with respect to the entire Security Operations Centre
and each of its team members.
Russia-Ukraine war: In response to the ongoing Russia-Ukraine war, the Bank has increased its monitoring efforts
with respect to threats coming from Russia. While the intensity of attempts to compromise have increased, we do
not expect them to lead to any significant negative impact on the Bank.
During 2022, we have enhanced our capabilities by implementing a vandal-protected backup storage. As a result,
neither external nor malicious internal threat actors can harm the Bank’s core database backup in any way.
Information security risk is measured against predefined risk appetite metrics and thresholds, and performance
is reported quarterly to the Risk Committee. It aims to minimise our exposure to the data and security breaches
to the lowest in order to achieve our main strategic objectives: (i) delivering excellent customer experience and
(ii) maintaining the Group’s financial strength. The Bank’s Internal Audit function, on a risk-based approach,
provides assurance on the adequacy and effectiveness of our risk management, internal controls and systems.
Information security is on the Risk Committee’s regular agenda, and we engage external auditors to conduct
cybersecurity audits.
Data protection policies: We maintain a comprehensive set of data privacy policies and standards to ensure we
operate in compliance with applicable privacy regulations and state-of-the-art principles. These policies and
procedures outline privacy principles and standards we observe while processing personal data, and are:
• regularly revised to ensure they reflect current legal, regulatory, best practice and internal policy requirements;
• annually reviewed and approved by relevant governance bodies; and
• aligned with recognised industry standards.
Effective implementation of the privacy strategy requires a strong organisational structure. To this end, we have
appointed the industry’s pioneering Data Protection Officer (‘DPO’) whose responsibilities include but are not
limited to:
• providing recommendations to the Bank’s employees to ensure compliance with the requirements of
applicable legislation;
• researching data processing procedures within the Bank and evaluating their compliance with
applicable legislation;
• advising and assisting business units on privacy matters, particularly when implementing a new process
or product;
• liaising with the supervisory authority regarding privacy matters; and
• drafting and maintaining internal policies and procedures as well as awareness programmes on privacy matters.
Privacy matters are considered in all new processes and projects. We are increasingly seeing employees proactively
engaging the DPO and undertaking data privacy impact assessments. These assessments ensure our projects
comply with data protection legislation when they go live.
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Information security and data protection risks continued
Mitigation
continued
Transparency: Transparency is a core element of our privacy programme. Our customers are informed in simple
language about our privacy practices, including how we collect, use, disclose, transfer and protect their personal
information. Our privacy commitments are reflected in our Privacy Statement.
The DPO reports to the Audit Committee at least twice a year on the status of the Bank’s privacy strategy
implementation. As a result, the Bank’s Executive Management and Supervisory Board remain up to date on
privacy matters at all times.
Operational risk
Principal risk/
uncertainty
Operational risk is the risk of financial and non-financial loss resulting from inadequate or failed internal processes,
people and systems or from external events.
Operational risk may result in losses emerging from the following events, among others:
• internal and external fraud;
• business disruption and system failures;
• employment practices;
• clients, products and business practices;
• damage to physical assets and infrastructure; and
• execution, delivery and process management.
Key drivers and
developments
Deficiencies or ineffectiveness in operational risk management may result in inaccurate financial, regulatory or risk
reporting, which may have an adverse effect on accurate and timely visibility of the Group’s risk profile for our key
stakeholders. The trends driving the need to transform, other than above-mentioned emerging risks, stem from
multiple sources:
• Customer expectations of banking products and services will change with the emergence of new technologies
and service models that will force banks to rethink their business models and deal with new operational risks.
• Accelerating digitalisation and automation will make IT and operational resilience more sophisticated. The speed
of change and the need to innovate has spurred the introduction of technologies whose deployment needs
careful management.
• The talent pool will need to shift to more IT- and data-savvy profiles to catch up with the increased level of
digitalisation and automation of processes.
The Group has implemented policies and procedures and has established an operational risk framework for
anticipating, mitigating, controlling and communicating operational risks and the overall effectiveness of the internal
control environment across the Group. The operational risk framework includes the risk and control self-assessment
(‘RCSA’) process, risk impact likelihood matrix, key risk indicators, risk appetite, operational event management,
and operational loss process. The RCSA process acts as a specific control through which operational risks and the
effectiveness of controls are assessed and examined, providing reasonable assurance that all business objectives will
be met. Through effective alignment of roles and responsibilities related to operational risks among the three lines of
defence, the Group identifies, monitors, measures, reports on and manages risks and related controls.
The prime responsibility for the management of operational risk and the compliance with control requirements
rests within the business units where the risk arises. They are required to report their operational risks on both a
regular and an event-driven basis. The Operational Risk department is a second line of defence, and is responsible
for defining and overseeing the implementation of the framework and monitoring the operational risk profile.
The Operational Risk department alerts the Board of Directors when risk levels exceed acceptable tolerance in
order to drive timely decision.
Principal risks and uncertainties continued
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Financial Statements Additional Information
Operational risk continued
Mitigation Internal controls: We have designed internal controls that ensure the Bank has efficient and effective operations,
safeguards its assets, produces reliable financial reports, and complies with applicable laws and regulations.
The following elements of the internal control framework enable us to mitigate operational risks:
• established clear authorities and processes for approval;
• close monitoring of key risk indicators and the alert system to ensure adherence to thresholds or limits;
• infrastructure security;
• appropriate employee recruitment, learning and development practices to maintain expertise;
• continuous processes to identify business lines or products that appear to under- or over-perform in comparison
with reasonable expectations; and
• regular verification and reconciliation of transactions and accounts.
Policies and standards: The Operational Risk department develops and maintains a framework and comprehensive
set of policies and standards reviewed and approved by the relevant governance bodies to ensure they are aligned
with recognised industry standards, such as Basel and the European Banking Authority (EBA), and are made available
to all relevant employees through internal channels. The Operational Risk Management Committee is responsible for
setting and overseeing qualitative and quantitative parameters of operational risk appetite and tolerance. The Bank’s
Management Board and Risk Committee are also responsible for setting an overall risk appetite.
Business resilience and continuity: We are exposed to disruptive events which could be severe and affect our ability
to fulfil some or all of our business obligations. Incidents that damage the Bank’s assets, including IT infrastructure,
may result in significant financial losses for the Group, as well as for the local industry. To ensure resilience against
such risks, the Group has established a business continuity plan appropriate for the nature, size and complexity of
our operations. The plan takes into account different scenarios to which the Group may be susceptible, including
system and technology failures.
The Group continuously performs business impact analyses, testing, training and awareness programmes,
communication and crisis management programmes, and develops recovery strategies. We identify and reassess
critical business operations, cyclically or as needed, key internal and external dependencies, and appropriate
resilience levels. The identified plausible disruptive scenarios are assessed for their financial, operational and
reputational impact, and the resulting risk assessment is the foundation for recovery objectives and measures,
and ultimately for a recovery plan.
Events and loss data management: The Group has an operational risk event and loss data management process
with the goal to identify and record the operational risk of financial and non-financial events. A single event can
result in multiple losses (or recoveries). The Group purchases insurance against specific losses to comply with
statutory or contractual requirements.
Third-party relationships: The Group’s policy ensures third-party relationship initiatives follow a defined process,
including due diligence, risk evaluation and ongoing assurance. The following aspects support effective monitoring
and management of third-party risk:
• standards that define whether and how activities can be outsourced;
• due diligence standards to select potential service providers and processes for identifying, managing and
monitoring the associated risks, including the financial condition of the service provider; and
• sound contracting of outsourcing arrangements.
Awareness programmes: We conduct awareness campaigns and mandatory training to help our employees identify
existing and potential risks. The Group’s fraud awareness programme remains a key component of its fraud control
environment, and awareness of fraud risk is supported by mandatory training for all colleagues. This is further
strengthened by material annual investment into both technology and colleagues’ personal development needs.
The Bank’s Internal Audit function, on a risk-based approach, provides assurance on the adequacy and effectiveness
of our risk management, internal controls and systems. Operational risks are reviewed quarterly by the
Risk Committee.
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78
Human capital risk
Principal risk/
uncertainty
Human capital risk is the risk of failure to deliver on the Group’s strategic objectives, operational disruption,
financial loss and/or reputational damage as a result of ineffective human capital management.
We are exposed to the following key risks:
• failure to recruit, develop and retain employees, including failure to identify a talent pipeline and put the right
people in the right roles;
• ineffective leadership, weak performance, employee disengagement and detachment resulting in high turnover;
• inappropriate and unfair remuneration policies;
• failure to meet all employee-related legal and regulatory requirements; and
• failure to effectively design people processes that ensure equal opportunity and diversity across the Group.
Key drivers and
developments
Employees are one of the key enablers of the success of our business. To be able to learn and innovate quickly,
organisations globally have focused more on building rigorous talent management capabilities, including building
a data analytics capability to hire, develop, and retain the best employees and match the right people to the
right roles. Demographic changes have also highlighted the need to think more deeply about what kind of
experiences employees value and how best to align their values and motivations with the values and objectives of
an organisation, and which are the best channels for active communication with various segments of prospective
candidates to get in touch with and keep them connected with the Group.
Increasing digitalisation and the growing focus on and importance of advanced data analytics and AI in business
processes across the organisation have made the recruitment, development, and retention of IT and data science
professionals one of our priorities. Globalisation and the shifting working patterns accelerated by the pandemic make
it even more challenging to recruit top talent in these areas due to the scarcity of qualified candidates and availability
of jobs both locally as well as globally. Georgia has a relatively limited talent pool which, while developing, may not
keep up with the skills required in a digital, fast-moving and financially sophisticated organisation.
Mitigation The Group takes the following mitigating actions with respect to human capital risk:
• We attract young talent by participating in job fairs and running extensive internships and student development
programmes. We actively partner with leading Georgian business schools and universities to recruit top talent
in different fields. We have a student development programme, Leaderator, that gives talented undergraduates
the opportunity to have a 360° view of the Bank in action, work on real projects, and receive coaching and
support from the Bank’s executives and middle managers. The programme also helps us to attract IT, digital
and data science and analytics students as it guarantees high qualification and fast professional growth within
one of the best tech teams in Georgia.
• We offer our employees learning and personal development opportunities to enhance their competencies and
skills throughout their careers, and support their career progression. Internal mobility remains a priority in our
talent strategy to ensure having the right person in the right position at any given time. In 2022 we launched the
Front2IT retraining programme enabling our front-office employees to move to a new profession in the field of
technology. We expect that this approach will positively affect turnover keeping employees within the Bank and
increasing motivation, engagement and overall productivity.
• We enhance our talent pool with those with international experience where appropriate and utilise training
programmes including in-house, local and international courses to ensure employees learn about best practices
and enhance their skills and knowledge.
• We offer competitive remuneration and benefits packages and support work-life balance. We monitor employee
pay trends via labour market compensation surveys in the financial sector. Our remuneration structure is based on
employee performance reviews, part of our continual feedback process. We continue to fine-tune our job architecture
and grading structures by further advancing the job levelling project to ensure our remuneration system and practices
are fair, clear and transparent for employees, allowing them to fairly plan their career moves and progression.
Principal risks and uncertainties continued
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Financial Statements Additional Information
Human capital risk continued
Mitigation
continued
• We have forums and communication channels enabling employee voices to be heard across the organisation,
like CEO vlog on Workplace – regular live sessions with employees on current developments, Employee Voice
meetings with the Board of Directors, town hall meetings and agile quarterly business reviews (QBRs).
• We ensure that HR policies and practices are developed and implemented to support our business activities and
are in line with Georgian legislation and relevant international standards. We regularly review our policies and
procedures to ensure that they reflect best practices, organisational changes, and legal requirements. You can see
some of our HR-related policies on www.bankofgeorgiagroup.com.
• We offer hybrid working arrangements, giving a majority of back-office employees the flexibility to combine
working from home with working from the office.
• We monitor human capital risk through a series of quantitative and qualitative indicators, such as ongoing
deep interviews with each individual employee, Bank and team/division level eNPS, engagement scores, internal
mobility, retention, and employee turnover. In addition we have Risk Committee-approved risk appetite metrics
and limits in place which we regularly monitor and quarterly report to the Risk Committee. During 2022, our EXM
team had already implemented action plans based on results of mentioned measures; some other initiatives are
being elaborated (please see the Empowering Our Employees section, page 122).
All violations of ethical principles and standards related to the Code of Conduct and Ethics and Standards of
Professional Conduct for Commercial Banks are reported quarterly to the Bank’s Audit Committee.
Model risk
Principal risk/
uncertainty
Model risk is the risk of potential adverse consequences arising from decisions based on model results that
may be incorrect due to the use of inaccurate assumptions, inappropriate variables, weak algorithms and/or
low quality data.
We recognise the importance of proper model risk management processes and controls to effectively address the
above-mentioned risks.
Key drivers and
developments
As banking operations become more complex and digital, models are becoming more prominent in decision-making.
Increased adoption of statistical, machine-learning models and AI helps us improve decision-making and gain
competitive intelligence. To sustain the benefits of model use in banking operations it is crucial to have sound model
risk assessment frameworks and validation practices in place.
In May 2022 the NBG’s updated regulation – Managing Risks for Data-based Statistical, Artificial Intelligence and
Machine Learning Models – came into effect. The regulator has set additional requirements for model development,
validation, monitoring and application. Within the scope of the regulation, all relevant new and existing models
must be in line with the new requirements.
Mitigation The Bank is actively enhancing the model risk management framework, which is continuously reviewed and refined
to adequately address key model risks. The Bank’s Model Risk Management Policy further defines:
• the segregation of roles and responsibilities of those involved in the model development lifecycle, including
ownership of model development, independent oversight and approval; and
• key controls with respect to data integrity, model development, validation, implementation, backtesting
and monitoring.
The Bank’s model risk and control structure is based on the three lines of defence approach. Model Risk Owners
in the first line are responsible for model approval and ongoing performance monitoring. The Bank’s independent
Risk function, in the second line, is responsible for validating new models and monitoring their compliance with
regulatory requirements by focusing on the soundness of the algorithms used, the model’s predictive ability and
complexity, sustainability, consistency with business objectives, assumptions, and data quality. Further, to ensure
effective model performance, the Bank has implemented automated processes for the ongoing monitoring of
model performance. Based on the significance of model risk, automated notifications are generated on a model’s
performance for relevant stakeholders cyclically (monthly, quarterly, ad hoc).
The Bank maintains a structured model development lifecycle, including recalibration. All new models or changes to
existing models are authorised by the Chief Risk Officer. Significant model-related issues are reported to the Bank’s
Supervisory Board, and the Bank’s senior management is aware of major model risks.
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Principal risks and uncertainties continued
Strategic risk
Principal risk/
uncertainty
Strategic risk is the risk that the Group will be unable to execute its business strategy and create value for its
stakeholders as a result of poor decision-making, ineffective resource allocation, or a delayed or ineffective
response to the changes in the external environment.
Key drivers and
developments
The Group faces strategic risks due to changes in the legal, regulatory, macroeconomic and competitive
environments. The Covid-19 pandemic and the emergence of global fintech have changed customer, shareholder
and employee expectations, indicating the need for strategic and forward-looking risk management.
Mitigation The Group has a sound corporate governance framework and its strategy is approved by its Board of Directors.
Customer-centricity, people and culture, brand strength, and data and AI-driven decision-making are key enablers
of the Group’s sustainable value creation. The Group assesses and monitors strategic risk implications in its
day-to-day activities, ensuring they respond appropriately to internal and external factors – including changes
to regulatory, macroeconomic and competitive environments.
Strategic planning: The Group conducts an annual strategic planning process to review its performance, discuss
the internal and external environment, and develop a medium- and short-term strategic plan, considering potential
financial and non-financial risks. This process is supported by risk appetite statements, a capital plan and a
recovery plan.
Monitoring: We conduct annual strategic review sessions involving top and middle management. During the year,
execution of business strategies is monitored quarterly to assess performance against targets. The Group takes
corrective measures to mitigate risks arising from significant variance.
Periodic strategic challenging reviews: Our strategic options or decisions are systematically discussed and
challenged with our Board of Directors, including during an annual dedicated strategic seminar session.
Reputational risk
Principal risk/
uncertainty
Reputational risk is the risk of damage to stakeholder trust and our brand image due to negative consequences
arising from internal actions or external events.
Key drivers and
developments
The Group’s operations are subject to inherent reputational risk, with primary drivers identified as: failure in
internal execution; failure to manage cyber and phishing cases; and a difference between the Group’s values
and public opinion.
Mitigation To mitigate potential reputational risks, effective systems and controls are in place to ensure high levels of
customer service and compliance. For each material risk identified at any level of the business, the risk is measured,
mitigated and monitored in accordance with our policies and procedures.
To protect and build our brand, our Marketing team monitors media coverage daily and our Legal team makes
sure marketing communications are fully compliant with internal policies, and reviews and confirms the compliance
of products and services from a legal and regulatory perspective. The Group regularly tracks and measures
customer satisfaction with both internal and external surveys, and monitors its compliance with risk appetite limits,
reporting to Executive Management monthly.
We also engage with our customers on information security-related matters through multiple channels,
including our website, digital platforms and text messages. We regularly create and share content, including
articles, interactive games and questionnaires through various media. We support and contribute to the
development of information security in Georgia by regularly participating in collaborative efforts with our
financial industry peers, law enforcement authorities, regulatory bodies and the Government to share
knowledge and prevent negative impacts.
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Financial Statements Additional Information
Climate-related risk
Principal risk/
uncertainty
Climate-related risk is the risk of financial loss and/or damage to the Group’s reputation as a result of accelerating
transition to a lower-carbon economy as well as the materialisation of actual physical damage as a result of acute
or chronic weather events. Among other things, transitional and physical risks may impact the performance and
financial position of our customers and their ability to repay their loans.
Key drivers and
developments
Key stakeholders, including investors and lenders, are increasingly demanding more climate-related disclosures,
including climate risk assessment and greenhouse gas (GHG) emissions reporting. Since 1 January 2021, the Group,
as a premium-listed UK company, has been required to make disclosures in line with the TCFD recommendations.
In 2021, Georgia launched its updated Nationally Determined Contribution, published its Fourth National
Communication under the United Nations Framework Convention on Climate Change (including updated
Greenhouse Gas Inventory), adopted its Climate Change Strategy (2030) and Action Plan (2021-2023) and
developed its National Energy and Climate Plan (2021-2030) and Long-Term Low Emission Strategy. In
2022, Georgia began work on a climate change law that will regulate climate-related issues and distribute
responsibilities. These strategies and regulations and their implementation may drive change across the Georgian
economy and increase the importance of climate change mitigation and adaptation.
We recognise climate change as an emerging risk and are working on integrating climate-related risks, both
physical and transitional, into the overall risk management framework and decision-making processes across
the Bank.
Mitigation In 2022, we continued to integrate climate-related risks into our risk management framework and business
resilience assessments. We are working on each of the four TCFD pillars: Governance, Strategy, Risk Management,
and Metrics and Targets. We have focused on mitigating climate-related risks by:
• reassessing climate scenarios and deepening our knowledge of climate change and climate policy in Georgia;
• designing, preparing and initiating a process to identify and address sector- and location-specific climate risks
for our business clients, as part of loan appraisal and environmental and social risk management process;
• collecting relevant data, including on output produced and energy consumed, and calculating Scope 3 financed
emissions for some GHG-intensive corporate clients;
• identifying opportunities for greening Georgia’s economy, to help the Bank understand where and how to
offer green financing and to discuss transformational opportunities with clients and lenders;
• preparing for identification of and reporting on transactions aligned with the NBG’s Green Taxonomy
(from January 2023), including in climate-relevant sectors; and
• raising climate awareness across the Bank by implementing training for bankers and risk managers from CB
and MSME departments.
Other initiatives to further embed climate risk and opportunity management into the Bank’s operations include the
establishment of an Environmental and Social Impact Committee comprising Executive and senior management
of the Bank. The Committee is responsible for monitoring the Bank’s climate, environmental and social risks and
impacts, arising primarily as a result of our lending activities. The Committee meets quarterly and reports to the
Supervisory Board twice a year.
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GOING CONCERN
AND VIABILITY
STATEMENTS
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Financial Statements Additional Information
Going concern
statement
In adopting the going concern basis for
preparing the consolidated financial
statements, the Directors have
considered the Group’s business activities,
strategy and objectives, principal risks
and uncertainties, and the performance
as set out on pages 17 to 81 and 149
to 162. The Directors have performed
a robust assessment of the Group’s
financial forecasts across a range of
scenarios over a 12-month period from
the date the financial statements are
authorised for issue by carrying out stress
testing, incorporating extreme downside
scenario and reverse stress testing, which
involved examining the level of disruption
that may cause the Group to fail. The
assessment specifically incorporated
an analysis of the implications of the
ongoing Russia-Ukraine war on the
Group’s projected performance, capital,
liquidity and funding positions, including
the impact of scheduled repayment of
borrowings and other liabilities. Based
on these, the Directors confirm that
they have a reasonable expectation that
the Group, as a whole, have adequate
resources to continue in operation for the
12 months from the date the financial
statements are authorised for issue.
Therefore, the Directors consider it
appropriate to adopt the going concern
basis of accounting in preparing the
accompanying consolidated financial
statements.
Viability statement
In accordance with provision 31 of the UK
Corporate Governance Code, the Board
is required to make a statement in the
Annual Report and Accounts regarding
the Group’s viability over a specified
time horizon.
In assessing Bank of Georgia Group PLC’s
viability, the Board considers a period
of three years to be appropriate as the
budget and business planning processes
are based on a three-year horizon and it
also considers that uncertainty increases
as the time horizon extends.
In assessing the Group’s viability over the
three-year time horizon, the Board has
considered different types of information
including:
• The Group’s business model and
strategic plans.
• Current capital position and
projections over the relevant period.
• Liquidity and funding profile and
projections over the relevant period.
• The Group’s risk profile, including any
breaches of risk appetite, and principal
and emerging risks that could have
a significant negative impact on
the Group.
• The effectiveness of the Group’s risk
management framework and internal
control processes.
• Stress testing and reverse stress
testing, as described in this section.
Bank of Georgia Group PLC’s business
and strategic plans, which are reviewed at
least annually, provide long-term direction
and assess resilience to a range of risks
across the planning horizon. These plans
include three-year forecasts assessing
the Group’s expected financial position
throughout the planning period. A suite of
economic scenarios supports the Group’s
financial planning processes. Stress
testing is also integrated with financial
planning processes. It is used to quantify
and evaluate the potential impact of
material risks on the financial strength
of the Group, including its liquidity and
capital positions.
For those risks considered sufficiently
severe to affect our viability, we
performed stress testing for the
assessment period, which involved
modelling the impact of a combination of
severe yet plausible risks. In addition, we
performed reverse stress testing, which
involved examining the level of disruption
that may cause the Group to fail. The
Group has examined, among others,
the impact of the following risks over
the assessment period:
• The risk of deterioration of
macroeconomic environment and
regional instability:
• Decline in real GDP growth rate.
• Depreciation of Georgian Lari
against the US dollar.
• Increase of unemployment rate.
• High and sustained levels of
inflation and increased interest
rates (the NBG’s monetary policy
rate, a US Fed rate, and an
ECB rate).
• Substantial drop in real estate prices
• Liquidity risk (one-off withdrawal of
customer funds).
• Increased operational losses, including
from materialisation of cybersecurity
risk and regulatory fines.
• Increased risks related to the Group’s
operations in Belarus, leading to a full
write-off of BNB operations.
Applying the stress testing scenarios to
the Group’s capital, liquidity and funding
positions did not result in a breach of any
regulatory requirements.
The reverse stress testing scenario is
currently deemed to be implausible.
The stress test scenarios were reviewed
against the Group’s current and projected
capital adequacy position and solvency,
and liquidity position, considering current
committed funding. The testing also
took into account the availability and
the likely effectiveness of mitigating
actions that could be taken to avoid
or reduce the impact or occurrence of
the identified underlying risks to which
the Group is exposed. These actions
included a decline in lending activity, a
partial suspension of share buybacks for
the share-based compensation scheme
and dividend distribution. It also took
into account the assumption that the
Group will be able to prolong or refinance
existing borrowings, or increase the
financing from DFIs, on terms worse
than the existing ones. As mitigating
actions in the case of the reverse stress
testing scenario, we also considered a
full suspension of share buybacks for the
share-based compensation scheme and
dividend distribution, the write-off of the
Bank’s AT1 capital notes and AT1 capital
perpetual subordinated syndicated
facility, a partial use of mandatory
reserves placed at the NBG, the release
of all Pillar 1 and Pillar 2 buffers under
the Basel III capital requirements set by
the NBG.
The Directors have also satisfied
themselves that they have the necessary
evidence to support the statement in
terms of the effectiveness of the Group’s
risk management framework and internal
control processes in place to mitigate risk.
Based on these analyses, the Directors
confirm that they have a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the three-
year period of from 1 January 2023 to
31 December 2025.
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SUSTAINABLE
BUSINESS
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Financial Statements Additional Information
Climate, environmental and social
management of loan portfolio
Responsible supply chain
Own carbon footprint
Anti-competitive behaviour
Climate
resilience
Green products
Sustainable
finance
Local communities
Energy efficiency
Health and safety
Air quality
Waste
Water
Human rights
Biodiversity
Board independence and diversity
Human capital development
Information security and privacy
Regulatory and legal compliance
Customer experience
Product innovation
Financial inclusion and empowerment
Ethical business
Risk management
Financial crime
Customer protection
Diversity, inclusion, and equality
IMPORTANCE TO STAKEHOLDERS
IMPORTANCE TO OUR BUSINESS
Environmental
Social
Governance
We believe in shared success.
Sustainability for us means acting in
ways that empower our customers,
our employees and our communities,
and doing the business the right way
– following the highest standards of
corporate governance and robust risk
management practices. This ensures we
effectively mitigate the negative impacts
we may have, directly or indirectly, on the
economy, people, and the environment –
and that we contribute to the sustainable
development of the communities where
we operate.
Bank of Georgia is a leading financial
institution in Georgia, providing innovative
products and solutions to more than
1.7 million active customers. Innovation
and responsibility go hand in hand, and
we recognise the role the Bank can play
in supporting sustainable development
and inclusion in all its forms. We believe
understanding and managing ESG risks
is crucial to maintaining our financial
strength, so our approach to ESG has
been integrated in the work we do
across the business. The management
of ESG-related issues is subject to
the governance and oversight of our
Executive Management team and the
Board of Directors.
We continue to make progress in
understanding climate-related risks
and opportunities, and putting in place
practices to identify, assess, monitor and
manage climate-related issues – focusing
on the Bank’s loan portfolio, as the main
risks and impacts are associated with
lending. We continue to support our
business customers in their transition
towards greener and more sustainable
ways of doing business.
Our approach to ESG has been informed
by the views of our key stakeholders.
In 2021 we conducted an externally
facilitated formal ESG materiality
assessment (see details in Annual
Report 2021), which included extensive
stakeholder outreach – helping us define
the Group’s material topics and formulate
our key objectives. Our ESG priorities
continue to evolve, and we are committed
to being transparent about our practices
and progress.
Empowering people by creating
sustainable opportunities
Supporting the transition with
business solutions
Being a leader
Empowering local communities
Transforming our own business
We support retail and business clients with a variety of
financial products – including credit and non-financial
offerings, such as expertise and networking.
We are known for our innovative products and great customer
experience. We believe we can build on our customer franchise
strength, to continue contributing to a more sustainable
future.
We are a leading organisation when it comes to actively
supporting our communities. We do so through educational
projects, brand campaigns and sponsorships.
Our goal is to continuously improve the way we do business,
by aligning our operations with the highest standards of
business conduct and best practices.
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86
ESG strategy
Employee empowerment Financial inclusion Education in communities
Risk management
and governance
To be the employer of choice
for top talent, providing equal
opportunities for development
and ensuring the best
employee experience based
on our values and business
principles.
To use the power of
technology and product
innovation to drive digital
financial inclusion in Georgia.
To give more school students
in Georgia access to quality
educational infrastructure and
opportunities.
To effectively manage risk –
including climate-related and
other E&S risks in our loan
portfolio – by doing business in
line with the highest standards
of corporate governance and
highest ethical principles.
Focus areas
Objectives
Material topics
• Human capital
development
• Diversity, inclusion and
equity
• Human rights
• Customer satisfaction
• Customer protection
• Financial inclusion and
empowerment
• Product innovation
• Information security
and privacy
• Financial inclusion and
empowerment
• Product innovation
• Ethical business
• Regulatory and legal
compliance
• Enterprise risk
management
• Board independence
and diversity
• Human rights
• Climate, environmental
and social management
of loan portfolio
• Financial crime
• Information security
and privacy
2022 KPIs and results
1
2023 KPIs
2
eNPS of 54-62
Digital monthly active users (MAU) –
1,000,000
Payments MAU – 1,000,000
Reaching 100,000 school students
53 (end of period) – see details on page 48
KPI Result
eNPS of
54-62
Employee empowerment Financial inclusion
MAU of sCoolApp in December 2023
70K
Number of self-employed borrowers at
31 December 2023
57K
1. For information on risk management practice and results, see the Principal Risks and Uncertainties section on pages 63 to 81 and the Risk Committee report on
pages 198 to 201.
2. The ESG KPIs for 2023 have been updated following the engagement with some of the stakeholders throughout the year on ESG matters including the measures that
they consider more appropriate to measure social impact and performance across the key ESG focus areas outlined above. As a result, we have decided to define targets
for specific segments to measure the Bank’s social impact.
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Financial Statements Additional Information
Business ethics and conduct
In everything we do, we are committed
to doing business with the highest ethical
standards and in line with applicable
laws and regulations. Bank of Georgia
has a leading customer franchise in
Georgia and maintaining the trust of
our stakeholders is a top priority, so we
monitor the changing legal and regulatory
environment, market conditions, and
customer behaviours and preferences.
Getting feedback from employees is one
of the ways we can assess the strength
of ethics and accountability across
our Group. We promote a ‘speak-up’
culture and aim to ensure our employees
are aware of our whistleblowing and
grievance mechanisms, and have full
comfort reporting potentially unethical
practices without fear of reprisal.
In 2022 we received 35 ethics-related
concerns from our stakeholders.
Contributing to the United Nations Sustainable Development Goals
We remain committed to contributing to the five United Nations Sustainable Development Goals (UN SDGs) we linked to our
strategy in 2020.
Over the past two years we have
focused on enhancing our ESG-related
disclosures. This Report is again produced
with reference to the Global Reporting
Initiative (GRI) standards 2021, and you
can find the GRI Content Index at the
end of the Annual Report on pages 344
to 347. You can also find the Group’s
climate-related disclosures, consistent
with the TCFD recommendations and
recommended disclosures on pages 103
to 117.
The information throughout this section is
presented in relation to Bank of Georgia,
unless otherwise stated. The Group’s
impacts are mainly driven by Bank of
Georgia, given the Bank is the core
operating entity representing 94.0% of
the Group’s total assets.
If you have any questions on our ESG
strategy and performance or would like to
provide feedback, please reach out to us
at esg@bog.ge.
We fully share the goal to end poverty in all its forms, everywhere. As one of the biggest and most
influential financial institutions in Georgia, we are taking responsibility to help achieve this goal.
We are known not only as a leading financial services provider and one of the biggest employers,
but also as an organisation supporting local communities in ways that go beyond our core business
activities.
Our focus area for community outreach and engagement has been education, because we believe
there are countless opportunities made possible by access to high-quality education. Our objective
is to enable access to educational opportunities across regions in Georgia, and to encourage more
students to pursue them.
We are committed to inclusion and equal opportunities in our organisation and strive for a gender-
balanced workforce. We do not tolerate any form of violence, harassment, or discrimination.
We are also committed to ensuring fair and transparent remuneration practices.
The Bank contributes to Georgia’s socioeconomic development through the products and services
it provides and salaries and taxes it pays. Financial inclusion is one of our priorities, and we aim
to provide accesible financial services to everyone and increase financial literacy among the
communities where we operate.
A changing climate presents both risks and opportunities for Georgia, its people, and its
companies – and, thus, for the financial services sector. We recognise our role in addressing this
global challenge. Climate change may affect us directly and indirectly, including through the
impact on our clients. Bank of Georgia’s Climate Action Strategy, published in 2022, describes
how we intend to contribute to Georgia’s climate-related goals. Assessing and discussing risks
with clients, providing green finance, managing GHG emissions and improving our climate-related
capacities are some of the key aspects of our climate strategy.
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Our Code of Conduct and Ethics is
an integral part of the employment
agreement between the Bank and
its employees, and is fundamental to
fostering company culture based on
our values and business principles.
The Code clearly sets the expectation
that all employees act legally, ethically
and transparently in all their dealings.
Employees joining the Bank commit to
following the Code in all activities, and
failure to do so may lead to disciplinary
action up to and including termination of
employment. We empower our employees
to act ethically and in line with our values
and business principles by giving them
detailed information about the resources
available to escalate concerns.
The Bank has a whistleblowing tool in
place that allows employees to report any
concerns anonymously or confidentially.
The Bank uses an external vendor,
WhistleB, an advanced independent
whistleblowing reporting channel and
case management tool. We prohibit any
form of retaliation against an employee
who raises a concerns and against anyone
who participates in an investigation.
In 2022 we received seven relevant reports
on the WhistleB platform, and a violation
related to the abuse of power was
confirmed in one case. A severe reprimand
was given to the employee and her
manager as a disciplinary measure.
We are committed to protecting
personal data, preserving the integrity,
confidentiality and availability of data,
increasing control over data protection
risks, and giving individuals full control
of their personal data. We maintain a
comprehensive set of information security
and privacy policies and standards to
ensure we operate in compliance with
applicable privacy regulations and in line
with best practice. We aim to safeguard
human rights, protect customers, and
ensure customer data is handled in
an ethical and responsible manner.
As an organisation fully committed to
the prevention of bribery and corruption,
Bank of Georgia ensures that appropriate
internal controls are in place and operate
effectively. We do not engage in or
tolerate unlawful or unethical business
practices, and do not tolerate involvement
in or association with corruption under
any circumstances. We have KYE
procedures in place, including different
screening procedures at recruitment,
employment and departure stages of
employment. In 2022, there was no
bribery and corruption incident registered
in the Bank, nor did the Bank incur any
bribery or corruption fines.
For more information on data protection and privacy, please see pages 144 to 145.
For more information on financial crime, please see page 143.
Code of Conduct and Ethics
Whistleblowing
Personal data protection and ethics
Anti-bribery and anti-corruption
Our policies
Inclusive policies and practices lead to
improved business performance and a
company culture where everyone feels
welcome, safe, and respected. Our policies
reflect the needs of our customers,
employees, and communities, and are
designed to safeguard human rights,
fair treatment and equal opportunities
for everyone.
Our policies reflect our non-negotiable
commitment to respecting human
rights and taking necessary steps
to prevent, mitigate and, where
appropriate, remediate any adverse
human rights impacts. We are committed
to walking the talk on our values and
business principles. Our human capital
management policies are based on the
Labour Code of Georgia, International
Labour Organization (ILO)’s core labour
standards, principles of professional
ethics, the Code of Conduct and Ethics,
Standards of Professional Conduct for
Commercial Banks of Georgia, effective
legislation of Georgia, and relevant
international regulations.
Through our policies and practices we
aim to cultivate an environment free from
discrimination and harassment, where
employees and all other stakeholders
are treated with dignity and respect.
The Bank provides all employees with
the Employee Corporate Handbook,
with the same conditions of employment
specified in the Code of Conduct and
Ethics, subject to applicable conditions
of employment prescribed by law.
We ensure compliance with fundamental
conventions regarding the effective
abolition of child and forced labour,
freedom of association, the effective
recognition of the right to collective
bargaining and the elimination of
discrimination. All these conventions are
ratified by Georgia and Bank of Georgia
acts in accordance with the Labour
Code of Georgia. We regularly review
our policies and procedures to ensure
they reflect best practice, organisational
developments, and evolving regulatory
and legal requirements.
During 2022, we focused on strengthening
our policies and practices in line with
best practice and feedback from
ESG ratings agencies. We prioritised
reviewing and developing new policies
for sustainability, climate change, human
rights, diversity and other material ESG
issues. Additionally, to empower our
employees and increase the effectiveness
of their daily work, we are trying to
make our policies and practices simpler
to understand and implement. We are
planning to migrate our policies to a new
platform in 2023, making them easier
to access.
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Financial Statements Additional Information
ESG governance
Key developments of 2022
Oversight of the majority of material
ESG topics and related impacts on the
economy, people, and the environment is
allocated to specific Board Committees:
the Risk, Audit, Nomination, and
Remuneration Committees. While
the Committees retain continued
responsibility for discrete ESG-related
matters, the full Board retains primary
responsibility for the Group’s overarching
ESG strategy – which has been framed
around material ESG topics. The Board
ensures the alignment of ESG strategy
with the business strategy, receives
updates on progress of the key pillars
of the ESG strategy, and oversees the
Group’s overall communications strategy
around ESG topics and impacts. The Full
Board also retains primary responsibility
for overseeing the management of
climate risks and opportunities, and it
oversees the management of other E&S
risks and opportunities that may arise
in the Bank’s loan portfolio. Updates
on material ESG topics are regularly
reported to the full Board or respective
Committees.
Management of ESG topics and
implementation of ESG strategy are
delegated to the Bank’s Executive
Management team. Discrete ESG
matters are managed by individual
members of Executive Management.
In 2022 a management-level
Environmental and Social Impact
Committee was held for the first time
to review and discuss the Bank’s ESG
strategy and impacts, as well as climate-
related matters. The Committee reported
to the Supervisory Board of the Bank
twice throughout the year.
We updated and developed a number
of ESG-related policies, which were
approved by the Board of Directors
We established a Bank-level
Human Rights Committee
The Board of Directors approved
the Bank’s Climate Action Strategy
• Human Rights Policy
• Diversity and Inclusion Policy
• Anti-discrimination and Anti-harassment Policy
• The Committee will regularly assess salient human rights
risks associated with the Bank’s activities and verify that
such risks are properly identified, assessed, monitored
and mitigated.
• It sets out the Bank’s commitments in response to climate
change. These include ensuring that our actions support the
achievement of Georgia’s climate-related goals, including
those specified in its updated Nationally Determined
Contribution (NDC) through:
• monitoring and managing climate and environmental risks;
• supporting the transition to a low-carbon, resilient
economy;
• reducing our operational GHG emissions; and
• anchoring climate expertise firmly in our employee’s
skill-set.
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LAGGARD AVERAGE LEADER
CCC
B BB BBB A
AAA
AA
Memberships and external recognition
Bank of Georgia was named winner
of the UN Global Compact Georgian
Network Corporate Responsibility
Competition – ‘Business for Sustainable
Development 2022’ – in two categories: –
‘Quality Education’ and ‘Decent Work and
Economic Growth’. These awards reflect
the Bank’s contribution to these SDGs as
part of our overall ESG strategy.
The Bank received two awards in the 2022 UN Global Compact Corporate
Responsibility Competition
The Group has been included in the global responsible investment index
FTSE4Good since 2017
The Bank became a signatory of the
UN Women’s Empowerment Principles in 2022
The Bank is a member of the UN Global Compact
Other memberships of industry and other associations
Georgian Banking Association Deutsche Wirtschaftsvereinigung (DWV) Pro Bono Network of Georgia
Business Association of Georgia International Investors Association Georgian Stock Exchange
American Chamber of Commerce
Georgian Financial Markets Treasuries
Association
International Association of Privacy
Professionals
International Chamber of Commerce Women for Tomorrow
This index tracks the business performance of companies that demonstrate strong and transparent ESG practices.
ESG ratings
ISS
1
MSCI
2
Bank of Georgia falls into the highest scoring range relative to global peers
ENVIRONMENT
SOCIAL
GOVERNANCE
1. ISS uses 1-10 scale. 1 indicates lower governance risk, while 10 indicates higher governance risk versus its index or region. 1 indicates higher E&S disclosure,
while 10 indicates lower E&S disclosure. Last governance data profile update – 3 March 2023; Last E&S data profile update – 31 August 2022.
2. MSCI score is as of March 2023.
3
3 4
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Financial Statements Additional Information
We are committed to respecting human
rights wherever we do business. We
support the Universal Declaration of
Human Rights and the ILO’s Core Labour
Standards. Our commitment is reflected
in our Code of Conduct and Ethics,
Human Rights Policy, Anti-discrimination
and Anti-harassment Policy, and Diversity
and Inclusion Policy.
We screen for human rights risks during
lending decisions within the framework
of our Environmental and Social Risk
Management (ESRM) Policy and in
targeted ESRM portfolio reviews of high-
risk sectors. In addition, we identify and
address human rights risks that could arise
in other areas of our value chain – such
as our supply chain, our workforce, and
our retail banking activities. We believe
our policies reflect our commitment to
respecting the human rights.
We ensure our actions are compliant with
regulatory and legal requirements and
mitigate any adverse impacts on human
rights linked to our business activities. The
Bank ensures transactions are reviewed
and evaluated against applicable E&S
requirements of Georgia, and any of
its lenders, should these requirements
be more stringent than Georgia’s legal
requirements. These requirements include
the following:
We recognise that our responsibilities
go beyond mere compliance, and we
continuously work on improving our
processes to more effectively mitigate
various human rights risks.
Our policies are guided by a wide range
of international external standards and
principles, including but not limited to:
• the Universal Declaration of
Human Rights;
• the ILO’s Core Labour Standards;
• the UN Guiding Principles on Business
and Human Rights;
• OECD Guidelines for Multinational
Enterprises; and
• IFC Performance Standards.
We address human rights as a
sustainability issue in all parts of our
organisation and in our due diligence
process.
We believe that, as a leading organisation
in Georgia, we are well-positioned to
contribute to building communities where
human rights are valued and respected.
We believe that a broad variety of
ideas, skills and experiences among our
employees will increase our creativity,
problem-solving capabilities, and the
understanding of customer needs.
• Bank of Georgia’s Environmental and Social Management Policy;
• IFI E&S Exclusion List;
• Georgia’s environmental, social, health and safety and labour laws and regulations;
• ILO Core Labour Standards;
• applicable international environmental, social, and health and safety conventions
to which Georgia is a signatory;
• IFC Performance Standards;
• EBRD Performance Requirements; and
• relevant E&S requirements of Bank of Georgia’s lenders, as reviewed from time
to time.
Strengthening the focus on diversity and inclusion (D&I)
Being a diverse and inclusive company
is an integral part of our success. We
believe, as one of the largest banks
in Georgia, we are well-positioned
to contribute to building diverse and
inclusive communities.
For us, diversity is about the respect
for and appreciation of differences
in personalities and professional and
educational backgrounds, as well as
in identity. Inclusion means ensuring
differences are welcomed and
appreciated.
We provide products and services to a
diverse customer base – from individuals
and small businesses to large corporates.
We believe that without a diverse
workforce we will be unable to provide
relevant and personalised experiences
to our customers.
One of the main questions for us now is:
‘How can we continue to drive progress?’
We have developed three principles we
apply to our D&I agenda: transparency,
accountability, and engagement.
We believe these principles will help
us take important steps forward.
Human rights
Our ongoing aim is to develop and
maintain D&I for our employees, our
customers, and the society at large.
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Financial inclusion as one of the key to people’s success
A lack of access to financial services is one
of the key barriers to people’s wellbeing
and prosperity, hindering sustainable and
inclusive socioeconomic development
and reduction of poverty. In 2021, we
defined financial inclusion as one of
our main impact focus areas closely
interlinked with our business strategy.
We believe measuring the use of our
financial products and services better
reflects the level of financial inclusion
in a country, rather than focusing on
metrics such as the number of cards or
accounts. Georgia already has one of the
highest rates of bank card and account
ownership compared with its peers
1
, but
we are focused on increasing the use of our
products and services, expanding digital
access, and improving accessibility
and quality.
According to the Georgian Credit
Information Bureau, 85% of adults have
had a loan from a formal credit institution
in the past five years – and 64% have
current loans from commercial banks,
which is one of the highest rates in the
world based on the IMF’s Financial Access
Survey.
2
The same survey suggests the
level of financial inclusion in Georgia
is also high in terms of bank deposits
and accounts – Georgia has high rates
for cashless payments and remote
financial services.
Bank of Georgia historically focused
on being accessible to people in towns
and rural areas, and of different
socioeconomic backgrounds, through a
wide network of ATMs, Express branches
and self-service (BOG Pay) terminals.
Transparency
• We will strengthen our understanding
of D&I.
• We will enable and encourage our
people to voluntarily share their
diversity data.
• We will strengthen our understanding
and application of various data.
Talent
To ensure we have diversity of thought
and mirror the communities we serve, it is
crucial that we attract, hire and develop
diverse talent.
Accountability
• We will continue to leverage our
employee engagement surveys.
• We commit to rejecting all forms of
discrimination or harassment, and
ensuring all employees are treated
with respect and provided with equal
opportunities.
Data
We will enable and encourage our
colleagues to voluntarily share their
diversity data, and we will use it to make
evidence-based decisions.
We plan to add more questions to our
employee surveys to gauge people’s
perspectives on D&I throughout our
organisation.
Engagement
• We will seek to implement best-in-
class learning programmes to raise
awareness of D&I matters among
our employees, customers, and
communities.
Customers
We are committed to supporting the
diverse communities we serve.
Over the years, Bank of Georgia has
consistently initiated and participated
in programmes empowering women
entrepreneurs with lending, education,
coaching, and networking opportunities.
Our approach to inclusion is organised under three core pillars:
1. IMF. Financial Access Survey (2021).
2. National Bank of Georgia, Financial Stability Report (2021).
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Financial Statements Additional Information
Last year we said we would focus
on increasing the number of MAU of
our mobile app and internet banking
platform, as well as the number of users
who use BOG cards for payments at least
once a month.
Focus area Why we think it’s important
2021 results
(Dec-21)
2022
target
2022 results
(Dec-22)
Financial inclusion –
Use of digital channels
Main benefits of using our mobile app:
• Convenience and quick access to our products and services.
• Visibility of personal finances and access to tools to manage
money more effectively.
• Ability to see all personalised financial and lifestyle offers.
• Chatbot/chat available 24/7.
• Access to information and educational content.
853K 1 million 1.1 million
Financial inclusion –
Use of cashless
payments methods
Cashless payments enable:
• Increased control over personal finances, giving people
a full view of where and how they spend their money.
• More benefits – personalised offers, ability to save money
through our loyalty programme.
• Greater visibility of customers’ financial history, income and
behaviour, enabling banks to better assess their creditworthiness.
782K 1 million 1.0 million
How we ensure the accessibility of our products and services
Customers can access our mobile app’s full functionalities without Wi-Fi or mobile data.
Digital onboarding in our mobile app and internet bank.
Tutorials and instructions for new digital products are available on our website.
Free or low-cost current accounts and debit cards.
Free product bundles for young people (sCool Card and sCool App for school students and Student Card
and mBank for students).
Lower fees on payments acceptance solutions for smaller merchants.
A wide network of ATMs and BOG Pay self-service terminals across Georgia.
A digital version of our BOG Pay terminals – bogpay.ge – rolled out in 2022, allowing even non-BOG
clients to make payments anytime, anywhere.
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94
57K
Self-employed borrowers
At 31 December 2023 (target)
70K
MAU of sCool App
Dec-23 target
46K
Self-employed borrowers
At 31 December 2022
33K
MAU of sCool App
Dec-22
In 2022, we rolled out a new product,
sCool App – the first financial mobile app
for school students (those aged 6-17) in
Georgia. Our goal is to reach more school
students and use the app to empower
children with financial literacy skills from
an early age. You can read more about
how we empower young people with
our products on pages 32 to 33 of
this Report.
Removing artificial barriers that prevent people from accessing credit is an important aspect of financial inclusion. Throughout 2022,
we focused on redesigning the lending process for self-employed customers.
Going forward we intend to focus on increasing the number of self-employed borrowers.
Access to credit
Barriers
• Difficulty in calculating a client’s monthly income due to
lack of formal employment.
• Lack of a digital process for loan application.
• Limited access to typical retail lending products.
• Self-employed individuals were treated process-wise
as business customers and not as self-employed retail
customers.
What we changed
• Application origination and disbursement handled in
digital channels.
• Full access to retail lending products (mortgages, consumer
loans, instalments, credit cards, among others).
• Simplified income validation using video calls and an income
matrix and on site validation visits.
• Client coverage and servicing changed to a retail
banking model.
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ESG REVIEW –
ENVIRONMENTAL
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96
Environmental
At a glance
We are committed to lending responsibly,
mitigating any adverse impacts our
clients may have on the environment
and raising awareness in our client base.
We are continuing to better
understand climate-related risks and
opportunities and set up processes
that will enable us to enhance our
approach to managing climate risk.
We have a dedicated department that
develops and implements climate risk
management capabilities.
In 2022 the Board approved the Climate
Action Strategy of the Bank, which
outlines the Bank’s main commitments:
monitoring and managing climate risks
in the client base; supporting a low-
carbon, resilient economy; reducing
our operational carbon footprint; and
anchoring climate expertise in the Bank’s
skill-set. In 2022 we performed a high-
level qualitative assessment of climate
risks in hypothetical scenarios. We will
continue to enhance our assessment
methodologies going forward.
We are also committed to finding ways to
support our customers in their transition
towards greener and more sustainable
ways of doing business. In 2022 the
NBG published its Sustainable Finance
Taxonomies, covering green and social
topics. From January 2023, all Georgian
banks are required to report on the amount
of lending aligned with these taxonomies.
We began to implement the Green
Taxonomy in 2023 and are working on
finding solutions to the data challenges
we have faced during the process.
In this section:
Environmental and social risk
management of our loan book
In this part you will read about how we integrate the consideration of E&S risks into the
Bank’s decision-making processes for extending credit to our business clients.
Pages 97 to 101
Operational environmental
footprint
In this part you will read about environmental aspects that are relevant to the Bank’s
direct operations, including information on consumption and measures taken to reduce
the negative environmental footprint.
Pages 101 to 102
Climate-related disclosures
In this part you will see disclosures in line with the TCFD recommendations and read
about the Bank’s continuously improving approach to understanding and managing
climate-related risks and opportunities.
Pages 103 to 117
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Financial Statements Additional Information
Environmental and social management system
At Bank of Georgia, we are committed to prudently managing the risks associated with our
lending activities. The Bank’s environmental and social management system (ESMS) enables us
to identify potential risks and ensure that our customers are properly managing those risks to
avoid negative impacts on the environment and the communities where they operate.
The Bank’s ESMS integrates E&S risk
management into the Bank’s decision-
making processes for extending credit
to our business clients. The Bank’s ESMS
is based on IFC Performance Standards
(PS) and the EBRD Performance
Requirements (PR), which have become
the benchmark for E&S risk assessments
in the lending process. The ESMS enables
us to identify, assess, document, mitigate,
and monitor the risks and the actual or
potential impacts associated with our
lending. We also use technical reference
documents with general and industry-
specific examples of best practices to
identify and manage E&S risks. The ESMS
and the associated E&S procedures are
periodically updated and approved by
the Supervisory Board of the Bank to
ensure they remain fit for purpose and
reflect changes in the legal and regulatory
environment as well as any changes in the
Bank’s operations or strategic priorities.
In 2022, we updated our ESMS. Further
enhancements were made to the E&S risk
procedures, E&S covenant and associated
risk-based tools to align with specific E&S
requirements of the Bank’s IFI partners
and best practices.
We continue to evolve our approach in
response to emerging risks. In 2022, with
support from the European Investment
Bank (‘EIB’), we developed enhanced
procedures to start integrating the
identification, assessment, and proper
management of climate-related risks
and opportunities. We continue to refine
our disclosures in line with the TCFD’s
recommendations. For more information
on the Bank’s climate-related actions,
see pages 103 to 117.
All commercial transaction requests
received by the Bank are assessed against
the Bank’s lending policies, Environmental
and Social Policy, and the Exclusion List.
We do not finance environmentally or
socially sensitive business activities that
do not comply with these policies or
that are included in the Exclusion List.
The list of excluded activities can be found
in Annex 1 of the Bank’s Environmental
and Social Risk Management Policy at
bankofgeorgia.ge.
Environmental and social risk management system
The Bank follows commercially sound
practices to ensure all commercial lending
transactions are reviewed and evaluated
against applicable E&S requirements of
Georgia, and any of Bank of Georgia’s
lenders, should those requirements be
more stringent than Georgia’s legal and
regulatory requirements, to the extent
such compliance is allowed and feasible in
accordance with the Georgian legislation.
These requirements include:
• Bank of Georgia’s Environmental and
Social Management Policy.
• Georgia’s environmental, social,
health and safety, and labour laws
and regulations.
• ILO’s Core Labour Standards.
• Applicable international
environmental, social, and health
and safety conventions that Georgia
has ratified.
• IFC’s Performance Standards and
EBRD’s Performance Requirements.
• Relevant E&S requirements of Bank of
Georgia’s funders, as reviewed from
time to time.
For the purpose of E&S risk assessment
and management, commercial
transactions assessed through ESMS
are loans, guarantees, letters of credit
and overdrafts issued to clients that are
managed by the Bank’s CB and MSME
segments (‘commercial transactions’).
To ensure effective E&S risk management, we take the following actions:
Environmental and social risk management
of our loan book
Indirect E&S impacts are mainly
associated with the projects that Bank
of Georgia finances whereas direct
environmental impacts are mainly related
to the Bank’s own operations. This section
presents the management approach
towards indirect E&S aspects related
to the Bank’s lending activities.
Bank of Georgia is committed to
providing responsible finance. The E&S
management of the Bank’s loan portfolio
encompasses a systematic identification,
assessment, management and mitigation
of E&S risks associated with the projects
that are financed by the Bank’s CB and
MSME Banking segments.
Bank of Georgia effectively manages the potential risks for the natural environment and
the communities where it operates associated with its lending portfolio.
Transaction
qualification
• IFIs exclusion list
• EBRD referral lists
Monitoring
• Monitoring memos
• Annual reports
to IFIs
Control
• Action plan
• Loan covenants
Evaluation
• Subsectoral guides
• IFC PS/EBRD PR
guides
Categorisation
• IFIs categorisation
guide (Low, Medium,
High, Category A)
• National legislation
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• The Bank reviews and monitors the
E&S performance of clients with credit
exposure of more than US$ 2 million in
accordance with the requirements of
the IFC Performance Standards.
• We aim to assess the relative
level of E&S risk associated with
clients’ businesses. We require some
customers to implement specific
E&S requirements that are set to
minimise specific E&S risks. These
requirements are included as covenants
in agreements between our customers
and the Bank.
• We aim to regularly monitor E&S risks
associated with the Bank’s activities
and assess clients’ compliance with
the terms of respective agreements.
The frequency and type of monitoring
• is determined based on the type of
activity being financed and the level
of E&S risk.
The level of E&S risk (low, medium,
high or category A) varies greatly for
different types of financial transactions
and by sector. An E&S risk category for
the proposed activity is determined by
checking the Environmental Assessment
Code of Georgia and by using the E&S risk
categorisation lists of IFIs.
Category A projects (developments on
greenfield land, or major extension or
transformation-conversion projects,
which may lead to significant or long-
term E&S risks and impacts) constituted
4.2% of total MSME and CB gross loan
portfolio, and 2.4% of the Bank’s total
gross loan portfolio as at 31 December
2022.
In addition, we engage with our
customers and provide information on
relevant laws and regulations and the
Bank’s ESMS during our E&S due diligence
(ESDD) processes. Our aim is to increase
awareness of E&S risks and impacts and
support the capacity building in these
matters. In 2022, with the assistance
of a local sustainability third-party
consultancy we provided Environmental
Management Awareness Trainings
to MSMEs and CB clients on local
environmental regulations and
requirements, as well as on mechanisms
for ensuring compliance with these
requirements, on legal sanctions, on
state control mechanisms, and on the
requirements and implementation
mechanisms of the international
environmental management system
standard ISO 14001:2015. The two-
day training series was conducted for
145 representatives of local companies
from various sectors. We plan to host
additional training sessions for our clients
in 2023.
With support from external consultants, we
also developed a free online course covering
the same topics and made it available
on our online educational platform for
businesses – businesscourse.ge. This was
supported by the Green for Growth Fund.
In addition, an information leaflet on
Bank of Georgia’s approach to managing
customers’ E&S risks is available on the
Bank’s website at bankofgeorgia.ge.
Environmental and social risk assessment
The Bank’s ESDD includes a review and
assessment of E&S risks and impacts
and proposes mitigation measures that
are commensurate with the impacts
and risks identified. ESDD also evaluates
a client’s measures to avoid, mitigate,
or compensate for adverse impacts on
workers, affected communities, and the
environment.
Bank of Georgia’s ESDD identifies
actions that are required for a client to
address environmental and social risks
and impacts, to ensure that transactions
comply with relevant national or
international standards and legislation,
including the IFC Performance Standards,
where applicable, and the Bank’s loan
approval conditions. These are set out
in the Environmental and Social Action
Plan (ESAP) which describes the actions
necessary for a borrower to take such as:
(i) implementing mitigation measures or
corrective actions; (ii) prioritising these
actions; (iii) including the timeline for
their implementation; and (iv) describing
the schedule for reporting to the Bank on
the implementation of the action plan.
Implementation of the ESAP is monitored
by the Bank and includes a timeline
and relevant covenants in the loan
documentation. Mitigation measures may
also be included as separate covenants in
a loan agreement.
Our comprehensive internal ESRM
procedures guide how we assess client
impacts on air quality, water quality,
climate change, biodiversity, local
communities, labour, human rights and
other E&S issues.
For E&S risk assessment and
management, we routinely rely on
a variety of publicly available ESRM
tools including, but not limited to,
EBRD’s Environmental and Social Risk
Management Manual, IFC’s First for
Sustainability web-based tools, training
modules and guidance for financial
institutions available on the IFC’s
website, as well as IFC and EBRD’s
sector guidelines.
During the E&S risk assessment process,
we engage with our customers to:
• raise customer awareness of
environmental, health and safety
(EHS) issues and regulations;
• establish a framework for customers
to achieve good E&S standards;
• encourage companies to adopt best
EHS practices and challenge them on
E&S risks;
• support companies to better
understand sector-specific EHS risks
and impacts;
• make recommendations and measure
EHS progress; and
• support customers in fulfilling their
E&S obligations.
In 2022, based on ESDD, ESAPs were
developed for 308 customers, who as at
31 December 2022 had an exposure of
GEL 959 million (10.1% of the Bank’s total
gross MSME and CB portfolio).
During 2022, our due diligence did not
reveal any material E&S risks related to
our borrowers.
1
The E&S risk assessment and monitoring
process involves a review of periodic
E&S performance reports submitted by
our customers as well as site visits that
our ESRM team undertakes. We pay
attention to:
• how effectively the mitigation
measures specified in the ESAP have
been implemented (if applicable);
• the validity of E&S permits or licenses;
• any fines and penalties incurred for
non-compliance with E&S regulations;
• recent reports from relevant regulating
or inspection authority confirming
compliance with specified laws,
including any emissions measurements
confirming that emissions are below
the permitted limits;
• E&S occurrences, including major
accidents or incidents associated with
a client’s operations, including but not
limited to worker injuries and spills;
• media attention to E&S issues related
to the client; and
• any complaints submitted by
stakeholders.
1. Materiality of E&S risks is identified according to the national legislation.
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72
69
185
26
142
125
109
2021
188
53
264
81
230
76
67
2022
Accommodation and food service activities
Agriculture, forestry and fishing
Construction / development
Energy
Manufacture of food products
Manufacturing, except for food products
Other
Accommodation and food service activities
Agriculture, forestry and fishing
Construction / development
Energy
Manufacture of food products
Manufacturing, except for food products
Other
The ESRM team conducts due diligence of new clients that may pose potential E&S risks. The data below show the gross loan exposure
as at 31 December 2022 of those borrowings that were screened by the ESRM team during 2022. Out of GEL 959 million portfolio
screened, GEL 594 million was assessed against IFC’s Performance Standards, while the rest was assessed against local legislation.
727
(GEL million)
959
(GEL million)
Environmental and social due diligence data
Environmental and social monitoring
We regularly monitor the E&S risks
associated with our existing lending
portfolio. The frequency and type of
monitoring are based on the type of
transaction being financed and the level
of E&S risk. Our E&S risk team conducts
portfolio-wide reviews of specific
sectors, where E&S risks are considered
high and, in some cases, we visit high-
risk customers on a regular basis. The
monitoring of Category A projects and
IFC Performance Standards-triggered
transactions happens annually.
When faced with complex E&S issues
or those beyond the in-house team’s
competencies, a qualified external
consultant(s) is hired to undertake the
E&S assessment. We ensure that all
activities are environmentally and socially
prudent and compliant with applicable
legal and regulatory environmental and
social standards. All high-risk clients are
required to provide the Bank with an
annual report on their environmental
and social performance, and on the
implementation of applicable ESAPs.
Any Category A client is required to
provide the Bank with an annual E&S
performance report. For Category A and
high-risk projects, our E&S staff visit the
sites of operations until major E&S issues
are resolved and satisfactorily monitored
by our clients.
In 2022, we carried out E&S monitoring
for 118 customers, with a total
exposure of GEL 1,439 million as at
31 December 2022.
In addition, during 2022, customers who
were provided with the action plans to
identify, avoid or mitigate environmental
and social risks have started to
implement our recommendations and
consider introducing environmental and
social management systems aligned with
international standards.
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50
27
57
572
72
2021
181
232
124
118
689
95
2022
Agriculture, forestry and fishing
Construction / development
Manufacture of food products
Manufacturing, except for food products
Other
The ESRM team carries out E&S monitoring of clients with identified E&S weaknesses annually. The data on this page show gross
loan exposure as at 31 December 2022 of clients that were monitored by the ESRM team during the year. Out of GEL 1,439 million,
GEL 1,321 million were assessed against IFC’s Performance Standards.
778
(GEL million)
1,439
(GEL million)
Environmental and social monitoring data
The Bank’s Environmental and Climate Risk Management department
Our centralised team of E&S risk
specialists within the Bank’s Risk
Management function evaluates
transactions that trigger a review under
our ESMS.
Furthermore, to address the challenges
of climate change and to ensure the
screening of proposed projects to identify
potential climate-related risks and
impacts in addition to other E&S risks
and impacts, the Bank has expanded
the responsibilities of the ESRM team.
A dedicated E&S team has been in place
since 2013. The head of this department
reports directly to the Chief Risk Officer.
The team undertakes preliminary
environmental, social and climate
due diligence of customer operations
and projects funded by the Bank and
recommends appropriate covenants to
be included in credit documents that are
monitored throughout the credit cycle.
The team ensures the implementation of
Bank of Georgia’s environmental, social
and climate risk management policies,
monitors the Bank’s environmental, social,
and climate risk profile and performance,
ensures data consolidation with respect
to environmental, social, and climate-
related risks within the Bank, and handles
environmental, social, and climate-related
communications. The team reports the
progress and the performance achieved
in the area of environmental, social, and
climate-related risk management to
the Environmental and Social Impact
Committee, comprising members of
the Executive Management team, which
reports to the Supervisory Board of the
Bank semi-annually.
Reporting to our international stakeholders
In 2022, Bank of Georgia reported on its
environmental and social performance as
part of its commitment to provide annual
environmental and social performance
reports to multiple international
development finance organisations.
These reports take into consideration
Bank of Georgia’s E&S performance
when granting loans. The reports include
portfolio information broken down by
industry and transaction type, as well as
a progress report on the implementation
of Bank of Georgia’s ESMS. We value
keeping an open dialogue on our ESMS
with our partner international financial
institutions to get their feedback on our
management system.
Accommodation and food service activities
Construction / development
Energy
Manufacture of food products
Manufacturing, except for food products
Other
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1,440
273
262
2020 2021 2022
External communications – grievance mechanism
Procedures for addressing external
queries and concerns, developed within
the framework of ESMS, enable any
stakeholder to submit queries or concerns
related to the Bank’s E&S Policy or any
other aspects related to the Bank’s
operations. We are committed to
responding to those queries in a timely
and effective manner. The grievance
mechanism is available on the Bank’s
website and anyone can send an
email with questions or concerns to
customerservice@bog.ge (as listed on the
website), or can submit their questions or
concerns in a written form to the Bank’s
Chancellery department.
In 2022, no major E&S complaints were
received by the Bank. We will continue
to engage with our stakeholders and
address any issues or concerns raised.
Training
Training activities play a critical role
in the effective management of E&S
and climate-related risks in our lending
portfolio. Each year, to enhance our
understanding of environmental, social
and climate-related issues and build
internal capacity, we held training
sessions for key risk and banking
personnel involved in environmental,
social and climate risk management
processes. The trainings covered a
variety of topics, including climate and
sustainable finance, ESG standards
and SDGs, health and safety, green
taxonomy, IFC Performance Standards,
renewable energy investments and
energy efficiency, green and affordable
housing. ESRM specialists underwent
GGF Green Finance Expert online training
programme and the Climate Ambition
Accelerator programme. In 2022, our E&S
risk specialists also took a fully accredited
programme and were awarded the
qualification of labor safety specialists. In
total, 360 employees of the Bank had an
E&S training during 2022.
A mandatory training course on E&S
risk assessment, reflecting key E&S
Policy requirements and international
standards, is undertaken by relevant
new hires.
Training hours spent on environ-
mental, social and climate topics
Operational environmental footprint
We are a service business, and our
direct environmental impact is less
significant than the impact we have on
the environment through our lending
activities. Nevertheless, we aim to be
a more resource-efficient company,
mitigating any negative impacts we
may have on the environment
through our operations.
We undertake measures to identify and
monitor environmental aspects relevant
to our direct operations, for instance, how
much business travel we undertake and
how much electricity we use. We strive
to adopt a “reduce, re-use, and recycle”
approach. The direct environmental
impact of our business activities arises
from electricity, natural gas, and fuel
consumption, water use, paper use,
as well as through other types of waste
produced.
Energy consumption
Types of energy used by the Bank include
electricity, natural gas, and fuel oil, the
principal type being electricity provided
by the national grid. To be more energy-
efficient, our branches are equipped
with LED lighting. Remote control
lighting systems are installed in new
branches. Since 2018, the majority of our
newly opened branches have operated
remote heating and air conditioning
systems, ensuring efficient electricity
consumption during non-working hours.
Remote-control lighting, heating, and air
conditioning systems have been installed
in 50 Retail branches – covering almost
half of all Retail branches (excluding
Express branches). For information on
greenhouse gas emissions, please see
pages 114 to 115.
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67,649
59,316
55,052
2020 2021 2022
Water consumption by the Bank is limited
to “domestic-type use” and cleaning
purposes.
Water consumption in 2022 amounted
to 67,649m
3
.
2020 2021 2022
Electricity (kWh) 17,104,700 17,489,358 19,623,529
Gas (m
3
) 432,312 448,718 349,205
Gas (kWh, assuming that 1 m³ gas = 9.7 kWh) 4,193,426 4,352,565 3,387,285
Total energy consumption (kWh) 21,298,127 21,841,923 23,010,813
Total energy consumption (kWh) per square
meter of office space
243 243 238
Energy consumption data
1
Water consumption
The decrease in gas consumption year-
on-year was a result of an upgrade
to the heating, ventilation, and air
conditioning system at Bank of Georgia
headquarters.
The increase in electricity and water
consumption vs prior year was mainly
driven by the increased office space to
accommodate the growing workforce.
In addition to digital records, the
Bank retains paper records of some
transactions in line with regulatory
requirements. In all other cases, we aim
to reduce paper consumption by using
digital media and more efficient printing.
Some of the Bank’s departments, such as
branches and cash centres, are paper-
intensive. In these locations, we have
encouraged the use of two computer
monitors at work stations, resulting in
a reduction of paper waste.
Paper consumption
Paper use (kg) per
employee
2020 34
2021 35
2022 39
1. Figures on electricity consumption and gas use were obtained from the Bank’s operational support department. To arrive at total energy consumption in KWh, m³ of gas
were converted into MWh of gas (1m³ of gas = 0.0097 MWh according to Georgia’s Fourth National Communication to the UNFCCC) and figures were multiplied by 1000.
Back-office paper from the Bank’s headquarters and several large back-office locations is collected and
shredded by a secure paper recycling firm. In 2022, c.1.6 tonnes of paper was collected for recycling in this way.
Documentation from the Bank’s archive, when retention period expires, is recycled annually. The Bank uses
a specialised third-party contractor for this service based on the appropriate service agreement.
The annual increase of paper use per employee was driven by the growing number
of our employees, as well as the return to the offices after the pandemic.
Waste management
In 2019, a new project, Development
of a Company Waste Management
Plan, was launched by the Bank with
the support of Green for Growth Fund
(GGF) as part of the Green for Growth
Fund Technical Assistance Facility. The
aim of this project was to assist Bank of
Georgia in developing a company-wide
Waste Management Plan aligned with
relevant Georgian legislation. A Waste
Management Plan, covering all main
locations of the Bank, is in place for
2020-2023. Highlights of the Waste
Management Plan include:
Training for the Bank’s Operations Support department who are responsible for the Bank’s waste
management process;
The Bank replaced plastic bags with biodegradable ones, widely used in the cash collections process;
The Bank’s old branded material was disposed together with the waste in line with the environmental
regulations by a licensed third-party company at the municipal recycling and sanitation landfill.
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Climate-related disclosures
Background on climate change
In 2015, 197 nations, including Georgia, committed to the goals of the Paris Agreement to limit global warming to 2 degrees Celsius
(‘°C’) above preindustrial levels, while pursuing the means to limit the increase to 1.5°C.
Changing climate presents both risks and opportunities for Georgia, its people and
its companies – and thus for the financial services sector. The Group recognises its
role in addressing this global challenge, and initiated its climate journey in 2021.
Our climate action and reporting are in line with the four pillars defined by the
Taskforce on Climate-related Financial Disclosures (‘TCFD’): Governance, Strategy,
Risk Management, and Metrics & Targets. This report focuses on the Group’s main
operating entity, the Bank, which constitutes 94.0% of the Group’s total assets as
at 31 December 2022. We also provide information on the GHG emissions of several
of the Bank’s and the Group’s subsidiaries.
Sources for background on climate change
Georgia’s Fourth National Communication to the UNFCCC (2021),
https://unfccc.int/sites/default/files/resource/4%20Final%20Report%20-%20English%202020%2030.03_0.pdf
Georgia’s Updated 2021 Nationally Determined Contribution (NDC),
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Georgia%20First/NDC%20Georgia_ENG%20WEB-approved.pdf
The World Bank Group and the Asian Development Bank (2021): Climate Risk Country Profile: Georgia,
https://openknowledge.worldbank.org/bitstream/handle/10986/36382/Georgia-Climate-Risk-Country-Profile.pdf?sequence=1&isAllowed=y
WBG Climatxzq Change Knowledge Portal (CCKP 2020): Georgia. Climate Data. Projections,
https://climateknowledgeportal.worldbank.org/country/georgia/climate-data-historical
OurWorldInData.org: Georgia: CO
2
country profile.
https://ourworldindata.org/co2/country/georgia
International Energy Agency (2021): Georgia energy profile.
https://www.iea.org/reports/georgia-energy-profile
Agenda.ge (08.11.2022): Georgian PM: climate change “challenge of our generation”, “swift, result-oriented” actions needed.
https://agenda.ge/en/news/2022/4354
Ministry of Environmental Protection and Agriculture (03.10.2022): Georgia initiates the development of the Climate Change Framework Law.
https://mepa.gov.ge/En/News/Details/21039
Climate change in Georgia
With its rich biodiversity and economic dependence on
climate-sensitive sectors such as agriculture and tourism,
Georgia is vulnerable to the effects of climate change. As
described in Georgia’s Fourth National Communication to
the UNFCCC (2021), the adverse impacts of climate change
have already been observed in Georgia – and they are
projected to increase in the future:
• Mean annual temperature has increased by up to 0.58
°C. Under a high emissions scenario, temperature can
increase by up to 4.9°C by the 2090s – which will lead to
rapid melting of glaciers. The frequency of heat waves is
also projected to rise significantly.
• Precipitation in western Georgia has mainly increased,
but it has decreased in some eastern regions. In the
future, more intense rainfall will increase the likelihood
of landslides, floods, avalanches, and mudflows. At
the same time, the probability of severe droughts is
projected to rise, especially for eastern and central areas.
• The level of the Black Sea rose by 0.7 metres on the
Georgian coast between 1956 and 2007, and the
frequency of storms increased by more than 50% over
the same period. Global sea level may rise by another
0.74 metres or more by the end of the 21
st
century.
Policies to address climate change
In 2017, Georgia’s greenhouse gas (‘GHG’) emissions amounted
to 17,766 Gg CO
2
eq, or about 0.03% of the global total. With
one of the world’s highest shares of hydropower in the electricity
mix (75.3% in 2019), GHG emissions from the electricity sector
are comparatively low. National emissions are growing, however,
particularly in sectors such as transport and industry. To address
the impacts and meet the objectives of the Paris Agreement,
Georgia has several climate action goals:
• By 2030, to reduce total GHG emissions by 35% compared
with the 1990 level – and to limit emissions in sectors such as
energy and transportation.
• To support renewable energy generation and transmission.
• To support the development of low-carbon approaches in
the building, industry, waste and agriculture sectors.
• To set national energy-saving targets in private and public
sectors, particularly in relation to energy efficiency in
buildings.
As noted by Georgia’s Prime Minister at COP27 in November
2022, Georgia is considering increasing the ambition of its
Nationally Determined Contribution (NDC). In 2022, Georgia
also launched the work on a climate change law that will
regulate climate-related issues and distribute responsibilities.
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104
Key messages
Governance
• The Board considers climate when reviewing Bank of Georgia’s strategies, policies, budget, opportunities
and risks. The Risk, Audit and Remuneration Committees have started to integrate climate
considerations into their regular procedures, for example when reviewing risks, disclosures and KPIs for
management.
• The management-level Environmental and Social Impact Committee was held in 2022, responsible
for monitoring and steering the Bank’s ESG-related action – including its climate risk and opportunity
management. The Committee reports to the Board twice per year.
• Climate-related responsibilities have been defined for relevant business, risk and support units.
Strategy
• In 2022 we assessed our strategy’s resilience to climate risks for the second time, using three timeframes
and scenarios:
• The effects of climate change and policy on our strategy are perceived to be low over the coming
years. Reputational risks can occur if our climate action lacks ambition and credibility.
• The future may hold greater risk for our clients and, thus, for the Bank. Both a ‘delayed transition’
scenario (meaning ambitious but late and abrupt climate action) and unabated climate change
(where no climate action is taken beyond ‘current policies’) are expected to have negative effects on
various sectors covered in our portfolio. Overall, risks are greater under the climate change scenario,
illustrating that well-coordinated and ambitious climate action is crucial.
• Tackling climate change can be an opportunity for financial institutions such as Bank of Georgia.
We already provide green finance to clients that invest in a low-carbon, climate-resilient future.
However, much room is left to increase the amount and visibility of our climate finance – Georgia’s new
Sustainable Finance Taxonomy will be among the key tools to help us monitor and grow this.
• Our Climate Action Strategy, https://bankofgeorgia.ge/en/about/management#docs, published in 2022,
addresses both risks and opportunities of climate change, and describes how we intend to contribute
to Georgia’s climate-related goals. Assessing and discussing risks with clients, providing green finance,
managing GHG emissions and improving our climate-related capacities will play key roles.
Risk
management
• Bank of Georgia is committed to addressing climate risks through risk identification, evaluation, and
management.
• In 2022, we reassessed how transition and physical risks can affect traditional Bank-wide risks, from
credit to reputational risk. We also reviewed and improved our qualitative analysis of risks for different
sectors covered in our portfolio, and calculated financed emissions for 26% of the corporate portfolio –
providing valuable insights for transition risk management.
• From 2023, we will start collecting first-hand information from all business clients to better assess the
climate-related risks they might face. High-risk clients will be addressed to help raise their awareness
and inspire change.
• Our new Climate Risk Management (CliRM) framework institutionalises climate risk assessment and
management at the Bank by specifying methodologies, processes and responsibilities.
Metrics and
targets
• Bank of Georgia uses metrics recommended by the TCFD to measure its impact on climate change and
the effects climate change may have on its business model and operations.
• GHG emissions are an important indicator to help us understand our direct and indirect impact on the
climate and exposure to potential transition risks. We have a clear picture of our Scope 1 and 2 emissions
and are currently working on expanding our understanding of Scope 3 emissions.
• Measuring the percentage of lending that could become vulnerable to climate risks under different
scenarios helps us understand risks to the Bank’s strategy and take corrective measures.
• Measuring the amount of green lending provided by Bank of Georgia allows us to monitor and drive our
contribution to Georgia’s sustainable development.
Our climate action and reporting are in line with the four pillars defined by the TCFD: Governance, Strategy, Risk Management,
and Metrics and Targets. We believe we have made all the required climate-related financial disclosures consistent with the TCFD
recommendations and recommended disclosures. The following are the key messages from our climate reporting.
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Governance
Board and Committees
Management
The Board of Directors oversees the
Group’s operations and ensures it is
being managed in accordance with
its strategies and targets. Since 2022,
the Board has been actively involved in
ensuring the quality and efficacy of the
Bank’s approach to climate change:
• The Board is responsible for reviewing
the Group’s strategies, policies and
budgets. In 2022, it reviewed and
approved the Bank’s Climate Action
Strategy and CliRM framework
(internal).
• The Board regularly examines
opportunities and risks as well as
the measures taken as a result. In
2022, the Board reviewed Bank of
Georgia’s 2021 Annual Report and
provided feedback and guidance for
enhancing the Bank’s climate risk
and opportunity management. The
Board was also informed of the Bank’s
progress on climate action during one
of its quarterly meetings. From 2023,
the Bank’s new climate-related due
diligence will generate more detailed
information on climate risks and
opportunities in the portfolio (see ‘Risk
management’ chapter), the results of
which will be reviewed by the Board.
• The Board also considers performance
against the objectives defined in the
Bank’s strategies. From 2023, the
Board will review the Bank’s progress
in implementing its Climate Action
Strategy.
• The Supervisory Board of the Bank,
as exemplified in its statute adopted in
accordance with the NBG’s Corporate
Governance Code, bears the overall
responsibility for the Bank’s E&S
strategy and its implementation. This
includes overseeing the Bank’s E&S risk
management framework and building
governance structures to ensure
proper attention to E&S issues, and
fulfilment of the Bank’s strategic goals
in this regard.
In December 2021 the Supervisory
Board decided to maintain the primary
decision-making and reporting on E&S
matters at the full Board level. The Bank’s
management created the Environmental
and Social Impact Committee, which
began its work early in 2022. The
Committee is responsible for reporting to
the Board on the progress of the Bank’s
implementation of its environmental,
social and climate strategies and policies
semi-annually, as well as on the due
functioning and enhancement of the
Bank’s ESMS.
The Bank's performance is regularly
monitored by the four Board-level
Committees that report to the full
Board. Starting in 2022, three of
these Committees take the following
responsibilities for climate-related issues:
• Risk Committee: Primary responsibility
for risk management at Board level,
including climate change as an
emerging risk throughout the Bank’s
portfolio.
• Audit Committee: assesses the quality
of disclosures, including the quality
of data and whether the information
provided is sufficient for stakeholders
to assess how the Group is managing
climate-related matters.
• Remuneration Committee: Considers
how the Bank’s Chief Risk Officer
performs against climate-related
targets – integrated into KPIs on ESG
aspects.
The Nomination Committee may take
climate-related expertise into account
when approving Board and management
positions in the future.
At the instruction of the Supervisory
Board, to anchor climate change and
other sustainability-related topics,
a Management-level Environmental
and Social Impact Committee was
established and held for the first time in
2022, comprising the Management Team
and senior managers, including the Bank’s
CEO, CRO, COO, CFO, CLO, Head of HR,
Chief Marketing Officer, Head of Investor
Relations, and Head of Funding.
The Committee is responsible
for managing the Bank’s climate,
environmental and social impacts,
focusing on those arising from its lending
activities. It holds overall responsibility
for designing, implementing, and
enhancing environmental, social and
climate strategies and policies, and for
setting and monitoring targets. The
Committee intends to further embed
E&S risk management in the Bank’s daily
operations. The Committee met twice
in 2022, with one meeting focusing on
climate-related matters.
Its work has been supported by a
cross-functional Climate Working
Group (‘CWG’) established in 2021,
which continued to work through 2Q22
to develop Bank of Georgia’s Climate
Action Strategy, design new processes
and methodologies, and contribute to
preparing climate-related disclosures.
Key people from the Bank’s CB and
MSME Banking segments, the Risk
function, Legal, ECRM, Investor Relations
and Funding departments participated
in regular meetings. The CWG can be
flexibly reconvened if needed.
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Board of Directors / Supervisory Board
Environmental and Social Impact Committee
Enterprise-wide risk Environmental & Climate Risk Lending, Credit Risk
Legal Investor Relations Operations
Climate Working Group
Our climate-related governance
Full Board • Reviews progress in the implementation of the Bank’s Climate Action Strategy.
• Reviews and approves any changes to the Strategy and the CLiRM framework.
• Examines climate-related opportunities and risks as well as measures taken as a result.
Environmental
and Social Impact
Committee
• Reviews progress in the implementation of the Bank’s Climate Action Strategy and CLiRM framework
and stipulates appropriate measures.
• Reports to the full Board on climate management and other ESG topics every six months.
Chief Risk Officer • Holds overall responsibility for risk management, including of climate-related risk.
Enterprise-wide
Risk Management
(ERM)
• Assesses the impact of specific climate scenarios on principal risks.
• Ensures climate risks are well integrated into the Bank’s overall risk management framework and
management responses. In the future, this may entail coordination and/or implementation of climate-
related stress testing, and integration of climate-related considerations into the Bank’s Risk Appetite
Statement and policies.
Environmental
and Climate Risk
Management
(ECRM)
• Conducts research on climate-related matters (policies, risk assessment methods, etc.).
• Assesses climate-related risks for the Bank’s clients, based on a standardised due diligence process.
• Together with CB department, calculates financed emissions.
• Supports other departments in conducting climate-related tasks.
• Prepares climate-related disclosures.
Business • Collects data from clients for climate-related risk assessment and GHG calculation.
Credit risk • Checks whether information collected by bankers during initial climate-related screening is reasonable
before projects are submitted to the Credit Committee.
• In the future, possibly conducts climate-related stress testing (alongside ERM).
Operational support • Collects relevant data and calculates GHG emissions from the Bank’s own operations, including Scope 1,
2 and 3 (except financed emissions).
Investor Relations • Notifies the ECRM department of climate-related requirements and/or expectations of investors and
stakeholders that could lead to reputational risks for the Group.
Legal • Conducts research on new climate-related regulation that could lead to legal risks for the Group.
Topic Responsibilities
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>8
years
5-8
years
2-5
years
<2
years
MediumShort Very longLong
Reassessing our resilience against various timeframes
Updating our analysis of potential future scenarios
Climate risk identification informs Bank
of Georgia’s regular risk management
processes and considers our standard
time horizons. The short-, medium- and
long-term time spans were defined to
reflect internal procedures and indicators,
such as financial planning, strategic
planning and average loan maturity.
The majority of our loans will be paid
back before 2030. Nevertheless, climate
change risks have to be mitigated before
they arise, making it necessary to expand
our horizons. We have defined a fourth
timeframe (‘very long’) to ensure climate
risks that may manifest over the longer
term are adequately identified and
managed.
Scenario analysis assists in the
identification, measurement and ongoing
assessment of climate risks, so we can
better evaluate potential threats to the
Bank’s strategic objectives and its ability
to create value over the longer term.
We started to use qualitative scenario
analysis in 2021, combining our research
of climate change and climate policies
in Georgia with selected terminology,
assumptions and narratives from the
scenarios developed by the Network for
Greening the Financial System (NGFS).
In 2022, we updated the methodology for
assessing Bank-wide climate-related risks
under different scenarios (see next page),
in line with updated NGFS’s scenarios.
Climate-related risks may adversely
impact the Bank both directly and
indirectly.
• Direct: Risks impacting the Bank
through damages to its physical
assets, activities and operations.
• Indirect: Risks impacting the Bank
primarily through its loan portfolio.
Such risks arise from the physical or
transitional effects of climate change
and manifest through more common risk
types, including credit risk, market risk,
operational risk and reputational risk.
Physical risks result from climate and
weather-related events (such as floods
and droughts), while transition risks arise
from the move towards a low-carbon
economy (new climate policies or changes
in consumer preferences, for example).
The transition to a low-carbon,
climate-resilient economy also creates
opportunities for the financial sector to
support innovative green products and
services that meet growing sustainable
investment needs, such as climate-smart
agricultural technology or more energy-
efficient buildings.
Bank of Georgia continues to integrate
these risks and opportunities into its risk
assessment and management framework
as part of an ongoing commitment to
building more resilient and sustainable
communities.
Strategy
Risks and opportunities for Bank of Georgia under different scenarios
Transition risks, 2022–2030.
‘Nationally Determined
Contribution’ scenario:
The effects of climate change will
become more clearly tangible over the
next decades but, in the meantime,
it is important for Bank of Georgia to
understand its more immediate impacts.
This period was assessed assuming the
Georgian Government will drive action to
achieve the unconditional GHG reduction
goals identified in its updated NDC (2021).
Transition risks, 2030–2050.
‘Delayed Transition’
scenario:
This period was assessed using the
‘Delayed Transition’ scenario, which
assumes Georgia will initiate highly
ambitious climate change mitigation
and adaptation policies from 2030
onwards – building on and enhancing the
climate policies described in the climate
background part on page 103. After 2050,
assuming most relevant technologies
and systems are low or zero carbon, the
transition will slow down. Transition risks
would be highest under this scenario.
Physical risks, from 2040
onwards. ‘Current Policies’
scenario:
Projections show that, under the
‘Current Policies’ scenario, temperatures
and related physical risks will start to
significantly rise in 2040 compared to the
‘Delayed Transition’ scenario. The ‘Current
Policies’ scenario assumes governments
do not increase the level of ambition of
their climate policies beyond today’s level.
Physical risks would be highest under
this scenario.).
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108
5
4
3
2
1
1 2 3 4 5
Notes on methodology: In 2022, climate-
related risks were assessed by answering
the following questions:
1. Identification of risk drivers and
transmission channels: How does
climate change interrelate with and
increase existing banking risks?
2. Assessment of impact: How strongly
will Bank of Georgia be affected by the
identified risk drivers if they emerge?
3. Assessment of likelihood: How likely
is it that the identified risk drivers
emerge under the three scenarios
1
?
Impact and likelihood values range from
one (insignificant/remote) to five (critical/
almost certain), with the definition of
values differing between risk types. The
resulting risk scores can be low, medium,
high or critical, as shown below. In some
cases, risk scores can lie between these
categories (low/medium, medium/high,
high/critical), because the risk is judged
to be right on the border between two
categories, for example, or to illustrate
that different risk drivers lead to different
risk scores under the same scenario.
In our analysis we have found that risks
will not differ significantly between the
defined short-, medium- and long-term
timeframes – that is, within the next
eight years – which is why results are
presented together under ‘<2030’. We will
continue refining our approach to Bank-
wide climate-related risk assessment
going forward.
1. Note on the likelihood of climate scenarios:
Theoretically, an important driver of the likelihood of
climate-related risks is the likelihood of the scenario
being used. However, providers of climate-related
scenarios do not usually determine the probability
of individual scenarios – they are simply considered
plausible.
We have identified Bank-wide climate-related risks over the short, medium, long and very
long term.
Type of risk Definition Drivers
(physical and transition risks)
Risk score
<2030 >2030 >2040
Nationally
Determined
Contribution
Delayed
Transition
Current
Policies
Credit The risk that the Bank incurs
a loss because its customers
fail to fulfil their contractual
obligations.
Both climate policy (transition
risks) and climate change (physical
risks) can negatively affect
borrowers’ repayment capacity
and the value of collateral.
Low Low/medium for many sectors
but high for others (such as
electricity generation and
agriculture – see heatmap
on the next page); location-
specific risks to be determined
from 2023
Liquidity The risk that the Bank is
unable to meet its payment
obligations when they fall
due under normal and stress
circumstances.
Affected borrowers cannot pay
back loans or they withdraw
deposits, reducing the Bank’s
liquidity. If sovereign or bank credit
ratings are downgraded, the
availability of wholesale funding
decreases and cost of funding
increases.
Low Medium Medium
Capital The risk that the Bank fails
to meet the minimum capital
adequacy requirements set by
the regulator.
Borrowers’ repayment issues can
negatively affect the credit quality
of the Bank’s portfolio, requiring
increased loan loss provision and
adjusted risk-weighted assets.
Low Medium Medium/High
Market The risk that the fair value or
future cash flows of financial
instruments will fluctuate due
to changes in market variables
such as interest rates, foreign
exchange, and equity prices.
The Bank is mostly exposed to
foreign exchange and interest
rate risks. Physical and transition
risks can cause global economic
downturn and an increase in
market volatility affecting interest
rates and currencies.
Low Medium Medium
Operations The risk of loss arising from
systems failure, human error,
fraud or external events.
Climate change can interrupt the
Bank’s regular operations and
increase the cost of maintaining
effective business resilience
(especially back-office processes
and data centres). Affected
borrowers could potentially
conduct fraud.
Low Low/Medium Medium
Reputation The risk of damage occurring
due to failure to meet
stakeholders’ expectations.
Lack of meaningful climate action
could affect the Bank’s reputation
among investors and customers.
Reputation could also suffer if
the Bank struggles with other
climate-induced challenges that
affect the continuity and quality
of its services.
Medium High Medium
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Financial Statements Additional Information
<2030:
Transition risk
(NDC)
2030-2050:
Transition
risk (Delayed
Transition)
From 2040:
Physical risk
(Current Policies)
Agriculture and
forestry
Crop production
Animal husbandry
Fishing
Forestry & logging
Buildings – construction
Real estate
Energy/electricity
Gas-fired thermal power plants
Hydropower plants
Other renewable energy (currently no exposure)
Distribution and trade (currently no exposure)
Health
Hospitality
Manufacturing
Food & beverages
Textiles
Wood-based products
Chemicals
Cement and similar construction material
Metals
Other (incl. glass, plastics, etc.)
Refined petroleum products
Transport-related goods
Other
Mining & quarrying
Fossil energy carriers (currently no exposure)
Other
Sale
Agri/forestry-related goods
Other
Services
Related to agri/forestry
Related to construction
Related to transport
Other
Transport
Railways (electric) (currently no exposure)
On water (currently no exposure)
Other
Waste and water
Waste management
Water and wastewater (currently no exposure)
Individuals / unknown use
<2030
Transition risk
CB
<2030
Transition risk
SME
<2030
Transition risk
Micro
Notes on methodology: Figures are as at
31 December 2022. Delayed Transition and
Current Policies are extreme scenarios for
transition and physical risks, respectively.
We assumed the structure of the balance
sheet stays the same to assess long-term
risks for our portfolio. The assessment
was conducted at the level of more than
650 individual activities, based on NACE2
codes, and aggregated for the sectors
presented above. For transition risks,
estimated GHG emissions and potential
contribution to their efficient reduction
were evaluated. For physical risks,
basic parameters such as the activity’s
dependence on water, vulnerability
against extreme weather events and the
need for raw materials were considered.
Results were compared against the
Climate-related Risk Radar for Georgian
Economic Sectors and its possible
Application for the Financial Sector
1
,
and were found to be in line. Location-
specific risks and individual borrowers’
characteristics, such as existing low-
carbon transformation plans or adaptive
capacities, were not considered in 2022
due to lack of data. However, we updated
our management systems in 2022 to
allow for collection of relevant data and
understanding of risks at location- and
counterparty-level from 2023. Risks for
our Mass Retail and Premium Banking
portfolio have not yet been assessed in
detail, as they depend to a high degree
on individual borrowers’ characteristics
and the location of the activity or asset
financed. We aim to also understand
climate-related risks for our mortgage
portfolio, using location-specific data.
1. National Bank of Georgia and German
Sparkassenstiftung for International Cooperation
2022, https://nbg.gov.ge/en/page/climate-risk-radar.
2. As at 31 December 2022 this equals GEL 3,018 million. We define ‘carbon-related
assets’ as those tied to the four non-financial groups identified by the TCFD.
The following industries are included: Oil and Gas, Coal, Electric Utilities, Air
Freight, Passenger Air Transportation, Maritime Transportation, Trucking Services,
Automobiles and Components, Metals and Mining, Chemicals, Construction
Materials, Real Estate Management and Development, Beverages, Agriculture,
and Food, Paper and Forest Products.
3. As at 31 December 2022 this equals GEL 197 million. This number includes
exposures to wholesale of solid, liquid and gaseous fuels and related products,
retail sale of automotive fuel, electricity production from natural gas, and cement
production which uses coal as a fuel. We have no exposure to prospection,
exploration and mining of fossil fuels or electric utilities using coal.
Low
Medium
High
Very High
Unknown
Potential risks in the
2022 business portfolio
Climate change can especially affect Bank of Georgia through its impact on the lending portfolio.
A preliminary, portfolio-level qualitative analysis of our corporate and MSME portfolios – making
up 57.1 % of the Bank’s total gross loan portfolio at 31 December 2022 – has helped us understand
hypothetical risks for different sectors.
Our heat map for assessing sector-based climate risks
% exposure to carbon-related assets
2
in the Bank’s gross loan portfolio
18.2%
% exposure to fossil fuel- and coal-related
assets
3
in the Bank’s gross loan portfolio
1.2%
3%
56%
38%
42%
62%
51% 46%
1%
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110
AmbitionCommitments
We commit to ensuring our actions support Georgia’s climate-related goals, including those specified in its updated
NDC (2021). As plans are updated, the Bank will update its own targets and policies with more detail
Anchoring climate expertise in our skill-set. Making climate change an integral part of capacity building.
Monitoring and managing climate
risks in the client base
Collecting data, raising clients’ awareness
and developing an approach to engaging
with high-risk clients.
Providing financing and solutions to clients,
and reducing the hurdles for climate
finance.
Supporting a low-carbon, resilient
economy
Incrementally expanding monitoring of our
operational carbon footprint and taking
relevant action.
Reducing our operational
carbon footprint
Bank of Georgia also sees the opportunities in the transition to a low-carbon economy
In 2022 the NBG published its Sustainable
Finance Taxonomies, covering green and
social topics. From January 2023, all
Georgian banks are required to report on
the amount of lending aligned with these
taxonomies. Bank of Georgia prepared
for implementing the taxonomy by
updating its internal classification system
to NACE2 – the European classification
system used by the NBG’s taxonomies
for identifying sectors and activities that
are or could potentially be green – and
by operationalising selected taxonomy
criteria so bankers can determine
whether clients are compliant. We
started reporting in January 2023, we
may not be able to assess compliance
with all taxonomy criteria yet – possibly
leading to a situation in which we report
less taxonomy-aligned lending than we
might actually have. This is due to several
criteria being highly complex (for example,
referring to European Directives that
are implemented differently in different
Member States of the European Union),
making it difficult or impossible to check
compliance during a standard loan
appraisal process. We will address such
barriers in 2023 and beyond.
1. As at 31 December 2022, this equals 3.0% of the
Bank’s gross loan portfolio. This includes the porfolio
identified based on the NBG’s Green Taxonomy
criteria as well as the portfolio based on BOG’s
lenders’ eligibility criteria.
Bank of Georgia works with its lenders
such as GGF and EBRD to provide green
finance. Through our ‘Energy Credit’
initiative, we offer companies credit to
buy solar panels. Other green finance is
directed mostly at large-scale renewable
energy (hydropower plants) and
construction projects.
In 2022, we conducted a market
analysis to identify opportunities for
green financing. We analysed relevant
regulation, interviewed companies
from different sectors to determine
their interest in green investments and
green loans, and identified green service
providers in Georgia (for the installation
of energy-efficient equipment, for
example). The findings will be used to
expand our climate-friendly lending in the
years to come.
The analysis showed that solar panels,
material recycling, energy efficiency
measures, installation of air filters, and
adoption of electric and hybrid transport
vehicles are among the most attractive
investments for our clients. Products
and services to realise such measures
can be procured from local green service
providers, while more innovative or newly
marketed services and products must be
sourced from international markets. Our
work also showed that Bank of Georgia’s
visibility as a provider of green loans is
perceived as low, requiring better marketing
and communication in the future.
The Bank has already developed and published a Climate Action Strategy. We acknowledge the financial sector is a crucial player in
supporting the decarbonisation of economies, and Bank of Georgia is committed to taking an active role.
How climate change affects our strategy
Bank of Georgia has committed to supporting Georgia’s climate-related goals
Total outstanding green
finance
1
(GEL million)
503.1
We plan to meet our outlined ambition
through the following commitments:
Monitoring and managing climate and
environmental risks: Bank of Georgia will
regularly assess climate-related physical
and transition risks across our portfolio.
In 2022 we started collecting relevant
data from borrowers to understand
their GHG emissions and related risks.
In 2023 we will begin using this data
to systematically identify clients with
the highest climate risks and discuss
such risks with them. This will feed into
our portfolio-level risk assessment and
allow us to continuously improve our
understanding of sectors and clients that
contribute to climate change through
GHG emissions, or that are vulnerable
to the changing climate and associated
impacts. We will ensure appropriate
management of our portfolio’s climate
risk profile and new credit origination in
line with our overall risk appetite.
Supporting the transition to a low-
carbon, resilient economy: We strive to
provide our clients with adequate climate
finance options to ensure they can
implement credible, safe, innovative, high-
quality climate solutions. We will actively
explore the opportunities to extend
climate-related financing to different
sectors and clients.
Reducing our operational carbon
footprint: We are committed to
monitoring emissions from our own
operations (including Scope 1, 2 and 3
emissions, except financed emissions)
and implementing measures that
support their reduction. We also commit
to continuously improving our ability to
measure our financed emissions and
providing relevant figures in our Annual
Reports.
Anchoring climate expertise in our
skill set: We are determined to invest in
enhancing our climate-related capabilities
across the Bank, and to build a
comprehensive toolkit for climate-related
risk and opportunity management.
The Bank’s Climate Action Strategy will
be implemented over the coming years, in
line with a concrete action plan developed
in 2022. Risk and opportunity analysis will
be repeated regularly and will inform any
updates to the strategy.
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Financial Statements Additional Information
Risk management
Bank of Georgia is committed to addressing climate risks by integrating their identification,
evaluation and management within standard risk management procedures.
Risk identification and evaluation
Bank of Georgia has an ESMS in place,
but climate is a complex topic that
requires expertise from across the Bank
and beyond. To accelerate progress, we
have continued to engage with third-
party consultants in 2022, supporting the
development of our CLiRM and extending
our ability to assess climate risk.
In 2022 we conducted the following
exercises:
Qualitative analysis of the effect of
climate change on enterprise-wide risks:
Based on the results of the 2021 Bank-
wide climate risk analysis (see Annual
Report 2021), we reassessed how the
transition and physical effects of climate
change can drive credit, liquidity, market,
capital, operational and reputational risk
for the Bank over varying time horizons
and for different scenarios (see previous
pages). The methodology was slightly
updated against the method developed in
2021. Overall, however, our assessment of
the magnifying effects of climate change
and climate-related transformations on
Bank-wide risks remains very similar to
2021.
Preliminary qualitative analysis of
climate-related risks in our portfolio:
Based on the 2021 portfolio climate risk
assessment, we reassessed transition
and physical risks – on a scale from zero
(no risk) to four (very high risk) – for
more than 650 activities conducted by
our clients and aggregated risks for 25
sectors. The overall results are very similar
to those of 2021 and show that over half
of our business portfolio is expected to
face low transition risks over the coming
years. The remainder of the business
portfolio could face medium risks.
Bottom-up climate risk assessment at
client level: From 2023, the ‘top-down’
analysis of our business portfolio will be
accompanied by ‘bottom-up’ client-level
assessments through an updated due
diligence process (see next page).
The first step of this process will be to
identify expected transition risks based on
the sector in which the client generates
their income, and expected physical
risks based on the sector and location of
income generation. While we will draw
on the heat map to assess risks per
sector, the analysis of risks for different
locations will be based on our ‘hazard
map’ developed in 2022 – which shows
physical risks for different sectors across
64 Georgian municipalities, taking up to
11 climate hazards (from landslides to
changes in precipitation) into account for
the overall score. The analysis is based
on publicly available data, including from
Georgian and international sources.
Although our approach does not currently
allow for determining different risk
levels within the same municipality (for
example depending on the proximity
to high-risk zones such as rivers and
slopes), we expect the results to be
sufficiently detailed to allow us to engage
our clients on climate-related risks and
opportunities.
Excerpt of our hazard map
for assessing location-based
physical risks
Forestry Construction
Municipality Current 2030 Current 2030
Khelvachauri
Keda
Kobuleti
Shuakhevi
Khulo
Batumi
Ozurgeti
Chokhatauri
Lanchkhuti
Khobi
Senaki
Abasha
Martvili
Chkhorotsku
Tsalenjikha
Mestia
Zugdidi
Poti
MediumLow
High
Following the second step – awareness
raising – the third step of our climate-
related due diligence will consist of
collecting additional data from clients
that we expect to face high or very
high climate risks (as identified in step
one). This includes information on GHG
emissions, past climate-related impacts,
management measures and a small
number of additional aspects. This in-
depth data collection will help us assess
clients’ awareness of potential risks
and preparedness for addressing them.
Analysis will be done once a year, per
identified client, as part of our regular
environmental and social risk monitoring.
Results will be used to refine our portfolio-
level risk assessment (heat map) and
identify highly exposed and unprepared
clients with whom we intend to engage
more closely in a fourth step.
Measuring financed emissions:
Understanding the emissions we finance
is important for managing climate
risks in our portfolio and steering our
contribution to Georgia’s climate-related
transition goals. In 2022, we assessed
financed emissions for parts of our
business portfolio using the methodology
developed by the Partnership for Carbon
Accounting Financials (PCAF). We will
repeat this exercise annually, covering
more and more of our portfolio. The
necessary data will be collected as part of
the climate-related due diligence process
described above and on the next page.
Moreover, we will pilot a methodology
for assessing financed emissions from
larger parts of our portfolio using a
methodology developed by IFIs. Please
see ‘Metrics & targets’ chapter for
further detail on the results of the 2022
assessment and on the methodologies for
borrower-specific and portfolio-level GHG
assessment.
Estimating alignment of selected clients
with the goals of the Paris Agreement:
In 2021/22, we used the Paris Agreement
Capital Transition Assessment (PACTA)
tool to assess the alignment of selected
clients from the steel and cement
sectors with low-carbon development
pathways. However, the number of clients
in the PACTA database is very small,
rendering the results of such analysis
extremely limited. Starting in 2023, we
will discuss low-carbon development
and Paris Agreement-alignment with
clients affected by transition risk as
part of our updated climate-related due
diligence process (step four, see below).
We will assess the results to determine
an approach to measuring portfolio
alignment in a standardised manner.
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112
Awareness raising
We make clients facing climate-related risks aware, so they can start to act (see flyer – https://bankofgeorgia.ge/en/about/management#docs)
Additional data collection
We address high-risk clients to determine whether they actually face climate risks identified in step one.
In-depth climate risk assessment
We will engage with selected (corporate) clients to support their climate management.
Initial screening
We preliminarily assess clients’ climate-related risks by looking at their sector and location.
2
1
3
4
Integrated risk management
Our climate-related due diligence:
Beyond risk identification and assessment,
Bank of Georgia has undertaken the
following steps to manage climate-related
risks and opportunities:
Development of a CliRM framework:
This framework describes climate-related
responsibilities across the Bank and
summarises all methods and processes
for risk assessment, evaluation and
management. It includes detailed
manuals for all climate-related activities,
from Bank-wide climate risk assessment
to the calculation of financed emissions.
The CliRM framework was approved by
our Environmental and Social Impact
Committee and by the Board in 2022.
It is available to all staff via our intranet
and will be reviewed regularly to ensure
any changes in our approach to climate
risk and opportunity management
are reflected.
Integration of climate-related risks in
our ERM framework: In 2020, the Group
identified climate change as an emerging
risk for the first time, making climate-
related risk an integral part of our risk
inventory. In 2021/22, an approach to
understanding the magnifying effects
of climate change on traditional banking
risks was developed and refined. Further
steps to integrate climate into overall
risk assessment and monitoring will be
considered. This could include reflecting
climate risks in our Risk Appetite
Statement and in our Credit Policies.
Integration of climate considerations
in our due diligence process: In 2022 we
continued to develop our climate-related
due diligence process, to assess and
address climate-related risks as part of
our loan appraisal and environmental
and social monitoring. The process
comprises four steps, as illustrated in the
figure below – we will start to implement
steps one to three in 2023, with step
four introduced once we have gathered
sufficient information on our existing
client base and their risks.
Our climate-related due diligence will
be integrated as much as possible into
standard procedures. We have made the
following changes in 2022:
• For step one, we updated our credit
information software to allow for
collecting information on clients’
business activities and locations,
and evaluating expected climate risk.
• For step two, we developed a new
booklet on climate change and low-
carbon, climate-resilient development
targeting business clients. Moreover,
we updated our Environmental and
Social Covenant with information on
our climate risk assessment process.
The Covenant must be signed by all
business clients and requires that they
read the climate booklet.
• Step three of our climate-related
due diligence will be implemented
alongside our environmental
and social risk management and
monitoring, allowing for more efficient
communication with our clients. We
have updated our ESMS framework
accordingly, also referring to the new
CliRM framework.
Building climate-related risk management
capacities: Capacity building is crucial
to ensuring climate-related risks and
opportunities are considered in every
credit decision. In 2022, more than 80
corporate bankers and risk managers
took part in training on climate risk
management and the Bank’s new
climate-related due diligence process.
Moreover, colleagues from ERM
participated in a deep-dive workshop
on scenario analysis.
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Financial Statements Additional Information
Metric Rationale and targets
GHG emissions: Absolute Scope 1,
Scope 2, and Scope 3; emissions
intensity
Measuring our GHG emissions helps us understand our direct and indirect impact on the climate.
Percentage of lending vulnerable
to climate-related transition and
physical risks, relative to total
lending
Climate-related risks for our borrowers can present credit risks for Bank of Georgia, so we manage
our portfolio’s climate risk profile and new credit origination in line with our overall risk appetite.
Percentage of carbon-related
assets, relative to total assets
Carbon-related assets are widely understood as a proxy for the financial sector’s exposures to
climate-related transition risks.
Amount of lending aligned with
climate-related opportunities,
relative to total assets
Banks can provide significant support to enable the transition to a low-carbon, resilient economy
by providing climate-related financing. Seizing climate-related opportunities can become a source
of significant revenue as the Government’s, economy’s and society’s climate ambitions continue
to grow. From 2023, we will monitor and report the share of financing in line with Georgia’s new
Sustainable Finance Taxonomies and explore opportunities to expand such climate-related lending.
Forward-looking metrics Bank of Georgia is committed to using its financed emissions calculations to develop forward-
looking climate-related metrics in the coming years.
Metrics and targets
Bank of Georgia uses metrics recommended by the TCFD to measure our impact on the climate,
and the effects of climate change on our business model and operations.
GHG emissions: our operational footprint
Since 2012, the Bank has reported GHG
emissions and energy use consistent with
the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013
and the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018.
This data covers the Bank as the main
operating unit and the core entity of the
Group, including its offices and retail
branches where the Bank has operational
control. For the first time, our 2022
reporting also includes emissions for three
Bank subsidiaries (BNB Bank, Georgian
Leasing Company, Bank of Georgia’s
Representative Office UK) and two Group
subsidiaries (G&T, Digital Area). Bank of
Georgia Group will determine in future
whether and how to calculate emissions
from other subsidiaries.
Our emissions data follows the guidelines
of the World Resources Institute /
World Business Council for Sustainable
Development (WRI / WBCSD)
Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard
(revised edition 2016) as a reference
source. The control approach was used
for all operations of Bank of Georgia.
We do not have responsibility for emission
sources not included in our Consolidated
Financial Statements on pages 228 to
342.
Scope 1
includes emissions from:
Scope 2
includes emissions from:
Scope 3
includes emissions from:
• Combustion of natural gas, petrol
and diesel at owned and controlled
sites (for heating and electricity
generation).
• Combustion of petrol and diesel in
owned passenger vehicles.
• Purchased electricity at owned and
controlled sites.
• Fuel- and energy-related activities;
waste generated in operations;
purchased goods.
• Air business travel; hotel
accommodation; land transportation
by rental cars.
• New in 2022: employee commuting.
Annual Report 2022 Bank of Georgia Group PLC
114
Data is provided by on-site delegates, invoices and meter readings.
Bank of Georgia GHG emissions 2020-2022 2020 2021 2022
Category Emission source category tCO
2
e tCO
2
e tCO
2
e
GHG Protocol Standards: Corporate Scope – 1 and 2, Value Chain – Scope 3
Scope 1
Direct emissions from owned or controlled
stationary sources
Fuels
874.4 907.6 957.3
Direct emissions from owned or
controlled mobile sources
Passenger vehicles
1,022.6 1,089.5 1,110.1
Scope 2
Location-based emissions from the
generation of purchased electricity, heat,
steam or cooling
Electricity
1,624.9 1,661.5 1,864.2
Scope 3
Fuel- and energy-related activities
All other fuel- and energy-
related activities
488.5 545.6 593.3
Transmission and distribution
losses
342.9 350.7 347.1
Waste generated in operations
Waste water
1
39.0 42.0 18.4
Waste
0.1 0.1 0.1
Purchased goods
Water supplied
1
18.9 20.4 10.1
Material use
200.4 224.8 281.1
Business travel
All transportation by air
9.8 19.9 80.9
Hotel accommodation
– 2.1 6.8
Land transportation by
outsourced vehicles
471.3 615.0 565.2
Employees commuting
– – 3,822.3
Scope 1
1,897.0 1,997.1 2,067.4
Scope 2
1,624.95 1,661.5 1,864.2
Scope 1+2
3,522.0 3.658.6 3,931.6
Scope 3 1,571.0 1,820.5
Without
commuting:
2,006.1
With
commuting:
5,828.4
Total emissions 5,093.0 5,479.1 5,937.8 9,760.1
tCO
2
e/employee 0.9 0.9 0.9 1.5
BOG employees (year-end)
5,821 6,207
6,597
Notes on methodology: We used the
most recent Georgia electricity conversion
factor provided by JRC
2
. GHG emissions
from business flights were calculated
using the ICAO online calculator. GHG
emissions from overnight hotel stays
were calculated on a ‘room per night’
basis, with emission factors based on the
Cornell Hotel Sustainability Benchmarking
Index (CHSB) Tool, version 2.
Further conversion factors were taken
from the 2022 UK Government GHG
reporting: conversion factors
3
– and
updated against the 2020 version
used for our 2021 reporting. Given that
differences are mostly minor, and that
updated emission factors also reflect real
changes in different activities’ emissions
intensity, GHG emissions for 2020 and
2021 were not remodelled using the
updated emission factors.
Compared to previous years, our gas
consumption significantly decreased in
2022 as the result of major improvements
to our heating system. Our petrol, diesel
and electricity consumption, in turn, rose
due to growth of the car fleet, office
size and staff numbers, and due to staff
returning to the office after two years of
home office.
In 2022, we assessed Scope 3 emissions
from ‘Employee commuting’ for the
first time. This was based on a survey
of employees’ mode of transportation,
distance travelled and – where known –
fuel used. 21% of employees participated
in the survey and final figures were
calculated by extrapolating to all
employees. While we acknowledge
this approach is not fully accurate, we
perceive the results to be sufficiently
informative for the time being, e.g. to
estimate the approximate share of
commuting emissions in our total
emissions. It was not possible to assess
commuting emissions for 2020 and 2021
due to a lack of data and irregularities
in commuting patterns throughout the
COVID-19 pandemic.
1. Between 2020 and 2021, the method for calculating
EFs for water supply and water treatment was
changed. These EFs are now calculated based on
the 2020 data from the UK water companies Carbon
Accounting Workbooks (CAW). This is because
previously the values were coming from a publication
of the UK water industry from 2012 that has now
been discontinued. There is a large decrease in the
conversion factors associated with water supply and
water treatment compared to last year’s conversion
factors. This is most likely due to the updated method
reflecting the grid decarbonisation since 2012.
2. JRC Guidebook – How to Develop a Sustainable
Energy and Climate Action Plan in the Eastern
Partnership Countries, European Commission, Ispra,
2018, JRC113659, http://com-east.eu/media/k2/
attachments/Com_east_guidebook_2018.pdf.
3. Department for Business Energy and Industrial
Strategy (BEIS), Greenhouse gas reporting:
conversion factors 2022, https://www.gov.uk/
government/publications/greenhouse-gas-
reporting-conversion-factors-2022.
115
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Financial Statements Additional Information
Bank of Georgia and Group’s subsidiaries’ GHG emissions 2022 Bank subsidiaries Group subsidiaries
Category Emission source category tCO
2
e tCO
2
e
GHG Protocol Standards: Corporate
Scope 1 and 2
Scope 1
Direct emissions arising from owned
or controlled stationary sources
Fuels
– –
Direct emissions from owned or
controlled mobile sources
Passenger vehicles
95.5 79.8
Scope 2
Location-based emissions from the
generation of purchased electricity,
heat, steam or cooling
Electricity
235.0 18.5
District heat
118.5 –
Scope 3
Fuel- and energy-related activities
All other fuel- and energy-related
activities
24.6 19.8
Transmission and distribution losses
10.2 3.4
Waste generated in operations Waste water
1.1 1.0
Purchased goods Water supplied
0.6 0.5
Scope 1 95.6 79.8
Scope 2 353.4 18.5
Scope 1+2 448.9 98.3
Scope 3 36.6 24.7
Total emissions 485.6 123.0
tCO
2
e/employee 0.6 0.6
Total employees 833 210
Notes on methodology: Once again, we
used the most recent Georgia electricity
conversion factor provided by JRC to
calculate electricity emissions for all
Georgian Bank/Group subsidiaries.
The emission factor for electricity use
by BNB is specific to Belarus and was
also taken from JRC. Further conversion
factors were taken from the 2022 UK
Government GHG reporting: conversion
factors.
Annual Report 2022 Bank of Georgia Group PLC
116
Outstanding
loan amount at
31 December
2021
(GEL) Scope 1 + 2
(tCO
2
e) Scope 3
(tCO
2
e)
Emissions
intensity
(tCO
2
e/GELm)
Financed 2021 emissions
Cement, steel
and other
energy-intensive
manufacturing
377,876,879 238,297
Emissions from use of
electricity and fuels; emissions
from chemical processes not
calculated.
/
Not calculated (yet) 631
Hotels (running)
339,302,849 1,235
Emissions from use of
electricity and fuels.
/
Not calculated (yet) 4
Real estate
management
(running)
151,402,530 /
Not calculated (yet), as
emissions mostly stem from
building use.
442
Emissions from tenants’ building use,
calculated based on measured energy
consumption.
3
Mining (gold, copper,
sand and gravel)
123,999,713 9,644
Emissions from use of
electricity and fuels.
/
Not calculated (yet) 78
Transport
110,859,680 7,980
Emissions from use of fuels
and, where material, electricity.
/
Not calculated (yet) 72
Electricity
generation
(from gas)
67,747,084 182
Emissions from use of
electricity and fuels for plant
operation.
35,618
Emissions from electricity generation,
calculated based on gas consumed.
528
Total
1,171,188,735 257,338 36,060
251
Financed 2021 emissions
Hotels (under
construction)
127,765,409 89,518
Lifetime emissions over
30 years, based on planned
hotel size or annual # of nights.
/
Not calculated (yet) 701
Real estate
management
(under construction)
20,904,434 /
Not calculated (yet)
55,448
Lifetime emissions from building use
over 30 years, based on planned building
size.
2,652
Total
148,669,842 89,518 55,448
975.09
Scope 3: Financed emissions
In 2022, Bank of Georgia analysed the GHG emissions of 66 corporate clients across six sectors:
Results: There is a wide variation between
sectors as some are more GHG-intensive
than others. Desk research showed that
our emissions intensities are generally in
line with those reported by other banks
from emerging economies and beyond.
The potential for emissions reduction
through energy efficiency improvements is
highest in energy-intensive manufacturing
such as cement and steel making.
Improving building design can help avoid
future emissions from the building sector.
Despite methodological challenges, we
will use our findings to inform client
engagement and business management
decisions from a climate perspective.
Methodology: The clients covered by
the assessment are considered carbon-
related through their Scope 1, 2 or 3
emissions, and account for approximately
26% of our corporate portfolio (as at
31 December 2021). The analysis was
done for emissions generated in 2021,
given the required data to calculate 2022
emissions was not available at the time
of calculation.
To calculate financed emissions, we
applied the ‘Global GHG Accounting and
Reporting Standard for the Financial
Industry’ developed by the PCAF.
Although a small number of loans was
used for the purchasing of real estate,
we considered all loans to fall into PCAF’s
‘general business loan’ category. This
decision was taken to allow for efficiently
calculating financed emissions and to
avoid double counting of emissions from
clients that have taken out loans for both
the purchasing of real estate and other
purposes.
Our bankers collected the following data:
outstanding loan amount; total debt and
equity; and primary physical activity data
for the company’s energy consumption.
On a scale from one (best) to five (worst),
the quality of our data thus scores two.
Most clients do not yet report GHG
emissions, making it impossible for us to
reach the highest data quality score.
Scope 3 emissions were calculated and
reported separately where relevant – as
were lifetime emissions for hotels and
apartment or office buildings whose
construction was still financed by Bank of
Georgia in 2021. For the latter, we based
calculations on the size of the building or
number of nights booked per year and
a total lifetime of 30 years.
Challenges and outlook: When it comes
to efficient and robust measurement
of financed emissions, one of the most
prominent hurdles is to ensure that clients
provide complete, consistent, reliable
data. We discussed individual data
points with clients whenever we detected
possible irregularities and, going forward,
will continue to monitor the quality of
data provided – engaging with clients to
raise awareness and improve results.
We have so far only calculated emissions
from a minor share of our portfolio.
In 2023 we aim to assess emissions
for approximately 30-40% of our CB
portfolio using the PCAF Standard.
Given the large number of clients in
our MSME and retail portfolios, we
cannot apply the PCAF Standard to
these segments. Indeed, attempts to
calculate financed emissions from our
MSME portfolio based on statistical data
for sector-based GHG emissions and
turnover failed in 2021/22 due to the lack
of comparable data.
We expect to pilot the Joint Impact
Model (JIM) in 2023 as a potential
solution. The JIM is a methodology
developed by several development
finance institutions to conduct indirect
impact modelling. Using input data
such as revenue and power production
from portfolios, the JIM enables users
to estimate financial flows through the
economy and its resulting economic
(value added), social (employment) and
environmental (GHG emissions) impact.
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Financial Statements Additional Information
Recommended disclosures The way forward for 2023
Governance
Board oversight of climate-related risks and opportunities.
Management’s role in assessing and managing climate-related
risks and opportunities.
The board and management will continue to exercise their climate-
related responsibilities as described in this Annual Report.
Training and upskilling colleagues across the Bank will continue
to be a key priority. E-learning materials will be developed.
Strategy
Climate-related risks and opportunities over the short, medium,
and long term.
Impact of climate-related risks and opportunities on our
businesses, strategy, and financial planning.
Resilience of our strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario.
We will continue to conduct climate-related risk and opportunity
analysis and disclose relevant results.
We will implement our Climate Action Strategy.
Improving our risk assessment capacities (see below) will also allow
us to better understand the resilience of our strategy.
Risk management
Processes for identifying and assessing climate-related risks.
Processes for managing climate-related risks.
Integration of processes for identifying, assessing, and managing
climate-related risks as part of our overall risk management.
To enhance credit risk assessment and manage risks, we will start
collecting data from business clients in a standardised manner
through an updated due diligence process. Moreover, we will assess
(very) high-risk clients’ awareness and preparedness for such risks
in more detail, together with respective clients.
We will strive to conduct sectoral case studies to better understand
climate risks and management responses for selected high-risk
sectors and clients (conditional upon external technical and
financial support).
We will continue to refine and expand our risk assessment
methodologies with feedback from the new due diligence process
and, possibly, sectoral case studies.
We will collect data to help identify climate finance opportunities
in line with the NBG’s Green Taxonomy.
We will reassess whether to integrate climate into our Risk
Appetite Statement and update policies as necessary.
Metrics and targets
Metrics used to assess climate-related risks and opportunities in
line with the Bank’s strategy and risk management process.
Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and
related risks.
Targets used to manage climate-related risks and opportunities,
and performance against targets.
We will assess emissions generated by 30-35% of our CB portfolio
(up from 26% in Annual Report 2022) and test a modelling-based
approach for assessing financed emissions from the total business
portfolio. Results will be published in our 2023 Aannual Report.
As we start to better understand emissions from our portfolio,
we will take into consideration whether – and how – to specify our
climate-related targets.
Our climate-related disclosures were prepared with technical assistance financed under the EIB’s Eastern Partnership Technical
Assistance Trust Fund (EPTATF). The opinions expressed do not necessarily reflect the view of the European Union, EPTATF or EIB.
The way forward
In 2022 we answered the CDP
questionnaire for the first time. Our
response scored a C (‘awareness’), on a
scale from A (‘leadership’) to F (‘failure to
disclose’) – showing that we have taken
significant strides in our climate action,
but that we need to continue working on
the matter to address our climate impact
and ensure good climate management.
We are disclosing climate-related
actions for the second time in 2022.
We believe we have covered all TCFD
recommendations and recommended
disclosures, providing information on
relevant decisions and how we made
them. Nevertheless, we acknowledge
we are only at the outset of our climate
journey and plan to move from testing
methodologies and preparing changes
to fully integrating climate-related risks
and opportunities into relevant processes
across the Bank. Climate-related
disclosures will incrementally become
more detailed.
118
Annual Report 2022 Bank of Georgia Group PLC
ESG REVIEW –
SOCIAL
119
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Financial Statements Additional Information
Social
At a glance
We aim to play an active role in creating
and enabling opportunities for our
customers, employees, and communities
in which we operate.
Our purpose is
helping people achieve
more of their potential
, and this means
different things to us in different contexts
– when we see our colleagues overcome
personal and professional challenges
and grow in this learning process, when
we see children in Georgia’s rural areas
use the libraries we sponsor to design, or
when we see young entrepreneurs use
our resources to develop their businesses,
this is what we call
“achieving more of
their potential.”
This does not mean
that we solve all of their problems or
that we never have a negative impact
on people. But, we strive to reduce any
negative impacts we may have, we take
responsibility for our actions.
Our main focus areas for social impact
are financial inclusion, education
in communities, and employee
empowerment. We are committed
to ensuring there are no unnecessary
barriers to finance for our customers and
we aim to deliver a positive, inclusive and
accessible experience to our customers.
Going forward, we will place an even
greater focus on young people and
financial education. In 2022 we launched
the first financial mobile application in
Georgia for school students and continue
to enhance it to increase engagement
and embed educational content because
we believe financial literacy is one of the
tools to
“achieve more of their potential.”
We are equally committed to building
an inclusive, healthy and stimulating
workplace for our people. And, finally,
we aim to give back by engaging with
our communities through philanthropic
giving and sponsorships that are focused
primarily on access to education and
educational opportunities.
In this section:
Empowering our customers
In this part you will read about how we listen to our customers and get their feedback,
and how we ensure that we act in the best interests of our customers.
Pages 120 to 121
Empowering our employees
In this part you will read about how we ensure inclusion and diversity in our workplace,
how we develop and implement our talent strategy, and how we listen to our colleagues
and what they tell us.
Pages 122 to 134
Empowering our communities
In this part, you will read about our initiatives in local communities, including educational
programmes we support, and non-educational sponsorships.
Pages 135 to 138
Annual Report 2022 Bank of Georgia Group PLC
120
Customer experience – how we listen to our clients
A few years ago Bank of Georgia
embedded a customer-centric model
in its operations. Customer-centricity
has been defined as one of the business
principles and a customer experience
(‘CX’) management department has been
set up, supporting the Bank in improving
the customer experience across segments
and main touchpoints. We have put in
place a systematic approach to not only
mitigate negative impacts we may have
on people, but also, and most importantly,
to learn from customer feedback. The CX
department now reports to the Deputy
CEO/COO.
The CX team continuously monitors and
collects real-time customer feedback. We
are serious about customer feedback. The
Bank’s senior management receives and
discusses the reports prepared by the CX
team monthly, including action plans and
how those have been executed.
The CX management process has been
incorporated across all levels of the Bank.
We recognise that robust CX governance
is crucial for the success of the Bank’s
overall strategy. Our CX governance
framework covers all key elements:
• measurement framework/data
collection framework;
• senior management ownership
(monthly meetings to discuss key
issues raised by our customers);
• customer-centric culture (CX
embedded in employee KPIs
framework); and
• continuous improvement process
based on customer’s voice (processes/
products/channels) (surveys after
new product launches, access to daily
reports for key staff, CX product
improvement initiatives sent quarterly
to agile teams).
A variety of data collection methods are used to understand what our customers think about Bank of Georgia, and whether the
interactions and the experiences they have with us are aligned with what we promise and aspire to.
Medallia
In 2019, we purchased Medallia, the world’s leading customer experience management platform, and we have since integrated it into
all key channels. Medallia enables us to engage daily with our customers, collect and analyse their feedback, identify the root causes
of problems and prioritise improvement projects.
Nov 2019
90 K 30 K 270 K 5.5 K 25 K
Channel
Approximate
number of
annual feedback
Jul 2020 Dec 2020 Nov 2021 Jul 2022 Planned
Retail mobile app
and internet banking
platforms
Call
Centre
Retail
Branches
Mobile app
for legal
entities
SOLO
lounges
Chat/bot
sCoolApp
BOG Pay
Complaints
management
Remote sales
Monthly internal telephone and email surveys – we collect, measure, and analyse customer feedback across all segments using
telephone and email surveys.
• Mass retail – randomly selected 800-850 active customers per month.
• SOLO segment – randomly selected 450 active customers per month.
• POS payments – randomly selected 350-400 merchants per month.
• Small and medium businesses – randomly selected 1,200 and 900 customers, respectively, per quarter.
• Mail surveys for CB and WM customers.
• Surveys on specific products including student cards, Amex cards, etc.
External survey – we measure the Bank-wide NPS using an external independent service provider.
NPS is a key metric for the whole organisation.
We have delivered a substantial shift in our approach to customer
experience, leading to a major increase in customer satisfaction.
External Bank-wide NPS was 58 by the end of 2022,
up from the low-30s four years ago.
Empowering our customers
121
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Financial Statements Additional Information
1. Excluding pawn loans which stood at GEL 165 million as at 31 December 2022.
Responsible financial inclusion
Financial inclusion enables people to
benefit from the products and services
that a formal financial system offers,
with the potential to improve their quality
of life. However, the only type of financial
inclusion that empowers individuals
and supports economic development
of communities is responsible financial
inclusion. The sustainability of our
business and sustainable development
of the local economy depend on how
responsibly we deliver our products and
services to our customers.
Responsible lending
• We do not lend without assessing
and checking a customer’s income.
1
• We adhere to the PTI and LTV limits
set by the NBG.
• The monthly debt load for any
individual cannot exceed 50% of their
monthly income, and this ratio is set
even lower for individuals with lower
incomes (maximum 25%) as well for
those who face FX risk – that is if a
borrower’s income is in GEL while the
loan is in foreign currency, maximum
debt burden cannot be more than
30% (and 20% for those with lower
income).
• LTV: maximum 85% for GEL loans and
maximum 70% for loans in foreign
currency.
• We set an income threshold below
which an individual is not eligible for
a loan.
• We perform regular portfolio
monitoring to identify any signs of
potential loan repayment problems.
• We send regular automatic loan
repayment reminders to all customers.
• We provide information on existing
Government programmes to our
customers to help them benefit from
Government subsidies if they are
eligible.
• For floating-rate loans, we always
inform our customers when the
interest rate changes.
Customer protection
We aim to maintain customer trust by
adhering to the highest ethical standards
in doing business. Fairness and customer
centricity are two of our six business
principles. This is reflected in our Code of
Conduct and in the Customer Protection
Standard, which was updated in 2022 to
reflect new local regulatory requirements
and additional control mechanisms for
effective execution. The Standard covers
all stages of the product and services
lifecycle and includes requirements
related to transparent product offerings
and clear, accurate and tailored
communications to enable customers
to make informed decisions. We have
developed an online training module on
responsible treatment of customers to
ensure all employees clearly understand
our commitments. Online training is
the part of mandatory onboarding
programme for customer-facing roles.
Our commitment to customer centricity
implies that we offer our customers the
products and services that are suited
to their needs and preferences, while
adhering to our internal policies and
procedures as well as applicable laws
and regulations. We clearly disclose
all features and terms and conditions,
including applicable fees and charges,
for the products and services offered
so that our customers can make
informed decisions. Responsible
marketing guidelines are included in
the Standard, according to which all
marketing communications must be
fair, clear, and not misleading. The Legal
department serves as a second line of
defence, monitoring the Bank’s marketing
communications and ensuring they are
fully compliant with internal policies and
procedures as well as applicable laws
and regulations.
The Bank has a Customer Claims
Management procedure that defines
how to handle customer complaints and
concerns in a timely and effective manner.
The Customer Claims Management
and Support Centre reviews and
manages all incoming claims. In case
of a material violation, the Customer
Claims Management and Support
Centre is obliged to escalate the matter
to the Bank’s Compliance Committee.
Customers can file complaints via any
channel, including the Bank’s website,
social media, call centre, and branches.
According to the NBG’s regulations,
customers can also file complaints via the
NBG. The Bank’s Customer Protection
Unit manages communications with the
NBG regarding customers’ claims.
The Customer Protection Unit also serves
as a second line of defence, reviewing and
analysing all complaints to identify any
trends and recurring claims potentially
indicating a systemic issue, any violation
of our Code of Conduct or Customer
Protection Standard, and offering
remediation action plans if necessary.
If the Customer Protection Unit
identifies a systemic issue from customer
complaints or reports received through
the whistleblowing channel, it reports
such findings to the Audit Committee in
its quarterly compliance reports.
The Bank has in place a product and
service approval process, which includes
an assessment of compliance risks
related to new products or services.
Assessment and approval are required for
new products and for changes to existing
products. We aim to ensure our products
and services are in line with relevant
regulatory and legal requirements as
well as internal compliance and control
framework. The Legal department
serves as second line of defence in the
product and service approval process
and reviews the compliance of products
and services from a legal and regulatory
perspective. All product developments,
including changes to existing products,
are reviewed by key control functions.
Responsible collections
Bank of Georgia has a Code of Ethics
for Debt Collection, governing culture
and ethics in the process of collections.
This Code is based on the requirements
of the NBG and international best
practice, ensuring the collections process
is managed with the principles of good
faith, transparency, and fairness.
During the collections process, we operate
with the following principles:
• We have transparent relationships
with borrowers.
• We interact with fairness and respect.
• We provide our customers full, reliable,
and helpful information, essential for
decision making.
• We define a suitable time for
communications and a list of
information to be prudent, attentive
and loyal towards the borrowers.
• We motivate and help borrowers find
the best outcomes.
As a control mechanism, the Bank
maintains records of communications
with customers to ensure effective
execution of the Code. The Customer
Protection unit serves as a second line
of defence, monitoring debt collection
process so that it is in compliance with
the principles, rules, and requirements of
the Code.
We continue to strengthen the controls on
collections activities to provide fail-safe
protection of consumers and promote fair
treatment of borrowers.
Annual Report 2022 Bank of Georgia Group PLC
122
67.9%
32.1%
69.7%
30.3%
98.7 %
1.3%
71.3%
28.7 %
26.7%
73.3%
46.6%
53.4%
Group employees by gender Bank of Georgia employees by gender
Bank of Georgia employees by contract type Bank of Georgia employees by location
Executive Management of the Group
1
Senior management of the Bank
2
0 20 40 60 80 100
3.9% 9.8%35.0%47.3% 4.0%
0 20 40 60 80 100
2.6%8.9%35.5%48.9%4.2%
Our employees at a glance
Generational split
<21
>=21 & <=30
>=31 & <=40
>=41 & <=50
>=51
<21
>=21 & <=30
>=31 & <=40
>=41 & <=50
>=51
We deliver on our strategic objectives
thanks to our employees and their
commitment to shared success.
We are committed to inspiring and
empowering them by ensuring a diverse
and inclusive work environment, with
equal opportunities for learning and
development. We do business in line with
our core values and business principles,
and continue to focus on attracting,
developing and retaining top talent,
fostering a high-trust environment and
a strong feedback culture, and developing
our organisation to give employees
meaningful work experiences.
Bank of Georgia’s Human Capital
Management (HCM) function plays a
critical role in helping us ensure employee
wellbeing, engagement and satisfaction.
The HCM function, combining HR
expertise with business knowledge,
designs and implements policies and
practices in line with the Group’s purpose,
values, business principles and strategic
objectives. The HCM team reports to the
Head of Human Capital and Employee
Experience Management, a member
of the Bank’s Management Team,
who reports directly to the CEO. The
Supervisory Board of the Bank and its
Nomination, Remuneration, Audit and
Risk Committees – oversee all matters
related to the Bank’s employees.
Empowering our employees
Total employees
8,391
Women
5,696
Men
2,695
Total employees
6,597
Women
4,601
Men
1,996
Women
Men
Women
Men
Women
Men
Women
Men
Total employees
15
Women
4
Men
11
Total employees
58
Women
27
Men
31
Permanent
Temporary
Tbilisi
Regions
Total employees
6,597
Permanent
6,511
Temporary
86
Total employees
6,597
Tbilisi
4,705
Regions
1,892
Age of employees, % (Bank of Georgia)Age of employees, % (Group)
1. Includes the CEO. The figures are presented as at 31 December, 2022.
2. Excludes Executive Management of the Bank.
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Financial Statements Additional Information
Culture: living our values and business principles
We are committed to the highest
ethical standards in everything we
do. We expect every employee to act
in line with our values and business
principles, complying with applicable
laws, regulations, and internal policies
and procedures. We communicate our
expectations of employee conduct
through multiple channels, including
our Employee Corporate Handbook,
available to all employees on the Bank’s
intranet, in Georgian and English. The
Code of Conduct, an integral part of the
employment agreement between the
Bank and its employees, is fundamental
to fostering the culture based on our
values and business principles. It clearly
sets the expectation that all employees
act legally, ethically, and transparently
in all their dealings. Failure to do so may
lead to disciplinary action, up to and
including the termination of employment.
We monitor employee awareness
of internal policies and are working
on strengthening our internal
communications and explaining our
policies through online, interactive,
self-paced courses.
Diversity, inclusion and equality
We are committed to ensuring
inclusion and equal opportunities in
our organisation. We do not tolerate
discrimination on any grounds, – be it
gender, marital status, sexual orientation,
race, ethnic origin, nationality, age,
disability, political or religious beliefs, or
on any other grounds under the applicable
local law. Universal human rights are
incorporated into our Handbook and our
Human Rights Policy. Our Anti-nepotism
Policy also underpins fair and transparent
decision-making in all employee-related
matters.
Whistleblowing tool
The Bank has a whistleblowing tool
allowing employees to report any
concerns anonymously or confidentially.
The Bank uses WhistleB, an external,
advanced, independent whistleblowing
reporting channel and case management
tool. We prohibit any form of retaliation
against an employee who raises a concern
or participates in an investigation.
Grievance mechanism
Through our grievance mechanism, which
is part of our Grievance Policy, employees
are encouraged to communicate
legitimate concerns about illegal,
unethical or questionable practices –
confidentially, if necessary, and without
the risk of retaliation. Grievances can be
submitted via email, anonymous hotline
call or electronic form.
In 2022, we had three cases reported
under the Grievance Policy, two of them
were provided anonymously. All cases
were investigated and resolved. For more
information on ethical business, please
see pages 87 to 88 of this report.
Gender equality
In 2020 our efforts to address barriers
to the employment of women were
recognised by the 2X Challenge, an
initiative seeking to empower women and
enhance their economic participation. The
nomination was awarded based on the
following criteria:
1. More than 40% of the Bank’s
employees are women.
2. The Bank commits to and implements
policies or programmes beyond
those required for compliance,
addressing barriers to women’s quality
employment.
3. Across the organisation women
represent at least 40% of senior
management and at least 33% in at
least three Board-level Committees
out of five.
In 2022 Bank of Georgia joined the
Women’s Empowerment Principles
(WEPs) to further strengthen our
initiatives aimed at supporting women
in the workforce. Bank of Georgia also
retains its 2XChallenge nomination,
and we monitor its criteria as our main
indicators of gender D&I, and provide
an annual update on diversity matters
to the Nomination and Remuneration
Committees.
Inclusion and non-discrimination
As detailed in the ‘Talent strategy’
chapter, we take steps to ensure
candidates and employees are not
discriminated against. We do, however,
process gender, age, education, position
and employee level, and other information
required for the fulfilment of our talent
strategy, and disclose our progress
through our ESG reporting framework
with reference to GRI standards.
Since 2020 we have also reported on
workforce diversity for the NBG, including
information on gender ratios by employee
position levels, age structure, and ratio of
disabled persons.
We plan to advance our D&I practices by
involving our HCM team members in an
international certification programme,
performing a self-audit and identifying
areas for improvement. This will be
completed in 2023, and we aim to have a
D&I enhancement plan in place for 2024.
Prevention of bribery and corruption
As an organisation that does not tolerate bribery and corruption, Bank of Georgia ensures appropriate internal controls are in place and
operate effectively. Our KYE procedures include screening at the recruitment, employment and departure stages.
In 2022, there were no bribery and corruption incidents registered, nor did the Bank incur any bribery or corruption fines.
(For more information on financial crime, please see page 143 of this report).
How employees can raise concerns
We encourage employees to speak up
and promptly escalate concerns about
a potential misconduct.
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124
4%
5%
2020
2021 2022
-1%
Fair rewards
The Bank’s Remuneration Policy and
practices are part of our human capital
strategy and are aligned with the Group’s
overall strategy, corporate culture,
business activities and risk appetite, and
comply with applicable regulatory and
legal requirements. The main principles of
the Bank’s Remuneration Policy are:
• Competitiveness: Compensation paid
by the Bank should be in line with
market practices and competitive
when compared with respective
positions in other banks and on the
Georgian labour market.
• Flexibility and fairness: To ensure
fair remuneration of employees in
similar positions in line with their
responsibilities, qualifications, and
skills. Our approach and remuneration
practices are gender-neutral and we
are committed to eliminating any
bias and discrimination. Flexibility
means our practices are in line with
the objectives of the Bank and can be
adapted as business needs change and
the competitive environment evolves
locally and globally.
The Remuneration Policy is approved
by the Supervisory Board of the Bank,
based on the recommendation of the
Remuneration Committee. In 2022,
changes related to remuneration of
Material Risk Takers and other new
requirements of the NBG were approved
and implemented.
Our remuneration system consists of fixed
salary and variable remuneration, which is
based on performance. The Policy defines
standards applied to remuneration of
Executive Management, Material Risk
Takers and the workforce, including those
employed in control functions (Internal
Audit, risk management, and compliance).
Additionally, all employees are eligible to
participate in the state pension scheme.
The Bank makes pension payments
according to the terms and conditions
defined by the Georgian legislation.
Remaining a competitive employer
We monitor employee pay trends via
labour market compensation surveys.
The results of the 2022 survey and the
analysis of internal data confirmed that
we remain a competitive employer.
2
We also monitor wage statistics in
Georgia. According to the National
Statistics Office of Georgia, a subsistence
minimum
1
was GEL 254 in December
2022, and average monthly nominal
earnings per employee as of 3Q22 stood
at GEL 1,595
2
. In addition, the living wage
was GEL 1,770
2
according to the Georgia
Fair Labor Platform
3
, while average
monthly earnings at the Bank amounted
to GEL 3,468
4
.
Ensuring fair remuneration
In addition, we monitor our gender equal
pay gap (GEPG) as one of the indicators
of equal opportunities, and report
this information to the Remuneration
Committee annually. The GEPG is the
difference between the compensation of
male and female employees in the same
position. In 2022 the GEPG stood at 4%.
The decrease in GEPG reflects our
commitment to creating equal
opportunities in the workplace –
we promote equal opportunities and
support women with a variety of
leadership initiatives.
Levelling
This framework considers job specifics to ensure fairness and transparency across
the Bank.
Levelling ensures:
• better employee understanding of total compensation (all pay and benefits)
approach;
• better management of employee mobility;
• a baseline for aligning jobs and compensation packages;
• a baseline for setting pay grades and salary ranges that are comparable with
similar jobs inside and outside the organisation, to attract top talent; and
• additional guidance in the selection of employees.
1. http://geostat.ge/en/modules/categories/791/subsistence-minimum
2. https://www.geostat.ge/en/modules/categories/39/wages
3. https://shroma.ge/en/living-wage-en
4. Excluding Executive Management.
5. The raw gender pay gap is a measure of the difference in mean earnings of men and women regardless of the nature of their work across an organisation. The figure is
calculated as the mean salary for male employees minus the mean salary of female employees (excluding Executive Management).
As for our raw gender pay gap (GPG)
5
,
which measures the difference in the
average earnings of men and women
regardless of the nature of their work,
average earnings of female employees are
44% lower than those of male employees.
This is mainly driven by the higher
proportion of women among new hires at
entry levels in non-managerial positions
and at lower ranges on managerial levels.
The Bank continues talent development
activities to support professional
development and career progression
of its employees.
We are committed to ensuring equal
opportunities by fine-tuning our job
architecture and grading structure. In
2022, we completed ‘Levelling’ for non-
managerial positions, having finished this
process for managerial positions in 2021.
A standardised process of assessment
and placement applies to each new
or updated position and its respective
incumbent, mapping the baseline for
career paths and employee career
progression.
GEPG
(Bank of Georgia)
(mean pay – women versus men)
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360
372
289
2020 2021 2022*
90%
91%
2021 202 2
83%
87%
77%
2020 2021 2022
6. As defined by the Labour Code of Georgia.
7. The difference between an employee’s salary during the leave and the amount paid by the Government.
Our benefits for supporting employee wellbeing
Bank of Georgia’s employee value proposition includes competitive remuneration and benefits packages and support for personal
and professional development.
Corporate insurance package ◊
We offer employees a standard corporate health insurance package, including pregnancy and childbirth coverage, fully paid by the
Bank. Employees can upgrade to a non-standard package by covering the price difference.
Maternity leave, newborn adoption leave and parental leave
6
From 2021 we replaced maternity leave – which was available only to employees who were a mother of a child – with parental leave.
Parental leave comprises maternity leave for childbirth and maternity or paternity leave for childcare available to an employee who
is either a mother or a father of a child.
This leave offers a total length of 730 calendar days in case of childbirth and childcare to all employees.
Parental leave types Legal requirements What we do
Paid maternity leave for pregnancy and
labour.
Payment is not legally required for
private sector.
126 calendar days’ compensation
7
paid by
the Bank. ◊
Paid maternity leave in case of complications
during childbirth or the birth of twins.
Payment is not legally required for
private sector.
17 calendar days’ compensation paid by
the Bank. ◊
Paid parental leave for childcare. Payment is not legally required for
private sector.
57 calendar days’ compensation paid by
the Bank. ◊
Unpaid parental leave for childcare. Difference between total length of
childbirth-related leave (730 days) and
above-mentioned calendar days as
appropriate.
Additional unpaid parental leave for
childcare.
12 weeks from the child’s birth until the
age of five, granted to any employee who
actually takes care of a child, for at least two
weeks per year.
Newborn adoption paid leave. Payment is not legally required for
private sector.
90 calendar days’ compensation paid by
the Bank. ◊
Newborn adoption unpaid leave. 460 calendar days.
Return-to-work rate after
maternity leave
Retention rate of employees who
returned to work after maternity
/parental leave, staying for at
least 12 months
Number of women on
maternity/parental leave
* One male employee used parental leave in 2022.
◊ Benefit beyond compliance.
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126
Additional benefits
Support in back-to-work adaptation ◊ – training programmes for employees returning to work from
parental leave.
Special working ergonomics for pregnant women – 21 workplace rearrangements in total were made
for our pregnant colleagues.
Paid time-off for special needs in accordance with Georgian regulations:
• Medical check-ups related to pregnancy.
• For mothers breastfeeding during the first 12 months.
• For employees who are legal representatives or supporters of a person with a disability.
• Paid medical check-ups for night-shift workers.
• COVID-19-related days-off.
Additional paid time-off ◊ in form of days off and uncertified sick leave – on top of those required by
the Labour Code of Georgia – available to all employees.
Educational vacation ◊ – In the case of distance learning, the Bank offers a short-term educational
vacation to employees. The Bank also provides the possibility of co-financing the cost of higher
education – master’s, academic or certification programmes at foreign universities for professional
development in the relevant field (e.g. MBA, CFA programme, etc.).
Special terms for banking services ◊ – no fee for services related to a salary account and discounted
rates on payment cards issued by the Bank, available to all employees.
Financial aid ◊ for:
• Childbirth, marriage, or a grave illness of a family member.
• Families in the case of an employee death.
• Coverage of an employee’s uninsured debt at the Bank in the case of the employee’s death.
TOIL (time off in lieu) compensation – employees can bank overtime hours and use them cumulatively
as paid vacation within 12 months. If, due to unexpected circumstances, employees cannot take
earned hours within the predefined time period, they will instead be compensated in cash (in
compliance with the Labour Code of Georgia).
Night-shift employees medical check-up was introduced in 2022, in accordance with the Labour
Code of Georgia. Those starting work or working a) at least three hours between 22:00 and 6:00
as part of their standard working time, or b) 25% of their annual work time during the same period,
are considered night workers. They are offered an annual medical check-up to prevent or mitigate
the risk of related professional illnesses, with costs covered by the Bank. Also notable:
• If according to a medical report the night worker has a health problem due to performing night
work, the Bank shall, where possible, transfer him or her to a suitable day job.
• In the case of a medical recommendation, the night worker is eligible to request a medical
examination every six months.
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67.4%
32.6%
65.2%
34.8%
20.4%
18.5%
18.5%
16.2%
2021 2022
84%
85%
83%
2020 2021 2022
60%
54%54%
2020 2021 2022
40%
30%
23%
2020 2021 2022
Talent strategy
In developing and implementing our talent
strategy, we focus on:
• Attracting, developing and retaining
highly qualified talents.
• Putting the right people in the
right roles.
• Ensuring alignment of our talent
strategy with business objectives by
analysing and anticipating business
needs and gaps in required skills and
competencies.
51% of our employees are 30 years old or
younger, and our approach has evolved
alongside changing attitudes towards
work among younger generations –
especially following the pandemic. When
recruiting, we highlight that hybrid work
is normal, that we are committed to
ensuring D&I, and that work-life balance
matters.
Our Talent Acquisition team actively
monitors the labour market and regularly
engages with potential candidates in
Georgia and abroad. We also run an
‘Employ the Talent’ initiative, where
employees can suggest candidates for
tech and mass retail job openings. Seven
candidates referred in this way were
successfully employed in 2022.
Bank of Georgia is an equal opportunity
workplace, where people from different
backgrounds and experiences come
together, empower each other, and
create value for our stakeholders. The
Bank’s recruitment policy and practices –
with panel interviews, relevant control
procedures and online applicant tracking
system – ensure a fair hiring process. We
do not ask for candidates’ date of birth,
gender or photograph, nor do we collect
information on race, religion, sexual
orientation, disabilities or nationality –
ensuring no candidate or employee is
discriminated against on any grounds.
One priority is to develop talent internally,
and current employees have priority
when filling vacancies – especially for
managerial positions. During 2022 a
number of internal moves happened
within executive and senior management,
reflecting our focus on putting the right
people into relevant roles and re-shuffling
when necessary.
Total new employee hires
1,685
Women
1,136
Men
549
Total new employee hires
2,309
Women
1,505
Men
804
New employee hires (Bank of Georgia) New hires (Group)
Women
Men
Women
Men
% of vacancies filled internally
(Bank of Georgia)
Employee turnover
(Bank of Georgia)
Internal mobility rate
(Bank of Georgia)
Retention rate
(Bank of Georgia)
129
Employees of the
Group promoted to
managerial positions
76 women, 53 men
Voluntary turnover Total turnover
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128
Bank of Georgia continues to support
younger talent by creating unique
opportunities for personal and
professional development. We collaborate
with leading Georgian business schools
and universities, regularly participate in
job fairs, and run internships and student
development programmes.
Since 2017 we have run Leaderator, a
highly recognised student development
programme in the local market. We
enrol talented undergraduates in the
programme and involve them in ongoing
projects to expose them to real-world
work experience. Leaderator participants
are mentored by professionals at middle
and senior management levels of the
Bank. We offer participants flexible
schedules and a financial reward, and
they may be offered jobs upon completion
of the programme.
Leaderator participants tell us that Bank
of Georgia is the employer of choice
among IT and tech students, because they
know we focus on helping young people
grow professionally within one of the best
tech teams in Georgia. Most participants
are promoted to different positions within
our IT team, and some have already been
promoted to managerial positions.
Summer internship programme
In 2022 Bank of Georgia held its second summer internship programme for Georgian students who study abroad.
Nine students were selected. Over the past two years, 13 young talents interned with the Bank during their summer break.
Key talent management activities during 2022
102
Number of Leaderators
selected in 2022
45% were women
54% were selected for IT/
Data/Digital programme
295
Number of students who
participated in the programme
91% of participants were
hired at the Bank after the
programme ended
Implemented Performance Management
System to enable setting, tracking and
evaluation of annual goals.
Enhanced one-on-one coaching
to develop leaders.
Updated Bank-wide employee
performance and development review.
Upgraded talent review framework and
launched employee review process to
segment Bank of Georgia employees,
identify high-potential employees and
point out strategic training needs –
enabling the bank to tailor development
programmes and create training plans
that equip our people with essential skill
sets for career advancement.
Launched pilot programme to address
increasing role of digital transformation
across the organisation, and reskilled and
enabled transition of frontline employees
into IT roles.
Revamped programme to support
newly appointed managers.
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Employee performance and development reviews
Talent development cannot happen
without fair and transparent
performance reviews and development-
oriented feedback. During 2022, we
focused on a few initiatives:
• Rolled out a KPI management
system for managers – at the
Bank, discretionary compensation
(i.e. bonuses) are paid based on
performance. During 2022, managers
participated in an annual KPI setting
process, inputting relevant KPIs
and then the actual performance
against these into the system. This
has enabled us to systematise the
KPI setting process and increase
transparency around performance
and remuneration. In 2023, we plan to
involve individual contributors in this
process as well.
• Continued talent reviews – held
them for more than 1,000 employees
throughout the year, across 60
departments and involving 300
managers. The purpose of a talent
review is to discuss employee
development and career progression
and develop individual development
plans, enabling employees to hone the
skills that are critical for new roles.
Outcomes of the talent development
programme for employees with high
potential (HiPos), held back in 2021,
showed that it was a good opportunity
for emerging leaders. The programme
targeted individual contributors with
the potential, abilities and aspiration
to undertake more responsibilities and
fill in the positions that require greater
contribution in the future. The purpose
of the programme was to assist HiPos
in developing a set of transferable
skills that would enable them to
succeed in different roles. By the end
of 2022, 39% (18) of participants
who completed the programme were
promoted to managerial level, and
34% (16) moved horizontally within
the Bank.
Creating opportunities for lifelong learning
We run a number of programmes to support our people in their personal and professional development, and in 2022 implemented
the following key talent management activities across Bank of Georgia:
Programme for first-time managers – We know that learning how to lead a team of any size takes time, patience, and practice.
We rebranded the programme for back-office employees and focused on empowering our first-time managers with the tools and
techniques they need.
38 participants (63% were women; 28 were internal talents)
Individual coaching – Since 2021 we have partnered with local coaches and offered individual coaching opportunities to our
managers to support their personal growth and professional development.
256 employees participated in this programme in 2022 (63% were women).
Strategic co-creation workshop – In 2022 we brought together teams of executive and senior managers to create a shared vision,
align values, and integrate each participant’s vision into the common understanding of organisational culture. Participants also
discussed the Bank’s longer-term strategy and vision.
97 participants.
Front2IT retraining programme – We launched a new programme – Front2IT –
giving front-office employees the opportunity to learn tech skills and pivot to a new
professional field. The programme was paid for by the Bank and included 84 hours of
intensive training and individual mentoring. Besides professional courses, participants
were involved in real-work processes and got hands-on experience in our IT department
We will continue this programme
to give our front-office employees
an opportunity to make bold
career moves.
105 employees
considered
10 employees
selected
7 of those selected
were women
After completion of the programme, participants’ compensation increased by 34%, on average.
83%
Bank of Georgia employees
who had a formal performance
and competencies review
2021: 78%
75%
Bank of Georgia employees
who received feedback
2021: 70%
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130
We continue to develop our ongoing professional development programmes and educational content to motivate more of our
employees to learn new skills and develop new competencies. Bank of Georgia’s learning system comprises a variety of internal and
external training sessions designed to meet the needs of our employees. Training topics, together with a personal development plan,
are aligned with business objectives and based on the outcomes of employee performance and development reviews that take place
twice a year. We continuously update our training plans based on the outcomes of development reviews, feedback from employees,
and the needs and key business objectives of specific functions.
Bank of Georgia has an online learning platform with a catalogue of courses and,
during 2022, an average of 3,047 employees accessed the platform monthly. We
also resumed face-to-face meetings and training sessions. We measure employee
satisfaction and their learning experience at the Bank using eNPS – a key performance
indicator for the entire organisation.
Learning eNPS
92% in 2022
(91% in 2021)
Variety of training programmes at Bank of Georgia
Professional programmes
• Onboarding
• Risks and compliance programme
• Banking products and services
• Software-related programmes
• Communication skills programmes
• HiPos programme
• Tailored training sessions and
educational content provided
Management programmes
• Management skills programme
• Feedback skills programme
• Leadership development: executive
coaching programme (individual and
team coaching)
• Financing master’s programmes and
other professional certifications
Executive programmes
• Leadership development: executive
coaching programme (individual and
team coaching, mentoring sessions)
• Individual business coaching
programme
• Financing master’s programmes and
other professional certifications
Risks and compliance programme:
We run a comprehensive risks and compliance awareness programme to build a strong risk culture and ensure our employees
understand some of the principal risks the Bank faces – as well as their role in managing and mitigating them. The programme
includes mandatory training for all new hires and mandatory annual training for existing employees. Training is online and self-paced,
but must be completed within a set timeframe. The Bank’s risks and compliance programme covers employees of the Bank as well
as some of the Group’s subsidiaries.
The programme covers:
• E&S risks;
• Customer rights protection and customer complaints management;
• Ethics in the collections process;
• Insider regulations;
• Information security and cybersecurity;
• Anti-corruption and anti-money laundering;
• Business continuity;
• Labour safety;
• Operational security;
• Corporate security (including anti-corruption, whistleblower protection, and conflict of interests); and
• Personal data protection.
As at 31 December, 2022, 86% of employees had completed the risks and compliance programme
(excluding employees in their first month of employment or on long-term parental leave).
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Training data for Bank of Georgia
Average training hours
per employee
28
2021: 30
Average training hours
per new hire
43
2021: 47
Average training hours
per female employee
32
2021: 34
Average training hours
per male employee
21
2021: 20
Average training hours
per senior manager
28
2021: 18
Average training hours
per CEO and Deputy CEOs
20
2021: 5
Meaningful employee experiences
We have a systematic approach
to identifying employee needs and
concerns and delivering solutions and
interventions that help us create more
positive experiences at every step of the
employee journey.
Bank of Georgia’s Employee Experience
team is responsible for getting regular
feedback from employees and providing
insights on issues and solutions,
as follows:
• Our Employee Experience team gets
in touch with all new hires to ensure
smooth onboarding.
• They collect and analyse employee
sentiment data through focus groups
and individual interviews.
• They analyse responses from regular
surveys to identify pain points for
further research and interviews.
Designing a differentiated employee
experience is essential for creating
value for our stakeholders.
We regularly engage with and listen
to our employees through a number of
channels:
• Ongoing deep interviews with
individual employees.
• Team reviews.
• Entry interviews.
• Exit interviews.
• Regular employee satisfaction surveys.
• CEO vlog on Workplace – regular
live Q&A sessions led by the CEO to
discuss strategy, performance and
current developments. Two sessions
held in 2022.
• Employee Voice meetings with the
Supervisory Board of Bank of Georgia
– held since 2018; these meetings
have promoted transparency and a
feedback culture. Employees meet
with the Chairman and the Senior
Independent member every year.
Other members of the Supervisory
Board have also participated in these
meetings. Two meetings were held
in 2022.
We believe a culture of gratitude
and recognition is key to creating a
collaborative workplace and living one
of our business principles: teamwork.
We promote this culture and expect
our managers to be role models for this
behaviour. We award the Best Employee
and Best Team of the Year to highlight our
people’s contribution to the organisation.
To promote idea sharing and ensure
employees are aware of each other’s
work, we also run agile quarterly business
reviews where we discuss new products
and future plans with our agile teams and
the Bank’s Executive Management team.
We provide regular updates to our
employees on the Bank’s strategy and
performance, risks and opportunities,
and new policies and procedures. In
accordance with the Labour Code of
Georgia, the Bank updates employees on
plans regarding significant operational
changes that could substantially affect
them at a minimum of 30 days prior
to implementation. We ensure our
employees can directly and openly
communicate with the senior leadership
and the Supervisory Board of the Bank.
In 2022, we developed around 20 new
training programmes including short
self-paced courses on banking products
and procedures, internal procedures
and regulations, compliance, and self-
development. We also resumed face-to-
face training sessions and updated our
existing programmes to address the
feedback of our employees. This included
onboarding training programmes for up
to 15 front-office positions, 18 self-paced
online courses on banking products and
procedures, eight communications skills
training programmes and 12 compliance-
related courses.
We are developing a new feedback
programme, which will include a self-
paced online course to provide managers
with necessary tools to facilitate the
feedback-sharing process across the
Bank. In addition to the online course,
we will hold facilitated discussions with
managers to share experiences and
use cases.
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To measure the effectiveness of employee empowerment initiatives, we closely track employee engagement and corporate culture
using internal and external surveys:
• Employee Engagement survey (Korn Ferry Engaged Performance™);
• eNPS survey.
Voice of the employee
Core indices – 2022
Engagement (Korn Ferry)
I have trust and confidence
in the company’s senior
leadership
Enablement (Korn Ferry)
My manager supports me in
learning and development
I believe the company is
socially responsible
70%
86%
2021: 73%
2021: 88%
2021: 74%
2021: 85% 2021: 93%
73%
86% 92%
eNPS (eop)
53
2021: 61 (eop)
During 2022, the Bank’s eNPS score
decreased to 53 (from 61 at the end
of 2021), slightly below our targeted
range of 54-62 for 2022. We aim to have
eNPS in the range of 54-62 during 2023.
The decrease was mainly driven by the
adverse impact of inflationary pressures
on our lower paid employees, especially
those in front-office roles, as well as by
some dissatisfaction with workplace
arrangements as we moved back-office
staff to a hybrid working model in 2022,
following a fully remote work mode during
the COVID-19 pandemic. As our staff
increases, we recognise the need to have
comfortable work spaces to support
employee wellbeing and productivity, and
we are working on adding and renovating
new office space to address the concerns
raised by some of our colleagues.
We also continue to monitor the labour
market and remuneration practices at
comparable companies to ensure that
we remain a competitive employer of top
talent and to adjust our remuneration
practices if and when necessary.
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Financial Statements Additional Information
1,802
1,917
1,996
4,019
4,290
4,601
6,597
6,207
5,821
20212020 2022
2,431
2,572
2,695
4,932
5,244
5,696
8,391
7,816
7,816
20212020 2022
Additional employee data
2022 Group-level trainings data
2021 2022
Total turnover (Bank of Georgia) 1,113 1,295
Men 444 470
Women 669 825
Tbilisi 769 903
Regions 344 392
<21 112 151
>=21 & <=30 703 790
>=31 & <=40 256 298
>=41 & <=50 37 44
>=51 5 12
Total turnover, % (Bank of Georgia) 18.5% 20.4%
Men 23.6% 24.2%
Women 16.1% 18.8%
Tbilisi 18.4% 20.2%
Regions 18.6% 21.0%
<21 53.8% 61.7%
>=21 & <=30 22.5% 25.2%
>=31 & <=40 12.5% 13.3%
>=41 & <=50 7.5% 7.9%
>=51 3.5% 7.4%
2022 Group-level trainings data
Average training hours per employee 24
Average training hours per female employee 27
Average training hours per male employee 19
Average training hours per new hire 34
Average training hours per senior manager 31
2021 2022
Permanent 6,167 6,511
Men 1,916 1,985
Women 4,251 4,526
Tbilisi 4,288 4,629
Regions 1,879 1,882
<21 232 271
>=21 & <=30 3,142 3,199
>=31 & <=40 2,130 2,293
>=41 & <=50 509 578
>=51 154 170
Temporary 40 86
Men 1 10
Women 39 76
Tbilisi 33 76
Regions 7 10
<21 2 3
>=21 & <=30 17 29
>=31 & <=40 16 46
>=41 & <=50 5 8
>=51 – 0
Total employees 6,207 6,597
Permanent, % 99.4% 98.7%
Temporary, % 0.6% 1.3%
Bank of Georgia employees Group employees
Women MenWomen Men
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Health and safety
Providing a healthy and safe working
environment is one of our priorities.
The Bank’s Health and Safety team,
reporting to the Deputy COO, covers fire
and emergency, medical emergency, and
occupational health and safety issues,
and is responsible for developing and
implementing health and safety practices
across the Bank.
In September 2019, a new law on labour
safety came into force in Georgia,
requiring organisations with more than
100 employees to have at least two
labour safety specialists in the company.
In compliance with the law the Bank
created a dedicated unit and currently
employs labour safety specialists.
In 2022 our labour safety specialists
underwent the accreditation programme
recertification and certificates were
renewed for the next three years by the
Labour Inspection Department of the
Ministry of Labour, Health and Social
Affairs of Georgia.
OHS training
Induction, a mandatory online course on labour safety, and practical training events are held annually for all employees of the Bank.
The online course includes modules on fire safety, emergency prevention and response, and workplace safety.
The Bank regularly carries out fire and emergency drills and relevant practical training.
Selected employees in major branches of the Bank are periodically trained in First Aid.
Incidents in 2022
In 2022 we had three incidents in the Bank’s branches. All three incidents were resolved by the police without injuries or damages.
We have expanded the presence of physical security personnel to additional branches throughout Georgia.
Occupational health and safety (OHS) management system
In 2020, the Bank implemented the
OHS management system, which covers
all employees and third-parties in our
workspaces. We developed the following
policies and procedures:
• Occupational Health and Safety Policy.
• Occupational Health and Safety Risk
Assessment Standard.
• Emergency Evacuation Standard.
• Fire Safety Standard.
• Occupational Accidents and
Occupational Diseases Investigation
and Reporting Standard.
• Prevention of COVID-19 in the
Workplace Standard.
• Radiation Emergency Response Plan.
The Occupational Health and Safety Risk
Assessment Standard defines principles,
rules, and responsibilities of OHS risk
assessment.
We continuously monitor our work spaces
to identify, assess, and mitigate potential
risks. The data and results of the risk
assessment are reviewed and updated
periodically, in line with existing legal
requirements.
Bank of Georgia has preventive and
control measures in place to ensure
employee health and safety. We continue
to raise awareness of employee health
and safety-related matters. In 2018, the
Bank launched “My Lawyer” – a project
to protect the rights of employees and
their family members in case a crime
is committed against them or if they
themselves are accused of wrongdoing.
We also have a 24-hour monitoring
hotline, including a dedicated mail- group
and an intranet-based platform where
employees can report security issues
and occupational safety matters. The
Infrastructure Security and Control
department is responsible for monitoring
the hotline and responding to the
reported concerns.
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Financial Statements Additional Information
JVARI TOWN
BLACK
SEA
OZURGETI
CHOKHATAURI
NABEGLAVI
VILLAGE
NIKOZI
AKHALKALAKI
DITSI
KHURVALETI
TBILISI
LAMBALO
UDABNO
DUISI
ERISIMEDI
SABATLO
AMBROLAURI
POTI
Bank of Georgia is the top of mind
bank in Georgia
1
, a leading financial
services provider and one of the biggest
employers, and an organisation that aims
to support local communities in ways that
go beyond its core business activities. Our
key focus area for community outreach
and engagement has been education
because there are limitless opportunities
made possible by access to high quality
education. We have focused on reaching
more school students in Georgia and
enabling access to those opportunities.
In 2022 our objective was to reach 100K
school students with the educational
initiatives in our communities as well as
through the mobile app we designed for
them in 2022.
Empowering our communities
Reached 100K+ school students
Overview of our educational initiatives in 2022
Improving educational infrastructure – building Ideathecas
To provide access to books and modern
technology to students living in Georgia’s
regions, Bank of Georgia, together
with the Georgian Book Institute,
started a project to design colourful,
multifunctional libraries in public schools
in 2020. Our goal is to enable Georgian
students to access a learning and
development space where they can find
educational resources, learn to work with
information technology, and engage in
team work.
Out of 16 Ideathecas – eight are located
near the administrative boundary lines;
three are in high-mountain areas; two
are in communities with ethnic and
religious minorities; and three are in cities,
including one in Tbilisi.
Located near administrative boundaries
Located in high-mountain areas
Located in communities with ethnic
and religious minorities
Located in cities
With this project, we want to benefit as
many school students in Georgia’s regions
and rural areas as possible. In addition to
benefitting the students who study at a
particular school, students from nearby
schools are also given the opportunity
to use Ideathecas within the framework
agreed in the project implementation plan.
We aim to open Ideathecas in at least five
public schools in different regions annually.
We are also partnering up with the Bank’s
corporate clients for this project.
16
Ideathecas
opened since 2020
7
Ideathecas
opened in 2022
c.8K
School students reached
1. Based on fall 2022 independent research by IPM Georgia.
Annual Report 2022 Bank of Georgia Group PLC
136
Scholarships
Kings Olympiad
Komarovi STEM camp
Public speaking competition
Since Number of students
supported
Total spend
During 2022 we continued to sponsor students within the framework of multiple scholarships that Bank of Georgia has been
involved in for the past few years.
Bank of Georgia has sponsored a leading
educational platform in Georgia – kings.ge.
Kings is the largest school olympiads
organiser in Georgia.
The purpose of this sponsorship is to
support non-formal education and
increase the level of general education
and motivation among students.
Bank of Georgia has supported a public
speaking competition organised by the
English-Speaking Union (ESU).
The Public Speaking Competition is
one of the largest international events
in the country aimed at popularising
English public speaking and enabling the
development of critical thinking skills of
young people in Georgia. The competition
has been taking place since 1998. We
began our partnership with ESU in 2012.
We’ve been supporting the competition
for the last ten years, during which as
many as 800 speakers have participated
in the contest. Forty of them have gone
on to hone their public speaking skills
at the International Public Speaking
Competition held in London.
Bank of Georgia continues to provide
resources and project funding for
the development of STEM education
in Georgia.
Fulbright Graduate Student Programme 2014 8 US$ 700K
Chevening Scholarship Programme 2013 23 GBP 719K
Miami Ad School Europe – Nika Gujejiani
Scholarship
2020 3 EUR 31K
San Diego State University in Georgia
– fully funded bachelor’s degree
2018 11 US$ 318K
44K
School students participated
70
School students participated
Komarovi is one of the top schools
focused on STEM subjects in Georgia.
We want to support learning and
development, especially encouraging
young people in Georgia to discover
and pursue STEM fields. This is why we
decided to partner with Komarovi school
in 2022 to organise a STEM camp.
10th and 11th grade students from all
over Georgia had the opportunity to
participate in an exciting STEM event
modelled on the British Summer School
during summer holidays, deepening their
theoretical and practical knowledge,
meeting new students from Georgia with
similar interests, and engaging in various
intellectual, sports, and entertainment
activities.
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Non-educational key sponsorships
Supporting protected areas of Georgia
The natural environment in Georgia is
unique and precious – a valued and shared
resource for all. We have partnered with
the Caucasus Nature Fund since 2010
to support Georgia’s protected areas.
Annually, Bank of Georgia contributes
up to US$ 100,000 to support 12
protected areas: Borjomi-Kharagauli,
Lagodekhi, Tusheti, Tusheti national park,
Vashlovani, Mtirala, Javakheti, Kazbegi,
Algeti, Kintrishi, Machakhela and Pshav-
Khevsureti. We continued educational
campaigns in 2022 to promote the unique
biodiversity of Georgia's protected areas.
500 Georgia – supporting startups
Bank of Georgia Group PLC launched
the 500 Georgia accelerator programme
in 2020, together with 500 startups
and Georgia’s Innovation and
Technology Agency (GITA), to accelerate
the development of Georgian and
international early-stage startups
operating in the region.
During 2020 and 2021, 28 companies
from 11 different business verticals
(fintech; healthcare; lifestyle; accounting
services; auto and transportation; HR
services; travel and hospitality; Adtech;
Agtech; Natural Language Processing;
and communications) completed the
programme and joined our Digital
Area ecosystem. Four companies –
Payze, Cargon, Cardeal, and Agrolabs
– successfully completed the final
acceleration process in San Francisco in
the third quarter of 2021.
In 2022, we launched a new four-year
500 Georgia regional startup accelerator
programme, aiming to accelerate up to
120 regional startups. Georgia's first
international acceleration programme,
designed to promote entrepreneurship,
helps develop the tech ecosystem,
connects entrepreneurs to international
networks, and supports participating
companies during fundraising.
Motivating entrepreneurs and encouraging innovation
In addition to supporting businesses
with our core financial products and
value-added offerings, we continue to
leverage our resources to contribute
to the sustainable development of
and to the success of local businesses
through a variety of other initiatives and
partnerships.
Sports partnerships
Bank of Georgia is the general sponsor
of the Georgian National Football
Federation and the Georgian National
Olympic and Paralympic Committees, as
well as the main sponsor of the Georgian
Basketball Federation.
In the beginning of 2022, Bank of Georgia
and the Georgian Basketball Federation
formed a three-year partnership. In 2022,
Tbilisi successfully hosted the group
stage of Eurobasket. During the year
we assisted in enhancing the brand of the
Georgian Basketball Federation and the
national team by introducing a new logo
and visual identity.
Moreover, in 2022 Bank of Georgia also
teamed up with the Georgian Football
Federation for the following four years.
After finishing 2022 at the top of the
UEFA Nations League group stage
standings without a single defeat, the
Georgian National Team is gearing up
for playoffs to battle for a spot in Euro
2024. Georgia is also getting ready to
host UEFA U21 Euro 2023 in Tbilisi, Kutaisi,
and Batumi in June 2023.
Bank of Georgia has been a partner and
the general sponsor of the Georgian
National Olympic and Paralympic
Committees since 2016. To help Georgian
Olympic athletes succeed, we have
assisted in the development of the
country’s sports infrastructure.
Sukhishvilebi
The Georgian National Ballet –
Sukhishvilebi – has been a global
household name for Georgian dance
since 1945.
In 2022, Bank of Georgia and Sukhishvilebi
formed a two-year partnership, and
as part of this partnership, we have
completely renovated and renewed their
main outdoor venue, ‘Takara’, where
the majority of their shows will be held
from 2023.
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138
Supporting charity
Around 50,000 children in Georgia live
in poverty. Bank of Georgia became the
main partner of the charity platform
– supergmiri.ge – launched in June
2020. The purpose of the platform is
to promote charity in Georgia and help
and encourage children from vulnerable
families. Supergmiri connects children in
vulnerable conditions with Superheroes –
people who are willing to provide help
and mentoring. Children receive a monthly
package, which includes products and
service vouchers tailored to a child’s
development needs and interests, with
monetary support provided by their
Superheroes. Superheroes can choose
to mentor children as well.
Bank of Georgia continued to support
the platform during 2022 by covering
administrative costs and marketing
communications to improve platform
efficiency and increase awareness
through social media and marketing
campaigns.
429
Children with Superheroes
As at 31 December 2022
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ESG REVIEW –
GOVERNANCE
Annual Report 2022 Bank of Georgia Group PLC
140
Governance
At a glance
We remained committed to the highest
standards of governance and recognise
our role in building resilient communities
and economy.
Running business in ways that uphold
high standards of corporate governance
and effectively managing risks is
crucial for any business, and especially
for a systemically important financial
institutions like ours.
At Bank of Georgia, we place significant
importance and resources on running the
business the right way and maintaining
the trust of our stakeholders. Our
robust regulatory and legal compliance
framework ensures we operate in line
with applicable laws and regulations.
We have built robust policies and
procedures to identify and mitigate
risks associated with money laundering,
terrorist financing, fraud, and other
financial crimes. We also recognise the
significance of information security and
data privacy, and we are committed to
protecting personal data and the integrity
of information and information systems
in general. We are committed to working
with our regulators to ensure the safety
of and trust in the financial system,
following the rules and regulations
governing our industry.
In this section:
Regulatory and legal compliance
In this part you will read about how we ensure compliance with laws and regulations. Pages 141 to 142
Financial crime
In this part you will read about how we prevent financial crime, comply with sanctions
regimes, and prevent bribery and corruption.
Page 143
Information security
In this part you will read about how we ensure information security and raise awareness
of our employees on these matters.
Pages 144 to 145
Data privacy
In this part you will read about our approach to data privacy, including our data privacy
policies, vendor security, and the results of our data privacy programme.
Page 145
Working with suppliers
In this part you will read about our procurement processes and see the largest
categories of the Bank’s suppliers.
Page 146
A responsible approach to tax
In this part you will read about our approach to tax and see taxes paid by the Group
in 2022.
Page 147
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Financial Statements Additional Information
The Group’s core business is banking,
carried out through the NBG-licensed
systemically important bank in Georgia
(which as at 31 December 2022, accounted
for 94.0% of the Group’s total assets).
The Bank operates in a highly regulated
environment, which evolves annually.
Apart from the developments in the
legal system in Georgia, which affect the
activities of commercial banks, the Bank’s
activities are subject to (1) banking and
financial institution regulatory framework
promulgated by the NBG; (2) anti-money
laundering and anti-terrorist financing
regulation by the Financial Monitoring
Service (FMS); (3) health and safety
regulations by Georgia’s Employment
Inspection; (4) personal data protection
regulations by the Personal Data
Protection Service (5); and other state
regulatory authorities, whose jurisdiction
covers the monitoring of activities of
commercial entities in Georgia.
Under the Georgian Law on the Activities
of Commercial Banks, banks operating
in Georgia are regulated by the NBG,
which has the power to issue decrees
or resolutions on various issues within
its competence, including, but not
limited to, anti-money laundering and
counterterrorist financing, monetary
regulation instruments, banking
supervision regulations and payment
system regulations. The NBG has guided
itself by the Basel Committee and ECB
best practices and Georgia’s DCFTA-
based harmonisation and implementation
efforts with EU legislation whilst
promulgating regulations relating to:
• corporate governance of banks and ‘fit
and proper criteria’ for administrators;
• capital structure, prudential ratios and
requirements for financial institutions;
• liquidity requirements for financial
institutions;
• credit risk management, risk weighting
and credit loss provisioning;
• operational risk management;
• treasury operations, derivatives,
financial collateral and netting;
• cybersecurity framework;
• anti-money laundering and counter-
terrorist financing;
• client onboarding, strong customer
authentication and verification;
• payment services and payment
systems;
• crediting of individuals;
• management of conflicts of interest;
• consumer protection;
• code of ethics in general bank activities
and code of ethics in recoveries;
• competition within the financial sector;
• brokerage and trading;
• custodian and settlement operations;
• depositary and asset management
operations;
• disclosure standards;
• ESG framework for financial
institutions; and
• bank resolution framework, among
others.
The NBG’s regulatory promulgation
process is continuous and evolving in
nature, and it publishes its supervisory
strategy for three-year periods (current
strategy is available at https://nbg.gov.
ge/en/page/supervisory-strategy), which
is due to be updated in 2023. Some
regulations can be translated into a
set of clear operational requirements),
which is due to be updated in 2023.
Some regulations can be translated into
a set of clear operational requirements
– this is ‘rules-based compliance’. Other
regulations, reflect regulatory intent
for a desired outcome, leaning towards
more ‘principles-based compliance’
requirements, which do not readily
translate into specific operational
and control requirements. The NBG’s
supervisory arm operates with a hands-
on approach with its regulated entities,
whereby specific long-planned inspections
are rare, but the NBG engages in daily
review process with the Bank and has
access to all of the Bank’s employees and
any information upon request.
The Bank has a high degree of comfort
that its operations are conducted in
compliance with applicable regulations,
due to the involvement of the regulator
being an ordinary part of its daily
operations. Therefore, the Bank has
adopted, subject to the confidentiality
constraints as described below, the
following metrics with regard to
regulatory non-compliances regarding
customer protection and credit
information requirements, which would
be considered material for its purposes
and which the Group would disclose and
describe in detail:
• any fine over the threshold of 0.1% of
the Bank’s regulatory capital; or
• any incompliance which is due to a
systemic failure of the Bank’s controls.
The disclosure of such information by
the Bank may be constrained if the
information falls under the confidentiality
categories as defined by the Resolution
of the Council of the National Bank
of Georgia #4 on the definition and
treatment of confidential information,
which establishes certain types of
communications with a regulated entity
as confidential and ascribes categories
of confidentiality to them, which are
necessary to be protected for the reasons
of sound management of monetary policy
and financial supervision in Georgia. As of
today, the regulatory communication and
measures (including fines) with regard
to any consumer protection requirement
breaches or credit information
requirement breaches are not ascribed
confidentiality category and therefore,
could be considered as disclosable
information by the Bank (‘Disclosable
non-compliance matters’).
Apart from daily engagement with
the primary regulator of the Bank, the
regulatory compliance is managed on
the basis of three lines of defence where
the second line function is undertaken by
compliance, legal and other risk functions,
and the first line is considered to lie with
all of the business directions of the Bank.
The Bank’s Internal Audit department
carries out its third line function in
regulatory compliance, via a specific
compliance audit unit.
The compliance operating model includes
the following:
• identifying and prioritising areas of
compliance risk;
• managing regulatory taxonomy and
inventory of regulatory areas that
impact the organisation; and
• maintaining a proactive engagement
approach with the regulators at an
early, draft-stage of the adoption of
regulations and providing feedback on
the feasibility of due implementation.
This allows the Bank to be ready and
plan its implementation processes ahead
of the adoption of regulatory changes,
which reduces the risk of non-compliance.
We have adopted this approach for all
legislative and regulatory changes that
may impact the Bank, with the Legal
function assisting the Bank in a timely
identification of possible legislative
changes and coordinating with the
Compliance department to proactively
manage the regulations promulgated by
the NBG.
We follow a standardised regulatory
change management process. The
Bank’s regulatory change management
framework includes monitoring change,
alerting the Bank on risks, and enabling
accountability and cross-functional
collaboration on the changes impacting
the Bank. The process includes a system
of record to monitor regulatory change,
measure impact, and implement
appropriate risk, policy, training, and
control updates. We have developed a
standardised impact analysis process
to measure the impact of a change to
determine if any action is needed and
to prioritise action items and resources.
In cooperation with the Legal function,
the Compliance department implements
this process on the basis of its inventory
and analysis of new and proposed
compliance risk-related rules, which are
then translated by relevant functions
into internal compliance standards,
procedures and guidelines to ensure
Regulatory and legal compliance
Annual Report 2022 Bank of Georgia Group PLC
142
new regulatory requirements are duly
incorporated into the procedures across
the Bank.
The regulatory change management
process involves standardised workflow
and task management with escalation
capabilities when items are past due to
ensure that corresponding procedures
and controls are implemented in a timely
manner to support the Bank in effectively
managing compliance risks.
We recognise that legal risk is ubiquitous
in our operations and can stem
from legislative changes, incorrect
interpretation of legislative or regulatory
norms, or unfavourable interpretations of
legislative or regulatory norms by relevant
authorities in particular instances. The
Legal function carries out the function of
prevention and early mitigation of legal
risk, its management as well as damage
control through its different research,
transactional and dispute resolution
teams. The Legal function operates as a
second line risk function and is involved
in oversight over all products, services,
transactions and processes of the Bank,
to proactively identify and manage
any possible legal risks and implement
relevant eradication or mitigation
mechanisms.
We have implemented a process of
developing and implementing risk
mitigation measures, including the
policies and procedures to prevent,
mitigate or minimise compliance and
legal risks and to detect, report and
respond to compliance violations. We
have developed an online training
platform for all employees where
we run relevant compliance training
programmes. Mandatory training is
reviewed and updated annually, and
specific legal and compliance training
sessions are also regularly conducted by
Legal and Compliance teams for targeted
colleagues from different functions.
In 2022, we had no disclosable non-
compliance matters.
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Financial Statements Additional Information
The landscape of financial crime has
evolved over the last few years. Risks for
banks arise from diverse factors, including
massive growth in transaction volumes,
and the greater integration of financial
systems worldwide. In addition, regulators
continually revise rules and Governments
increasingly use economic sanctions
against public and private entities, and
even individuals. We are committed to
safeguarding the integrity of the Bank
and of the financial system we are part
of as well as protecting our brand and
reputation and mitigating any negative
impacts on the economy and people by
operating robust programmes to prevent
financial crime.
ML/FT and sanctions
We are committed to doing business
only with clients who meet our strictest
criteria and are within our risk appetite.
We have a risk-based AML/CFT
programme, operating based on the three
lines of defence model. The programme is
designed to ensure the Bank’s compliance
with regulatory and legal requirements,
international standards, such as
Financial Action Task Force (FATF)
recommendations and international
financial sanctions programmes. We
adhere to the international sanctions
regimes and strictly monitor that all
our activities are in line with applicable
sanctions requirements. To strengthen
our ability to detect and prevent financial
crime and sanctions evasion, we continue
to enhance our ML/FT and Sanctions Risk
Management function.
Anti-bribery/anti-corruption
The Bank does not tolerate bribery and
corruption. We have written policies,
procedures and internal controls in place
to comply with anti-bribery and anti-
corruption laws.
The anti-bribery/anti-corruption
programme includes:
• risk management processes (oversight,
governance and escalation);
• Adopting, communicating and
providing training;
• Conducting regular risk assessments,
reviewing and pre-approving
processes;
• due diligence of third parties and
including anti-bribery terms in
contracts;
• Establishing effective processes to
investigate cases of alleged bribery;
• Keeping accurate and detailed records
of the organisation’s approach to anti-
bribery; and
• independent testing processes from
Internal Audit.
The Code of Conduct and Ethics, the
Conflicts of Interest Policy, the Anti-
bribery and Anti-Corruption Policy and
KYE procedures safeguard the integrity
of the Bank. The ABC Policy and the Gift
Acceptance Policy provide employees
with guidance on how to recognise and
deal with bribery and corruption and
outline steps employees are required to
take when accepting or offering gifts,
hospitality and inducement to/from
external third parties. An enhancement
programme to further improve our ABC
risk assessment, controls and reporting
is in progress, as we continue to further
structurally strengthen our response to
ABC risks in key areas in support of our
zero tolerance approach. The Internal
Control and Compliance departments
serve as a second line of defence in
managing ABC risks.
We have developed online training
modules on ABC risks, including on
the Gift Acceptance Policy and on the
whistleblowing platform. Annual training
is mandatory for all employees.
The Bank has in place KYE procedures
that include:
• declaration process;
• background check process; and
• employee monitoring process.
The Bank’s Compliance Committee
reviews any complaint related to ABC
incidents. The Audit Committee regularly
receives information on any reported
incidents.
In 2022, no bribery or corruption incidents
were registered in the Bank, nor were any
bribery or corruption fines imposed on
the Bank.
KYC
Customer risk assessment is a fully
automated process. We manage
customer risks throughout the
relationship lifecycle. Information on a
client’s ownership structure, ultimate
beneficial owners and source of funds/
wealth is obtained during onboarding.
Our existing clients are subject to a
regular due diligence process. The Bank
has an online solution that enables a fully
automated screening of all transactions
against sanctions lists (OFAC, the EU,
the UK, the UN and other similar bodies,
including global news databases).
We have invested significant resources
to improve our ML/FT and sanction
risk management capabilities, including
implementing advanced analytics and
transaction monitoring solutions to
detect a suspicious activity. The reporting
process for cash transactions report
(CTR) and suspicious transactions report
(STR) is automated.
We conduct an Anti-Financial
Crime Enterprise-Wide Business
Risk Assessment, which includes
an assessment of inherent risk, the
effectiveness of controls, and residual risk.
The assessment serves as a baseline for
defining the Bank’s risk appetite towards
ML/FT risks. Based on the outcomes,
the AML and Compliance departments
define appropriate measures to address
the issues that were identified. We have
zero tolerance toward the sanctioned
persons and transactions. Employees
receive annual mandatory training on the
risks related to ML/FT and on sanctions
programmes.
Financial crime risks are on the regular
agenda of the Audit Committee.
The Committee receives information
on existing controls and implemented
measures.
In 2022, we enhanced our cooperation
with the Regulator and other relevant
Government authorities, as well as US,
UK, and EU embassies, and partner
financial institutions to monitor and
mitigate sanctions-related risks both
at the sectorial and country levels.
Financial crime
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144
We also run a Bank-wide information
security awareness programme to
ensure that our employees understand
information security matters and
their applicability to the Bank’s daily
operations. We view each employee
as a ‘human firewall,’ and therefore
we continuously refine our approach
to employee training and testing.
General information security training
is mandatory for all employees during
onboarding and afterwards – annually.
The purpose of the general training is to
raise awareness on key attack vectors
and proper responses to different types
of information security incidents (e.g.
ransomware). The Information Security
department monitors the completion
of mandatory information security
training. Quarterly, the Information
Security department runs a phishing
campaign to test if our employees
can detect phishing and respond duly.
The Information Security department
monitors performance and requires
additional training for employees who
were deceived and were unable to detect
and duly respond to a phishing email.
We also engage with our customers on
information security-related matters
through multiple channels, including
our website, digital platforms and text
messages. We regularly create and share
content, including articles, interactive
games and questionnaires, through
various media.
As our organisation becomes more digital
and further relies on cloud computing and
third-party providers, we are increasingly
exposed to and a target of cyber
attacks, such as a supply chain attack,
or distributed denial of service (DDoS),
among others. We are taking measures to
mitigate the risks of a supply chain attack
(for more information, please see page 74
of this report). Although DDoS attacks
targeting the Bank are rising, we had
a 99.99% uptime in 2022. Although the
Bank was not involved in any significant
negative impact in 2022, we maintain a
thorough Information Security Incident
Response Policy to prevent an information
security incident, and if it does occur, to
limit its impact on our stakeholders. This
policy defines roles and responsibilities
throughout each phase of an information
security incident response and enables
effective cross-functional collaboration
and the management of public and
internal relations.
Controls and monitoring continue to be
embedded across the Bank as part of
the overall internal control framework
and are continuously reassessed. Each
year the Bank is subject to at least 11
types of security assessments to evaluate
the effectiveness of our actions and to
manage actual and potential impacts.
These assessments include penetration
testing, breach and attack simulation,
NIST self-assessment, and internal and
external audits.
These assessments give us insight into
how effectively the policies and processes
have been implemented. As a result, the
Bank sets goals and targets that may
be mandatory (based on legislation) or
voluntary, for example, for automation
oroptimisation purposes.
We support and contribute to the
development of information security
in Georgia. We regularly participate in
collaborative efforts with our financial
industry peers, law enforcement
authorities, regulatory bodies and the
Government to share knowledge and
prevent negative impacts. Our goal is
to enable more efficient and effective
information security supervisory
oversight, streamline and align the
fragmented information security
regulatory framework with international
standards, and help increase the overall
security and resilience in Georgia. The
Bank has a dedicated team to coordinate
threat intelligence sharing and develop
external relationships. We are a member
of the Financial Services Information
Sharing and Analysis Centre (FS-ISAC)
through which the Bank has access to a
threat intelligence platform, resilience
resources and a trusted peer-to-peer
Information security risks represent one
of the major threats that organisations
worldwide are facing. The external threat
profile is dynamic, and these threats
continue to increase. The Bank remains a
subject of a growing number of attempts
to compromise its information security.
We understand that if these attempts
are successful, they could have a negative
impact on our customers and employees,
as well as on subsidiaries, partners, and,
given that the Bank is part of Georgia’s
critical infrastructure, the country as
a whole. We have relationships with
customers and partners from other
countries as well, and thus, the negative
consequences of a compromise of our
information security could extend beyond
Georgia. Such compromise could expose
us to potential contractual and regulatory
liability, lead to a loss of current and
future customers and partners, damage
our brand and reputation, and result in
financial losses.
Information security is a priority area
for the Bank. As we develop new digital
products and services, we implement
complementary measures to ensure the
robustness of our information security
systems. To successfully deliver on our
commitments, we undertake a number of
initiatives. We devote significant human
and financial resources and engage
globally renowned technology companies
to respond to information security threats
accordingly. We recognise the importance
of establishing and maintaining a rigorous
information security management
system that is compliant with current
business and regulatory requirements
and commensurate with existing and
emerging threat landscape.
The Bank has a dedicated Information
Security department, responsible for
developing and maintaining the Bank’s
information security management
system, including policies and procedures
that are reviewed regularly and amended
to reflect any lessons learned. The
Information Security department is
headed by the Chief Information Security
Officer (CISO) who directly reports to the
Deputy CEO-IT and Data Operations. The
CISO presents quarterly updates to the
Risk and Audit Committees. As a result,
the Bank’s Executive Management and
the Supervisory Board remain up-to-date
on information security risks.
We employ highly qualified security
professionals across multiple lines of
business. Additionally, we run regular
trainings to ensure that they are aware
of and clearly understand current security
trends and issues.
4 phishing campaigns conducted
Cross-functional team of 25 employees
97% of employees were not deceived by a phishing campaign
40 active professional certifications
11 types of security
assessments conducted
8 breach and attack
simulations
1 third-party penetration
testing
3 independent Internal Audit
engagements
Information security
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Financial Statements Additional Information
network of experts to anticipate,
mitigate, and respond to information
security threats specifically targeting
financial institutions, additionally bank
contributed in creation of cyber threat
intelligence sharing platform with the
NBG.
Policies
We maintain a comprehensive set of
information security and privacy policies
and standards to ensure that we operate
in compliance with applicable privacy
regulations and in line with best practice.
These policies and procedures outline
privacy principles and standards we
observe while processing personal data
and are:
• regularly revised to ensure that they
reflect current legal, regulatory,
best practice and internal policy
requirements;
• annually reviewed and approved by
relevant governance bodies; and
• aligned with recognised industry
standards.
Breach of customer privacy
One of the major threats that financial
services companies face are cyber
incidents. Over the past few years,
we have witnessed a number of major
organisations falling victim to cyber
attacks. Fortunately, our operations have
not been materially affected, nor have
we suffered a breach to date. In 2022,
we received three complaints regarding
breaches of customer privacy and losses
of customer data from our regulatory
body – the Personal Data Protection
Service. Two has been identified as a
substantiated complaint.
Embedded into operations
Privacy matters are considered in all new
processes and projects. We undertake
data privacy impact assessments to
ensure that our processes and products
comply with data protection legislation
once they go live.
Transparency
Transparency is a core element of our
privacy programme. Our customers are
informed in a simple language about
our privacy practices, including how we
collect, use, disclose, transfer, and protect
their personal information. Our privacy
commitments are reflected in our Privacy
Statement and Information Security
Statement.
Vendor security
We understand that vendors can pose
significant risks to our operations and
our customers’ privacy. To this end, we
perform comprehensive due diligence of
a vendor’s organisational and technical
measures during the selection process
and make sure that necessary contractual
and technical controls are implemented.
Existing vendor relationships are subject
to, at a minimum, annual monitoring and
review to determine their fulfilment of
information security and data protection
requirements.
In a data-driven world, security threats
continue to evolve and, if materialised,
may have a significant negative impact
on our customers and on their human
rights, especially the right to privacy. Any
breach, attack or compromise may result
in financial loss, damage to our brand and
reputation, and/or regulatory censure.
We are committed to protecting our
customers’ privacy, ensuring that personal
data is handled in accordance with the
requirements of the applicable privacy
legislation and best practice.
Information is one of our most valuable
assets and data privacy is a priority. We
have embedded good privacy standards
and practices within the corporate
operations and structure. We fully
comply with applicable data protection
legislation and adhere to the highest
legal and information security standards.
We have established a rigorous privacy
programme, which is aligned with current
business and regulatory requirements,
and we continuously enhance the
programme to effectively respond to an
emerging threat landscape.
Effective implementation of privacy
strategy requires a strong organisational
structure. To this end, we have appointed
the industry’s first ever DPO, whose
responsibilities include, but are not limited
to: providing recommendations to the
Bank’s employees to ensure compliance
with the requirements of the applicable
legislation; researching data processing
procedures within the Bank and evaluating
their compliance with the applicable
legislation; advising and assisting business
units on privacy matters, particularly
when implementing a new process or
a product; liaising with the supervisory
authority – the Personal Data Protection
Service, regarding privacy matters; and
drafting and maintaining internal policies
and procedures as well as awareness
programmes on privacy matters. The DPO
reports to the Audit Committee semi-
annually on the status of the Bank’s privacy
strategy implementation. As a result, the
Bank’s Executive Management and the
Supervisory Board remain up-to-date on
privacy matters.
Awareness raising is one of the key
aspects of our privacy framework. As
part of the privacy programme, we
conduct awareness campaigns to help
our employees recognise privacy concerns
and respond accordingly. We provide
continuous and role-based privacy
training that keeps employees abreast
of privacy risks and clarifies their role in
mitigating them.
2 substantiated complaints concerning
breaches of customer privacy and losses
of customer data
0 GEL loss due to a cybersecurity incident or
a regulatory fine
0 identified leaks, thefts,
or losses of customer data
0 security breaches (external intrusion into
the Bank’s network or systems)
0 data breaches (personal or financial data leaked to the public)
Data privacy
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Bank of Georgia is one of the largest
purchasers in the country, with a variety
of suppliers in its supply chain. We are
committed to dealing fairly with our
suppliers, acting with integrity, and
ensuring a responsible supply chain.
We are also committed to involving
local suppliers in our supply chain
and contributing to local business
development. In 2022 local suppliers
accounted for 82% of the Bank’s total
spend on suppliers and represented 86%
of all suppliers.
Largest categories of suppliers by spend in 2022
IT 30%
Professional services 10%
Rent 9%
Marketing 5%
Security and banking equipment 5%
Maintenance and repair 5%
We work with suppliers that share our
values and our commitment to having
a positive impact in the communities
we serve. We incorporate E&S risk
management practices in our procurement
processes. Suppliers are selected based
on merit and in line with business needs.
The Bank has a Purchasing Policy and
Tender (RFP) Procedures, which define
the requirements for supplier selection
and appointment:
• We have transparent and objective
selection criteria and procedures that
ensure fair competition.
• As part of the Bank’s third-party
screening process to identify the level
of risk which third parties might pose,
the Bank carries out the following
due diligence processes: indirect
investigations, including general
research of the activities undertaken
by proposed business partners, such
as agents, non-resident vendors,
joint venture partners, contractors,
suppliers and other third parties,
and their reputation.
• The Purchasing Policy defines
requirements with respect to process
transparency to mitigate anti-bribery
and corruption (ABC) risks associated
with procurement processes.
• In 2020, we integrated E&S topics
into supplier selection/procurement
process. E&S topics are part of the
request for proposal (RFP) form,
communicated to potential suppliers
during the selection process. To
decrease E&S risks in our supply
chain, we require all suppliers to sign
environmental and labour safety
clauses, which constitute a key part
of the contract and are mandatory
for implementation.
Our relationships with suppliers are based
on a clear understanding of the Bank’s
expectations and requirements. We have
developed an Information Security Policy
for Supplier Relationships to ensure the
protection of confidentiality, integrity,
availability and accountability of the
Bank’s information assets which may be
accessible to or affected by suppliers.
To refine our procurement processes
and align them with international best
practice, we have implemented SAP
ARIBA procurement modules in 2021:
Suppliers Lifecycle and Performance
Management Module (SAP SLP) as part
of supplier registration and qualification
process and sourcing module (SAP
sourcing) as a part of a transparent
selection process. SAP SLP enables us
to enhance several aspects of the supplier
qualification process, including:
• background check (security screening)
and checking conflicts of interest;
• information security due diligence
questionnaires for those suppliers who
have access to the Bank’s information
assets;
• personal data protection (Privacy
Due Diligence Questionnaire)
questionnaires, when relevant; and
• general questions to all suppliers
regarding: child labour, illegal
immigrants, discrimination, minimum
salary, and modern slavery statement.
Suppliers’ evaluation and qualification
on E&S issues is done on an annual basis.
SAP sourcing enables us to improve
supplier selection process, including the
possibility to open RFPs or auctions in one
space. Since December 2021, all selection
processes have run through the new
system, ensuring greater transparency
and comprehensive reporting in the
procurement process.
Working with our suppliers
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Financial Statements Additional Information
Property tax
Corporate
income tax
Other tax
GEL
325,509,284
Types of taxes paid in 2022, GEL million (BOG) Taxes paid in 2022, GEL (BGEO LN)
Our approach to tax, its management
and governance are important for us.
The Group must not use, encourage or
facilitate – nor cooperate with external
parties – to facilitate products or services
that are in conflict with tax legislation.
We have a dedicated tax unit within the
Bank as well as policies and procedures
in place to ensure compliance with
applicable tax laws and regulations
related to our business.
We seek to pay our fair share of tax and
minimise the likelihood of customers
using our products and services to avoid
tax. The Group strives to maintain high
standards for tax governance, monitoring
risks and ensuring tax compliance.
The Group’s profits are taxed at different
rates depending on the country or
territory in which the profits arise.
We are privileged to play a central
role in the Georgian economy. Our tax
contributions are just one of the ways in
which we contribute to the communities
we serve and the wider society.
Company name
Corporate income tax
(GEL)
Other tax
(GEL)
Total tax
(GEL)
Georgia
BGEO Group 7,815,107 348,977 8,164,083
Bank of Georgia 196,763,534 85,808,670 282,572,204
Solo 2,895 994,025 996,920
Tree of Life Foundation – 50,372 50,372
Georgian Leasing Company – 7,517,649 7,517,649
Galt & Taggart 47,634 1,354,395 1,402,029
United Securities Registrar of Georgia – 38,046 38,046
Express Technologies – 114,650 114,650
Didi Digomi Research Center – 6,194 6,194
Georgian Card 55,513 1,830,760 1,886,273
Direct Debit Georgia – 1,626,969 1,626,969
Metro Service + 8,159 1,286,764 1,294,923
Digital Area (114,915) 1,154,502 1,039,587
Area Extra 1,978 149,667 151,645
Easy Box LLC 161 6,536 6,697
Total 204,580,065 102,288,176 306,868,241
Belarus
Belarusky Narodny Bank 10,657,404 6,284,908 16,942,312
BNB Leasing 22,263 652,312 674,576
Total 10,679,668 6,937,220 17,616,888
Benderlock Investments Limited 41,761 – 41,761
Total 41,761 41,761
Hungary
Bank of Georgia Representative
Office Hungary – – 52,382
Israel Georgia Financial Investments – 120,473 120,473
Turkey
Representative Office of JSC Bank
of Georgia in Turkey – 5,355 5,355
UK
Bank of Georgia Group PLC – 1,261,726 1,261,726
BGEO Group Limited – (457,542) (457,542)
Total – 804,184 804,184
Tax payments and responsibilities
Annual Report 2022 Bank of Georgia Group PLC
148
Non-financial information statement
This non-financial information statement provides an overview of topics and related reporting references in our reporting as required
by sections 414CA and 414CB of the Companies Act 2006. We integrate non-financial and Environmental, Social and Governance
(ESG) information across the Strategic report and other sections, including the Sustainable Business section, in this Annual Report.
We are actively monitoring developments including in relation to ESG metrics. In 2022, our focus included the Global Reporting
Initiative (GRI) standards and the Task Force on Climate-related Financial Disclosures (TCFD).
Reporting requirement Pages in this Report Some of our relevant policies
Business model
• Our purpose and strategy
framework
• Fulfilling individuals’ needs
• Fulfilling businesses’ needs
• Segment snapshot
• Financial overview
17–19
22–33
34–43
44–45
154–167
Environment
• Environmental and social
management of our loan book
• Operational environmental
footprint
• Climate-related disclosures
95–101
101–102
103–117
• Environmental and Social Policy
Our employees
• People and culture
• Empowering our employees
48
122–134
• Code of Ethics and Conduct
• Human Rights Policy
• Diversity and Inclusion Policy
• Anti-discrimination and
Anti-harassment Policy
• Whistleblowing Policy
Social matters
• Our strategy and purpose
framework
• Engaging with stakeholders for
shared success
• ESG review – social
17–19
20–21
118–138
• Environmental and Social Policy
• Human Rights Policy
• Diversity and Inclusion Policy
• Anti-discrimination and Anti-
harassment Policy
Respect for
human rights
• Human rights
• Empowering our employees
• Sustainable financial inclusion
• Environmental and social
management of the loan book
91
122–134
92–94
95–101
• Human Rights Policy
Anti-bribery and
corruption (ABC)
• Financial crime
• Financial crime risks
143
72–73
• Code of Conduct and Ethics
• Anti-bribery and Anti-corruption Policy
• Whistleblowing Policy
Risk management
• Risk management
• Principal risks and uncertainties
56–61
62–81
Non-financial KPIs
• Key performance indicators 50–55
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Financial Statements Additional Information
In this statement we describe how our
Board of Directors have had regard to the
matters set out in section 172(1) (a) to (f)
of the Companies Act 2006 (section 172)
when performing their duty to promote
the long-term success of the Company
for the benefit of its members as a whole.
Board engagement with stakeholders
The Board is committed to effective engagement with its key
stakeholders. For 2022, the key stakeholders for the Company
continued to be its customers, employees, communities,
investors, and regulators. During 2022 the Board continued to
engage with stakeholders and were informed of stakeholder
interests, both directly and indirectly, through different channels.
The Board received updates regarding relevant stakeholder
matters from management reports. In addition, shareholders
were invited to the 2022 AGM and had the opportunity to
join the AGM electronically to ask questions, and also to ask
questions via email which were answered ahead of the meeting.
The Board recognises that stakeholder feedback is invaluable
in helping formulate the longer-term strategy of the Company
and ensures that the interests of key stakeholders are duly
considered in Board deliberations and decision-making.
Depending on the subject, the relevance of each stakeholder
group may differ and, as such, as part of its engagement
with stakeholders, the Board seeks to understand the relative
interests and priorities of each group and consider these, as
appropriate, in its decision-making. The Board also considers
the long-term impact of its decisions and, in doing so, aims
to maintain the Company’s reputation for high standards of
business conduct and to ensure fair treatment of all of its
stakeholders. The Board acknowledges that decisions must be
made based on competing priorities of different stakeholders
and that it is not always possible to achieve an outcome which
meets the expectations of all stakeholders.
When the Board makes decisions, it also considers the views
of other stakeholders as appropriate, including the Georgian
Government, as well as other governments as applicable,
and suppliers.
Key stakeholders
The Board has identified that the Company’s key
stakeholders are:
• Customers
• Employees
• Communities
• Investors
• Regulators
This section 172 statement details how the Board seeks to
understand the needs and priorities of its key stakeholders and how
these are taken into consideration as part of its decision-making.
Customers
The success and sustainability of our organisation depends
on the satisfaction of our customers. We aim to provide our
customers with products and services tailored to their unique
needs and circumstances and to ensure a positive experience
as they interact with the Company across multiple touchpoints.
With this in mind, the creation of a simple and straightforward
digital daily banking and payments experience is core to our
strategy. We continue to develop new digital products and
accelerate digital sales.
We recognise that our customers’ individual needs are all
different. We aim to make banking as accessible as possible for
everyone. Our retail mobile application can be used without WiFi
or an internet data package, and we offer a digital customer
on-boarding process. Our customers can activate a free digital
card within a few seconds through the mobile application, add
the card to a wallet – Apple Pay or Google Pay, launched in
November 2022, and access a variety of products and services,
including personalised lifestyle offers.
How do we engage with them?
The Bank engages with its customers and regularly tracks
customer satisfaction through internal and external surveys.
Bank-wide NPS is a key metric that is monitored by an
independent external service provider at least twice a year. The
Board reviews the NPS results and discusses areas that could be
improved. By year-end, the Bank’s NPS was 58 compared with
55 at the end of 2021, and a substantial improvement from the
mid-30s during 2019.
The insights from external and internal surveys are reported at
the most senior levels of the Bank monthly and play a crucial role
in how we address the evolving expectations and preferences of
our customers. We use customer feedback to plan and prioritise
initiatives that improve our products and services.
Bank of Georgia’s digital achievements have been recognised
globally. In 2022, Bank of Georgia was named the World’s
Best Consumer Digital Bank by Global Finance, in addition
to receiving awards in multiple regional (Central and Eastern
Europe) categories, including for the Best Mobile Banking App.
Section 172(1) statement
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150
Section 172(1) statement continued
Employees
The ability to attract, develop, and retain top talent is key to the
delivery of our strategic objectives and the long-term success
of the Company. We believe that a great customer experience
starts with a great employee experience.
Our objective is to be the employer of choice for top talent,
providing equal opportunities for development and ensuring
best employee experience based on our values and business
principles.
For more details, see the Employee Empowerment section on
pages 122 to 134.
How do we engage with them?
The Board engages with employees through various
mechanisms, including:
• Half-year and annual performance reviews;
• Employee satisfaction and engagement surveys;
• CEO vlog sessions;
• Town hall sessions with senior management; and
• Employee Voice meetings with the designated workforce
engagement Non-executive Director and the Chairman.
Our Chief Executive Officer encourages employees to engage
with the talent management initiatives and processes available,
and to consider their professional development pathways during
his live sessions.
Over the past few years we have refined the employee end-
to-end journey to create a positive employee experience, with
diverse opportunities for development, to ensure ongoing
high levels of engagement. By encouraging employees to
participate in and provide feedback on our talent management
initiatives and processes, we aim to increase transparency and
engagement across the organisation. Further information on our
employee engagement is available on page pages 131 to 132.
The Board engages with its employees through the Bank-wide
eNPS, which is a key success metric and performance indicator.
The Bank started to measure this in 2019 and continues to
monitor the score regularly. The results of the eNPS survey are
presented and discussed at the Board meetings.
During 2022, the Bank’s eNPS decreased to 53 (from 61 in 2021),
slightly below the target of 54 for 2022. We aim to have eNPS
in the range of 54-62 during 2023. The decrease was mainly
driven by the adverse impact of inflationary pressures on our
employees in mass positions, especially in the front office,
as well as by dissatisfaction of some teams with workplace
arrangements as we move back-office staff to a hybrid working
model in 2022, following a fully remote work mode during the
Covid-19 pandemic. As our staff increases, we recognise the
need to have comfortable work spaces to support employee
wellbeing and productivity, and we are working on adding and
renovating new office space to address the concerns raised by
some of our colleagues. We also continue to monitor the labour
market and remuneration practices at comparable companies to
ensure that we remain a competitive employer of top talent and
to adjust our remuneration practices if and when necessary.
Communities
The Board recognises that the Bank, as a leading organisation
and financial institution in Georgia, plays a significant role in
helping the country overcome some of its biggest environmental
and social challenges and in contributing to Georgia’s
sustainable development.
The Bank’s key impact areas include fostering financial inclusion
and empowering local communities, with a focus on educational
opportunities for children and young people. We believe both
financial inclusion and education are integral to individual
wellbeing and the prosperity of local communities.
How we engage with them?
We work with and encourage the communities where we
operate in different ways. We have focused on increasing
access to quality educational infrastructure and educational
opportunities, and our aim is to reach more school students in
Georgia with these initiatives.
Our core engagement activity with communities is developing
new tools and innovative products that enable greater financial
inclusion in Georgia. We have focused on increasing the use of
digital tools (e.g. the mobile app, payments, etc.) as a way to
create opportunities for more people. In 2022, we rolled out the
first financial mobile application for school students in Georgia –
sCoolApp. Although we have had a special product – sCool Card
– for school students for years, we saw that school children did
not engage with the Bank’s mobile application because it was
not relevant for them. sCoolApp was born as a solution, and our
goal for 2023 is to use this channel as a daily engagement tool
with this segment and embed financial education directly into
the application.
We have developed a range of educational campaigns to
increase financial literacy. As we launched Investments
in the retail mobile application, we continued to develop
comprehensive content to raise awareness of the risks and
benefits of investing, including educational videos and e-learning
modules.
During 2022, we continued to sponsor the design of
multifunctional, tech-equipped libraries – Ideathecas – in
Georgia’s regions, provide scholarships to students to study
abroad and were involved in other educational projects. For
more information, please see pages 135 to 138 of this Report.
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Financial Statements Additional Information
Investors
Providing sustainable and attractive returns to shareholders
while maintaining a strong capital and liquidity position is
necessary to ensure the flow of capital is maintained. Therefore,
continued shareholder support is critical to the sustainability of
the Company and the delivery of our long-term strategy.
How do we engage with them?
The Company has a comprehensive investor engagement
and communication programme and encourages open and
transparent dialogue with existing and potential investors.
The programme covers communication relating to financial
results, performance and strategy issues, as well as discussions
on ongoing corporate governance and other ESG topics. The
Board reviews and considers matters that our shareholders
have indicated as important to them in written communications
as well as during individual conference calls. We provide more
details on our enhanced approach to ESG in the Sustainable
Business section on pages 85 to 148. This engagement
programme will continue during 2023.
The Board’s primary contact with the Company’s institutional
shareholders is through the Chairman, CEO, Chief Financial
Officer, Advisor to the CEO and the Head of Investor
Relations, who provide a standing invitation to shareholders
to meet and discuss any matters of interest. Our committee
Chairs also make themselves available to answer questions
from shareholders. Hanna Loikkanen is the Board’s Senior
Independent Director, whose role includes acting as an
intermediary between the Board and shareholders.
We will engage with shareholders, including through the
Company’s forthcoming AGM, to be held in May 2023, and
will also continue to communicate with shareholders on
important developments throughout the year. Our annual
results announcement, half-year results, and quarterly
results are supported by a combination of presentations
and conference calls.
Throughout 2022, we engaged with more than 350 institutional
equity and fixed income investors, and participated in more
than 20 investor conferences and a roadshow with the largest
shareholders. The most recent roadshow took place following
the Group’s third quarter of 2022 results release, in November-
December 2022 in the UK and the US, attended by the Group
CEO, with the Chairman attending some of these meetings
as well.
The Chairman has overall responsibility for ensuring that the
Board understands the views of major shareholders. The full
Board is kept updated on these views during its quarterly
meetings by the Chairman as well as management and
the Investor Relations team. The Group has considered the
feedback received from shareholders in various areas including
in developing its capital distribution policy and the remuneration
policy. Informal feedback from analysts and the Group’s
corporate advisors is also regularly shared with the Board.
Our website, www.bankofgeorgiagroup.com, provides our
investors with access to the Company’s results, press releases,
investor presentations, analyst reports, as well as other
information relevant to our investors. Investors can also access
details of the Company’s results and other news releases
through the London Stock Exchange’s Regulatory News Service.
Regulators
The Company can operate only with the approval of its
regulators, which have a legitimate interest in how the Company
operates in the market and treats its investors.
How does the Board engage with them?
Regular liaison takes place with the relevant Government
entities, including different ministries, as well as the NBG,
Bank of Georgia’s regulator. As part of the communication
programme with the local regulator, we discuss Bank-specific
and system-wide issues. The Bank also uses the Banking
Association platform, together with other banks, to discuss
the issues impacting broader banking system, including
macroeconomic and regional developments impacting the
industry, and legal and regulatory environment. The Bank has
formal links and coordinated processes for communication with
the regulator.
The Bank continues to monitor and enhance its enterprise-
wide compliance risk management framework. With the
existing complex regulatory environment, the Bank has directed
its resources and developed a robust tool kit for a timely
implementation of new regulatory requirements. This includes
the change management systems as described in greater detail
in the Regulatory and Legal Compliance section on pages 141
to 142. Furthermore, the Bank continues to fully implement its
centralised system for regulatory communications, ensuring
all electronic and written communications with the NBG are
accumulated systemically and monitored by the Compliance
department, so that timely and high quality responses are
delivered through this centralised channel.
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Remuneration Policy
What was the decision?
The Board, following the recommendation from the
Remuneration Committee, approved an updated Directors’
Remuneration Policy (the ‘Policy’), which was put to
shareholders for approval at the 2022 AGM. This was done in
accordance with the normal three-year voting cycle, but also as
specifically required under the then new NBG regulatory code on
remuneration, where NBG was seeking to follow the EU Capital
Rights Directive: strengthening banks by reducing risk taking.
In having to make a number of regulatory-driven changes,
the previous shareholder-approved Remuneration Policy and
the existing CEO’s employment contract were rendered void,
and in need of renegotiation.
How were stakeholders engaged and their
interests considered?
The Policy was extensively discussed with major shareholders
and proxy advisors ahead of proposing the Policy for shareholder
approval. Additional enhancements were made to the Policy
in response to feedback, including that under the proposed
Policy the total vesting and holding period be increased to
eight years from the beginning of the work year (an increase
from six years under the previous Policy). In the feedback from
major shareholders, no shareholder objected to the basis of the
proposed Policy.
At the 2022 AGM, the shareholder vote to approve the Policy
was passed with a majority of 67.62%. Recognising a meaningful
proportion of shareholders did not support the resolution, the
Remuneration Committee representatives held discussions with
a significant proportion of major shareholders, in particular with
those who voted against the resolution. In addition, discussions
were held with wider stakeholders, including Glass Lewis, to
understand their specific concerns in relation to the Policy.
Following the outreach to approximately 50% of shareholders,
a significant majority of the largest shareholders remained
overwhelmingly supportive of the Executive Director and the
Group’s strategic priorities.
Actions and outcomes
Following the stakeholder meetings, a statement was published
on the Company’s website, detailing the Company’s response to
the 2022 AGM voting outcome and actions taken to understand
the result. The statement highlighted the following actions
taken to address shareholder concerns:
• We are committed to a period of stability in our approach
to executive remuneration, and confirm that our intention
is for our new Policy to remain in effect for three years. We
reiterate that, notwithstanding the recent global inflationary
pressures, there will be no inflation-linked increases over the
length of the contract, with no renegotiation or salary uplift
in 2023 or 2024.
• We remain committed to pay for performance and our long-
term management and shareholder outcomes alignment,
which our shareholders have supported for many years.
• We will continue to focus on setting stretching performance
targets and improving the transparency and quality of
disclosure in the Directors’ Remuneration Report, which
shareholders recognised improved significantly with recent
years’ inclusion of minimum and stretch targets and
weightings.
• We will continue to engage regularly with shareholders
and other stakeholders and commit to ensuring that we
consult with major shareholders ahead of any further major
regulatory changes impacting our Remuneration Policy.
Further information on the engagement with shareholders, the
actions taken to consult with shareholders and the impact on
the Committee’s approach can be found in the Chair’s Letter
of the Directors’ Remuneration Report on pages 202 to 222.
Principal decisions
Principal decisions are those decisions taken by the Board that are material, or have strategic importance to Bank of Georgia
Group PLC, or are significant to the Company’s key stakeholders.
This statement describes three examples of principal decisions taken by the Board during 2022.
Section 172(1) statement continued
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Financial Statements Additional Information
Approving capital distributions
What was the decision?
During 2022, the Board recommended a final dividend for the
financial year 2021, approved an interim dividend in respect of
the period ended 30 June 2022, and agreed to commence an
on-market GEL 112.7 million share buyback and cancellation
programme, which ended in December 2022 and resulted in the
cancellation of 1,670,446 ordinary shares. The Board’s decisions
were informed by the Group’s capital distribution policy, which
was updated in September 2021, as well as regular updates on
the Group’s financial and capital positions. A key focus of Board-
level discussions was how excess capital was being managed.
How were stakeholders engaged and their
interests considered?
The Directors were mindful of their duties under section 172 in
respect of capital distribution, and the Directors considered
whether the declaration of a dividend and the share buyback
and cancellation programme would support the long-term
sustainable success of the Company and align with investor
expectations. The financial implications of capital distribution,
including the ability of the Company to continue supporting its
customers and maintaining financial stability, were considered
by the Board.
The Board received specific feedback regarding dividends
and share buybacks from shareholders during roadshows.
In general, UK investors were focused on sustainable income
generation and therefore had a preference to receive dividends;
whereas, US investors were focused on continued growth and
therefore would prefer to see a buyback programme. The Board,
recognising the differing interests of these investors, agreed
to maintain both regular progressing dividends and a share
buyback and cancellation programme, as and when appropriate,
targeting a 30-50% total capital distribution ratio.
The Board reviewed the capital requirements and capital
distribution scenarios, including the capital ratios for 2022-
2023 and assumptions, along with macroeconomic updates on
a regular basis. In particular, the Board considered the Bank’s
Basel III CET1, Tier 1 and Total capital adequacy ratios as at
31 December 2022, noting that all were comfortably above the
minimum required levels.
Actions and outcomes
On 20 October 2022, the Company paid an interim dividend
of GEL 1.85 per ordinary share in respect of the period ended
30 June 2022.
In December 2022, the Company completed the GEL 112.7 million
share buyback and cancellation programme, having repurchased
and cancelled 1,670,446 ordinary shares. In February 2023,
the Board approved an increase of the share buyback and
cancellation programme by up to GEL 148 million.
At the 2023 AGM, the Board intends to recommend for
shareholder approval a final dividend for 2022 of GEL 5.80 per
share payable in Pounds Sterling at the prevailing rate. This
would make a total dividend paid in respect of the Group’s 2022
earnings of GEL 7.65 per share.
The Board will continue to review the Capital Distribution Policy
and revise it if, and as, required.
ESG strategy
What was the decision?
Following a formal ESG materiality assessment undertaken
by the Group during 2021, the Group continued to develop its
climate action strategy and improve its ESG-related policies,
practices, and disclosures during 2022.
In 2022, the Board approved the Bank’s Climate Action Strategy
as well as few standalone social policies, including a Diversity
and Inclusion Policy, an Anti-discrimination and Anti-harassment
Policy, and a Human Rights Policy. The proposed initiatives to
support the implementation for these policies and monitor
their effectiveness included the introduction of a management-
level Human Rights Committee that will report annually to
the full Board, as well as the development of an ESG learning
programme for the Bank’s employees.
The Climate Action Strategy outlined the Bank’s key
commitments in relation to managing climate-related risks
and opportunities. These included: monitoring and managing
climate-related risks; supporting Georgia’s transition to a
lower-carbon economy, in line with the country’s climate goals;
reducing its operational carbon footprint; and developing
climate expertise across the organisation.
How were stakeholders engaged and their
interests considered?
The Board recognises that the Bank’s operations may have both
positive and negative impacts on the economy, people, and the
environment, and acknowledges its role in ensuring that the
Company properly manages its impacts, limiting and mitigating
the negative ones, while being a driving force for good and
creating opportunities for its stakeholders. The Board recognises
that sound ESG policies, when embedded with appropriate
governance and responsible business practices, help generate
sustainable shareholder value and contribute to the success
of the wider society.
The policies adopted by the Board aim to put customers’ and
employees’ rights at the forefront, protect human rights,
and promote equal opportunities.
Actions and outcomes
The Board has committed to enhancing the Company’s
disclosures in line with best practice and global sustainability
standards. This includes the requirement for all premium-listed
companies to state, in their Annual Report, whether their
disclosures are consistent with the TCFD recommendations,
or to explain why not.
Considering the global challenge of climate change, the Bank,
the main operating entity of the Group, has committed to
supporting Georgia’s climate-related goals, currently focusing on
enhancing data collection and analysis of climate-related risks
and opportunities that arise primarily from its lending activities.
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OVERVIEW
OF FINANCIAL
RESULTS
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Financial Statements Additional Information
Income statement highlights
GEL thousands 2022 2021 Change y-o-y
Interest income 2,256,881 1,851,044 21.9%
Interest expense (1,074,546) (897,103) 19.8%
Net interest income 1,182,335 953,941 23.9%
Net fee and commission income 317,491 232,431 36.6%
Net foreign currency gain 466,094 109,099 327.2%
Net other income (without one-off items) 36,092 70,206 -48.6%
Operating income 2,002,012 1,365,677 46.6%
Operating expenses (641,186) (507,952) 26.2%
Profit (loss) from associates 754 (3,781) NMF
Operating income before cost of risk 1,361,580 853,944 59.4%
Cost of risk (119,068) (51,412) 131.6%
Net operating income before non-recurring items and income tax 1,242,512 802,532 54.8%
Net non-recurring items 1,038 (590) NMF
Profit before income tax and one-off items 1,243,550 801,942 55.1%
Income tax expense (111,376) (74,824) 48.9%
Profit adjusted for one-off items 1,132,174 727,118 55.7%
One-off items 311,825 – –
Profit 1,443,999 727,118 98.6%
Earnings per share (basic) 30.99 15.22 103.6%
Earnings per share (diluted) 30.33 14.88 103.8%
Overview of financial results
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Balance sheet highlights
GEL thousands Dec-22 Dec-21 Change y-o-y
Liquid assets 10,367,600 6,047,616 71.4%
Cash and cash equivalents 3,584,843 1,520,562 135.8%
Amounts due from credit institutions 2,433,028 1,931,390 26.0%
Investment securities 4,349,729 2,595,664 67.6%
Loans to customers and finance lease receivables
1
16,861,706 16,168,973 4.3%
Property and equipment 398,855 378,808 5.3%
Total assets 28,901,900 23,430,076 23.4%
Client deposits and notes 18,261,397 14,038,002 30.1%
Amounts due to credit institutions 5,266,653 4,318,445 22.0%
Borrowings from DFIs 1,867,454 2,135,301 -12.5%
Short-term loans from central banks 1,715,257 1,413,333 21.4%
Loans and deposits from commercial banks 1,683,942 769,811 118.7%
Debt securities issued 645,968 1,518,685 -57.5%
Total liabilities 24,653,078 20,337,168 21.2%
Total equity 4,248,822 3,092,908 37.4%
Book value per share 94.07 65.65 43.3%
Key ratios
2022 2021
ROAA (adjusted for one-off items)
2
4.4% 3.2%
ROAA (reported) 5.6% 3.2%
ROAE (adjusted for one-off items)
2
32.4% 25.8%
ROAE (reported) 41.4% 25.8%
Net interest margin 5.4% 4.9%
Loan yield 11.5% 10.6%
Liquid assets yield 4.3% 3.5%
Cost of funds 4.9% 4.6%
Cost of client deposits and notes 3.6% 3.6%
Cost of amounts due to credit institutions 8.9% 7.3%
Cost of debt securities issued 7.1% 6.9%
Cost/income (adjusted for one-off items)
2
32.0% 37.2%
Cost/income (reported) 26.8% 37.2%
NPLs to gross loans 2.7% 2.4%
NPL coverage ratio 66.4% 95.5%
NPL coverage ratio, adjusted for discounted value of collateral 128.9% 147.7%
Cost of credit risk 0.8% 0.0%
NBG (Basel III) CET 1 capital adequacy ratio 14.7% 13.2%
Minimum regulatory requirement 11.6% 11.5%
NBG (Basel III) Tier I capital adequacy ratio 16.7% 15.0%
Minimum regulatory requirement 13.8% 13.6%
NBG (Basel III) Total capital adequacy ratio 19.8% 19.3%
Minimum regulatory requirement 17.2% 17.7%
Overview of financial results continued
1. Throughout this announcement, gross loans to customers and respective allowance for impairment are presented net of expected credit loss (ECL) on contractually accrued interest
income. These do not have an effect on the net loans to customers balance. Management believes netted-off balances provide the best representation of the loan portfolio position.
2. Figures were adjusted for a one-off GEL 391.1 million of other income due to the settlement of an outstanding legacy claim, and a one-off GEL 79.3 million tax expense
due to an amendment to the corporate taxation model in Georgia.
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Discussion of results
The Group’s business consists of three key segments: (1) Retail Banking operations in Georgia comprising sub-segments that target
mass retail, mass affluent and high-net-worth clients and MSMEs; (2) Corporate and Investment Banking operations in Georgia
serving corporate and institutional customers and providing brokerage services through Galt & Taggart; and (3) JSC Belarusky
Narodny Bank (‘BNB’) serving retail and SME clients in Belarus.
Operating income
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Interest income 2,256,881 1,851,044 21.9%
Interest expense (1,074,546) (897,103) 19.8%
Net interest income 1,182,335 953,941 23.9%
Fee and commission income 559,465 390,829 43.1%
Fee and commission expense (241,974) (158,398) 52.8%
Net fee and commission income 317,491 232,431 36.6%
Net foreign currency gain 466,094 109,099 327.2%
Net other income (without one-off items) 36,092 70,206 -48.6%
Operating income 2,002,012 1,365,677 46.6%
Net interest margin 5.4% 4.9%
Average interest earning assets 21,765,305 19,510,848 11.6%
Average interest bearing liabilities 21,865,374 19,409,266 12.7%
Average net loans and finance lease receivables, 16,213,098 15,057,524 7.7%
Average net loans and finance lease receivables, GEL 8,009,664 6,493,966 23.3%
Average net loans and finance lease receivables, FC 8,203,434 8,563,558 -4.2%
Average client deposits and notes 15,876,171 13,766,622 15.3%
Average client deposits and notes, GEL 6,172,866 5,290,089 16.7%
Average client deposits and notes, FC 9,703,305 8,476,533 14.5%
Average liquid assets 8,178,417 6,283,441 30.2%
Average liquid assets, GEL 3,305,624 2,651,356 24.7%
Average liquid assets, FC 4,872,793 3,632,085 34.2%
Liquid assets yield
4.3% 3.5%
Liquid assets yield, GEL
8.9% 7.9%
Liquid assets yield, FC
1.0% 0.1%
Loan yield
11.5% 10.6%
Loan yield, GEL
15.9% 15.1%
Loan yield, FC
7.2% 7.1%
Cost of funds
4.9% 4.6%
Cost of funds, GEL
9.4% 8.2%
Cost of funds, FC
1.8% 2.5%
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158
Performance highlights
Operating income
• The Group generated operating income (adjusted for one-off items) of GEL 2,002.0 million (up 46.6% y-o-y). The y-o-y growth
was strong across key revenue lines.
• Net fee and commission income amounted to GEL 317.5 million for the full year of 2022 (up 36.6% y-o-y), driven mainly by
settlement operations and currency conversion operations, partly offset by cash operations.
• Net foreign currency gain amounted to GEL 466.1 million for the full year 2022 (up 327.2% y-o-y). The key drivers of the significant
y-o-y boost to net foreign currency gain were increased migrant inflows to Georgia as well as higher spreads on the back of
exchange rate volatility.
• In 2022 net other income (adjusted for one-off items) amounted to GEL 36.1 million (down 48.6% y-o-y), mainly due to significant
net gains from sale of real estate properties and investment securities recorded in 2021. Full year net other income also included
a net loss related to the repurchase of US$ 129,987,000 of the Bank’s US$ 350 million 6.00% Notes due 2023 under the tender
offer announced and completed in September 2022.
NIM
• NIM was 5.4% in 2022 (up 50bps y-o-y), supported by increased loan yield, partly offset by increased cost of funds.
• For the full year 2022, loan yield stood at 11.5% (up 90bps y-o-y). The y-o-y increase was mainly driven by higher GEL loan yield
(15.9% in 2022 versus 15.1% in 2021), reflecting the policy rate hikes by the NBG.
• Cost of funds stood at 4.9% (up 30bps y-o-y) in 2022. GEL cost of funds was 9.4% (up 120bps y-o-y), driven by the policy rate
hikes by the NBG. Foreign currency cost of funds was 1.8% (down 70bps y-o-y).
Overview of financial results continued
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Operating expenses, cost of risk, profit
GEL thousands 2022 2021 Change y-o-y
Salaries and other employee benefits (362,019) (281,087) 28.8%
Administrative expenses (164,450) (129,524) 27.0%
Depreciation, amortisation and impairment (111,089) (93,618) 18.7%
Other operating expenses (3,628) (3,723) -2.6%
Operating expenses (641,186) (507,952) 26.2%
Profit (loss) from associates 754 (3,781) NMF
Operating income before cost of risk 1,361,580 853,944 59.4%
Expected credit loss/impairment charge on loans to customers (128,678) (1,452) NMF
Expected credit loss/impairment charge on finance lease receivables (3,208) (4,950) -35.2%
Other expected credit gain (loss) and impairment charge on other assets and provisions 12,818 (45,010) NMF
Cost of risk (119,068) (51,412) 131.6%
Net operating income before non-recurring items and income tax 1,242,512 802,532 54.8%
Net non-recurring items 1,038 (590) NMF
Profit before income tax 1,243,550 801,942 55.1%
Income tax expense (111,376) (74,824) 48.9%
Profit adjusted for one-off items 1,132,174 727,118 55.7%
One-off in other income 391,100 – –
One-off income tax expense (79,275) – –
Profit 1,443,999 727,118 98.6%
Operating expenses and efficiency
• Operating expenses amounted to GEL 641.2 million for the full year, up 26.2% y-o-y. The y-o-y growth was driven mainly by
business growth, continuing investments in strategic areas, particularly IT, as well as the inflationary environment.
• Notably, the Group delivered positive operating leverage y-o-y in 2022, improving the cost to income ratio to 32.0% versus 37.2%
in 2021.
Cost of risk
• Cost of credit risk ratio was 0.8% in 2022 (0.0% in 2021).
One-off items
• We posted significant one-off items in 2022:
• A GEL 391.1 million one-off other income relates to the settlement of a dispute over terms and enforcement of a historic
collateral option with regard to an industrial asset linked to one of the Group’s legacy defaulted borrowers. An outstanding
claim was settled at the end of 2022 and the Group recognised the GEL 391.1 million one-off income at fair value in its
consolidated financial statements. This other income arose at the holding company level and is not therefore reflected in
the Bank’s capital ratios, which are calculated within the regulated Bank – JSC Bank of Georgia.
• A GEL 79.3 million one-off expense due to the re-measurement of deferred taxes as a result of an amendment to the
corporate taxation model in Georgia applicable to financial institutions, which passed into law on 28 December 2022 and
became effective with regard to 2023 taxable profits. The previous taxation model, effective for 2022 results, implied a 15%
tax rate charged to banks’ taxable profit before tax, regardless of retention or distribution status, although this was previously
expected to change on 1 January 2023 to a zero corporate tax rate on retained earnings and a 15% corporate tax rate on
distributed earnings. This expected change did not happen, and the existing model of taxation of banks has been maintained.
At the same time, the existing corporate tax rate for banks was increased from 15% to 20% for 2023 taxable earnings,
and dividends issued from 2023 profits and subsequent periods will no longer be taxed (the existing dividend tax rate is 5%).
In addition, with effect from 2023, taxable interest income and deductible Expected Credit Losses will be defined per IFRS,
instead of local National Bank of Georgia regulations.
Profitability
• The Group’s profit adjusted for one-off items was GEL 1,132.2 million (up 55.7% y-o-y).
• For the full year 2022, adjusted ROAE was 32.4% (25.8% in 2021).
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Balance sheet highlights
GEL thousands, unless otherwise noted Dec-22 Dec-21 Change y-o-y
Liquid assets 10,367,600 6,047,616 71.4%
Liquid assets, GEL 3,461,218 2,819,195 22.8%
Liquid assets, FC 6,906,382 3,228,421 113.9%
Net loans and finance lease receivables 16,861,706 16,168,973 4.3%
Net loans and finance lease receivables, GEL 8,854,286 7,348,911 20.5%
Net loans and finance lease receivables, FC 8,007,420 8,820,062 -9.2%
Client deposits and notes 18,261,397 14,038,002 30.1%
Client deposits and notes, GEL 6,692,834 5,426,211 23.3%
Client deposits and notes, FC 11,568,562 8,611,791 34.3%
Amounts due to credit institutions 5,266,653 4,318,445 22.0%
Borrowings from DFIs 1,867,454 2,135,301 -12.5%
Short-term loans from central banks 1,715,257 1,413,333 21.4%
Loans and deposits from commercial banks 1,683,942 769,811 118.7%
Debt securities issued 645,968 1,518,685 -57.5%
Loan book
• Net loans and finance lease receivable amounted to GEL 16,861.7 million at 31 December 2022, up 4.3% y-o-y in nominal terms.
Growth on a constant-currency basis was 12.9% y-o-y. The y-o-y nominal growth was driven mainly by consumer portfolio
(up 25.4%), mortgages (up 5.1%) and SME portfolio (up 10.5%), partly offset by reduced corporate portfolio (down 4.4%) due
to GEL appreciation, as the majority of corporate loans are denominated in foreign currency.
• The de-dollarisation trend continues in y-o-y perspective, as the share of foreign currency denominated loans was 47.5% at
31 December 2022 versus 54.5% at 31 December 2021.
• The share of non-performing loans in gross loans increased to 2.7% as at 31 December 2022 (up 30bps y-o-y), mainly driven
by a one-off methodological change as we seek to align our internal NPL definitions more closely to IFRS Stage 3 definitions.
We classified some Retail Stage 3 loans that had already been provisioned as NPLs. Consequently, the NPL coverage ratio
decreased to 66.4% at 31 December 2022 versus 95.5% at 31 December 2021. NPL coverage is supported by a high level of
collateralisation of the NPL portfolio.
• The positive asset quality trend during the year is also reflected in an improvement in Stage 3 loans to gross loans to 3.4% at
31 December 2022 (3.8% at 31 December 2021).
Non-performing loans
GEL thousands, unless otherwise noted Dec-22 Dec-21 Change y-o-y
NPLs 471,577 394,720 19.5%
NPLs to gross loans 2.7% 2.4%
NPLs to gross loans, RB 2.5% 1.8%
NPLs to gross loans, CIB 3.4% 3.6%
NPL coverage ratio 66.4% 95.5%
NPL coverage ratio adjusted for the discounted value of collateral 128.9% 147.7%
Stage 3 ratio
1
3.4% 3.8%
Deposits
• Client deposits and notes amounted to 18,261.4 million at 31 December 2022 (up 30.1% y-o-y), mainly driven by increased migrant/
client flows and subsequent growth in current and demand deposits. On a constant-currency basis deposits increased by 43.2% y-o-y.
• 63.3% of client deposits and notes were denominated in foreign currency at 31 December 2022, versus 61.3% at 31 December 2021.
1. Includes Stage 3 loans and defaulted POCI loans.
Overview of financial results continued
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Liquid assets
• Liquid assets increased significantly and amounted to GEL 10,367.6 million at 31 December 2022 (up 71.4% y-o-y). The y-o-y
growth was mainly driven by a substantial growth of client deposits. As at 31 December 2022, the share of liquid assets to total
assets stood at 35.9%, versus 25.8% at 31 December 2021.
Capital position
• At 31 December 2022, the Bank’s Basel III Common Equity Tier 1, Tier 1, and Total capital adequacy ratios stood at 14.7%, 16.7%,
and 19.8% respectively – all comfortably above the minimum requirements of 11.6%, 13.8% and 17.2% respectively.
Since January 2023, the NBG has transitioned to IFRS-based accounting. The Bank’s capital ratios and requirements as at
31 December 2022, based on the IFRS accounting, were:
Capital ratios
Capital
requirements
CET1 17.7% 14.5%
Tier 1 19.7% 16.7%
Total capital 21.7% 20.2%
The IFRS-based ratios in the table above are presented on a management basis and are not officially approved by the NBG on the
basis that they were not mandatory as of the reporting date.
The Bank’s minimum capital requirements, reflecting the full loading of Basel III capital requirements, to be completed in 2023, and
which remain subject to ongoing annual regulatory reviews, are currently expected to be as follows:
Capital
requirements
(Dec-23)
CET1 14.8%
Tier 1 17.1%
Total capital 20.2%
Capital distribution
• In August 2022 the Board of Directors declared an interim dividend of GEL 1.85 per share in respect of the period ended
30 June 2022 to ordinary shareholders of Bank of Georgia Group PLC. The interim dividend was paid on 20 October 2022.
• In addition, the Board extended the share buyback and cancellation programme announced in June by an additional GEL 40 million.
The Group completed the share buyback and cancellation programme in December 2022. Since the announcement of the Group’s
share buyback and cancellation programme on 30 June 2022, the Group bought back and cancelled 1,670,446 ordinary shares at
a total cost of GEL 112.7 million. As at 31 December 2022, the number of shares with voting rights amounted to 47,498,982.
• On 16 February 2023, the Board has approved an increase of the share buyback and cancellation programme by up to GEL 148 million.
• At the 2023 Annual General Meeting, the Board also intends to recommend for shareholder approval a final dividend for 2022
of GEL 5.80 per share, payable in Pounds Sterling at the prevailing rate. This would make a total dividend paid, from the profits
of JSC Bank of Georgia in respect of the Group’s 2022 earnings, of GEL 7.65 per share.
Annual Report 2022 Bank of Georgia Group PLC
162
Discussion of segment results
Retail Banking (RB)
Income statement highlights
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Interest income 1,633,958 1,266,028 29.1%
Interest expense (865,990) (683,497) 26.7%
Net interest income 767,968 582,531 31.8%
Net fee and commission income 256,287 178,928 43.2%
Net foreign currency gain 277,608 58,139 377.5%
Net other income 21,401 25,869 -17.3%
Operating income 1,323,264 845,467 56.5%
Salaries and other employee benefits (251,530) (205,055) 22.7%
Administrative expenses (126,811) (102,138) 24.2%
Depreciation, amortisation and impairment (99,739) (80,127) 24.5%
Other operating expenses (2,574) (2,595) -0.8%
Operating expenses (480,654) (389,915) 23.3%
Profit from associates 754 (3,781) NMF
Operating income before cost of risk 843,364 451,771 86.7%
Cost of risk (172,702) (72,351) 138.7%
Profit before non-recurring items and income tax 670,662 379,420 76.8%
Net non-recurring items 1,241 20 NMF
Profit before income tax 671,903 379,440 77.1%
Income tax expense (without one-off tax expense) (63,189) (32,956) 91.7%
Profit adjusted for one-off income tax expense 608,714 346,484 75.7%
One-off income tax expense (42,085) – –
Profit 566,629 346,484 63.5%
Balance sheet highlights
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Net loans, standalone 11,368,907 10,349,776 9.8%
Net loans, standalone, GEL 7,515,389 6,201,310 21.2%
Net loans, standalone, FC 3,853,518 4,148,466 -7.1%
Client deposits, standalone 12,432,717 9,557,682 30.1%
Client deposits, standalone, GEL 3,716,801 2,904,521 28.0%
Client deposits, standalone, FC 8,715,916 6,653,161 31.0%
of which:
Time deposits 5,395,511 5,462,952 -1.2%
Time deposits, standalone, GEL 1,842,959 1,534,172 20.1%
Time deposits, standalone, FC 3,552,552 3,928,780 -9.6%
Current accounts and demand deposits 7,037,206 4,094,730 71.9%
Current accounts and demand deposits, standalone, GEL 1,873,842 1,370,349 36.7%
Current accounts and demand deposits, standalone, FC 5,163,364 2,724,381 89.5%
Assets under management 1,953,970 1,503,529 30.0%
Overview of financial results continued
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Financial Statements Additional Information
1. Figures adjusted for a one-off GEL 42.1 million tax expense due to an amendment to the corporate taxation model in Georgia.
Key ratios
GEL thousands, unless otherwise noted 2022 2021
ROAE (adjusted for one-off items)
1
29.0% 21.4%
ROAE (reported) 27.0% 21.4%
Net interest margin 4.7% 4.2%
Cost of risk 1.5% 0.7%
Cost of funds 6.0% 5.6%
Loan yield 12.4% 11.3%
Loan yield, GEL 16.0% 15.3%
Loan yield, FC 6.1% 5.9%
Cost of deposits 2.5% 2.6%
Cost of deposits, GEL 7.2% 6.2%
Cost of deposits, FC 0.5% 1.2%
Cost of time deposits 4.3% 3.8%
Cost of time deposits, GEL 11.2% 9.9%
Cost of time deposits, FC 1.0% 1.9%
Current accounts and demand deposits 0.6% 0.8%
Current accounts and demand deposits, GEL 2.4% 2.3%
Current accounts and demand deposits, FC 0.0% 0.1%
Cost / income ratio 36.3% 46.1%
Performance highlights
• Operating income amounted to GEL 1,323.3 million for 2022 (up 56.5% y-o-y). Operating income before cost of risk for the full
year amounted to GEL 843.4 million (up 86.7% y-o-y), supported by strong net FX gains, up 5x.
• RB’s NIM for the full year amounted to 4.7%, up 50bps y-o-y, reflecting higher loan yield (up 110bps y-o-y) partly offset by higher
cost of funds and excess liquidity.
• Cost of credit risk ratio was 1.5% for the full year 2022 (up 80bps y-o-y), driven mainly by unsecured consumer and micro portfolios.
• RB’s profit (adjusted for one-off item) was GEL 608.7 million in 2022 (up 75.7% y-o-y). For the full year, adjusted ROAE stood
at 29.0% (21.4% in 2021).
Portfolios
• Net loans and finance receivables stood at GEL 11,368.9 million at 31 December 2022, up 9.8% y-o-y. On a constant-currency basis,
the loan book increased by 16.4% y-o-y. Loan book growth was mainly driven by consumer loans, SME loans, and mortgages. The
nominal reduction in micro lending largely reflected the impact of GEL’s appreciation against US$ during the year. Foreign currency
denominated loans represented 33.9% of total RB loans at 31 December 2022, compared with 40.1% at 31 December 2021.
Retail Banking loan book by product
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Loan originations
Consumer loans 3,353,673 2,737,779 22.5%
Mortgage loans 1,520,022 1,747,404 -13.0%
Micro loans 1,346,051 1,736,510 -22.5%
SME loans 1,582,590 1,564,334 1.2%
Outstanding balance
Consumer loans 3,218,477 2,567,361 25.4%
Mortgage loans 4,157,864 3,956,204 5.1%
Micro loans 1,977,280 1,980,691 -0.2%
SME loans 1,777,902 1,608,857 10.5%
• RB client deposits increased to GEL 12,432.7 million at 31 December 2022, up 30.1% y-o-y. On a constant-currency basis, deposits
increased by 44.7% y-o-y. The main growth driver was current and demand deposits. Dollarisation level of client deposits in RB
is broadly stable, at 70.1% at 31 December 2022 (69.6% at 31 December 2021).
Annual Report 2022 Bank of Georgia Group PLC
164
Corporate and Investment Banking (CIB)
Income statement highlights
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Interest income 554,135 501,292 10.5%
Interest expense (177,364) (169,586) 4.6%
Net interest income 376,771 331,706 13.6%
Net fee and commission income 49,543 47,869 3.5%
Net foreign currency gain 123,993 37,619 229.6%
Net other income (without one-off items) 14,299 43,979 -67.5%
Operating income 564,606 461,173 22.4%
Salaries and other employee benefits (80,978) (52,836) 53.3%
Administrative expenses (18,079) (16,781) 7.7%
Depreciation, amortisation and impairment (5,292) (8,551) -38.1%
Other operating expenses (1,283) (892) 43.8%
Operating expenses (105,632) (79,060) 33.6%
Profit from associates – – –
Operating income before cost of risk 458,974 382,113 20.1%
Cost of risk 79,461 22,662 250.6%
Profit before non-recurring items and income tax 538,435 404,775 33.0%
Net non-recurring items – (78) -100.0%
Profit before income tax 538,435 404,697 33.0%
Income tax expense (44,040) (38,473) 14.5%
Profit adjusted for one-off items 494,395 366,224 35.0%
One-off in other income 391,100 – –
One-off income tax expense (33,653) – –
Profit 851,842 366,224 132.6%
Balance sheet highlights
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Net loans and finance lease receivables 4,926,264 5,100,938 -3.4%
Net loans and finance lease receivables, GEL 1,321,797 1,113,914 18.7%
Net loans and finance lease receivables, FC 3,604,467 3,987,024 -9.6%
Client deposits 4,824,646 4,015,449 20.2%
Client deposits, standalone, GEL 3,021,179 2,559,463 18.0%
Client deposits, standalone, FC 1,803,467 1,455,986 23.9%
of which:
Time deposits 1,520,701 1,258,019 20.9%
Time deposits, standalone, GEL 1,412,130 1,106,874 27.6%
Time deposits, standalone, FC 108,571 151,145 -28.2%
Current accounts and demand deposits 3,303,945 2,757,430 19.8%
Current accounts and demand deposits, standalone, GEL 1,609,049 1,452,589 10.8%
Current accounts and demand deposits, standalone, FC 1,694,896 1,304,841 29.9%
Letters of credit and guarantees 1,812,231 1,728,569 4.8%
Assets under management 1,480,894 1,469,315 0.8%
Overview of financial results continued
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Financial Statements Additional Information
Key ratios
GEL thousands, unless otherwise noted 2022 2021
ROAE (adjusted for one-off items)
1
39.1% 34.6%
ROAE (reported) 67.4% 34.6%
Net interest margin 5.6% 5.1%
Cost of risk -1.0% -1.2%
Cost of funds 2.6% 2.5%
Loan yield 9.3% 8.7%
Loan yield, GEL 14.7% 13.5%
Loan yield, FC 7.7% 7.5%
Cost of deposits 6.2% 5.5%
Cost of deposits, GEL 9.4% 8.0%
Cost of deposits, FC -0.1% 0.6%
Cost of time deposits 10.4% 8.2%
Cost of time deposits, GEL 11.1% 9.1%
Cost of time deposits, FC 1.1% 2.0%
Current accounts and demand deposits 3.9% 3.5%
Current accounts and demand deposits, GEL 7.7% 6.7%
Current accounts and demand deposits, FC -0.2% 0.3%
Cost / income ratio (adjusted for one-off items)
2
18.7% 17.1%
Cost / income ratio (reported) 11.1% 17.1%
Concentration of top ten clients 5.9% 8.3%
Performance highlights
• Operating income (adjusted for one-off item) amounted to GEL 564.6 million in 2022 (up 22.4%). The y-o-y growth in 2022
was driven by significant foreign currency gains posted throughout 2022, as well as net interest income generation.
• Operating income before cost of risk (adjusted for one-off items) was GEL 459.0 million in 2022 (up 20.1%).
• NIM stood at 5.6% in 2022, up 50bps y-o-y. CIB’s NIM was positively impacted by higher loan yield (up 60bps y-o-y).
• For the full year cost of risk ratio stood at -1.0%, driven by some recoveries.
• For the full year profit (adjusted for one-off items) amounted to GEL 494.4 million (up 35.0% y-o-y). The adjusted ROAE in 2022
was 39.1% versus 34.6% in 2021.
• CIB’s reported profit, due to a significant one-off item, was GEL 851.8 million in 2022. The unadjusted ROAE was 67.4% for the
full year.
Portfolios
• Net loans and finance receivables stood at GEL 4,926.3 million at 31 December 2022, down 3.4% y-o-y. The y-o-y nominal decrease
was due to GEL appreciation that resulted in a decrease of foreign currency denominated net loans and finance receivables.
On a constant-currency basis, loan book increased by 9.1% y-o-y. Foreign currency denominated loans represented 73.2% of total
CIB loans at 31 December 2022, compared with 78.2% at 31 December 2021. The concentration of top ten CIB clients was 5.9%
at 31 December 2022 (8.3% at 31 December 2021).
• Client deposits and notes amounted to GEL 4,824.6 million at 31 December 2022, up 20.2% y-o-y. On a constant-currency
basis, deposits increased by 27.3% y-o-y. Foreign currency denominated deposits represented 37.4% of total CIB deposits at
31 December 2022, compared with 36.3% at 31 December 2021.
1. Adjusted for a one-off GEL 391.1 million other income due to the settlement of an outstanding legacy claim, and a one-off GEL 33.7 million tax expense due to an
amendment to the corporate taxation model in Georgia.
2. Adjusted for a one-off GEL 391.1 million other income due to the settlement of an outstanding legacy claim.
Annual Report 2022 Bank of Georgia Group PLC
166
Belarusky Narodny Bank (BNB)
Income statement highlights
GEL thousands, unless otherwise noted 2022 2021 Change y-o-y
Net interest income 37,511 39,676 -5.5%
Net fee and commission income 11,500 5,476 110.0%
Net foreign currency gain 64,493 13,341 383.4%
Net other income 1,170 1,242 -5.8%
Operating income 114,674 59,735 92.0%
Operating expenses (55,432) (39,675) 39.7%
Operating income before cost of risk 59,242 20,060 195.3%
Cost of risk (25,827) (1,723) NMF
Net non-recurring items (203) (532) -61.8%
Profit before income tax 33,212 17,805 86.5%
Income tax expense (7,684) (3,395) 126.3%
Profit 25,528 14,410 77.2%
Balance sheet highlights
GEL thousands, unless otherwise noted Dec-22 Dec-21 Change y-o-y
Cash and cash equivalents 640,018 186,050 244.0%
Amounts due from credit institutions 74,778 8,719 757.6%
Investment securities 60,361 69,794 -13.5%
Loans to customers and finance lease receivables 538,166 662,297 -18.7%
Other assets 68,043 54,060 25.9%
Total assets 1,381,366 980,920 40.8%
Client deposits and notes 1,034,124 516,634 100.2%
Amounts due to credit institutions 172,389 309,812 -44.4%
Debt securities issued 2,745 7,327 -62.5%
Other liabilities 20,670 12,490 65.5%
Total liabilities 1,229,928 846,263 45.3%
Total equity 151,438 134,657 12.5%
Total liabilities and equity 1,381,366 980,920 40.8%
Overview of financial results continued
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Financial Statements Additional Information
BNB has continued to focus on its core domestic retail and small business customers, with an emphasis on digitising the business,
growing its customer franchise and building customer deposits. As a result, client deposits increased by 100.2% y-o-y during the
fourth quarter.
In the first quarter of 2022, we reassessed our assets in BNB due to deteriorated expectations, resulting in a GEL 49.3 million total
negative effect on equity in 1Q22. Throughout the following quarters, BNB has demonstrated operational resilience and a focus on
maintaining solid liquidity and capital positions. The capital ratios, calculated in accordance with the National Bank of the Republic
of Belarus’s standards, were above the minimum requirements at 31 December 2022 – Tier 1 capital adequacy ratio at
9.5% (minimum requirement of 7.0%) and total capital adequacy ratio at 16.7% (minimum requirement of 12.5%).
In November 2022, the government of Canada sanctioned additional individuals and entities, including our banking subsidiary in
Belarus, BNB. BNB did not have exposure to Canada, therefore we did not experience any significant impact on BNB’s operations
or financial position. The Group has actively engaged with Global Affairs Canada to investigate the reasons – as of today, these
are solely due to the fact BNB is located in Belarus, and the Group is actively seeking delisting of its subsidiary from the Canadian
sanctions list, on the basis of no grounds existing for sanctioning it under the relevant regulations.
168
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GOVERNANCE
169
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Financial Statements Additional Information
Governance at a glance
2022 key highlights:
1. New Chairman and strong leadership within
the Company
The Board was pleased to appoint a new Chair of the Board,
Mel Carvill who has extensive international financial services
and regulatory experience. As part of the appointment process,
Mel undertook an extensive induction programme, which
included meeting several members of the senior management
team. Further details on the appointment process and
induction programme are available on page 187.
2. Culture and ESG
The Board oversaw the implementation of the Group’s purpose
– helping people achieve more of their potential – and the
Group’s culture. Further details on our culture can be found on
page 175. The Board remain committed to ensuring a robust
ESG strategy, which is reflected in the CEO targets. Further
information on our work on ESG can be found on pages 86
to 147 and information on the CEO targets can be found on
pages 204 to 209
3. Stakeholder engagement
During the year members of the Board have undertaken
numerous engagement opportunities with our employees
and stakeholders, including an investor roadshow, extensive
shareholder consultation and the Employee Voice forum.
Further details can be found on pages 149 to 153, 171 and 174.
4. Diversity and inclusion
The Board remains committed to ensuring the Company is
an inclusive organisation, reflecting all aspects of diversity.
We reviewed and expanded the Diversity and Inclusion Policy,
which is based on international standards and best practice.
Further details on our commitment can be found on pages
91 to 92, 171 and 176 to 178.
Annual Report 2022 Bank of Georgia Group PLC
170
67%
11%
11%
11%
11%
89%
33%
67%
29%
71%
Governance at a glance continued
Board and committee meeting attendance
Details of Board and Committee meeting attendance in 2022 are as follows:
Members Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
Neil Janin*
1
0/0 scheduled
1/1 ad hoc
N/A 1/1 scheduled 1/1 scheduled N/A
Mel Carvill*
1
4/4 scheduled
5/5 ad hoc
N/A 3/3 scheduled 2/2 scheduled N/A
Alasdair Breach* 4/4 scheduled
6/6 ad hoc
N/A 4/4 scheduled 3/3 scheduled 4/4 scheduled
Tamaz Georgadze* 4/4 scheduled
6/6 ad hoc
N/A 4/4 scheduled 3/3 scheduled 4/4 scheduled
Archil Gachechiladze 4/4 scheduled
6/6 ad hoc
N/A N/A N/A N/A
Hanna Loikkanen* 4/4 scheduled
6/6 ad hoc
4/4 scheduled
6/6 ad hoc
4/4 scheduled 3/3 scheduled N/A
Mariam Megvinetukhutsesi* 4/4 scheduled
6/6 ad hoc
N/A 4/4 scheduled N/A 4/4 scheduled
Véronique McCarroll*
2
4/4 scheduled
5/6 ad hoc
N/A 4/4 scheduled N/A 4/4 scheduled
Jonathan Muir* 4/4 scheduled
6/6 ad hoc
4/4 scheduled
6/6 ad hoc
4/4 scheduled N/A N/A
Cecil Quillen*
2
4/4 scheduled
5/6 ad hoc
4/4 scheduled
5/6 ad hoc
4/4 scheduled 3/3 scheduled N/A
* Denotes Independent Director.
1 Mr Janin resigned as a Director and Chairman, and Mr Carvill was appointed as a Director and Chairman with effect from 10 March 2022.
2 Ms McCarroll was unable to attend one ad hoc Board meeting, and Mr Quillen was unable to attend one ad hoc Board meeting and one ad hoc Audit Committee meeting
on the same day, due to prior commitments. Both provided full comments on the materials discussed to the Board, and Mr Quillen also provided full comments to the
Audit Committee ahead of the meeting.
2022 in numbers:
Board composition as
at 31 December 2022
Director ages as
at 31 December 2022
Board independence as
at 31 December 2022
Board gender split as
at 31 December 2022
Director tenure as
at 31 December 2022
Management Team gender
split as at 31 December 2022
Executive Directors – 1
Chairman (independent upon appointment) – 1
Senior Independent Non-executive Director – 1
Independent Non-executive Directors – 6
Independent – 89%
Non-independent – 11%
Male – 6
Female – 3
Male – 10
Female – 4
6
111
1 year<1 year 3 years 4 years 5 years2 years
1
33
2
45-4940-44 50-54 55-59 60 -64
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Financial Statements Additional Information
Dear Shareholders,
The Board remain dedicated to ensuring
the principles of good corporate
governance are in place, with robust
processes and controls. It is the strong
belief of the Board that good governance
delivers strategic and organisational
benefits. It is through good governance
design and controls that the Board is
given the confidence that we are making
optimal decisions to promote the long-
term sustainable success of the Company.
We remain committed to ensuring the
opinions of our stakeholders, including
our shareholders, our customers, our
employees and our communities are
considered in everything we do, enabling
us to be a key driver for the banking
sector and to advance the sustainable
development of Georgia.
During the year we delivered on our key
corporate governance commitments,
including with the UK Corporate
Governance Code, Listing Rules and DTRs.
The Supervisory Board of JSC Bank of
Georgia continues to comply with the
governance standards set by the NBG.
Board committee composition
I was delighted to have been elected
as Director and assume the role of
Chairman on 10 March 2022 following the
resignation of Neil Janin as advised in our
annual report last year.
During the year we continued to deliver on
our key corporate governance commitments
and, as a result, the Board appointed
Véronique McCarroll as Chair of the Risk
Committee with effect from 1 January
2022, and Cecil Quillen as Chair of the
Remuneration Committee with effect from
1 January 2023, to continue to meet the
governance standards set by the NBG.
Board effectiveness
The Board undertook an internal
effectiveness review of itself and its
committees. This was facilitated by the
Company Secretary and further details on
the process and outcomes of this evaluation
can be found on pages 177 and 178.
Purpose and culture
Our purpose ‘Helping People Achieve
More of Their Potential’ is at the core of
our strategy and enables us to deliver
sustainable returns for our shareholders.
Further information on our purpose can
be found on page 19.
The Board understands the importance
of culture and setting the tone from the
top. We strive to cultivate a culture of
collaboration and learning. We receive
regular updates on our employees to
ensure that they are listened to and that
outcomes from interactions are followed
up on. Further information on our culture,
business principles and values is available
on pages 19 to 20, 123 and 175.
Diversity
The Board keeps diversity at all levels
under consideration and during the
year adopted a revised and significantly
expanded Diversity and Inclusion Policy
which aligns to current best practice.
As a FTSE 250 company, the Board is
mindful of the aims of the Parker Review
and the FTSE Women Leaders Review,
and of those of the new Listing Rules, and
as part of the ongoing succession cycle,
the Board takes into consideration all
aspects of diversity. Further information
on diversity is available on pages 94 to 95
and 176 to 178.
Engagement with stakeholders
Since my appointment as Chairman,
I have undertaken a number of meetings
with stakeholders across the business,
including travelling to Georgia to meet
executives, senior management and
employees across the business.
In addition, I have undertaken a range
of meetings with shareholders at the
Company’s AGM. I have participated in
a roadshow where I have met with our
major shareholders. Furthermore, I have
also met with the Company’s external
advisors and senior governmental
regulatory supervisors.
I look forward to continuing to engage
with stakeholders in the future. Further
information on our stakeholder engagement
is available on pages 149 to 153 and 174.
AGM outcomes and
shareholder engagement
The Board recognises that the AGM
provides an important opportunity for
shareholders to interact with the Board.
We were glad to see that the Directors’
remuneration policy was passed with
a majority of votes, however given a
significant minority of shareholders
voted against this resolution,
members of the Board led a further
shareholder consultation. An update
on this consultation is available on
the Company’s website https://
bankofgeorgiagroup.com/information/
meetings and further information and a
final summary is available in the Chair’s
Letter of the Directors’ Remuneration
Report on pages 202 to 222.
Looking ahead
We remain committed to working
with management to ensure our high
standards extend beyond the boardroom
and are implemented throughout the
business in the successful delivery of the
Group’s strategic priorities.
I would like to thank my fellow Directors
for their commitment during 2022 and
their focus and diligence in ensuring a
robust governance framework for the
Company.
Mel Carvill
Chairman of the Board
23 March 2023
Chairman’s introduction
Mel Carvill
Chairman of the Board
Directors’ governance statement
“The Board believes that a
robust governance framework
facilitates sustainable long-
term growth of the Group.”
Annual Report 2022 Bank of Georgia Group PLC
172
Statement of compliance
with the UK Corporate
Governance Code
The Board is committed to maintaining
high standards of corporate governance
which enhance performance, reduce risk
and promote our shareholders’ interests.
The Board recognise that good corporate
governance is essential in building a
successful business for the longer term
and in supporting positive relationships
with our key stakeholders.
The Board has overall responsibility for
governance and is accountable to its
shareholders. This Governance Report
describes how, during 2022, the Board has
applied the main principles and complied
with the relevant provisions of the Code.
The Code is publicly available at the
Financial Reporting Council’s website,
www.frc.org.uk.
The Board is committed to the principles
of good corporate governance, and
has continued to evolve its governance
framework and underlying governance
structures to meet the needs of
the business.
During the year we have undertaken steps
to ensure ongoing compliance with the
Code, including receiving an analysis from
the Company Secretary on the Company’s
application of the provisions and principles
throughout the year. Throughout the year
ended 31 December 2022, the Company
has applied all the Main Principles and
complied with all provisions of the Code.
This statement, and the reports from
the Board committees, set out how we
applied the Main Principles of the Code
as required by LR 9.8.6. The Directors’
Report also contains information
required to be disclosed under the UK
Listing Authority’s Rules and Disclosure
Guidance and Transparency Rules. To the
extent necessary, certain information is
incorporated into this Report by reference.
Governance structure
The Board is composed of nine Directors,
eight of whom are independent Non-
executive Directors. The Board is assisted
in fulfilling its responsibilities by four
principal committees: Audit, Nomination,
Remuneration and Risk. Their Terms
of Reference are reviewed annually to
ensure they are aligned with the most
recent version of the Code, and that the
committees function effectively. The
relevant Committee recommends any
amendments to the Board.
The current Terms of Reference are
available at:
https://www.bankofgeorgiagroup.com/
governance/documents.
For further information see the
Nomination Committee Report on page
186, Audit Committee Report on page 192,
Risk Committee Report on page 198
and Directors’ Remuneration Report
on page 202.
BOARD
Audit Committee
Key responsibilities:
• Reviews and monitors the
integrity of the Group’s
financial and reporting
processes.
• Responsible for the
governance of both the
internal audit function
and external auditor.
• Works with the Risk
Committee in assessing
the effectiveness of the
risk management and
internal control framework.
See pages 192 to 197
for the Audit Committee
Report.
Nomination Committee
Key responsibilities:
• Ensures the Board has
the right balance of skills,
experience, independence
and Group knowledge.
• Responsible for both
Director and management
succession planning.
See pages 186 to 191
for the Nomination
Committee Report.
Remuneration Committee
Key responsibilities:
• Makes recommendations
to the Board on the
Directors’ Remuneration
Policy.
• Determines the
remuneration package
of the Chief Executive
Officer and Executive
Management.
• Assesses the performance
of Directors and Executive
Management Team
against KPIs.
• Responsible for design and
oversight of the Group
employee share schemes.
See pages 202 to 222
for the Directors’
Remuneration Report.
Risk Committee
Key responsibilities:
• Assists the Board in
relation to risk oversight.
• Reviews Group risk
appetite in line with
strategy.
• Identifies and monitors
risk exposure and the
risk management
infrastructure.
• Assesses the strength and
effectiveness of the risk
management and internal
control framework.
See pages 198 to 201
for the Risk Committee
Report.
Chief Executive Officer
Management Team
Directors’ governance statement continued
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The role of the Board
The Board is responsible to shareholders
for creating and delivering sustainable
shareholder value through the effective
oversight of the Company’s business.
The Board’s responsibilities include
developing and overseeing the execution
of the Company’s strategy within a
framework of effective risk management
and internal controls, demonstrating
ethical leadership, and upholding
corporate governance best practice.
The Board recognises its duties under the
UK Companies Act 2006 (‘Companies
Act 2006’) to promote the long-term
success of the Company, taking into
account not only the views and interests
of our shareholders but also our various
stakeholders, such as our employees,
customers, the environment and
community as a whole.
Each Director understands their statutory
duty to consider and represent the
Company’s various stakeholders in
deliberations and decision-making.
More details about how the Directors
have fulfilled their duties under Section
172 of the Companies Act 2006 can be
found on pages 149 to 153.
The Board monitors the execution of
strategy and financial performance.
As a Board, we appreciate the need to
ensure management strikes the right
balance between delivering on short-term
objectives and ensuring sustainable
long-term growth.
To ensure the Board meets its
responsibilities, certain key decisions
can only be approved by the Board.
These decisions can be found in the
Schedule of Matters Reserved for the
Board on our website at:
https://www.bankofgeorgiagroup.com/
governance/documents.
The Board delegates authority for
the day-to-day management of the
business to the CEO. The CEO, in turn,
delegates aspects of his own authority,
as permitted under the corporate
governance framework, to the
Management Team of the Bank.
Operation of the Board
The Board meets at least four times a
year, three of which are usually held in
Georgia. Other meetings held during the
year were held via video conference.
The Board’s responsibilities include:
• oversight of the Group;
• strategy and assessment of the risks
and uncertainties and risk appetite;
• the governance structure;
• the Directors’ and Executive
Management’s succession planning
• overseeing the Group’s ESG strategy,
the management of ESG and
climate-related matters and
sustainability reporting;
• setting the overall purpose, values and
culture of the Group; and
• accountability to shareholders for the
Group’s long-term success.
The Senior Independent Non-executive
Director supports the Chairman in his role,
acting as an intermediary for other Non-
executive Directors where necessary and
liaising with the Non-executive Directors
outside of the Board and Committee
meetings.
During 2022, the Chairman met with
the Non-executive Directors without the
CEO present and the Senior Independent
Non-executive Director held a meeting
with the Non-executive Directors without
the Chairman.
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174
What was on the Board’s agenda during 2022
The Board adhered to an annual schedule of rolling agenda items, designed to ensure all matters are given due consideration
and reviewed at the appropriate point in the financial and regulatory cycle. The Board had an extensive agenda during 2022:
Financial and corporate
reporting
• Reviewed and approved quarterly, half-year and full-year results.
• Received quarterly Group financial performance updates.
• Declared a final dividend in respect of the period ended 31 December 2021 of GEL 2.33 per share,
and an interim dividend in respect of the period ended 30 June 2022 of GEL 1.85 per ordinary share,
in line with the updated dividend and capital distribution policy.
• Approved the launch of a GEL 112.7 million share buyback and cancellation programme in the
second half of 2022.
• Discussed the Annual Report and received updated and recommendations.
• Reviewed and approved the Group’s Annual Report and Accounts.
• Reviewed and approved the notice of AGM.
• Appointed a new Company Secretary to the Board and its committees.
Strategy • Reviewed the Company’s business principles, purpose and strategy.
• Reviewed performance against strategy.
• Received regular updates from key areas of the Group’s operations.
• Reviewed information technology and cyber risks.
• Received regular updates on the Georgian macroeconomic environment as well as on global
macro developments.
• Monitored the ongoing impact of the Russia-Ukraine war.
• Received updates on key projects.
• Considered updates on ESG practices and assessed the climate risk management framework.
• Approved the Bank’s climate action strategy.
Governance and policies • Assessed the culture, and worked to reinforce the desired culture, of the Group.
• Considered external legislative and governance developments and received regulatory updates.
• Received an overview of the legal requirements toward the functions and duties of the supervisory
board of the Bank.
• Considered Board succession planning.
• Reviewed policies.
• Considered Board and committees’ effectiveness.
• Reviewed Committees’ Terms of Reference and Schedule of Matters Reserved for the Board.
Stakeholder engagement • Received reports about engagement with shareholders and other stakeholders including reports
from investor roadshows.
• Received the results of employee and customer surveys.
• Received reports on engagement with the NBG.
• Received reports from the designated Non-executive Director for engagement with the workforce.
• Received reports on shareholder engagement on the Directors’ Remuneration Policy.
Standing agenda items • Received reports from the Chief Executive Officer.
• Received feedback from Board committees.
• Reviewed and approved the minutes of previous meetings.
• Received status updates on any matters outstanding from previous meetings.
Directors’ governance statement continued
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The Chairman and CEO receive regular
input from the Non-executive Directors
ahead of Board meetings to ensure
that any matters raised by the Non-
executive Directors are on the agenda
to be discussed.
Culture
By setting the tone at the top,
promoting an open and agile culture,
establishing the culture of the Group
and demonstrating our leadership,
management is able to create and
implement policies and procedures in a
manner that clearly sets an expectation
that every employee acts ethically and
transparently in all their dealings. This
fosters an environment where business
and compliance are interlinked.
Maintaining a culture based on six
key business principles and ensuring
equal opportunities for personal and
professional development are the
key enablers to ensuring this purpose
is delivered.
Our CEO has made culture one of his
leadership priorities and is actively
promoting diversity as one of the
cornerstones of culture. The percentage
of women in the Executive Committee
equivalent and direct reports for the Group
was 50% as at 31 October 2022 – the date
of the most recent FTSE Women Leaders
Review. According to the statistics in this
external report on FTSE 250 companies,
the Group is number 10 overall and ranked
first in the banking sector.
To encourage all employees to participate
in the development of the Group’s culture,
our CEO takes the following steps to
promote engagement: he writes a blog
for employees, records video messages,
updates the Group with examples of
employees going the extra mile to inspire,
highlights where employees have shown
potential, and holds live discussions
during which employees can ask the CEO
questions and talk directly with him. In
addition, he has encouraged employees to
engage in the talent development process
introduced in 2020.
More information on our employee
engagement initiatives can be found on
pages 122 to 134 and 149 to 153, and later
in this report.
Following employee feedback and
outputs from eNPS surveys and
Barrett Organisational Culture and
Values Assessment, and the Board’s
ongoing emphasis on culture, the
Board has identified the following core
values, aligned with our mission
and key strategic and operational
objectives:
• motivation;
• support;
• creation and action; and
• courage.
The Board, with management input,
further identified key business principles
designed to support the organisational
values and reinforce the message of
sustainable value creation within the
Group. Our business principles are:
• teamwork;
• development;
• fairness;
• customer-centricity;
• operational excellence; and
• innovation.
The Board considered these business
principles again during the period, taking
into account employee feedback –
including as raised in the Employee Voice
(see below for details on this forum) –
and how values and principles were being
embedded to date, and confirmed that
they continue to be appropriate.
The Board remains focused on culture
and employee empowerment and
engagement. The Board received an
update on the eNPS and Employee
Engagement scores (the details of
which can be found on page 132 in
our Sustainable Business section).
Every employee is encouraged to
participate in the development of our
culture, and the Board has received
updates on the processes by which
the culture is being shaped.
Foundations of our culture are
embedded across various activities
related to employee engagement
and empowerment. For example,
an updated Talent Assessment system
was launched in 2020 and is based on
our business principles, and employees
were involved in developing this system.
Other examples of providing employees
with opportunities to provide feedback
and direct communication are outlined in
the Sustainable Business section
on pages 84 to 148.
In line with the recommendations of
the Code, Hanna Loikkanen has been
appointed as the designated Non-
executive Director to engage with
the workforce.
Meetings of the Employee Voice, an
information discussion forum for the
Board to engage with the workforce,
have been held during the year. These
meetings, which aim to support the
exchange of opinions, ideas and views
between the Board and employees, are
facilitated by Hanna Loikkanen as the
designated Non-executive Director for
workforce engagement, and all Board
members are invited to participate. In
2022, Employee Voice meetings were
held with three groups to discuss the
current employee experience, challenges
and opportunities, and how to increase
employee engagement and attractiveness
of the Bank as an employer.
In addition, several Board members
provide regular mentoring to members
of the Management Board and to senior
management on leadership, employee
engagement and culture creation.
In 2022, the Board continued to monitor
and assess our culture. An Employee
Engagement Survey was undertaken
by Korn Ferry. An internal eNPS survey
was also undertaken. We were pleased
to see high levels of engagement
with the survey. The Board discussed
the parameters and growth areas as
well as the main detractors. Also, the
Board continued to further improve
the employee experience through a
number of initiatives, including: the
Employee Experience Management
team meeting with every employee
to consider their specific experiences;
enhancing the onboarding process;
developing the exit interview process to
better capture feedback from employees;
and encouraging talent development,
specifically for young talent and those
with high potential. We also received
regular reports on whistleblowing to help
inform the Board’s assessment of the
development of the Group’s culture.
The Board believes there is significant
value in these actions, both in allowing
Directors to gain further insight into
the Group’s culture and employee
issues, and in providing employees with
further opportunities to engage with the
Board. These disclosures reflect how our
employees are considered in the Board’s
decision-making.
Looking ahead to 2023, the Board will
continue to monitor culture, further
improve employee experiences and
enhance the talent development
platform, and monitor metrics and
output from the eNPS survey. We will also
continue to receive reports from Hanna
Loikkanen on employee matters.
We will report in our 2023 Annual Report
on the ways we have developed these
initiatives over the coming year.
Annual Report 2022 Bank of Georgia Group PLC
176
Board and Committee meeting attendance
The Board and Committee meeting attendance can be found on page 170. The Board remain satisfied all Directors have sufficient
time to perform their duties.
Board size, composition and independence
We consider that diversity of skills, background, knowledge, experience, geographic location, nationality, and gender is important
to effectively govern the business. The Board and its Nomination Committee work to ensure the Board continues to have the right
balance of skills, experience, knowledge and independence necessary to discharge its responsibilities in accordance with the highest
standards of governance.
The Board is mindful of developing
diversity both at Board level and at
other levels in the Group, and during
2022 the Board approved a new Diversity
and Inclusion Policy mirroring current
best practice. The Board considers the
following targets when considering
Board composition, drawing on the FTSE
Women Leaders Review, the Parker
Review and the new Listing Rules and
Disclosure Guidance and Transparency
Rules:
• 40% of women on the Board and
leadership teams by the end of 2025;
• At least one women in the Chair,
Senior Independent Director, Chief
Executive Officer or Finance Director
by the end of 2025; and
• One Director from a minority ethnic
background on the Board by 2024.
We note that, in respect of the target
outlined in the second bullet point and
for the purposes of LR 9.8.6R(9), the
Company has met this target as our Senior
Independent Director is a woman. We are
proud that in the recently released 2022
FTSE Women Leaders Review for the FTSE
250, with 50% women in the Executive
Committee equivalent and direct reports,
we place number ten overall and number
one for the banking sector.
Female representation on the Board is at
33%. Further information on the review of
the Board and Committee Compositions
can be found on pages 187 to 191. As a
FTSE 250 company, the Board is also
mindful of the aims of the Parker Review
for companies to have at least one director
from an ethnic minority background by
2024. As part of the ongoing succession
cycle, the Board takes into consideration
the need to improve the ethnic diversity
of the Board during the process for
recruiting new Non-executive Directors.
It is anticipated that this process will
satisfy the Parker Review requirements.
Our approach to diversity is balanced with
the need to appoint directors who can
best serve the interests of the Company
and shareholders, as well as having
relevant experience for a banking business
substantially based in Georgia.
Following the appointment of Mel Carvill
in March 2022, the Board considers the
overall size and composition is appropriate,
considering the independence of character
and integrity of all the Directors. Each of
our Non-executive Directors occupies – and/
or has previously occupied – senior positions
in a broad range of relevant associated
sectors, bringing valuable insights to the
Board’s deliberations and contributing
significantly to decision-making. No
individual, or group of individuals, can
dominate the decision-making process and
no undue reliance is placed on any individual.
The Board has assessed the independence
of the Chairman and each of the seven
Non-executive Directors in line with principle
G and provisions 9 and 10 of the Code.
The Board considers that the Chairman
and each Non-executive Director act in an
independent and objective manner. We
consider that our Non-executive Directors
are independent and free from any
business interest or relationship that could
materially interfere with the exercise of their
judgement in accordance with the criteria
outlined in the Code. In addition, the Board
is satisfied that each Non-executive Director
dedicates the necessary amount of time to
the Company’s affairs and their role.
Considering the matters above, the Board
believes the Non-executive Directors have
retained their independence and that it
is appropriate to put them forward for
election or re-election at the AGM. Further
information on our work on succession
planning can be found on pages 186 to 191
in the Nomination Committee Report.
Cecil Quillen
Archil
Gachechiladze
Mariam
Megvinetukhutsesi
Alasdair
Breach
Hanna Loikkanen
Jonathan
Muir
Mel Carvill
Véronique
McCarroll
Tamaz
Georgadze
Directors’ governance statement continued
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Financial Statements Additional Information
Division of responsibilities
The Board has adopted written statements setting out the respective responsibilities of the Chairman, CEO, Senior Independent
Director and Non-executive Directors. Biographies for the Board members are set out on pages 179 to 181. A summary of the
responsibilities of the Directors is set out below.
Chairman CEO Senior Independent Director Non-executive Directors
• Guardian of the Board’s
decision-making process.
• Ensures the Board plays a
full and constructive part in
strategic decision-making.
• Sets the Board agenda.
• Ensures the Board receives
accurate, timely and clear
information.
• Shapes boardroom culture
and sets clear expectations.
• Ensures a formal and
rigorous evaluation of
the Board takes place
each year.
• Responsible for running the
Group’s business.
• Operational and strategic
management of the Group.
• Develops the Group’s
strategy and commercial
objectives.
• Leads communication with
stakeholders.
• Provides a sounding
board for the Chairman
and serves as a trusted
intermediary for the other
Directors.
• Responsibility for an orderly
succession process for the
Chairman.
• Available to Non-executive
Directors and shareholders
if they have concerns that
normal channels fail to
resolve.
• Meets with other Non-
executive Directors for an
annual appraisal of the
Chairman’s performance.
• Provide constructive
challenge and specialist
advice.
• Provide strategic guidance.
• Take into account the views
of shareholders and other
stakeholders.
• Scrutinise the performance
of management.
Further information on roles and responsibilities can be found on the Company website: https://bankofgeorgiagroup.com/storage/documents/Roles%20and%20Responsibilities.pdf
Board induction, ongoing
training, professional
development and
independent advice
On appointment each Director
participates in an induction programme,
during which they meet members
of senior management and receive
information about the role of the Board
and individual Directors, and each
Board Committee and their respective
delegated powers. They are also advised
by the UK General Counsel and Company
Secretary of the legal and regulatory
obligations of a Director of a company
premium listed on the London Stock
Exchange. Induction sessions are designed
to be interactive and are tailored to
individuals based on their previous
experience and knowledge. In addition,
Directors are informed of the Company’s
strategy and structure, and how the
business operates.
We are committed to ensuring
the continuing development of our
Directors, so they build on their expertise
and develop an ever-more detailed
understanding of the Business and the
markets in which Group companies
operate. All our Directors participated
in ongoing training and professional
development throughout 2022, which
included briefings and presentations by
the UK General Counsel, our Company
Secretary, members of management and
our professional advisors. During the year,
our UK General Counsel and Company
Secretary provided updates on regulatory
and legislative changes, including:
proposed and actual changes
to disclosure requirements of the
UK Listing Rules; restoring trust in
corporate governance and audit;
climate risks reporting; changes to
pre-emption right guidelines; diversity
reporting requirements; and proxy
advisor voting guidelines.
Audit Committee members also received
updates on developments in audit and
accounting, including: mandatory climate
related financial disclosures; energy and
carbon reporting; TCFD reporting; going
concern and viability reporting; corporate
governance reporting; and the revised
accountancy fraud charter.
During the year, the Board appointed
Computershare Company Secretarial
Services Limited as Company Secretary
to the Board and its committees.
Computershare is a global company
delivering governance solutions to listed
companies through deep professional
expertise and innovative technologies.
All Directors have access to the advice of
the UK General Counsel and Company
Secretary, as well as independent
professional advice at the Company’s
expense, on any matter relating to their
responsibilities.
Evaluation of Board
performance
Following the external evaluation
undertaken by Farman & Partners in
2020, the Board focused on continuous
improvement and recognises that the
annual evaluation process is an important
tool in reaching that goal. The Board
undertook an internal effectiveness
review in 2022, administered via a
questionnaire enabling Directors to
provide anonymous feedback, and
collated by the Company Secretary.
An external Board evaluation will be
undertaken during 2023 in accordance with
the requirement under the UK Corporate
Governance Code to have an external
evaluation at least every three years.
The conclusions of the 2022 effectiveness
review were positive and confirmed
that the Board, its committees and
the Chairman operate effectively, and
that each Director contributes to the
overall effectiveness and success of the
Company. The results confirmed that
the Board has a good balance of skills,
experience and diversity of backgrounds
and personality that encourages open,
transparent discussions and change.
The Board understands the importance
of diversity and the increasing regulations
from the NBG and UK PLC requirements,
and that appropriate focus should
be given to address future Board
vacancies. The Board concluded that
the key areas for 2023 included: Board
succession planning and composition;
continued improvement of the digital
transformation programme; monitoring
the implementation of the various
ESG and sustainability initiatives;
and maintaining and extending
diversity in all its forms at Board and
management levels.
Further information about the evaluation
process for individual committees is
provided in the Nomination Committee
Report.
Annual Report 2022 Bank of Georgia Group PLC
178
In September 2022 the Non-executive
Directors, led by the Senior Independent
Non-executive Director, met to evaluate
the performance of the Chairman. They
concluded that the new Chairman was
performing well and showed effective
leadership. The Chairman also met with
the Non-executive Directors without the
CEO present in December 2022.
Internal controls and
risk management
The Group has a comprehensive system
of risk management and internal controls
in place, designed to ensure that risks
are identified, assessed and mitigated
and that the Group’s objectives are
attained. The Board believes that risk
culture is at the heart of the Group’s
Risk Management framework. Further
information on the risk framework is
available on page 57 and information on
the risk culture of the Group is available
on page 58.
The Board recognises its responsibility
to present a fair, balanced and
understandable assessment of the
Group’s position and prospects. The
Board has overseen the process for
determining whether the Annual Report
and Accounts presented a fair, balanced
and understandable assessment of
the Group’s position and performance,
business model and strategy. A statement
on this is made on page 223.
The Board is accountable for reviewing
and approving the effectiveness of
the internal controls operated by the
Group, including financial, operational
and compliance controls, and risk
management. Further information on
the Group’s internal controls is available
on page 58 and information on the
effectiveness review is available on
page 59.
The Board recognises its responsibility in
respect of the Group’s risk management
process and system of internal controls,
and oversees the activities of the Group’s
external auditor and the Group’s risk
management function supported by the
Audit and Risk Committees.
The Group’s risk management approach is
further discussed in the Risk Management
section of the Strategic Report on pages
56 to 61. For details on the management
of principal risks and uncertainties please
refer to pages 62 to 81. Please refer to
pages 192 to 197 for further details on the
role of the Audit Committee, and pages
198 to 201 for further details on the role
of the Risk Committee.
The Group’s governance structure for
risk management is illustrated on page
59. See page 59 in the Risk Management
section for the confirmation of
effectiveness of our risk management
processes and internal controls.
Diversity and Inclusion
Policy
The Group’s Diversity and Inclusion Policy
applies to all employees of the Group, all
functions, all units in the Group, and all
subsidiaries with regard to age, gender,
ethnicity, sexual orientation, disability and
socio-economic backgrounds. The Board,
the Audit Committee, the Nomination
Committee, the Risk Committee and the
Remuneration Committee have regard
for the Diversity and Inclusion Policy when
reviewing it’s composition, succession
planning and future appointments.
The Diversity and Inclusion Policy commits
to ensuring a diverse and inclusive
culture within the Group. Our ongoing
aim is to be a bank that develops and
maintains diversity and inclusivity – for
our employees, our customers, all our
stakeholders and for society.
More information on the Group’s Diversity
and Inclusion Policy, its objectives,
implementation, application to the
Board and its committees, and results
can be found on pages 187 to 189.
In December 2022, the Board also
approved new or significantly revised
policies, including:
• Diversity and Inclusion Policy
• Anti-Discrimination Policy
• Human Rights Policy
These policies have been drafted to be
clear and easy to follow, and are based
on international best practice. More
information can be found on page 88
and pages 149 to 153 of the Sustainable
Business section.
Directors’ governance statement continued
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Financial Statements Additional Information
Board of Directors
Date of appointment
March 2022
Committee memberships
N
Re
Skills and experience
Mr Carvill has extensive international
experience across a broad range of
companies in the financial sector. He
qualified as a Chartered Accountant at
Coopers & Lybrand and is a Fellow of
the Institute of Chartered Accountants
in England and Wales. He holds an
Advanced Diploma in Corporate Finance,
is a Chartered Insurer and an Associate of
the Chartered Insurance Institute, as well
as a Fellow of the Chartered Institute for
Securities and Investment.
Career
Mr Carvill worked at the Generali Group
from 1985 until 2009, holding various
positions including Chief Risk Officer, Head
of Corporate Finance and M&A and of
Strategic Planning. He also served as Head
of Western Europe, Americas and Middle
East at Generali. In 2009 he joined PPF
Partners, a private equity fund investing
in Central Eastern Europe and Asia, where
he held the position of President until 2014,
and then worked for the wider PPF Group,
latterly serving as an advisor. Mr Carvill
served on company boards in European
and Asian markets, including as senior
independent director of Sanne Group plc.
Other appointments
• Vice-chairman of Aviva-Cofco Life
Insurance Company Ltd
• Director of Singapore Life Holdings PTE
Ltd and Singapore Life Ltd
• Director of Clearbank Group Holdings Ltd
• Member of the operating board of Genesis
Investment Management LLP
• Director of Guernsey Investment Fund
• Director of Home Credit N.V.
• Commissioner of PT Home Credit
Indonesia
Date of appointment
February 2018
Committee memberships
Re
A
N
Skills and experience
Ms Loikkanen has over 25 years of experience
working with financial institutions in
Russia and Eastern Europe. She holds a
master’s degree in Economics and Business
Administration from Aalto University and
has attained a certificate in Corporate
Sustainability Management from Yale SOM.
Career
Ms Loikkanen has worked for Nordea
Finance in various senior management
positions in Poland, the Baltic States
and Scandinavia with a focus on business
development, strategy and business
integration; for SEB in Moscow where
she was responsible for the restructuring
of SEB’s debt capital market operations
in Russia; and for MeritaNordbanken in
St Petersburg where she focused on trade
finance and correspondent banking. In
2004, Ms Loikkanen joined FIM, a Finnish
investment bank, to run their brokerage
and corporate finance operations in Russia.
From 2007 to 2015 Ms Loikkanen worked
at the Moscow office of Swedish asset
management company East Capital,
managing a private equity fund focusing
on investments in financial institutions in
the region. She previously served as an
independent director of BGEO Group PLC,
which included positions on their Nomination
and Risk Committees.
Other appointments
• Chairman of T&B Capital Oy
• Executive director of OnBoardSolution Oy
• Non-executive director of FinnFund
(Finnish Fund for Industrial Cooperation Ltd)
• Non-executive director of VEF AB
• Non-executive director of Eastnine AB
• Non-executive board member of Finnish
Church Aid Investments
• Non-executive board member of Caucasus
Nature Fund
Date of appointment
January 2019
Skills and experience
Mr Gachechiladze has over 20 years of
experience in financial services in both local
and international organisations. He received
his undergraduate degree in Economics from
Tbilisi State University and holds his MBA
with distinction from Cornell University. He is
also a CFA Charterholder and a member of
the CFA Society in the United Kingdom.
Career
Mr Gachechiladze held senior positions
between 1998 and 2009 at the World Bank’s
CERMA, KPMG, The European Bank for
Reconstruction and Development (EBRD),
Salford Equity Partners, Lehman Brothers
Private Equity (currently Trilantic Capital
Partners) and TBC Bank. In 2009 he joined
the Bank as Deputy CEO, Corporate
Banking and has since held various roles
with the Bank and the Group, such as
Deputy CEO, Investment Management,
CFO of BGEO Group and Deputy CEO,
Corporate and Investment Banking. Prior to
his appointment as CEO, Mr Gachechiladze
served as CEO of Georgian Global Utilities
(formerly part of BGEO Group PLC).
Mel Carvill
Non-executive Chairman
Hanna Loikkanen
Senior Independent Non-executive Director
Archil Gachechiladze
CEO
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Date of appointment
February 2018
Committee memberships
Re
Ri
N
Skills and experience
Mr Breach has extensive experience with
European and Russian companies. He holds
an MSc in Economics from the London
School of Economics and an undergraduate
degree in Mathematics and Philosophy from
Edinburgh University.
Career
Mr Breach has close to 30 years’ experience
in markets, economics, banks and funds.
From 1998 to 2002, he was a Russia and
Former Soviet Union (FSU) economist at
Goldman Sachs, based in Moscow, and
from 2003 to 2007 he was at Brunswick
UBS (later UBS Russia) as Chief Economist,
Strategist and later co-Head of Research
and Managing Director. Mr Breach is the
founder, lead PM and co-CIO of Gemsstock
Fund, a macro hedge fund based out
of London and Switzerland. 12 years in
existence (founded in 2010) it has won
numerous awards and now has $3bn AUM.
He is also co-founder of a number of different
enterprises, including: TheBrowser.com,
a web-based curator of current affairs
writing, FiveBooks.com, a web-based
curated library and set of interviews on
books with experts, Vinothek1620, a Swiss
wine-bar and wine-merchant and Wald &
Klima, a charity planting trees and rewilding
Ursental in Switzerland. He previously served
as an independent non-executive director of
BGEO Group PLC, which included positions
on their Remuneration, Nomination and Risk
Committees.
Other appointments
• Director of the Browser Ltd, FiveBooks Ltd
• Director of Furka Holding AG, Furka
Property AG, Enoteca1620 AG, Wachthuus
AG, Sankt Wendelin AG
• Director of Gemsstock Ltd, Gemsstock AG
and of the Gemsstock Fund
Alasdair Breach
Independent Non-executive Director
Date of appointment
February 2018
Committee memberships
Re
Ri
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Skills and experience
Mr Georgadze has extensive experience
with wide range of international companies.
He holds two PhDs, one in Economics
from Tbilisi State University and the other
in Agricultural Economics from Justus-
Liebig Universität Gießen, Germany.
Mr Georgadze also studied Law at Justus-
Liebig Universität Gießen and graduated
with honours.
Career
Mr Georgadze worked as an aide to the
President of Georgia in the Foreign Relations
Department from 1994 to 1995. He had a
ten-year career at McKinsey & Company in
Berlin, where he served as a Partner from
2009 to 2013. At McKinsey & Company,
he conducted engagements with banks
in Germany, Switzerland, Russia, Georgia
and Vietnam, focusing on strategy, risk
identification and management, deposit and
investment products, operations and sales.
In 2013, Mr Georgadze founded Raisin, which
launched the first global deposit platform
in Europe and he continues to serve as its
CEO. Mr Georgadze previously served as an
independent non-executive director of BGEO
Group PLC, which included positions on their
Audit, Nomination and Risk Committees.
Other appointments
• General director at Raisin GmbH
Tamaz Georgadze
Independent Non-executive Director
Date of appointment
February 2018
Committee memberships
A
N
Skills and experience
Mr Muir has over 30 years’ experience
working as a professional in accounting
and finance. He graduated with first class
honours from St. Andrews University in
the UK. He is a British-qualified Chartered
Accountant and a member of the Institute
of Chartered Accountants of England
and Wales.
Career
Mr Muir was a partner at the global audit
and consulting company Ernst & Young
from 1985 to 2000. From 2003 to 2013, he
was Vice President of Finance and Control,
then CFO of TNK-BP, which he joined
after serving as CFO of SIDANCO, one of
TNK-BP’s heritage companies. Mr Muir is
an executive director (CEO) of LetterOne
Holdings SA and is CEO of LetterOne
Investment Holdings. LetterOne is an
international investment business consisting
of two groups which target investments
in the healthcare, energy, telecoms and
technology, and retail sectors. Mr Muir
previously served as an independent non-
executive director of BGEO Group PLC’s
including positions on their Audit and
Nomination Committees.
Other appointments
• Director of LetterOne Holdings SA and of
LetterOne Investment Holding SA
Jonathan Muir
Independent Non-executive Director
Board of Directors continued
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Date of appointment
February 2018
Committee memberships
Re
A
N
Skills and experience
Mr Quillen has extensive legal and
commercial experience in Europe and
the United States. He received his
undergraduate degree from Harvard and his
law degree from the University of Virginia.
Career
Mr Quillen is a lawyer and a London-based
US partner of Linklaters LLP, the global
law firm where he is a leading US capital
markets practicioner in the London market.
He works on a broad spectrum of securities
and finance matters; a particular focus of
his practice has been transactions in the
CIS and in central and eastern Europe.
Mr Quillen became a partner of Linklaters
in 1996 and was resident in the firm’s New
York office before transferring to the London
office in 2000. He is admitted to practice in
New York and the District of Columbia and
is a registered foreign lawyer in England and
Wales.
Other appointments
• Partner at Linklaters LLP
• Officer of the Securities Law Committee,
and chair of the Public Company Practice
and Regulation sub-committee, of the
International Bar Association
• Officer of the Advisory Committee for
Securities Regulation in Europe of the
Practicing Law Institute
• Trustee of the University of Virginia Law
School Foundation
• Trustee of Harvard Global Foundation and
UK Friends of Harvard University
Date of appointment
March 2021
Committee memberships
Ri
N
Skills and experience
Ms Megvinetukhutsesi has extensive
governance and financial experience. She
received her undergraduate degree in
Banking and Finance from Tbilisi State
University and holds an MSc in Finance
and Investments from the University of
Edinburgh.
Career
Ms Megvinetukhutsesi has 20 years’ prior
experience in financial services, including
in banking appointments at the European
Bank for Reconstruction and Development
from 1997 to 2007 and as Deputy CEO at
TBC Bank from 2009 to 2014. Previously
she served as Head of Georgia’s Investors
Council Secretariat from 2015 to 2019,
promoting reforms for improvement
of Georgia’s investment climate.
Ms Megvinetukhutsesi provides consulting
services to businesses on governance
and financial management.
Date of appointment
October 2018
Committee memberships
Ri
N
Skills and experience
Ms McCarroll has over 30 years’ experience
in financial services, with a strong focus
on corporate and investment banking, risk
management and digital banking. She
graduated from ESSEC (Ecole Supérieure
des Sciences Economiques et Commerciales)
in 1985.
Career
Ms McCarroll started her career with
Banque Indosuez in Capital Markets in
1986, serving in various front office fixed
income and then market risk management
roles. She was an executive director at
Crédit Agricole CIB, in charge of Strategy
and Business Transformation, and spent
19 years in consulting firms, helping large
banking clients on risk and finance matters,
including as a Partner at McKinsey &
Company, Oliver Wyman and Andersen/
Ernst & Young. As a Deputy CEO at Orange
Bank S.A., Ms McCarroll has responsibility
for finance, data office, risk and compliance
and SME subsidiary, having previously
headed Strategy and Innovation for Mobile
Finance and Digital banking across Europe
at Orange. She also teaches Finance at Paris
Dauphine University.
Other appointments
• Non-executive director of Moonstone
Lending Fund
• Deputy CEO – Finance, Risk and
Compliance, Orange Bank S.A.
Cecil Quillen
Independent Non-executive Director
Mariam
Megvinetukhutsesi
Independent Non-executive Director
Véronique McCarroll
Independent Non-executive Director
Board Committees
Remuneration Committee
Risk Committee
Nomination Committee
Audit Committee
Chairman
Re
Ri
N
A
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Sulkhan Gvalia
Deputy CEO, Chief Financial Officer
Skills and experience: Sulkhan has extensive experience in banking,
having served in various senior roles at Bank of Georgia, including
Deputy CEO – Chief Risk Officer (2005-2013) and Deputy CEO
– Head of Corporate Banking (2013-2016). Prior to his recent
appointment, Sulkhan was the founder and CEO of E-Space Limited
– the only Georgian company developing electric car charging
infrastructure in Georgia. Sulkhan started his career in banking
at TbilUniversalBank and served as its Deputy CEO before its
acquisition by Bank of Georgia in November 2004.
Education: Sulkhan holds a bachelor’s degree in law from
Tbilisi State University.
Appointed: May 2019
David Chkonia
Deputy CEO, Chief Risk Officer
Skills and experience: Prior to his current role, David served as a
senior advisor and Director of International Business at Bank of
Georgia during 2021-2022. Before joining the Bank, he held senior
positions in local and international organisations. He was Deputy
CEO/Chief Risk Officer at TBC Bank during 2017-2020. Previous to
that, David was Director at BlackRock in London, where he advised
financial institutions and regulators on risk management, balance
sheet strategy and regulation, Senior Vice President at PIMCO,
responsible for the risk advisory practice. During 2009-2011,
David Chkonia worked at European Resolution Capital.
Education: David holds an MBA from the Wharton School of the
University of Pennsylvania and a bachelor’s degree in finance from
San Jose State University.
Appointed: July 2022
Levan Kulijanishvili
Deputy CEO, Chief Operating Officer
Skills and experience: Levan joined the Bank in 1997 and held
various senior positions throughout this career, including Head of
Compliance and Internal Control from 2009 until his appointment
as Deputy CEO/Finance in 2016, and Head of Internal Audit during
2000-2009.
Education: Levan holds an MBA from Grenoble Graduate School of
Business and a bachelor’s degree in economics and commerce from
Tbilisi State University.
Appointed: September 2017
Archil Gachechiladze
Executive Director and CEO of Bank of Georgia Group PLC and CEO of Bank of Georgia
See page 179 for his biography
Management Team
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Zurab Masurashvili
Deputy CEO (subject to regulatory approval), SME Banking
Skills and experience: Zurab was appointed Head of SME Banking in
May 2019 and was promoted to Deputy CEO (subject to regulatory
approval) in December 2022.
Zurab joined Bank of Georgia early in his career in 2004 and then
rejoined in 2015 in various senior positions, including Head of
Express Banking, Head of MSME Banking, Head of Retail Business
Banking, and recently as Head of SME Banking. Previous to Bank of
Georgia, Zurab was Deputy CEO, responsible for Retail Banking at
PrivatBank, and Deputy CEO, Chief Operations Officer at Tao Bank.
Before that, during 2002-2007, Zurab was a business and finance
consultant on a variety of IFI projects globally.
Education: Zurab is a master’s degree candidate in Innovation &
Entrepreneurship from HEC Paris and holds a bachelor’s degree
in geology from Georgian Technical University.
Appointed: May 2019
Nutsa Gogilashvili
Deputy CEO (subject to regulatory approval), Mass Retail Banking
Skills and experience: Nutsa became Head of Mass Retail Banking
in September 2022 and was promoted to Deputy CEO (subject to
regulatory approval) in December 2022.
Prior to her recent appointment, she was Head of Human Capital
Management and Customer Experience during 2019-2022, directly
reporting to the CEO.
Nutsa joined Bank of Georgia in 2016 as Head of Strategic Processes
of Corporate and Investment Banking, responsible for human
capital and customer experience initiatives in the Corporate and
Investment Banking business. In 2017 she became Head of Customer
Experience and played a key role in building the customer experience
management function at the Bank.
Before joining Bank of Georgia, Nutsa was at TBC Bank where she
held the role of Head of Strategic Planning and Budgeting. Before
taking up this role, during 2011-2014, Nutsa worked as an analyst
at JP Morgan in London, covering different products.
Education: Nutsa holds a master’s degree in finance from Bayes
Business School and a bachelor’s degree in economics from Moscow
State Institute of International Relations
Appointed: September 2022
Eter (Etuna) Iremadze
Deputy CEO, Premium Banking
Skills and experience: Etuna was appointed Head of SOLO in
May 2019 and became Deputy CEO in March 2021, and has been
leading SOLO and WM businesses since April 2021.
Etuna joined Bank of Georgia early in her career in 2006 in Corporate
Banking, in various roles, including senior positions. During 2009-2016
she was Head of Blue Chip Corporate Banking Unit, responsible for
structured lending, M&A, significant buyouts and project financing.
Prior to her recent appointment, Etuna spent two years as Head of
Strategic Projects Department at Georgian Global Utilities (formerly
part of BGEO Group PLC).
Education: Etuna holds an MBA from Grenoble Business School and
a bachelor’s degree in economics and commerce from Tbilisi State
University.
Appointed: March 2021
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Andro Ratiani
CEO of Digital Area
Skills and experience: Andro started his career in Bank of Georgia
in 2002 and re-joined in January 2018 as Head of Innovation. He
has extensive experience in financial services. Previous to Bank of
Georgia, Andro was Director/Global Head of Product Management
at IHS Markit, based in New York, responsible for global and US
strategic technology projects for syndication lending. Before that,
he was at UBS AG Investment Bank and Wealth Management Bank
in New York, and at Wells Fargo.
Education: Andro holds a master’s degree in technology
management from Columbia University and a bachelor’s degree
in business administration from University of Hawaii.
Appointed: February 2021
David Davitashvili
Deputy CEO, Data and Information Technology
Skills and experience: David joined Bank of Georgia in 2006 and
served in various senior roles, including Deputy Chief Operating
Officer, responsible for collections, cash operations, procurement,
and information security, and Head of Internal Audit from 2009 to
2017, covering both banking and non-banking subsidiaries.
Education: David holds an Executive MBA from Bayes Business
School and a bachelor’s degree and a master’s degree in
management and microeconomics from Tbilisi State University.
Appointed: July 2022
Zurab Kokosadze
Deputy CEO, Corporate and Investment Banking
Skills and experience: Zurab became Head of Corporate Banking
in June 2020 and became Deputy CEO, leading Corporate and
Investment Banking direction in March 2021.
Zurab joined Bank of Georgia in 2003 as a Junior Corporate Banker
and has progressed through various positions, being in senior roles
prior to his recent appointment. He served as Head of Corporate
Banking, under Deputy CEO, during 2017-2020.
Education: Zurab holds an MBA from Grenoble Graduate School of
Business and a bachelor’s in business administration from Caucasus
School of Business.
Appointed: March 2021
Mikheil Gomarteli
Deputy CEO, Strategic Projects Direction
Skills and experience: Mikheil was appointed as Deputy CEO,
Strategic Projects Direction of JSC Bank of Georgia in
September 2022.
Prior to this appointment, Mikheil was Deputy CEO, leading the
Bank’s Retail Banking business since 2009. Mikheil joined Bank of
Georgia in 1997 and served in various senior and executive roles.
Throughout his time with the Bank, Mikheil has been instrumental
to Retail Banking and digital transformations and was behind many
key initiatives launched during the past few years.
Education: Mikheil holds a bachelor’s degree in economics from
Tbilisi State University.
Appointed: September 2022
Management Team continued
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Levan Gomshiashvili
Chief Marketing and Digital Officer
Skills and experience: Levan was appointed Chief Marketing
Officer in May 2019 and additionally became Chief Digital Officer
in February 2023. Levan has extensive experience in marketing,
having worked in different roles, including creative manager and
chief marketing officer in international and local companies. Before
joining the Bank, Levan was the founder of HOLMES&WATSON,
a creative agency, where he served as an Account Manager for
clients operating in different sectors. Levan is also the founder of
Tbilisi School of Communication, an educational facility focused on
executive education.
Education: Levan holds a master’s degree in management from the
University of Edinburgh and a bachelor’s degree in management
from Saint Petersburg State University of Economics and Finance.
Appointed: May 2019
Ana Kostava
Chief Legal Officer
Skills and experience: Ana became a direct report of the CEO in
October 2021. She joined Bank of Georgia in April 2018 as Senior
Group Lawyer (2018-2020). Prior to that, Ana was an Associate at
Dechert LLP during 2015-2018. Ana has experience working at the
World Trade Organization Appellate Body Secretariat and European
Court of Human Rights. She started her career in law as Associate
at Legal Partners Associated LLC in 2010. Since 2015, Ana has been
an Associate Lecturer at Free University of Tbilisi.
Education: Ana holds an LLM from University of Cambridge and an
LLB from Caucasus University, Caucasus School of Law. She also
holds a Harvard Law School Executive Education Certificate of
Leadership in Corporate Counsel.
Appointed: June 2020
Elene Okromchedlishvili
Head of Human Capital Management
Skills and experience: Prior to her recent appointment, Elene
served as Head of Business Processes, Lean Transformation and
Transactions.
She joined the Bank in 2017 and held various positions, including
Head of IFRS Reporting Unit responsible for the Bank’s stand-alone
financial statements and those of its subsidiaries, and Head of
Operational Efficiency and Cost management Unit.
Before joining the Bank, Elene worked at EY, progressing
to the position of senior auditor.
Education: Elene holds an MBA from IE Business School
and a bachelor’s degree in business administration from
Free University Tbilisi.
Appointed: September 2022
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186
Nomination Committee report
Mel Carvill
Chair of the Nomination Committee
Dear Shareholders,
I am pleased to present the Nomination
Committee (the ‘Committee’) Report,
providing an overview of the work of
the Committee and its activities during
the year.
The primary focus of the Committee
during 2022 was on:
• Succession planning.
• Appointment of Chair of the Board
and of the Remuneration Committee.
• Board and committee composition.
• Board diversity.
The Committee considered the
composition of the Board and its
committees throughout the year.
The skills and experience of each of
the existing directors were assessed,
supported by the Board skills matrix,
identifying opportunities to further align
the composition of the Board with the
Group’s strategic aims.
As detailed in our Annual Report and
Accounts 2021, I was delighted to be
appointed as Chair of the Board and
Chair of the Nomination Committee on
10 March 2022. This followed a thorough
and orderly succession planning process,
following Neil Janin’s confirmation that
he intended to step down from the role.
You can read more about my background
and experience on page 179.
In accordance with our succession
planning procedures and in accordance
with the National Bank of Georgia’s
Code of Corporate Governance (the
‘NBG Code’), Neil Janin stepped down as
a member of the Board of Directors of
Bank of Georgia Group PLC with effect
from 10 March 2022. He also stepped
down as a member of the Supervisory
Board of JSC Bank of Georgia on
31 March 2022.
During the year, the Committee reviewed
the composition of the Remuneration
Committee, to ensure the requirements of
the NBG Code were being met alongside
the requirements of the UK Corporate
Governance Code. As a result of this
review Hanna Loikkanen stepped down
as Chair of the Remuneration Committee
and was replaced by Cecil Quillen with
effect from 1 January 2023, in compliance
with both Codes. I would like to thank
Hanna for her hard work and diligence
and welcome Cecil to his new role.
The Committee has continued to focus on
diversity at both Board and management
level, and we continue to apply the
Company-wide Diversity Policy, which has
been significantly revised and become the
Diversity and Inclusion Policy. The Board
considered a variety of diversity targets
when reviewing new appointments,
including the recommendations of the
FTSE Women Leaders Review and the
Parker Review. Whilst we continue to
work towards being a more diverse
company, we are proud to have 33%
female representation on the Board
and 50% female representation in the
Executive Committee equivalent and
direct reports, which places the Company
at tenth place overall, and first for the
banking sector, in terms of women in the
Executive Committee equivalent and
direct reports within the FTSE 250.
The Committee received a report on the
recent updates to the Listing Rules and
Disclosure Guidance and Transparency
Rules related to diversity. We are mindful
of these new targets and will provide
a full update on our compliance with
these obligations during next year’s
annual report.
I invite you to read more about our work
in the following report.
Mel Carvill
Chair of the Nomination Committee
23 March 2023
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The role of the
Nomination Committee
The Committee provides dedicated focus
to the following areas:
Board leadership
• Identifying the skills, knowledge
and experience required for the
effective leadership and long-term
success of the Company, managing
the balance of Board competencies
through succession planning,
knowledge development and targeted
recruitment.
Board committees
• Monitoring the size, structure
and composition of the Board’s
committees to ensure the necessary
support now and in the future, in line
with succession plans.
Talent pipeline
• Overseeing succession planning for
senior management.
Diversity
• Under the Diversity and Inclusion
Policy, considering the perspectives
and attributes across the Board
and senior management, confirming
ambitions to drive progress in diversity
across the Group.
The Committee’s Terms of Reference
were reviewed and approved by the Board
in September 2022. The full Terms of
Reference are available on our website at
https://www.bankofgeorgiagroup.com/
governance/documents.
Committee membership
and attendance
The membership of the Committee and
the members’ meeting attendance for
the year are set out in the Board and
committee meeting attendance table on
page 170, and the skills and experience
that each member contributes can be
found on pages 179 to 181.
All members of the Committee are
independent Non-executive Directors of
the Board. The CEO and other members
of the management may be invited to
attend meetings to provide more insight
into key issues and developments.
Induction and training
Each Director, upon appointment,
receives a comprehensive and tailored
induction to the Company. This includes:
• meetings with executives, senior
management and employees across
the business to understand the
Group’s strategy, structure, risk profile
and risk management procedures;
• meetings with a range of stakeholders,
including shareholders (such as
being available at the AGM), the
Company’s external advisors and
senior governmental supervisors and
regulators such as the NBG; and
• a session with the Company Secretary
on the statutory and regulatory
obligations upon the Company and
upon each Director.
The induction for Mel Carvill included
in-person and virtual meetings with Board
members and senior management over
a number of months. Topics included
strategy, financial and legal position,
and corporate governance. He spoke
with shareholders at the 2022 AGM, and
engaged in roadshows meeting individual
investors in November and December
2022. Mel looks forward to further
engagement with stakeholders in
the future.
During the year, Committee members
were briefed on recent developments
in respect of diversity and inclusion in
the UK and wider diversity initiatives,
and were provided with information on
appointment processes and independence
criteria and review of the NBG
requirements.
The graphs below show the gender diversity of the Board and Executive Committee equivalent and direct reports, as at
31 December 2022.
33%
67%
50%
50%
Board
Gender
Executive Committee and
direct reports
Gender
Male
Female
Male
Female
Diversity
The Board has adopted a Diversity and
Inclusion Policy, which incorporates a wide
range of factors such as, but not limited
to, ethnicity, sexual orientation, disability
and socio-economic background and
mirrors current best practice, which was
reviewed by the Board in December 2022.
The Board is supportive of the ambition
shown in recent diversity reviews,
including the Parker Review (ethnic
diversity) and the FTSE Women Leaders
Review (formerly Hampton-Alexander
– gender diversity). The Committee will
continue to examine ways the Board
can become more diverse, and the
Business is also working to maintain
high levels of female representation at
senior management level. In 2020, we
committed to a target for diversity of
33% female representation on the Board,
which was achieved in 2021 and has
been maintained in 2022. During 2022,
the Committee received an update on
the following targets:
• 40% of women on the Board and
Leadership teams by the end of 2025;
• At least one woman in the Chair or
Senior Independent Director role on
the Board, and/or one woman as Chief
Executive or Finance Director by the
end of 2025; and
• One Director from a minority ethnic
background on Board by 2024.
In the process, the Board considered
the FTSE Women Leaders’ Review, the
Parker Review published in 2020 and the
updated Listing Rules and Disclosure
Guidance and Transparency Rules.
A full update on the work done in respect
of the above items will be provided in
next year’s annual report. The Committee
notes that in respect of the second bullet
point above, and for the purposes of LR
9.8.6R(9), the Company has met this target
as it’s Senior Independent Director is a
woman. The Board considers diversity to
Annual Report 2022 Bank of Georgia Group PLC
188
be important for the future development
of the business, including the need to be
representative of Georgian society.
During the year, the Committee continued
to spend time reviewing the diversity
of skills and experience, gender, social
and ethnic backgrounds, cognitive and
personal strengths, amongst other
factors, including merit and other
objective criteria.
The Committee noted that with the
Group’s workforce primarily based
in Georgia, the ethnic make-up of its
workforce is different to that of a
UK-based group. The Board itself is
highly diverse in terms of nationality:
our nine Directors are citizens of six
different countries. The Committee will
continue to have regard for all diversity
factors, including gender and ethnicity,
in any future appointments as well as
the appropriate knowledge, skills and
experience in accordance with the Group’s
Diversity and Inclusion Policy.
Whilst the Committee is pleased with
the progress made in increasing diversity
within senior management positions and
the Board, we recognise that there is
always further work to do. We continue
to score highly on gender diversity on the
Executive Committee and direct reports.
The Committee was pleased to note that
in the 2022 edition of the FTSE Women
Leader Review the Company was ranked
tenth overall and first in the banking
sector in respect of the Group’s female
representation in Executive Committee
and direct reporting positions, with
a combined total of 50%. This reflects
some of the talent development and
management processes and initiatives
we have in place, detailed below.
We are pleased to report our progress on
the Group’s diversity initiatives:
1. Mentoring programme for women
leaders:
The programme has been extended to
include women as well as other leadership
pool employees. The programme is
merit-based and promotes diversity.
We continue to develop the programme,
adapting it with the changing business
environment. The programme provides
participants with tailored resources,
including coaching and mentoring,
as well as guidance and support from
our senior management.
Since 2014, Bank of Georgia has also
run a leadership development executive
coaching programme, providing our
middle and senior managers with
a tailored approach to developing
leadership skills. We focus on leadership
skills that underpin a culture of feedback,
customer-centricity, collaboration and
development. Since 2020, the Bank has
implemented a new talent management
system and extended the leadership pool
– in addition to employees in managerial
positions, we now include high-potential
employees (‘HiPOs’) in non-managerial
positions, as determined during the talent
assessment process. They all participated
in newly designed development
programmes in 2021 (including training
in project management, data analytics,
emotional intelligence and design
thinking, among others). We ensure the
pool remains diverse, and we encourage
managers to support and promote their
female subordinates, while providing
equal opportunities for both male and
female employees. Since 2020, the Bank
has prioritised different self-paced
courses, which has significantly impacted
gender representation in business
management skills programmes. We
also monitor gender balance. Our efforts
towards supporting women have been
recognised by 2XChallenge, and we
continue our practices to provide equal
opportunities in the workplace and to
empower female employees.
2. Initiatives to promote Women
in Business:
In 2021 we launched several initiatives to
promote Women in Business. We helped
60 MSME women-owned businesses
digitise their inventory, optimise logistics
processes, sell online on Extra.ge, Georgia’s
e-commerce marketplace, and take
advantage of Extra.ge’s delivery services,
with the help of Visa and Adapter. The
project also assisted with marketing
and public relations activities, including
TV stories about women entrepreneurs.
Overall, this initiative raised the number
of women-owned businesses in BOG’s
portfolio by 3,192, resulting in a 1.3% rise
in the number of women-owned firms in
the portfolio.
In 2020, the Bank received a 2XChallenge
nomination from FMO – part of a
syndicate of five European development
finance institutions providing special
support to women employees and clients.
2XChallenge is an initiative to increase
access to finance for women-owned,
women-led and women-supporting
enterprises in developing and emerging
countries. The nomination was awarded
based on the following criteria related
to employment:
1. Over 40% of the Bank’s employees
are women.
2. The Bank commits to or implements
policies or programmes beyond
those required for compliance, thus
addressing barriers to women’s quality
employment.
The US International Development
Finance Corporation also confirmed
this nomination, adding the Leadership
criterion:
3. Across the organisation, women
represent 40% of senior management
and 33% in three committees out
of five.
By joining the 2XChallenge, we indicated
our objective of providing women in
Georgia with improved access to quality
employment and economic participation.
We closely monitor commitment
thresholds.
From 2021, maternity leave was
substituted with parental leave of two
types: (i) exclusively for female employees
relating to childbirth; and (ii) for childcare,
which can be used by a mother or a
father of a child. The Board supported the
progressive approach towards working
parents, which may also reduce possible
gender bias, particularly with regard to the
recruitment and promotion of women.
In July 2021, the Bank became the UN
Global Compact (UNGC) participant,
confirming the commitment to ensuring
that the UNGC principles are integrated
into the Bank’s strategy, culture, and
day-to-day operations. This commitment
includes policies and practices which
we already have in place as well as their
further development to respect human
rights and promote diversity and equal
opportunities in the workforce.
The Committee was updated on these
thresholds as at July 2022:
• Employment:
• Women in the Bank workforce: 69%
• “Quality” indicator beyond
compliance:
• Additional financial benefit:
parental leave compensation
• Support in back-to-work
adaptation – training programmes
for employees returning to work
from parental leave
• Health and wellbeing: corporate
health insurance package,
including pregnancy and childbirth
coverage
• Furthermore, female as well as
male employees are provided
with:
• additional paid days off,
beyond those defined by the
Labour Code of Georgia.
• childbirth bonus and marriage-
related financial aid.
Nomination Committee report continued
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In September 2022, the Committee noted
highlights from the talent management
and leadership development programs
including:
• the Front2IT retraining, which enables
employees from the front office to
transition to a new profession in the
field of technology supported by
training, mentoring and professional
courses;
• the individual coaching sessions, for
employees in managerial positions to
develop leadership skills and set and
work on personal and professional
goals; and
• programmes for entry level managers.
Diversity remains an important area
of focus, and we are committed to
sustaining and developing our gender
balance and wider diversity in 2023. We
will oversee the following initiatives to
help us promote gender diversity at both
the Board and senior management level:
• A continuation of our sessions
between our employees and successful
Georgian women to build on the
success of the initial event.
Details regarding equal opportunity
and diversity are also provided in the
Sustainable Business section on page 127.
In December 2022, the Board was
pleased to approve the significantly
improved Diversity and Inclusion Policy
which commits to ensuring a diverse
and inclusive culture within the Group,
recognising that this is crucial to the
Group’s success, innovation, and progress.
The Group has committed to several
principles within this Policy to continue
the transformation across the Group.
The Diversity and Inclusion Policy includes
focus areas supporting each principle
to reflect what the Group is currently
striving for. The 11 principles of the
Diversity and Inclusion Policy are:
• Human rights
• Discrimination and harassment
• Gender equality
• Ability variation and accessibility
• Cultural diversity
• Age diversity
• Parental leave
• Equal pay
• Employee health, well-being and safety
• Fair and inclusive recruitment
• Education and training for professional
development.
The full policy can be found
on the Group’s website at
https://www.bankofgeorgiagroup.com/
governance/documents.
In further support of the Group’s
commitment to the principles set out
in the new Diversity and Inclusion Policy,
the Board also approved an Anti-
Discrimination and Anti-Harassment
Policy in December 2022.
Through this policy, the Group commits
to the elimination of discrimination and
harassment of any form within the
Group. The Anti-Discrimination and
Anti-Harassment Policy sets out the
principles and guidelines to support the
Company to become a better institution
for its employees, customers and all
other stakeholders.
The Group has committed to several
anti-discrimination and anti-harassment
principles in this policy and continues the
implementation of anti-discrimination
transformation across the Group. The 10
principles of the Anti-Discrimination and
Anti-Harassment Policy are:
• Equal opportunity and fair treatment
• Non-discrimination in the recruitment
process
• Non-discrimination in remuneration
and promotion
• Prohibition of workplace discrimination
and harassment
• Prohibition of harassment
• Prohibition of sexual harassment
• Non-discrimination against and by
suppliers and third parties
• Non-discrimination in lending
• Diversity and inclusion
• Marketing practices
The Group’s work on diversity and
inclusion and anti-discrimination and
anti-harassment is based on, but not
limited to, the following relevant local
legal requirements and international
standards:
• The United Nation’s Universal
Declaration of Human Rights
• The Charter of Fundamental Rights of
the European Union
• International Labour Organization’s
Fundamental Instruments
• Convention on the Elimination of
all forms of Discrimination against
Women
• UN Guiding Principles on Business
and Human Rights
• OECD Guidelines for Multinational
Enterprises
• UNGC
• International Finance Corporation’s
Performance Standards
Both these policies will be kept under
regular review and updated in accordance
with local legal requirements and
international standards.
Succession planning and
Board composition
We believe effective succession planning
mitigates risks associated with the
departure or absence of well-qualified
and experienced individuals.
To maintain the right balance of skills and
knowledge on our Board, the Committee
keeps Board composition under continual
review. Board succession was discussed at
each meeting of the Committee
during 2022.
Our aim is to ensure the Board and
management are always well resourced
with the right people in terms of skills and
experience, to effectively and successfully
deliver on our strategy. We also recognise
that continued tenure brings a depth
of Company-specific knowledge that
is important to retain.
In addition to the responsibilities set out
above, the Committee is responsible for
both Director and Executive Management
succession planning, and for making
recommendations to the Board regarding
its composition.
There is a formal, rigorous and
transparent procedure for the
appointment of new Directors to the
Board, including a review of other
significant commitments Directors may
have.
Appointment of the
new Chairman
The process relating to the appointment
of Mel Carvill as Chairman on 10 March
2022 was detailed in last year’s
Committee report.
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Appointment of the Chair
of the Remuneration
Committee
The Committee placed specific focus
on reviewing the composition of the
Remuneration Committee during the
year. To ensure the requirements of the
NBG Code, as well as the UK Corporate
Governance Code were met, the former
Committee Chair Hanna Loikkanen
stepped down and was replaced by Cecil
Quillen as Chair of the Remuneration
Committee with effect from 1 January
2023. Mr Quillen has been a member
of the Remuneration Committee since
24 February 2018 and the Committee
believes he brings relevant and necessary
skills to the position, gained through his
prior experiences and roles as detailed
on page 181.
Non-executive Directors’
terms of appointment
On appointment, our Non-executive
Directors are provided with a letter
of appointment setting out the terms
and conditions of their Directorship,
including the fees payable and the
expected time commitment. Each Non-
executive Director is expected to commit
approximately 25-35 days per year to
the role. Additional time commitment
is required to fulfil their roles as Board
Committee members and/or Board
Committee Chairs, as applicable. The
Committee was satisfied that all Non-
Executive Directors dedicate the amount
of time necessary to contribute to the
effectiveness of the Board.
External appointments
Prior to accepting any external
appointments, Directors are required
to seek the Board’s consent. The Board
believes that other external directorships
and positions provide the Directors with
valuable expertise that enhances their
ability to act as Non-executive Directors
of the Company. The number of external
directorships and positions should,
however, be limited, in particular for
Executive Directors, to ensure they can
dedicate the amount of time necessary
to contribute effectively to the Board.
Independence
As part of the Board effectiveness review,
the Committee asks Board members to
evaluate their own contribution. For each
Non-executive Director, the Committee
reviews the time commitment required
by them, taking into account any external
directorships, their length of service
and their independence of character
and integrity. Based on the results of
these reviews, the Committee makes a
recommendation to the Board regarding
the suitability of each Non-executive
Director for re-election to the Board.
The Board has assessed the independence
of the new Chairman and each Non-
executive Director in line with principle
G and provision 9 of the UK Corporate
Governance Code, and are of the opinion
the Chairman and each Non-executive
Director act in an independent and
objective manner. We consider that,
under the Code, all of our Non-executive
Directors are independent and free from
any relationship that could affect their
judgement.
As part of a wider assessment, the
Committee considered the extent to
which the length of time on the board
of a predecessor company, BGEO
Group Limited (‘BGEO’), could impact
the independence of the Independent
Directors. Al Breach was appointed to
the board of the predecessor company
Bank of Georgia Holdings PLC (later
BGEO Group PLC, and now BGEO Group
Limited) on 20 October 2011.
He was appointed to the Board of the
Company on 24 February 2018. The
Committee concluded that he meets the
Code’s technical requirements in respect of
independence as further explained below.
Hanna Loikkanen was originally appointed
to the Board of BGEO on 24 October
2011, then resigned from their Board on
19 December 2013. She was reappointed
to the Board of BGEO on 12 June 2015.
The Committee concluded that the
18-month gap was deducted from any
tenure calculations.
The Committee took into account their
views, and also noted the following:
• There were substantial changes in
the Executive Management upon
demerger in 2018 and since (only two
out of the 11 executive managers have
remained since early 2018).
• There were substantial changes
in the nature of the business and
management personnel upon the
demerger in May 2018.
• There are no other factors the Board
considered could impinge on the
independence of the Directors.
The Board also notes that in respect
of succession and the recruitment of
appropriate members to the Board in our
particular geographical, geopolitical and
market environment:
• Any new Board member must clearly
understand the operating, economic
and political environment in Georgia
to give full and proper oversight.
• The Bank is a regulated company
in Georgia, so Board members
must meet the regulator’s various
requirements for the Supervisory
Board, but also be willing to take
responsibility for an emerging-
markets-focused group.
Considering the matters above, the Board
considers that all current Directors have
retained their independence and strongly
recommends their appointment or re-
appointment by shareholders.
However, under the amended NBG
Code which came into force from
2022, the length of time a member of
the Supervisory Board is considered
independent is seven years – and,
further, a Chair of the Board must be
independent. As such, several Directors
were no longer considered independent
under the NBG Code, but they remain
independent under the UK Corporate
Governance Code. This included Neil
Janin, who stepped down from the Board
on 10 March 2022, Tamaz Georgadze,
Al Breach and Hanna Loikkanen (the
NBG Code does not take into account
the 18-month period she was not on
the Board). The NBG regulations on the
membership of committees also differ
from the UK Corporate Governance Code.
Nomination Committee report continued
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The Board of the Company believes
the mirror board structure, where the
same members sit on the Board of the
Company and the Supervisory Board
of JSC Bank of Georgia, with the same
roles in the mirror committees, remains
the best structure for the governance of
the Group.
As noted in last year’s report, the
Committee is overseeing an orderly
transition of changes to the Board,
with those Directors who are no longer
independent under the NBG Code
stepping down or changing roles over
the next few years. Initial changes were
Tamaz Georgadze who stepped down as
Risk Committee Chair on 31 December
2021 but remains a member of the Risk
Committee, Neil Janin who stepped
down as Chair of the Board and from
the Board on 10 March 2022, followed
by Hanna Loikkanen who stepped down
as Remuneration Committee Chair, but
remained a member of the Committee,
on 31 December 2022.
Board and Committee
effectiveness
During 2022, an internal Board
effectiveness review was undertaken.
It concluded that the Board functions
as an effective and efficient team, with
the required skills to meet current and
future priorities.
As part of this review, the Committee
undertook a self-assessment of its
effectiveness.
The findings of the review were
considered by the Committee at its
September 2022 meeting. The Committee
was satisfied with the results of the
evaluation and is confident it continues
to operate and perform appropriately
and fulfil its responsibilities. For more
information on the Board and Committee
evaluation see pages 177 and 178.
Director re-election
Following the Board effectiveness
review, and with careful consideration
of a range of factors, including
Directors’ other commitments, the
Committee recommended to the
Board the re-election of Mel Carvill,
Archil Gachechiladze, Al Breach, Tamaz
Georgadze, Hanna Loikkanen, Véronique
McCarroll, Mariam Megvinetukhutsesi,
Jonathan Muir and Cecil Quillen at the
2023 AGM.
Senior and middle
management succession
planning
We are committed to talent development
programmes and initiatives within the
Group. We increase the skills of our
existing executive managers and develop
a pipeline of new executive, senior and
middle managers through coaching,
mentoring and leadership programmes.
We continue to expand our programmes
to include management at lower levels.
Our talent development programmes
are transparent and promote teamwork
and development, in line with our
business principles. We aim to nurture
managers who:
• have the courage to give and seek
honest feedback;
• realise ‘a stronger me plus a stronger
you makes a stronger us’;
• value meritocracy over favouritism;
• encourage dialogue over an
authoritative decision-making style;
and
• favour cooperation over individualistic
or ‘heroic’ behaviour.
During 2022, the Bank continued
initiatives to encourage talent
development across the Bank, with a
focus on young talent and those with
high potential.
The Bank runs Leaderator, the most
recognised student development
programme on the market, designed to
provide opportunities for young people
to develop skills and competencies,
explore various business and operational
units, and gain practical experience with
real projects. Leaderator is one of the
most extensive student programmes
implemented by the Bank in recent
years. We have expanded its offerings
for the past few years and, in 2022,
ran programmes in: Corporate and
Investment Banking, Premium Banking
and Brokerage, Small and Medium
Business, Financial Management,
Business Analysis and Reporting, Risk
Governance, Business Efficiency, Retail
Banking, Digital Channels Development,
Information Technologies, Quantitative
Models Analysis, Data Science, Human
Capital Management, Marketing and
Compliance. Participants were assigned
mentors within the Bank or from G&T.
In accordance with the Group’s senior
management succession planning, the
Group was pleased to announce that
members of JSC Bank of Georgia’s
Executive Management Team, Nutsa
Gogilashvili – Head of Mass Retail
Banking, and Zurab Masurashvili –
Head of SME Banking, were promoted
to Deputy CEOs for the Bank on
19 December 2022, subject to NBG
approval. Both Zurab and Nutsa have
been key to Bank of Georgia’s success
over the past few years. Zurab has
transformed SME banking, resulting in
our leadership position in this segment.
Nutsa has demonstrated great
achievements in developing a customer-
centric culture and a new human capital
management strategy, which led to a
major improvement in customer and
employee experience and high NPS
and eNPS scores. The Committee
has confidence that Zurab and Nutsa
will further strengthen the Executive
Management team and keep contributing
to the success of the whole organisation.
Further information on talent
management can be found in the
Sustainable Business section on page 128.
During 2022, the Committee received
reports on the talent pipeline across the
Group for senior management positions
and has, alongside the Board, dedicated
time to strengthening the senior
management team as part of the wider
strategic development of the Group.
Looking ahead to 2023
In the coming year, the Committee
will spend time on succession planning
and diversity at Board and senior
management level, including a review
of Committee composition.
Consideration and additional focus will be
given to the governance requirements of
both the UK Corporate Governance Code
as well as the NBG Code, in particular
in relation to Board composition and
independence requirements, and of the
new Listing Rules, the Parker Review and
the FTSE Women Leaders Review.
We will also focus on the talent
management of leadership and high
potential roles within the senior
management team, with focus on
ensuring that the approach and outcomes
align with the Company’s strategic aims.
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Jonathan Muir
Chair of the Audit Committee
Audit Committee report
Dear Shareholders,
I am pleased to report on the activities of
the Audit Committee (the ‘Committee’)
throughout 2022, in which ten formal
Committee meetings were held.
The Committee’s role is to recommend
the financial statements to the Board
and review the Group’s financial reporting
and accounting policies, including formal
announcements and trading statements
relating to the Company’s financial
performance. We also oversee the internal
control environment and the relationship
with Ernst & Young LLP (‘EY’), the
Group’s external auditor, and the role and
effectiveness of the Internal Audit function.
A particular focus of the Committee in
2022 and ongoing in 2023 is on the impact
of the ongoing economic uncertainty for
the Georgian economy, as a result of
the Russia-Ukraine war and global
macroeconomic challenges.
In addition, during 2022, the NBG granted
an extension of two years in respect of
the mandatory audit rotation, under NBG
rules, to allow EY to continue as auditor of
Bank of Georgia Group PLC for the 2023
and 2024 audits. A resolution to reappoint
EY as auditor will be put to shareholders at
the 2023 AGM. There was no requirement
in 2022 for mandatory audit rotation under
the UK Listing Rules or the UK Corporate
Governance Code.
In advance of the extension and the Board’s
decision to retain EY, the Committee
undertook a competitive tender for the
role of external auditor.
The Committee Chair led a thorough,
carefully considered process resulting in the
identification of a preferred and second-
choice audit firm. However, due to the
impact of the Russia-Ukraine war, neither
were able to accept the appointment.
The Committee sought an extension of the
mandatory audit rotation period from the
NBG, alongside the final stages of the audit
tender process. On the basis that it was in
the best interest of the Company, and as EY
remained independent, it was agreed that
EY’s reappointment be recommended at
the AGM in 2023.
The Committee has reviewed and
challenged management across a number
of areas during 2022, including the
monitoring of the control framework during
the changing environment. It has overseen
work on critical areas such as loan loss
provisions and the accounting treatment
of key non-recurring items. The Committee
heard how management assessed the
ECL provision in light of current economic
conditions, and challenged the assumptions
and controls around the model used to
assess their impact. An update on the
ECL provision was provided at regular
Committee meetings, with further updates
provided at ad hoc meetings to review and
approve the regular quarterly and annual
financial reports.
Further, the Committee continues to
give considerable focus to reviewing
management’s work in addressing
cybersecurity and IT-related issues arising
during the year, in light of ongoing remote
working and the increased potential for
attacks on the infrastructure.
The Committee also received reports and
held regular discussions regarding the
ongoing viability of the Company and its
liquidity status. The Committee continued
to focus on the key issues relevant to the
Group’s financial reporting, and worked with
management and EY to review any changes
required in response to the introduction of
new accounting or regulatory guidance.
The Committee receives a report at each
meeting on specific areas of accounting
and quality of earnings, and where material
judgement has been applied. These areas
are discussed, challenged, and the opinion
of the external auditor sought before final
conclusions on appropriate treatment
are reached. Such areas in 2022 included
ECL provisions and impairments, impact
of sanctions, cost capitalisation and
accounting/valuation for repossessed assets.
The Committee is responsible for ensuring
the Bank maintains a risk-aware culture.
We receive regular reports on financial crime
risk management, including fraud risks and
sanctions compliance, information security
and data protections risks, and compliance-
related matters, among others. These will
continue to be areas of focus in 2023.
During the year, the Committee reviewed
and approved the Internal Audit Plan and
its execution for 2022, and approved the
Internal Audit Plan for 2023. We recognise
the importance of the Internal Audit
function to the control environment.
We also continued to ensure the
integrity of the Company’s published
financial information, and reviewed the
judgements made by management and
the assumptions and estimates on which
they were based.
As a Committee, we have worked closely
with our colleagues on the Risk Committee
on matters including liquidity, adequacy
of capital (including adequate buffers),
the impact of the Russia-Ukraine war, the
NBG’s transition to IFRS-based accounting,
information security, cybersecurity and
compliance matters.
The Committee will continue to play
an active role in continuing to oversee
the development of the Group’s risk
management and internal control processes
during 2023.
Jonathan Muir
Chair of the Audit Committee
23 March 2023
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Composition and
operations of the Audit
Committee
The composition of the Committee
complies with the 2018 UK Corporate
Governance Code (the ‘Code’), which
provides that the Audit Committee should
comprise at least three Independent
Non-executive Directors. The independent
Committee members are Jonathan
Muir (Chairman), Hanna Loikkanen
and Cecil Quillen. The Board is satisfied
that Jonathan Muir has recent and
relevant financial experience, which is a
requirement of at least one Committee
member. It is also satisfied the
Committee, as a whole, has competence
relevant to the financial and banking
sector in which the Company operates,
and that it holds the relevant combination
of skills and experience to discharge
its responsibilities.
Full details of the Committee members’
biographies and qualifications can be
found on pages 179 to 181.
The Committee works to a planned
programme of activities focused on key
events in the annual financial reporting
cycle and standing items that it regularly
considers under its Terms of Reference.
It also reacts quickly to business
developments.
Details of attendance at Committee
meetings can be found on page 170.
The Company Secretary is secretary
to the Audit Committee and attends
all meetings. The meetings are also
attended by the Company’s CFO, CRO,
COO, Head of Internal Audit as well as
representatives of EY, the CEO, the Chief
Legal Officer, UK General Counsel and
Head of Compliance where required.
Invitations to attend are occasionally
extended to other members of the Board
and management where necessary, to
provide a deeper level of insight into key
issues and developments.
The Chairman of the Committee,
Jonathan Muir, will be available at the
AGM to respond to any shareholder
questions that may be raised on the
Committee’s activities.
Meetings with the auditor
During the year, the Committee met
privately, without management present,
with EY and the Head of Internal Audit.
The Chairman of the Committee also held
discussions with the lead audit partner
in advance of meetings. The focus of
these private meetings was to encourage
discussion of any issues of concern in
more detail, directly with the external
auditor and the Bank’s Head of Internal
Audit. EY confirmed it was satisfied
with the communication between
management, EY and the Committee.
In addition, the Chair of the Committee
has maintained regular dialogue with
the external auditor throughout the year.
Key purpose and
responsibilities
On behalf of the Board, the Committee
safeguards high standards of integrity
and oversees conduct in financial
reporting, internal control and risk
management (together with the Risk
Committee), and internal audit. It also
oversees the work of our external auditor.
The Chairman of the Committee reports
to the Board on how it has discharged
its responsibilities at subsequent
Board meetings.
A full description of the Committee’s
roles and responsibilities is set out in its
Terms of Reference, as reviewed and
updated in September 2022, available at:
https://www.bankofgeorgiagroup.com/
governance/documents.
Financial reporting
One of the Committee’s key
responsibilities is reviewing the integrity
of the financial statements, considering
the appropriateness of accounting
policies and practices, and reviewing
the significant issues and judgements
considered in relation to the financial
statements.
The Committee received detailed
reporting from the Chief Financial Officer
and the external auditor in respect
of the key areas of management’s
judgements, reporting and audit during
the year. The Committee and the external
auditor, without management present,
discussed the key areas of audit focus,
the suitability of the accounting policies
adopted and whether management’s key
reporting estimates and judgements were
appropriate. Considering the external
auditor’s assessment of risk, but also
using our own independent knowledge of
the Group, we reviewed and challenged –
where necessary – the actions, estimates
and judgements of management in
relation to the preparation of the
financial statements.
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194
The significant governance and control matters and financial judgements considered by the Committee in relation to the financial
statements are addressed below.
Matter considered Action taken by the Audit Committee
Governance • Reviewed governance processes and policies.
• Reviewed the Terms of Reference of the Committee.
• Oversaw the creation of a team responsible for working with KPMG to assess readiness for
internal control reporting under new UK regulations.
• Undertook an externally facilitated committee effectiveness evaluation.
• Undertook a review of the effectiveness of the external auditor.
• Reviewed control assessments around non-financial disclosures.
• Reviewed ECL provisions.
• Initiated an external audit tender.
Financial reporting • Reviewed the appropriateness and disclosure of accounting policies and practices;
• Reviewed the Annual Report and Accounts content and advised the Board on whether the
Annual Report and Accounts were fair, balanced and understandable;
• Reviewed changes to deferred tax balances and disclosures following announced changes to the
Georgian Tax Code at the end of 2022;
• Reviewed the Company’s annual and interim financial statements and quarterly accounts relating
to the Company’s financial performance, including a review of the significant financial reporting
policies and judgements contained therein;
• Reviewed the stress scenarios as a consequence of the ongoing economic environment and
the continuing Russia-Ukraine war; and
• Reviewed and recommended to the Board for its approval of the going concern and
viability statements.
Internal Audit • Reviewed reports of internal audits and monitored action points and follow-up actions arising
from audits.
• Approved the annual internal audit plan and budget for 2022 and 2023.
• Approved internal audit function KPIs.
• Reviewed the internal audit satisfaction survey results and issues statistics.
• Approved amendments to the Group Internal Audit Charter.
• Monitored and reviewed the effectiveness of the Company’s internal audit function, including
overseeing an independent review.
Litigation • Reviewed litigations that could be material to the Company, and whether provisions for contingent
liabilities were required in respect of such cases. For further information please see Note 21 to the
Consolidated Financial Statements on page 306.
ECL provisions • Reviewed the controls around the development of the model used to assist in determining the
appropriate provisions.
• Reviewed the key inputs into the models, including key economic scenarios and management
overlays.
• Assessed outputs against peers and industry.
• Sought external audit opinion and views on the model and its output.
• Reviewed and challenged the judgements used and resolution of any model deficiencies.
Global sanctions • Oversaw the response and controls on additional measures to address the risks associated with
significant inflows of Russian nationals.
• Reviewed the assessment of AML and sanctions risk and any impact on the Company.
Accounting for repossessed
assets
• Agreed the approach for re-valuation of repossessed assets.
BNB governance • Reviewed BNB’s AML/sanctions compliance processes.
The Committee also received regular reports on recoveries and loan write-offs, information security strategy and cyber risks.
Audit Committee report continued
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Internal Audit
The Committee is responsible, on
behalf of the Board, for overseeing the
Internal Audit function, which serves
as the Group’s independent assurance
over the adequacy and effectiveness
of the systems and processes of risk
management and control across
the Group.
The Committee monitors the scope,
extent and effectiveness of the Group’s
Internal Audit function. It reviews and
approves the Internal Audit Policy and
Internal Audit Plan, which is designed
using a risk-based approach aligned with
the Group’s overall strategy. Regular
reports are received from Internal Audit
on audit activities and significant findings,
as well as on corrective measures
and follow-ups. In certain cases the
Committee invites heads of divisions and
departments to present their responses
and mitigating actions regarding Internal
Audit findings.
The Head of Internal Audit reports
functionally to the Chairman of the
Audit Committee and administratively
to the CEO and has direct access to
the Committee and the opportunity to
discuss matters with the Committee
without other members of management
present. The Committee also monitors
the staffing of the Internal Audit
department as well as the team’s
qualifications and experience.
The Committee continues to monitor
the effectiveness of the Internal Audit
function and receives regular updates on
internal audits and remediation actions.
The Committee considered the quality
of the reporting by Internal Audit to the
Committee and its ability to address
unsatisfactory results. In addition, the
independent assessment of the function
confirmed its independence, and many
areas of compliance with international
standards, while identifying areas for
improvement. These formed the basis
of a plan of action commenced in 2022
and continuing into 2023, to enhance the
efficiency and overall effectiveness going
forward.
The effectiveness of the Internal Control
function and its work is continually
monitored using a variety of inputs,
including quality of reports, status of
completion of audit plan and execution of
remediation actions. These are reported
on a quarterly basis. In addition regular
meetings are held between the Audit
Chair and Head of Internal Audit to
discuss ongoing matters and results. On
this basis, the Committee concluded that
the Internal Audit function is effective.
External audit
With respect to our responsibilities for
the external audit process on behalf of
the Board, the Committee:
• approved the annual audit plan,
which included setting the areas of
responsibility, scope and key risks
identified;
• oversaw the audit engagement,
including the degree to which the
external auditor was able to assess key
accounting and audit judgement;
• reviewed the findings of the external
audit with the external auditor,
including the level of errors identified
during the audit;
• monitored management’s
responsiveness to the external auditor’s
findings and recommendations;
• reviewed the qualifications, expertise
and resources of the external auditor;
• monitored the external auditor’s
independence, objectivity and
compliance with ethical, professional
and regulatory requirements;
• reviewed audit fees;
• monitored the rotation of key partners
in accordance with applicable
legislation;
• initiated an audit tender; and
• recommended the appointment,
reappointment or removal, as
applicable, of the external auditor.
Auditor independence
The Committee has adopted a Non-audit
Services Policy to safeguard the auditor’s
independence and objectivity, which was
reviewed and updated in September 2022.
The provision of non-audit services by
our external auditors aligns with the
current EU Statutory Audit regime, the
FRC Ethical Standards and the Code.
Any work – other than for audit or review
of interim statements to be undertaken
by the external auditor – now requires
authorisation by the Committee,
except in very narrow circumstances.
The Policy is available at
https://www.bankofgeorgiagroup.com/
governance/documents.
The Committee has formally assessed the
independence of EY, which included the
review of:
(i) a report from EY describing its
arrangements to identify, report and
manage any conflicts of interest,
and its policies and procedures for
maintaining independence and
monitoring compliance with relevant
requirements; and
(ii) the value of non-audit services
provided by EY. EY has also confirmed
its independence throughout the year,
within the meaning of the regulations
on this matter and in accordance with
its professional standards. As indicated
in Note 25 to the Consolidated
Financial Statements on page 310,
the total fees paid to EY for the year
ended 31 December 2022 were GEL 2.1
million, of which GEL 44,000 related to
work other than the audit of year end
or review of the interim accounts.
The Committee asserts that engaging
EY on occasions for non-audit work is
the most efficient method of having
those particular services delivered to the
Company and does not consider that this
work compromised EY’s independence.
Auditor effectiveness
The Committee has an established
framework for assessing the effectiveness
of the external audit process. This includes:
• a review of the audit plan, including
the materiality level set by the auditor
and the process adopted to identify
financial statement risks and key areas
of audit focus;
• regular communications between
the external auditor and both the
Committee and management,
including discussion of regular papers
prepared by management and EY;
• regular discussions with EY
(without management present) and
management (without EY present) to
discuss the external audit process;
• a review of the final audit report,
noting key areas of auditor judgement
and the reasoning behind the
conclusions reached; and
• a formal questionnaire issued to
all Committee members and to
the management of the Group
responsible for interaction with the
external auditors – which covers,
among other items, the quality of
the audit and audit team, the audit
planning approach and execution,
the presence and capabilities of the
lead audit partner, the audit team’s
communication with the Audit
Committee, and management and the
auditor’s independence and objectivity.
Following the Committee’s assessment
of the external auditor, it formed its own
judgement (which was consistent with
management’s view) and reported to the
Board that:
• the audit team was sound and reliable,
providing high-quality execution
and service;
• the quality of the audit work was of a
high standard;
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196
• EY’s independence and objectivity
were affirmed;
• EY was able to challenge management
on its approach to key judgements;
and
• appropriate discussions were held
with the Committee during the audit
planning process.
The Committee is satisfied that the
relationships between the external auditor
and management allow for scrutiny
of views on both sides, and is pleased
the evaluation highlighted the ability
and willingness of the external auditor
to challenge management’s views in a
constructive and proportionate manner.
The Committee recommended to the
Board that EY be reappointed as auditor
of the Company, and the Directors will
be proposing the reappointment and
determination of EY’s remuneration at
the 2023 AGM.
Audit tender and lead
partner rotation
EY was appointed as auditor of Bank
of Georgia Group PLC in 2018 and
reappointed by shareholders at the 2022
AGM. The Committee was also authorised
to set the remuneration of the auditor,
with 98.40% and 100.00% of votes in
favour for each resolution respectively.
Since the rotation of the Audit Partner
during 2021, Peter Wallace has served as
the lead audit partner for the Company,
and the Committee believes this supports
the continuance of EY’s independence.
Although the Group was not required to
put the external audit contract out to
tender before 2027, the NBG transition
rules required EY to rotate out from the
JSC Bank of Georgia audit following the
2022 audit. The Committee Chair led a
thorough, carefully considered process,
resulting in the identification of a preferred
and second-choice audit firm. However,
due to the impact of the Russia-Ukraine
war, neither was able to effectively
support Bank of Georgia Group PLC audit
or accept the position.
During the process, the Bank applied for –
and was granted by the NBG – a two-
year waiver in respect of the mandatory
audit rotation, allowing EY to remain
in place for the 2023 and 2024 audits
after seeking assurance from EY that it
remained independent.
During 2022, the Company complied
with The Statutory Audit Services for
Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Committee Responsibilities)
Order 2014.
Viability statement
In accordance with the provision 31
of the Code, the Board is required to
make a statement in the Annual Report
and Accounts regarding the Group’s
viability over a specified time horizon. In
collaboration with the Risk Committee, and
considering the recommendations of the
FRC guidance, we spent time considering
the timeframe over which the viability
statement should be made – as well as
an assessment of the period of coverage,
which we agreed should be three years.
This period is considered to be appropriate
as the budget and business processes are
based on a three-year horizon and it also
considers that uncertainty increases as the
time horizon extends.
In assessing the Group’s viability over the
three-year time horizon, the Committee
considered different types of information
including:
• The Group’s business model and
strategic plans.
• Current capital position and
projections over the relevant period.
• Liquidity and funding profile and
projections over the relevant period.
• The Group’s risk profile, including any
breaches of risk appetite, and principal
and emerging risks that could have
a significant negative impact on the
Group.
• The effectiveness of the Group’s risk
management framework and internal
control processes.
• Stress testing and reverse stress testing.
Our full viability statement can be found
on page 83.
Whistleblowing, conflicts
of interest, anti-bribery and
anti-corruption, and data
protection
The Audit Committee ensures there are
effective procedures in place relating to
whistleblowing. The Whistleblowing Policy
is reviewed annually and allows employees
and stakeholders to confidentially raise
concerns about business practices. The
Group has an advanced independent
whistleblowing reporting channel and
case management tool, WhistleB, in
place. The Company has continued
to promote the importance of the
whistleblowing process and procedures
to employees.
In line with the Code, responsibility for
the whistleblowing process sits with the
Board. The Audit Committee continues to
monitor the use of the system. Updates
on whistleblowing procedures, the actions
undertaken to promote the WhistleB
platform and the case management tools
are provided to the Audit Committee
quarterly.
The Audit Committee reviews the Group’s
Anti-Bribery and Anti-Corruption Policy
and procedures and receives reports from
management on a regular basis in relation
to any actual or potential wrongdoing.
It also receives reports on any Code of
Conduct and Ethics violations. There were
four claims in the year from Russian and
Belarussian citizens claiming that the
Bank’s decision to refuse to open accounts
in their names was discriminatory. After
careful review these claims were deemed
unfounded. There were no other significant
findings during 2022.
The Committee also oversees compliance
with the General Data Protection
Regulation and receives regular updates
from the Bank’s Personal Data
Protection Officer.
Risk management and
internal controls
Although the Board assumes ultimate
responsibility for the Group’s risk
management and internal control
framework, its work is supported by
the Audit Committee and the Risk
Committee.
The Audit Committee assists the Board
in fulfilling its responsibility to review
the adequacy and effectiveness of the
controls over financial reporting.
The Committee also monitors the Group’s
compliance with corporate governance
policies and procedures related to anti-
bribery and anti-corruption, conflicts of
interest, and whistleblowing.
During the year, the Committee received
updates on the UK Corporate Governance
reform, in particular on the Audit,
Reporting and Governance Authority
reforms. The Committee has discussed
proposals and started preparations that
it envisages would be required, and will
carefully monitor the progress of further
regulatory updates.
In light of the Russian-Ukraine war,
the Committee kept the evolving
sanctions landscape under review and
ensured that the Company remained
compliant with sanctions. The Bank’s
compliance programme ensured there
were processes in place to manage
these risks, and reviews performed to
evaluate compliance with the applicable
requirements of the sanctions regimes.
The Committee is supported by a
number of sources of internal assurance
within the Group in order to discharge
its responsibilities. Risks are regularly
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reviewed, and management provides
updates to the Committee on how they are
managed within particular business areas.
It also receives reports from the Internal
Audit team, as well as reports on any
compliance issues and litigation updates.
The Internal Audit Plans for 2022 and
2023 included a thorough risk heat map.
The Internal Audit Plan is risk-based and
aligns with the Company’s strategy. We
challenged the reports by management
and Internal Audit and requested data
regarding compliance with key policies and
procedures related to operational risk.
With respect to external assurance, the
Committee reviews the external auditor’s
reports presented to the Committee,
which include its observations on risk
management and internal financial
controls identified as part of its audit.
Fair, balanced and
understandable reporting
The Committee reviewed drafts of
this Annual Report and Accounts to
consider whether it is fair, balanced
and understandable, and whether it
provides the information necessary
for shareholders to assess the Group’s
performance, business model and
strategy. We also gained assurance that
there is a robust process of review and
challenge at different levels within the
Group to ensure balance and consistency.
We also discussed the overall messages
and tone of the Annual Report with the
Bank’s CEO and CFO, and considered
other information regarding performance
presented to the Board during the
period, both from management and the
external auditor. After consideration
of all this information, we are satisfied
that, when taken as a whole, the Annual
Report and Accounts are fair, balanced
and understandable, and provides the
information necessary for shareholders to
assess the Group’s performance, business
model and strategy.
Committee effectiveness
As part of the wider Board and
Committee effectiveness review, an
internally facilitated evaluation of
the Committee’s effectiveness was
undertaken during 2022 and the findings
were considered by the Board at its
September 2022 meeting. The review
concluded the Committee functioned
well, had the appropriate composition to
fulfil its duties, and that the interaction
between the Committee and the Board
was appropriate. The Committee agreed
the practice of organising joint meetings
of the Audit and Risk Committees
continued to be a success and enhanced
effectiveness. The Committee was
pleased with the results of the evaluation
and will continue to consider areas in
which it can improve in the future to
the benefit of the Company. For more
information on the evaluation of the
Board and committees see pages 177
and 178.
Priorities for 2023
The Committee has agreed several focus
areas for 2023, including:
• enhanced risk management processes
and cyber and IT risks;
• continued interaction between the
Risk Committee and the Committee
on specific topics of relevance to both,
in particular capital adequacy and
liquidity;
• ensuring continued integrity and
balance in the Group’s financial
reporting;
• monitoring proposals for UK Corporate
Governance reform and considering
appropriate processes;
• consideration of new and emerging
risks;
• continued focus on the ECL provisions;
• continued work to improve the
performance of Internal Audit as it
implements recommendations from
the independent review;
• monitoring specific implications of
the Russia-Ukraine war on the Bank,
including macro and regional-specific
impacts, and assessing financial
impacts; and
• continued monitoring of controls in
relation to sanctions compliance.
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198
Risk Committee report
Véronique McCarroll
Chair of the Risk Committee
Dear Shareholders,
Having been appointed as Chair of
the Risk Committee from 1 January
2022, I am delighted to present the Risk
Committee (the ‘Committee’) report
on behalf of the Board – and to provide
details on how the Committee discharged
its responsibilities throughout 2022.
The Committee has assisted the Board in
providing oversight of the Group’s overall
risk exposure profile in what continues to
be a challenging global macroeconomic
environment. A key focus area for the
Committee during the year was oversight
of the impact of the Russia-Ukraine
conflict and global macroeconomic
factors. The Committee monitored these
risks and challenges and received regular
risk reports from the Chief Risk Officer
regarding the effects on the Company,
including the sanctions imposed on
Belarus and Russia, and the impact on the
Bank’s loan book and customer portfolios.
The Committee reviewed the processes in
place to assess, monitor and mitigate the
risks linked with these events.
Following the appointment of David
Chkonia as Chief Risk Officer in July
2022, there have been substantial
developments to the operational
risk management framework, the
organisational structure of the Risk
department and reporting to the
Committee. The scope of the ERM
framework has also been redefined.
The Committee has been pleased
with the ongoing implementation
and improvements to the Group’s risk
management framework.
I am pleased to confirm that the Group’s
operational risk management framework
has enabled the Group to proactively
manage the operational requirements of
the business and ensure our operational
risk profile remains robust.
Throughout the year, the Committee has
carefully monitored the development of
the credit portfolio, ensuring compliance
with the risk appetite level. In addition,
the Committee has continued to monitor
liquidity, interest rate and FX risk, for which
the Bank has solid positions within the
parameters of the limits it has defined.
The Committee recognises the importance
of monitoring other risks such as
information security, cyber risk and financial
crime which may affect the business.
I’d like to take this opportunity to thank
the Committee for its support during the
year, and the management team for its
hard work, the quality of reporting to the
Committee and the continued steps being
taken to assess, monitor and mitigate risk.
Further detail of the Committee’s
work during the year is set out in the
following report.
Véronique McCarroll
Chair of the Risk Committee
23 March 2023
An overview of our risk management
framework is set out on pages 57 to 61.
A description of principal risks and recent
trends and outlook, as well as mitigation
efforts, can be found on pages 63 to 81.
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Key purpose and
responsibilities
Ensuring dedicated focus on the following
areas, the Committee:
Risk oversight
• Provides advice in relation to current
and potential future risk exposures.
• Oversees the risk management
policies, processes and infrastructure.
• Oversees, supports and evaluates the
risk management roles of the senior
management team.
Risk appetite
• Reviews Group risk appetite in line
with strategy.
• Supports the Board to ensure the
risk profile is in line with the overall
strategy, and well managed within a
sound and comprehensive risk appetite
framework.
Risk management
• Identifies and monitors risk
exposure and the risk management
infrastructure.
• Assesses the strength and
effectiveness of the risk management
and internal control framework.
• Assesses the Group’s capability to
identify and manage new types of risk.
• Assesses, reviews and challenges the
emerging and principal risks facing
the Company.
• Assesses the adequacy and quality
of the Risk Management function in
conjunction with the Audit Committee.
• Oversees the risk management
policies, processes and infrastructure.
• Reviews the principal risks and
uncertainties disclosures in the
Half-Year and Annual Reports.
The Committee works closely with the
Audit Committee to ensure both are
updated and aligned on matters of
common interest, including those relating
to information security risks and other
operational risks which are reviewed in a
joint Risk and Audit Committee session.
The Committee also considers external
risks arising from macroeconomic
developments, regional instability and
regulatory changes.
The Committee operates under Terms of
Reference, which are reviewed annually
and are available on the Group’s website
at https://www.bankofgeorgiagroup.com/
governance/documents.
Composition and meetings
of the Committee
On 1 January 2022, Véronique
McCarroll was appointed as Chair of
the Committee – bringing extensive
experience in financial services with a
strong focus on corporate and investment
banking and risk management. In
addition to Véronique McCarroll, the
other members of the Committee are Al
Breach, Tamaz Georgadze and Mariam
Megvinetukhutsesi. Full details of
members’ biographies and qualifications
can be found on pages 179 to 181.
Details of Committee meeting attendance
can be found on page 170. The Company
Secretary is secretary to the Committee
and attends all meetings. In July 2022,
the Company’s Chief Risk Officer, Giorgi
Chiladze, was succeeded by David Chkonia
– who has full access to the Committee
and attends all its meetings.
David Chkonia has leveraged his experience
in international risk management to focus
on strengthening the Company’s internal
risk culture and implementing best pratices
in the risk management framework. The
risk team has been reorganised to address
the future needs of the risk management
model. In addition, particular areas of focus
have included building the ERM function,
updating the operational risk management
framework and redesigning the end-to-end
consumer finance credit process.
Other members of management are
invited to provide a deeper level of insight
into key issues and developments as and
when required. Other Board members
are also invited to attend Committee
meetings, and the Committee Chair
reports to the Board on its activities.
During 2022, the Committee considered
a range of reports providing ongoing risk
identification, assessment, mitigation and
management.
The Committee received reports on
the Group’s overall risk profile using
quantitative models and risk analytics;
the loan portfolio; key risk exposures, with
detail of how they are being managed;
performance against risk appetite for
credit, liquidity, interest rates and foreign
currency; emerging and potential risks,
including the drivers of risk throughout
the Group; financial risk and capital
adequacy; and analysis of stress-testing
scenarios and the results of stress tests
and reverse stress tests. The underlying
assumptions, methodology and results
of these tests were reviewed and
challenged by the Committee. Jointly with
the Audit Committee, the Committee
considered reports detailing the Bank’s
information security and cyber risk, KYC
procedures, AML, compliance and other
operational risks.
External risks
Prior to Committee meetings the Board
considers the macroeconomic situation
and political risks which provide context
for the Committee’s discussions on the
Group’s management of financial risks.
The Committee discussed updates
on political and geopolitical events
relating to the economies of Georgia’s
key trading partners, as well as the
impact those events may have on the
Georgian economy.
The Bank discussed the correspondent
relationship and SWIFT transactions
considering the Russian bank sanctions
and determined there was no exposure
at present. However, challenges in
relation to increased client inflows were
highlighted as potential risks to some
entities using legal channels for sanction
evasion/avoidance. Accordingly, several
mitigations were introduced – including
heightened monitoring capabilities in
the front and back offices, increased
AML resources for sanctions screening,
and enhanced due diligence for SWIFT
transactions from or to Russia, with
online transactions blocked by default.
Georgia continues to align its regulatory
framework with that of the EU
according to the Association Agreement
signed in 2014. Further changes to the
framework are expected which may
impact the business and competitive
landscape in the financial services
industry overall. The Bank is engaged in
discussions on regulatory changes with
the NBG and other stakeholders, such
as government bodies or banking and
business associations, to assess and
manage the impacts of these changes.
The Committee is regularly updated on
regulatory developments.
Emerging risk
The Company has continued to
work on integrating climate-related
risks and implementing the TCFD
recommendations. The Committee
reviewed and discussed environmental
and social risks. For more details on
climate action, please see pages 103 to
117 in the Sustainable Business section.
During the year, the Committee noted the
impact of change management on the
Company’s risk management framework,
and it was anticipated that the redesign
of the organisational structure, in
conjunction with the operational risk
management framework as detailed
below, would help address these concerns.
As part of the new organisational
structure, credit risk has been split into
three separate units, giving the Company
a more in-depth understanding of each.
ERM was redesigned and now has holistic
oversight of credit risk.
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200
Financial risks and our
loan book
The Committee receives regular updates
regarding the Company’s financial risks
and loan book, including profiles of the
businesses with the most significant
Group exposures; management’s plans
to manage exposures through initiatives
including increasing local currency loans
and de-dollarisation of the portfolio;
analysis of retail borrowers’ debt-
bearing capacity; capital buffer change
decomposition; and capital adequacy.
Reports are discussed at scheduled
meetings and, where necessary, during
informal interim calls with management.
The Committee continues to monitor the
credit risk exposure, sector and single-
name concentration of the corporate loan
book, as well as the foreign currency share
of the retail loan book. It also reviews the
stress testing results, including internally
developed stress tests and the stress test
using the criteria specified by the NBG.
During 2022, the Committee continued
to monitor NPL levels and management
actions to assure adequate NPL coverage.
The share of NPLs was up 30 bps year-on-
year driven by a one-off methodological
change as the Group sought to align its
internal NPL definitions more closely to
IFRS Stage 3 definitions. As a result, the
Group classified some Retail Stage 3
loans that had already been provisioned
as NPLs. Consequently, the NPL coverage
ratio decreased to 66.4% at 31 December
2022 versus 95.5% at 31 December 2021.
In March 2022, the Committee reviewed
the impact of the PTI penalty issued
by the NBG on the portfolio and noted
the additional controls implemented to
quickly detect any errors in automated
process and to ensure model algorithms
fully comply with the approved policies
and procedures. Throughout the year,
more specific focus was also made on
our consumer loans portfolio to review
scoring model calibrations and end-to-
end risk management.
Operational risks
Jointly with the Audit Committee, the
Risk Committee reviews the operational
risk profile through a comprehensive
risk heat map and a description of the
top incidents and key risk scenarios.
Compliance risk and financial crime risk,
including internal and external fraud
risk, remain areas of focus. The Audit
and Risk Committees received a report
considering fraud risks and the actions
being undertaken to mitigate them.
The Committee considered the events
that had caused business disruption,
their root causes, mitigative actions
and remediation plans. Furthermore,
the Committee continued to review
monitoring metrics and agreed to include
an additional metric for operational risk
monitoring.
The Committee approved the redesign
and implementation of a new operational
risk management framework that aims
to enhance the first line engagement in
the processes and improve operational
risk management governance. The Group
has also established an Operational Risk
Management Committee to further
improve decision-making processes.
IT and information
security risks
Strong IT infrastructure is key to
ensuring the Bank is resilient and able
to maintain necessary systems and
processes. During the year the Audit and
Risk Committees worked together to
oversee the development of a risk-based
information security approach, which
included the implementation of a cyber
risk management framework-policy and
maintenance of a cyber risk register.
A third-party security assessment
of the Group’s network for external
vulnerabilities was undertaken.
In May 2022, a new metric was introduced
to help monitor and track the number of
unique individuals intensively attacking
the Company.
The Company has established a
cybersecurity risk management
framework to align with risk methodology
and compliance with the new Georgian
laws on information security, and to
develop appropriate cyber response plans.
A key achievement during the year was
the introduction of a vandal-protected
backup storage system to ensure that
neither external nor malicious internal
threat actors can harm the core database
backup in any technological way.
The Bank has also appointed a new
DDoS mitigation service provider
which has the capability to defend the
Bank’s infrastructure from larger DDoS
attacks and keep services available. The
Committee has seen positive progress
of the cyber response plans with IT and
other key stakeholders actively engaged.
Risk management
In 2022, the Committee considered a
wide range of risks facing the Group,
both principal and emerging, across
all key areas of risk management. The
Committee assisted the Board in setting
the Group’s Risk Appetite Statement and
updating the Company’s risk appetite
metrics in response to our major strategic
stakes and in consistency with our
recovery planning framework.
During the year, the Committee continued
to work closely with the Audit Committee
to ensure the risk management framework
and systems of internal controls operate
effectively and in compliance with the
Code and FRC guidance. This included
the redefining of the Company’s ERM
scope and restructuring of the Risk
Management function.
During the year, management reviewed
the risk mitigation tools and control
functions. Management reported to the
Committee (and to the Audit Committee)
on their assessment of the effectiveness
of these controls.
The Committee completed a
robust review of the principal risk
disclosures and other relevant risk
management disclosures, and provided
recommendations to the Board on their
inclusion in the Half-Year Report and this
Annual Report.
Finally, the Committee reviewed the viability
statement in conjunction with the Audit
Committee and management. The viability
statement can be found on page 83.
Committee effectiveness
As part of the wider Board and
Committee effectiveness review, an
internally facilitated evaluation of
the Committee’s effectiveness was
undertaken during 2022. The results of
the evaluation were discussed by the
Committee in September 2022, and
it was concluded that the Committee
continued to function well, had the
appropriate composition to fulfil its
duties, and that its interaction with
the Board was appropriate. The
Committee agreed the practice of
organising joint meetings of the Risk and
Audit Committees continued to be a
success and enhance effectiveness. The
Committee highlighted the high quality
of reporting to the Risk Committee and
were pleased to welcome the new Chief
Risk Officer, who has provided insight into
the Group’s evolving risk environment.
Overall, the results of the evaluation were
positive and the Committee will continue
to consider areas where it can improve in
the future to the benefit of the Company.
For more information on the evaluation of
the Board and Committees see pages 177
and 178.
Focus for 2023
A key focus for the Committee
during 2023 will be oversight of the
implementation of the new organisation
structure and operation risk management
framework to ensure the Group’s
objectives are met.
Risk Committee report continued
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The Committee has identified areas of
improvement within the risk management
framework, including the control
environment for fraud risk management,
and will work with management to ensure
these are addressed during 2023.
The Committee will continue to monitor
and review the risks and potential
threats caused by the Russia-Ukraine war,
particularly in relation to compliance
and information security and fluctuations
in interest and FX rates, as well as
consideration for longer-term
economic impacts.
As the NBG adopted IFRS 9 provisioning
standards from January 2023, the
Group will focus on running two IFRS
9 impairment methodologies in 2023,
including the existing internal IFRS 9
methodology for external reporting
and internal risk management, and
NBG IFRS 9 for regulatory reporting
purposes. After year one, the Group will
assess the possibility of moving to a
single methodology. The Committee will
focus on the impact of IFRS 9 on capital
requirements and internal triggers.
The Committee will pursue the good
collaboration and links with the Audit
Committee to maintain the broad
and global view of the Bank risk
management matters.
Annual Report 2022 Bank of Georgia Group PLC
202
Dear Shareholders,
On behalf of the Board, I am pleased
to present the Directors’ Remuneration
Report for the 2022 financial year.
I became Chair of the Remuneration
Committee on 1 January 2023, having
been a member of the Committee since
February 2018. I would like to take this
opportunity to thank my predecessor
Hanna Loikkanen for all her work as Chair.
Our Directors’ Remuneration Report is
set alongside a background of strong
growth momentum for the Group,
excellent financial results and the digital
transformation of the Bank. The Group’s
full year financial results were exceptional,
with ROAE at 32.4%, cost to income at
32.0%, cost of risk ratio at 0.8% and PBT at
GEL 1,244 million. Non-financial measures
were also impressive, with NPS at 58.4,
eNPS healthy at 52.9, and strong progress
on the material ESG focus area of financial
inclusion. The Group maintained a strong
balance sheet and continued investments
in building the business.
Shareholder engagement
and response
The Directors’ Remuneration Policy
(‘the Policy’) was put to shareholders and
approved at the 2022 Annual General
Meeting (‘AGM’), in accordance with
the mandatory three-year cycle. The
Policy was also changed as required
by the regulator as a result of the
new National Bank of Georgia Code
of Corporate Governance (‘the NBG
Code’), as set out in the 2021 Directors’
Remuneration Report, available at
https://bankofgeorgiagroup.com/reports/
annual.
Ahead of determining the revised Policy,
a number of major shareholders were
consulted. As Chair, Hanna Loikkanen
held individual video calls with large
shareholders and spoke to proxy agencies,
to discuss the impact of the NBG Code
changes and solicit specific shareholder
feedback.
The Committee considered feedback,
including feedback from a major
shareholder which led to the Committee
implementing an extension of the
total vesting and holding period of the
discretionary deferred shares from six
years to eight.
At the 2022 AGM, 68% of shareholders
approved the Policy. The Remuneration
Committee was pleased that the Policy
was approved, but recognised that a
meaningful proportion of shareholders did
not support the resolution.
Since the AGM, the Committee,
represented by Hanna Loikkanen and
management representatives, has held
discussions with a significant number of
our major shareholders – in particular
those who voted against the resolution.
Following this recent outreach, which
covered over 50% of our investor base,
a significant majority of our largest
investors remain overwhelmingly
supportive of our Executive Director and
the Group’s strategic ambitions.
In addition, post-AGM discussions were
held with wider stakeholders – including a
proxy voting agency which recommended
that shareholders vote against the Policy
– to understand their concerns.
Shareholders recognised that our Policy
appropriately aligns executive pay
with performance, and highlighted the
importance of the Committee’s ongoing
commitment to stretching performance
targets and greater disclosure around
variable pay. In light of the conversations
with shareholders, the Committee is
comfortable that the targets were
stretching and that achievement against
targets for discretionary is in line with
shareholder expectations. Investors
were also pleased that the pension of
the Executive Director is completely
aligned to the Georgian workforce.
What is in this report?
This Directors’ Remuneration Report is divided into two sections:
• The Annual Report on Remuneration (set out on pages 202 to 222), which includes the Annual Statement by the Chair of the
Remuneration Committee, describes the implementation of Bank of Georgia Group PLC Directors’ Remuneration Policy and
discloses the amounts earned relating to the year ended 31 December 2022.
• A summary of the current Remuneration Policy (set out on pages 217 to 222), the full text of which can be found on our
website at https://bankofgeorgiagroup.com/governance/documents.
The report complies with the provisions of the Companies Act 2006 and Schedule 8 of The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008. It has been prepared in line with the recommendations of the UK
Corporate Governance Code and the requirements of the UKLA Listing Rules.
Directors’ Remuneration report
Cecil Quillen
Chair of the Remuneration Committee
203
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Financial Statements Additional Information
Shareholders emphasised the need to
remain competitive in the local and
regional talent market, and expect the
Remuneration Committee and the Board
to take necessary measures to position
the Group accordingly. In response to one
investor’s request for greater discussion
in the Remuneration Report, where
appropriate, with regard to the context
of the regional recruitment market,
we have expanded the “CEO’s pay and
comparators – peers” section later in
this Report.
Following our consultation meetings,
we were very pleased with the high
quality of engagement. This confirmed
that, with the new Policy approved
by shareholders in June 2022, the
focus of our shareholders and proxy
agencies should now be on ensuring
its continuing successful implementation.
We issued an update statement on
the consultation on 16 December
2022, which can be found at https://
bankofgeorgiagroup.com/information/
meetings.
You can read more about the Remuneration
Structure later in this Statement.
As explained in last year’s Directors’
Remuneration Report, new NBG regulations
required that we change the fixed number
of salary shares and the fixed number
of maximum opportunity discretionary
deferred shares into dollar amounts which
could then be translated in deferred shares.
This also involved renegotiating the CEO’s
and Executives’ contracts. In doing so we
aimed for economic neutrality over the
three-year period.
As part of the feedback process we noted
stakeholders had questioned whether the
share price assumptions used to estimate
an equivalent amount in dollars for the
three-year Policy were optimistic. In
some cases, the stakeholder analysis was
based on a spot price taken at a dip in the
market after Russia’s invasion of Ukraine.
As explained and illustrated in last year’s
Directors’ Remuneration Report, GBP
17.00 (US$ 23.46) was the reference price
per share used by the Company – taking
into account a more long-term analysis of
the share price, both in terms of past and
future expectations. As discussed with
our major shareholders, this was then
linked to an imputed 15% cost of equity
in ensuring the economic neutrality of the
new Policy.
In response to this, and as discussed
with stakeholders in the consultation,
we would like to note that, as at year
end, this estimate has been proven to be
conservative, rather than excessive.
The Executive Director Archil Gachechiladze
receives less compensation under the
new Policy that he would have under the
old Policy.
• The US$ 370,000 cash salary remained
unchanged.
• Under the old Policy, Mr Gachechiladze
would have also received 75,000
deferred salary shares. Under the new
Policy, using the average share price
of the five business days leading up
to Christmas Day, he received 71,694
deferred salary shares at the beginning
of 2023 – a reduction of 3,306 shares.
• Under the old Policy, the maximum
opportunity for performance
remuneration (100%) was 75,000
shares (plus US$ 370,000 converted
into shares), deferred over a six-year
period. In accordance with the new
Policy, the last closing share price
at the date of the determination of
the performance pay for work year
2022 was US$ 33.22, and shares and
maximum opportunity was 77,360
shares – rather than the 86,137 shares
it would have been under the old Policy
(75,000 shares, plus US$ 370,000
converted into shares). This is a
reduction of 8,777 shares.
• To translate this into the actual
discretionary deferred share
remuneration awarded in accordance
for 2022, at 96.9% of maximum
opportunity performance outcome he
received 74,962 shares under the new
Policy – versus the 83,467 he would have
received under the old Policy. This is a
reduction of 8,505 shares.
In addition to disclosing this important point,
we have set out the actions we have taken
to address shareholder concerns below:
• With the new Policy having been
approved, we are committed to a period
of stability in our approach to executive
remuneration, and confirm our intention
for our Policy to remain in effect for
three years.
• Notwithstanding the recent global
inflationary pressures, there will be no
inflation-linked increases over the length
of the contract, with no renegotiation
or salary uplift in 2023 or 2024.
• We remain committed to performance-
related pay and the alignment of long-
term management and shareholder
outcomes, which our shareholders have
supported for many years.
• We will continue to focus on setting
stretch performance targets and
improving the transparency and
quality of disclosure in the Directors’
Remuneration Report, which
shareholders recognised has improved
significantly with recent years’ inclusion
of minimum and stretch targets
and weightings.
• We will continue to engage
regularly with shareholders and
other stakeholders, and commit
to ensuring we consult with major
shareholders ahead of any further
major regulatory change impacting
our Remuneration Policy.
The Committee notes from the
engagement exercise that shareholders
and stakeholders are now focused
on ensuring the continuing successful
implementation of the Policy. The
Committee would like to thank
shareholders for their engagement. The
Board, as always, continues to be available
to shareholders on such matters.
We were pleased that the Remuneration
Report was supported by shareholders at
the 2022 AGM with 93% approval.
Remuneration Structure
The Committee continues to believe the
Policy is in the best interests of the Group.
It was approved by more than two-thirds
of shareholders, is in line with the NBG’s
new regulatory requirements, and has
very strong shareholder alignment.
The structure dictates that a high
proportion of the salary, and all
performance-related pay, is in deferred
shares (no cash bonus). This creates
strong medium- to long-term alignment
with shareholders. Shares are allocated
at the time of grant, rather than vesting,
which ensures maximum alignment
with shareholders. Performance-related
deferred shares are subject to an
extensive malus and clawback regime
As set out in more detail in last year’s
Directors’ Remuneration Report, the key
elements of the Policy are as follows:
• In accordance with the NBG’s
requirements, share salary is fixed in
monetary value in the contract, which
is translated into deferred shares.
Vesting and holding periods are set out
in the new Policy table and are over a
total period of five years.
• In accordance with the NBG
requirements, performance-based
remuneration is capped at a maximum
of 100% of salary (cash and share
salary).
Annual Report 2022 Bank of Georgia Group PLC
204
• The vesting and holding periods for
discretionary performance-based
remuneration mean shares are
released over a period of eight years
from the beginning of the work year
– an increase from the six-year period
under the previous Policy.
• Malus provisions, which were already
extensive, were expanded further for
discretionary remuneration – including
for material breach of applicable
regulations, the Bank’s internal
policies, or significant increases
in the Bank’s regulatory capital
requirements.
• Clawback applies for two years from
the date of vesting, an increase from
one year.
• Pension entitlements for Executive
Directors and senior management
remain in line with the Georgian
workforce, at 0-2% contribution by the
Bank with a further 0-2% contribution
by the Georgian Government.
• Shareholding guidelines require
Executive Directors to build and
maintain a shareholding requirement
equivalent to 200% of total salary,
to be built up and maintained for
two years post-employment. Given
the high proportion of remuneration
in deferred shares, and the length of
deferral, Executive Directors who have
been with the company more than a
couple of years will naturally hold a
higher amount than the shareholding
guidelines at any particular time.
• No cash bonus and no LTIP.
Non-executive Directors’ fees
The revised Policy did not propose any
changes to the section on Non-executive
Directors’ fees. Fees have not been
increased since the Company was listed
in 2018, and further the Board has not
proposed an increase in Directors’ fees,
despite inflation.
Further stakeholder
considerations for the
Remuneration Report
Feedback on the new level of disclosure
for CEO KPIs (including the minimum,
target and maximum, and their
weightings) was very positive during 2021
and 2022, and we have ensured a similar
level of disclosure for this year’s KPIs.
Further to feedback in previous years,
we have also retained a higher overall
weighting for financial KPIs than for
non-financial KPIs. In addition, following
feedback from a major shareholder, we
disclose the total shareholdings of top
management in this report.
Given the importance of ESG matters
to stakeholders, the CEO has KPIs and
personal Key Business Objectives relating
to material ESG matters. This year we
have introduced metrics (with threshold,
target and maximum levels) for financial
inclusion. The Company identified
financial inclusion as a key material ESG
area given our position as a systemic bank
in an emerging economy.
Further, ESG and the share price of
companies is becoming increasingly
correlated. The Committee notes
that the majority of compensation
delivered to executive management is
in shares which are deferred for up to
eight years. The incentive structure for
senior management is inherently geared
towards the medium- to long-term
success of the Company and does not
create ESG risks (or other material risks)
by inadvertently motivating irresponsible
behaviour, instead supporting behaviour
with medium- to long-term positive
impact on ESG matters.
The Group’s purpose is helping people
achieve more of their potential, and
KPIs are chosen to reflect sustainable
growth so the Company can support
its customers. This is underpinned by a
structure that defers remuneration, in
shares, for up to eight years. The KPIs also
reflect the Group’s contribution to the UN
Sustainable Development Goal’s through
the financial inclusion targets.
The Group’s values, identified by
the employee engagement exercise
described in more detail on page 175 of
the Director’s Governance Statement,
are motivation, support, creation and
action, and courage. Our business
principles, identified by a management
team exercise based on the outcome
of the employee engagement exercise,
are teamwork, development, fairness,
customer-centricity, operational
excellence, and innovation. The CEO is
held accountable for these values and
principles by the Net Promoter Score
(NPS) and Employee Net Promoter Score
(eNPS) KPIs.
Workforce remuneration
and engagement
Hanna Loikkanen is a member of
the Remuneration Committee and
designated Non-executive Director to
engage with the workforce. She has
facilitated quarterly informal discussions
known as ‘Employee Voice’ to engage with
the workforce. All Board members are
invited to participate in these meetings,
which aim to facilitate the exchange of
opinions, ideas and views between the
Board and the workforce and allow the
workforce to raise matters (including
remuneration). Further information on
the output from these meetings can
be found in the Directors’ Governance
Statement on page 175.
The Committee considered and approved
an overview of the employee bonuses for
2022. These are divided along business
lines and comprise both cash bonuses and
share bonuses.
Further to the substantial amendments
in last year’s workforce policies, this year
the Committee considered further minor
amendments to workforce remuneration
policies for employees of the Bank.
The main principles of the policy are
competitiveness, flexibility and fairness.
The policies cover fixed and variable
remuneration as well as benefits.
Employees can be awarded deferred
shares via the Employee Equity
Compensation Plan on a discretionary
basis. The alignment with the Group’s
values and its long-term sustainable
success is enhanced by this scheme.
The Committee was updated on workforce
remuneration and discussed gender
pay gap data and analysis for front-
office, back-office and IT positions. It
supported the ongoing review of workforce
remuneration to ensure incentives and
salary bands are gender-neutral.
The Committee was pleased to oversee
the changes in employee remuneration.
Year on year, the average employee total
bonus for 2022 increased 27.6%, the
average cash salary increased 26.3%,
and the average deferred share salary
increased 28.9%.
2022 performance-
based remuneration
for Executive Director
2022 was a year of significant growth
momentum for the Group, with strong
financial results and the Bank’s growing
and more digitally customer base. Its
market-leading digital channels and
payment solutions, coupled with top-of-
mind customer franchise
1
and a dedicated
team with a strong, customer-centric
culture, ensured it was well-positioned
to benefit from economic growth.
The Group reported strong financial
results, culminating in excellent full-year
performance with operating income
before cost of risk (adjusted for one-off
items) increasing 59.4% year-on-year,
profit (adjusted for one-off items)
increasing 55.7% to GEL 1,132 million,
and full-year return on average equity
standing at 32.4% (adjusted for one-off
items). The Group maintained a strong
balance sheet and continued investments
in building the business.
Directors’ Remuneration report continued
1. Based on fall 2022 independent research by IPM Georgia.
205
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Financial Statements Additional Information
Annual Report on Remuneration
The Remuneration Committee and its advisors
The Remuneration Committee is principally responsible for establishing and implementing a Remuneration Policy that rewards fairly
and responsibly and is designed to support the Company’s strategy and promote its long-term sustainable success. The Committee
takes into account pay and employment conditions elsewhere in the Group, and oversees any major changes in employee benefits
structures throughout it. The Committee comprises five independent Non-executive Directors, with Cecil Quillen serving as Chair –
having taken over from Hanna Loikkanen on 1 January 2023. Mr Quillen has been a member of the Committee since February 2018
and Ms Loikkanen continues as a Committee member. Neil Janin stepped down from the Board and as a member of the Committee
on 10 March 2022, and from that date Mel Carvill was appointed to the Board and as a member of the Committee. Other members
during 2022 were Al Breach and Tamaz Georgadze. Members’ attendance is shown in the Board and Committee meetings
attendance table on page 170.
Outside of formal meetings held during the year, the Committee also participated in various telephone discussions. Other attendees
at Committee meetings who provided advice or assistance on remuneration matters from time to time included the CEO, other
Board members, and the UK General Counsel. Attendees at Committee meetings do not participate in discussions or decisions
related to their own remuneration, which helps avoid conflicts of interest.
The Committee may also consider outside guidelines. For example, it follows the Investment Association Principles of Remuneration,
and the UK General Counsel attends events organised by accountancy firms, law firms, stock exchanges, investor bodies and similar
organisations to keep the Committee up to date with developing market practice.
The Committee was not advised by remuneration consultants during 2022 or 2023 to date. The Committee received additional
advice on compliance from Baker McKenzie LLP, the Group’s legal advisors, and is of the view that this advice was objective and
independent.
Shareholder context
The Directors’ Remuneration Policy applicable to this section of the Annual Report on Remuneration was approved by shareholders
at our AGM on 20 June 2022. The Policy received the following votes from shareholders:
Resolution Votes for % Votes against % Total votes cast Votes withheld
Approval of the Directors’
Remuneration Policy 26,378,680 67.62 12,629,820 32.38 39,008,500 250
Below are the shareholder voting figures for the Directors’ Remuneration Report 2021 (including the Annual Statement of the Chair
of the Remuneration Committee), as presented at our 2022 AGM:
Resolution Votes for % Votes against % Total votes cast Votes withheld
Approval of the Directors’
Remuneration Report 35,988,946 93.32 2,576,116 6.68 38,565,062 443,688
The Committee considered the personal
contribution of the CEO to the overall
corporate performance. The Group
achieved excellent results under his
leadership and in part through his
initiatives.
The CEO outperformed against most
of the KPIs and was awarded 96.9% of
his maximum opportunity, which was
paid in deferred shares. This level of
award is considered to be appropriate
as it reflected his performance, all KPIs
including financial metrics, strategic
and ESG metrics, the experience of
shareholders in terms of value creation
(through the buybacks, dividends and the
share price movement) and the wider
experience of stakeholder experience of
the company (including the increase to
the employees’ salaries and bonuses).
The Remuneration Committee noted
that, in 2022, the Group continued to
implement its capital distribution policy.
Shareholders were pleased to receive a
dividend in July following the 2022 AGM.
An interim dividend of GEL 1.85 per share
was paid in October 2022 and a new GEL
112.7 million buyback programme was
implemented and completed from July to
December 2022. A further tranche of the
buyback programme, of up to GEL 148
million, was launched after the 2022 Full
Year Preliminary Financial Results release.
For full year 2022 the Board intends to
recommend to shareholders at the AGM a
final dividend of GEL 5.80 per share.
The Committee also took into
consideration the employee experience,
including the 26.3% and 28.9% increases
for average employees cash and deferred
salary respectively, and the average total
bonuses of 27.6%, as set out above.
The Group monitored its material ESG
metrics in respect of its key material area
of financial inclusion, and Digital Monthly
Active Users and Payment Monthly Active
Users were included as measurable and
material ESG KPIs.
You can read the KPI calculations and
disclosures, and notes on each KPI, in the
section entitled ‘Basis for determining
Mr Gachechiladze’s discretionary deferred
share remuneration in respect of 2022’
later in this Report.
Cecil Quillen
Chair of the Remuneration Committee
23 March 2023
Annual Report 2022 Bank of Georgia Group PLC
206
How the Remuneration Committee addressed the factors in provision 40 of the UK Code
The Remuneration Committee pays close attention to the requirements of the UK Corporate Governance Code (‘the Code’) in
determining the Policy and its structure. This includes the factors set out in provision 40 of the Code:
Principle Approach
Clarity The rationale is clear: the Executive Director and senior management are incentivised towards the medium-
to long-term success of the Company. Targets for annual bonuses are aligned to the Group’s strategic
priorities. This provides clarity to shareholders and other stakeholders on the relationship between the
successful delivery of the Group’s strategy and remuneration paid.
Simplicity The Policy is designed to retain simplicity while complying with all relevant regulatory requirements and
meeting shareholder expectations. Remuneration elements include fixed pay (base salary comprising cash
salary and deferred salary shares, pension and benefits) and variable pay (discretionary deferred shares and
no cash bonus).
Risk By its nature, having such a high proportion of the remuneration in shares deferred over several years, the
structure drives the CEO and senior management to mitigate reputational and behavioural risks or short-
termism in their actions and decisions, and avoids conflicts of interest. Changes to the Policy aim to further
reduce risk-taking behaviour in line with the new NBG Code. The Policy also has minimum shareholding and
post-employment shareholding requirements.
Predictability The Policy describes the purpose, operation and maximum potential of each remuneration element and
illustrates a range of potential outcomes for Executive Directors. Weighted KPIs and ranges for the targets
of KPIs are used in the financial year’s performance review.
Proportionality Outcomes reward performance proportionately by reference to performance targets, although the
Remuneration Committee retains its discretion to adjust the award as it considers appropriate. For further
considerations on proportionality, see the ‘CEO’s pay and comparators – peers’ section on page 211, which
includes a list of possible peers. The CEO’s performance-based remuneration is subject to extensive malus
and clawback provisions.
Alignment to culture A high proportion of remuneration paid in deferred shares rather than cash promotes alignment with the
culture and long-term success of the Company. Further, the CEO’s performance KPIs include: (i) Employee
Net Promoter Score; and (ii) developing ESG (including new metrics on our key pillar of financial inclusion).
See the Chair’s Letter for further explanation of the alignment to the Group’s purpose and values.
Single total figure of remuneration for the sole Executive Director (audited)
The table below sets out the remuneration earned by the Company’s Executive Director, Archil Gachechiladze, in respect of his
employment with the Company for the years ended 31 December 2022 and 31 December 2021.
Mr Gachechiladze’s current service agreements provide for salary in the form of cash and deferred shares. In addition, he is eligible to
receive discretionary deferred share remuneration up to a maximum of 100% of total salary. In accordance with the NBG regulatory
requirements, the new Policy has applied since 1 January 2022 and includes the change in deferred share salary (both quantum and
structure), and variable pay for work year 2022.
For 2022, 86.8% of Mr Gachechiladze’s remuneration as set out in the table below is in the form of deferred shares. Deferred shares
will vest in tranches, with vesting and holding periods of up to eight years from the start of the work year in accordance with the
current Policy. The change in quantum and structure in deferred share salary and maximum variable pay was set out in the 2022
Policy and approved by shareholders.
The changes in share salary and discretionary remuneration from 2021 to 2022 are reflective of the change in Policy, including that
the fixed number of shares for the share salary and maximum discretionary remuneration under the old Policy were changed to fixed
dollar amounts under the new Policy which could then be translated into deferred shares as per the NBG regulations. Please see the
above Annual Statement by the Chair of the Remuneration Committee on page 203 above for more details on how this conversion
was carried out and the comparative levels of remuneration if the old Policy were still in place.
Cash salary
1
(US$)
Deferred
share salary
2
(US$)
Taxable
benefits
3
(US$)
Pension
benefits
4
(US$)
Dividend
equivalents
5
(US$)
Total
fixed pay
(US$)
Discretionary
deferred share
remuneration
6
(US$)
Total
variable pay
(US$)
Single
total figure
(US$)
2022 370,000 2,200,000 58,054 3,400 282,676 2,914,130 2,490,343 2,490,343 5,404,473
2021 370,000 1,686,000 3,141 3,287 32,575 2,095,003 1,791,927 1,791,927 3,886,930
Notes:
1. Expressed in US Dollars but paid in British Pounds and Lari, as applicable, converted into the respective currency as at the date of payment. Accordingly, there may be
variations in the numbers above and those provided in the accounts.
2. Deferred share salary. The figures show the value of the underlying nil-cost options over BOGG shares granted in respect of the 2022 and 2021 work years. For 2022 under
the new Policy approved by shareholders in June 2022, Mr Gachechiladze was awarded 106,034 BOGG shares, the number of shares were calculated by reference to US$
20.7481 which is the average share price of the five working days before 25 December 2021. For 2022 the shares vest on the first anniversary of the start of the work year but
are subject to holding periods so that 40% is released on the second anniversary, and 20% is released on each of the third, fourth and fifth anniversaries, of the start of the
work year, all subject to the terms of his service agreement. Share salary was 75,000 deferred shares per full year for 2021 under the previous Policy. The value attached to
each BOGG share for 2021 was calculated at a US$ 22.480 share price (based on the official share price of GBP 16.680 share closing price on 31 December 2021 converted
into Dollars using an exchange rate of 1.3477, being the official exchange rate published by the Bank of England on the same date).
3. Benefits. The figures show the gross taxable value of Mr Gachechiladze’s health, life and personal accident insurance and tax equalisation payments.
4. Pensions. The figures show the aggregate employer contributions for the relevant years into the Group’s defined contribution pension scheme. Under the Group’s defined
contribution pension scheme, normal retirement age is 65. Mr Gachechiladze receives up to 2% employer contribution, in line with other Georgian employees.
Directors’ Remuneration report continued
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Financial Statements Additional Information
5. Dividend equivalents. The figure shows the dividend value paid in respect of nil-cost options exercised in the relevant year.
6. Discretionary deferred share remuneration. The figures show the value of the underlying nil-cost options over BOGG shares granted in respect of bonus awards in the
relevant year. For 2022 Mr Gachechiladze was awarded 74,962 BOGG shares. The number of shares were calculated by reference to the closing share price on 9 February
2023 (the working day before the meeting) which was US$ 33.2214 (based on the official share price of GBP 27.30 per share converted into Dollars using an exchange rate
of 1.2169, being the official exchange rate published by the Bank of England on the same date). For 2021, Mr Gachechiladze was awarded 90,970 BOGG shares. The value
was calculated by reference to the closing share price on 31 January 2022 (the working day before the meeting at which the award was determined) which was US$ 19.698
(based on the official share price of GBP 14.68 per share converted into Dollars using an exchange rate of 1.3418, being the official exchange rate published by the Bank
of England on the same date). For 2022 the discretionary remuneration is deferred and any discretionary deferred shares will vest as follows: 40% vests immediately, and
15% will vest on each of the third, fourth, fifth and sixth anniversaries of the start of the work year; each tranche is subject to a further two-year holding period and so are
released on the fifth, sixth, seventh and eighth anniversaries of the start of the work year. The awards are subject to the leaver provisions as described in the 2022 Policy
available at https://bankofgeorgiagroup.com/governance/documents. The means of determining the number of shares underlying this remuneration and the terms and
conditions are described in the 2022 Policy. The basis for determining Mr Gachechiladze’s 2022 discretionary award is described on pages 207 to 209.
7. Mr Gachechiladze was reimbursed for reasonable business expenses, on provision of valid receipts in line with company policy.
8. No money or other assets are received or receivable by Mr Gachechiladze in respect of a period of more than one financial year. The Company does not operate an LTIP.
9. The number of shares awarded pursuant to the deferred share salary and discretionary deferred share remuneration is fixed on grant. No discretion has been exercised as
a result of share price appreciation or depreciation. Discretionary deferred shares are subject to one-year targets which are satisfied pre-grant. No amounts were recovered
or withheld in 2019, 2020, 2021 or 2022. The values reported at grant are not attributable to share price appreciation.
It is notable that the deferred share salary is released over a five-year period, and discretionary deferred share remuneration vests
in tranches over a total vesting and holding period of eight years from the start of the work year, during which actual share prices
will also vary.
The following table sets out details of total remuneration for the CEO, Mr Gachechiladze, for the period from 28 January
2019 (effective date of appointment) to 31 December 2022, and his discretionary compensation as a percentage of maximum
opportunity.
Note that 2019 was not a complete year, that in 2020 part of his cash salary was voluntarily reduced, and that variations in share
price affect the total figure of remuneration for 2019, 2020 and 2021 – these years used a share salary of 75,000 deferred shares
for a complete year and a maximum discretionary opportunity of 75,000 deferred shares plus cash salary equivalent in deferred
shares. The cash value of the maximum discretionary deferred remuneration varied according to the share price at the date of
Remuneration Committee meetings.
2019 2020 2021 2022
Single total figure of remuneration (US$) 3,558,415
1
1,561,020 3,886,930 5,404,473
4
Discretionary compensation as a percentage of maximum opportunity (%) 100% 0%
2
97.0%
3
96.9%
Notes:
1. 2019 was not a complete year as Mr Gachechiladze was appointed from 28 January 2019.
2. Mr Gachechiladze did not receive a bonus for the 2020 work year after the NBG informed the Remuneration Committee that, as the Bank had utilised the Pillar 2 or
conservation buffers, no bonus should be granted – please see the Chair’s Letter in the Directors’ Remuneration Report of the Annual Report and Accounts 2021 for further
information. For 2020, the approved discretionary deferred share award, which considered KPIs disclosed in the 2020 Directors’ Remuneration Report and subsequently
approved by shareholders, was 67% of maximum opportunity (but was not paid, as per the previous sentence). Mr Gachechiladze’s 2020 cash salary (and that of senior
management) was voluntarily reduced by 20% from 1 March 2020 to 31 December 2020, and the amount donated to charity by Mr Gachechiladze – half of the remaining
cash salary for that period – has not been taken into account.
3. The increase in remuneration in 2021 compared to 2020 is attributable partly to the reinstatement of the normal cash salary as per note 2, partly to the bonus being paid,
and partly to variations in share price. Share salary and bonus were calculated in accordance with the share price at the time; for each of 2019, 2020 and 2021, share salary
would have been 75,000 shares for a complete year, and for 2022 was cash converted into deferred shares in accordance with the approved Policy and NBG requirements.
4. For 2022 share salary and bonus were calculated using a cash value converted into deferred shares in accordance with the amounts in and terms of the approved Policy and
with NBG requirements.
Basis for determining Mr Gachechiladze’s discretionary deferred share remuneration
in respect of 2022
Mr Gachechiladze’s KPIs included both financial and non-financial components. The financial elements largely track the Group’s
published KPIs as he is expected to deliver on the Group’s key strategic priorities, while non-financial factors include developing
Group culture and ESG performance.
The following table sets out the financial KPIs set for Mr Gachechiladze in respect of 2022, and his performance against them.
The table below provides further explanation of each KPI.
The financial KPIs were selected to reflect medium-term financial metrics for our investors and the sustainable health of our
business. The Remuneration Committee ensures targets set are relevant drivers of required annual performance. KPIs also take
into account stakeholders of the Group and its culture, alongside non-financial strategic priorities, and were disclosed in last year’s
Annual Report.
To improve accountability, we have included two metrics within the Developing ESG KPI to help measure our key initiative of
financial inclusion in Georgia: Digital Monthly Active Users and Payments Monthly Active Users.
Annual Report 2022 Bank of Georgia Group PLC
208
KPI with weighting %
(Numbering refers to the notes below the table)
Threshold
(25%)
Target
(70%)
Max
(100%) Achievement
Weighted
performance
outcome (see
corresponding
notes below
for further
explanation)
Financial KPIs – 60%
1. ROAE (15%)
20% is the medium- to long-term target,
in line with strategy
16.0% 21.0% 24.0% 32.4%
See note 1 below
15.0%
2. Cost to Income ratio (15%) 40.0% 39.0% 37.2% 32.0%
See note 2 below
15.0%
3. COR (15%)
Cost of credit risk ratio
1.8% 1.1% 0.9% 0.8%
See note 3 below
15.0%
4. PBT (15%)
Profit before tax
GEL 780mln GEL 830mln GEL 990mln GEL 1,244mln
See note 4 below
15.0%
Non-financial KPIs – 20%
5. NPS (5%)
Net Promoter Score
35.0 40.0 55.0 58.4
See note 5 below
5.0%
6. eNPS (5%)
Employee Net Promoter Score
46.0 54.0 62.0 52.9
See note 6 below
3.2%
7. Developing ESG (10%) in line with the Group’s 900,000 1,000,000 1,050,000 1,121,434 9.7%
championed SDGs, with financial inclusion metrics of
• Digital MAU and
• Payments MAU
900,000 1,000,000 1,050,000 1,039,834
See note 7 below
Individual KPIs 20%
8. Individual Key Business Objectives Below Met Exceeded 95%
See note 8 below
19%
Total
96.9%
Notes for each KPI in turn:
1. Return on Average Equity (ROAE): 32.4% achieved. ROAE is a long-standing metric of the Company and a key determinant of
profitability for shareholders. Our communicated medium-term target remains 20%+. ROAE was adjusted for one-offs, ROAE
reported was 41.4%. ROAE was 25.8% in 2021, 13.0% in 2020 and 26.1% in 2019. The Committee notes that the achievement of
32.4% represents an extraordinarily high result.
2. Cost to Income ratio: 32.0% achieved. Positive operating leverage delivered with great operational efficiencies achieved by the
CEO in 2022. Cost to Income was adjusted for one-offs, Cost to Income reported was 26.8%. Cost to Income was 37.2% in 2021,
39.7% in 2020 and 37.8% in 2019.
3. Cost of Credit Risk ratio (COR): 0.8% achieved. COR allows the businesses to focus on areas of operation that will have the
greatest long-term effects on its total risk management costs. Cost of credit risk ratio was 0.0% in 2021, 1.8% in 2020 and 0.9%
in 2019.
4. Profit before tax (PBT): GEL 1,244 million achieved. PBT is an important measure of overall performance for any business.
Profitability was outstanding in 2022, with GEL 1,244 million being the highest level ever achieved. PBT was adjusted for one-offs,
PBT reported was GEL 1,635 million. PBT was GEL 802 million in 2021, GEL 316 million in 2020 and GEL 573 million in 2019.
5. Net Promoter Score (NPS): 58.4 achieved in the fourth quarter 2022. NPS is based on external research and is the key measure
for measuring customer satisfaction. NPS surveys are conducted by external surveyors and are not only aimed at customers
(which tends to give a higher score to companies) but by surveying the Georgian public at random. Mr Gachechiladze lead a
focus on customer satisfaction: (i) engage with customers proactively and responding in real time; (ii) anticipate customer needs,
wants and future behaviour; (iii) harness strong human relationships with data analytics for dynamic customer insights; and
(iv) invest in technology to deliver customer experience. The Bank believes that satisfaction feeds customer loyalty, which in turn
impacts the sustainable profitability and the long-term success of the Group. NPS was 55 in 2021, 46 in 2020 and 37 in 2019.
6. Employee Net Promoter Score (eNPS): 52.9 achieved. Employee NPS is calculated by the response to a confidential external
survey of employees. It is based on the question, “On a scale of 0-10, how likely is it that you as an employee would recommend
our Bank to a friend or a colleague as an employer?” Responses of 9 and 10 are counted as promoters; 7 and 8 are neutral; and
0-6 are detractors. eNPS is calculated as the percentage of promoters minus the percentage of detractors. eNPS was 61 in
2021, 58 in 2020 and 46 in 2019. This metric feeds into profitability of the Bank through higher retention rates and thus lower
recruitment requirements. It also supports the Bank in the recruitment of the best talent, which is crucial in a small market like
Georgia. To ensure employee engagement and open lines of communication, the CEO held town halls and periodic live sessions
with employees, and maintained a CEO vlog on Workplace
Directors’ Remuneration report continued
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Financial Statements Additional Information
7. Developing ESG, in line with the Group’s championed SDGs and market best practice, focusing on the two material ESG pillars
for the Bank: 1,121,434 Digital Monthly Active Users (MAU) and 1,039,834 Payments MAU. In 2021 the Group launched and
completed a formal ESG materiality assessment process to gain a multi-stakeholder perspective on ESG issues. This was a
combination of research, data analysis and internal and external stakeholder engagement, including interviews with investors
and surveys. The Bank was able to identify 27 topics, which were then mapped by importance to stakeholders and to business,
with 14 priority topics selected.
Following this, three pillars were identified for the Bank’s most material ESG impact areas: employee engagement, sustainable
financial inclusion, and education/financial education. Two new metrics have been identified in respect of financial inclusion:
Digital MAU and Payments MAU. A monthly active digital user has logged in at least once within the past month to the mBank/
iBank app, and a payment monthly active user has made at least one payment with their card (this method of calculation
ensures dormant accounts are not included). Please see the Sustainable Business section on the importance of financial inclusion
for individuals and businesses in our emerging economy, in particular pages 92 to 94.
Digital MAUs increased 31.5% year-on-year. Payments MAUs (also called monthly active card users in this Annual Report)
increased 33.0% year-on-year.
8. Individual Key Business Objectives: 95% achieved. Mr Gachechiladze’s leadership style, and vision and implementation of strategy
in the face of significant regional difficulties, has been impressive during 2022. His drive for digitalisation means that the Bank’s
digital transformation has even been recognised externally with Bank of Georgia named World’s Best Consumer Digital Bank
2022, becoming a winner in one of only four global award categories by Global Finance (in addition to other awards). In addition
to the financial inclusion initiative covered by the KPI above, in 2022 on the initiative of Mr Gachechiladze the Bank progressed
financial education and inclusion from a younger age. The Bank offers a free account and card for school students and the
associated sCool Card has active lifestyle and education-related offers. The Bank launched an associated mobile app in 2022 –
sCoolApp, which has had a great take up to date with 33,167 monthly active users by December 2022. The Bank also reached
2.1 million people with the financial literacy initiatives through media (1,200 written pieces), social network, TV channel visits
and events. To further support the financial inclusion initiative, in 2022 the Bank launched subscription sets for mass retail
customers, and a payments platform (online analogue of its self-service terminals, bogpay.ge), to make banking easier and more
accessible. One of the biggest obstacles micro business and MSMEs face when they need access to finance is a lack of proper
accounting. Great progress was made in 2022 to fulfil the needs of small businesses, resulting in a 26.2% year-on-year increase in
monthly active MSME clients. The Bank has been fostering financial inclusion for MSMEs by the launch in 2022 of the Accounting
Development Programme, with 145 MSMEs participating since its introduction in 2022. The new low cost brokerage platform
also offers fractional trading capabilities for the first time in Georgia. Mr Gachechiladze has continued to strengthen the
management team and has been actively promoting the necessity of creating a diverse leadership pool to help secure the growth
of the business and succession plans, including in the promotion of women. Changes in leadership roles have been smooth and
resulted in improved efficiency, results and adherence to corporate culture.
Investor confidence in the Company is strong. As at the date of the closing price before the Remuneration Committee meeting,
the share price was US$ 33.22. This is extraordinary, particularly given the high levels of uncertainty and volatility during the year
in the region caused by the Russian-Ukraine war.
The Company distributed a full-year dividend in July 2022 and an interim dividend of GEL 1.85 per share in October 2022. The
Board intends to recommend a final year dividend of GEL 5.80 per share for the full year 2022. Further in 2022 the Group carried
out and completed a GEL 112.7 million buyback and cancellation programme, and this was extended by up to a further GEL 148
million in February 2022.
The Committee was pleased to note that the average employee bonus for 2022 increased by 27.6% year-on-year, the average
cash salary increased by 26.3% and average employee deferred share salary by 28.9%.
The Committee considered the personal contribution of the CEO to the overall corporate performance. The Group achieved
excellent results under his leadership and in part through his initiatives. The CEO outperformed against most of the KPIs and
was awarded 96.9% of his maximum opportunity, which was paid in deferred shares. This level of award is considered to be
appropriate as it reflected the experience of shareholders in terms of value creation (through the buybacks and dividends) and
the wider experience of stakeholder experience of the company (including the increase to the employees’ salaries and bonuses).
Alignment with shareholders is built into the structure by the award being entirely in deferred shares, which have a total vesting and
holding period of eight years from the beginning of the work year. The discretionary deferred shares in relation to Mr Gachechiladze’s
2022 performance-based remuneration are awarded in accordance with the Policy. There is no cash bonus and the Company does
not operate an LTIP. The Remuneration Committee concluded that the level of deferred share award as calculated against the KPIs
remained appropriate and did not exercise discretion. As the number of deferred discretionary shares to be awarded is determined in
shares and fixed on the grant date, share price appreciation/depreciation did not impact the Remuneration Committee’s decision to
increase the number of shares to be awarded to Mr Gachechiladze for the 2022 financial year.
In accordance with the results of the KPIs as determined above, taking into account the above stakeholder matters and
Mr Gachechiladze’s outstanding performance despite the very challenging market environment, the Remuneration Committee
awarded the CEO 96.9% of the maximum deferred share opportunity.
Annual Report 2022 Bank of Georgia Group PLC
210
Percentage change in remuneration of Directors and employees
The following table details the percentage change in the remuneration awarded to Directors, compared with the average
percentage change in the per capita remuneration awarded to the Group’s employees, in line with the requirements of the
Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019. Given the small number of
employees employed by the Bank of Georgia Group PLC entity (fewer than five), we instead consider comparison against the Group.
A comparison of full-time UK employees in compliance with the requirements of the Companies (Directors’ Remuneration Policy and
Directors’ Remuneration Report) Regulations 2019 is included below.
The ‘Single total figure of remuneration’ table on page 206 includes an explanation of cash salary, deferred share salary, taxable
benefits and discretionary deferred remuneration of the Executive Director in their notes to the table.
Year-on-year change in pay for Directors compared to the Group’s employees as a whole for FY2022
Executive
Director
Non-Executive Directors
Average
employee
Archil
Gachechiladze
3
Neil
Janin
4
Mel
Carvill
5
Hanna
Loikkanen
6
Al
Breach
7
Jonathan
Muir
Tamaz
Georgadze
8
Cecil
Quillen
Véronique
McCarroll
9
Mariam
Meghvinetukhutsesi
10
Total cash salary 26.3% 0.0% (77.0)% 100% 0.0% 0.0% 0.0% (6.6)% 0.0% 7.9% 41.6%
Total deferred
share salary
1
28.9% 30.5% – – – – – – – – –
Taxable benefits 14.1% 1748.3% – – – – – – – – –
Total bonus
2
27.6% 39.0% – – – – – – – – –
Year-on-year change in pay for Directors compared to the Group’s employees as a whole for FY2021
Executive
Director
Non-Executive Directors
Average
employee
Archil
Gachechiladze
3
Neil
Janin
4
Hanna
Loikkanen
6
Al
Breach
7
Jonathan
Muir
Tamaz
Georgadze
8
Cecil
Quillen
Véronique
McCarroll
9
Mariam
Meghvinetukhutsesi
10
Total cash salary (5.7)% 20% 0.0% 2.7% (3.4)% 0.0% 0.0% 0.0% 0.0% –
Total deferred
share salary
1
89.9% 35% – – – – – – – –
Taxable benefits 1.9% 229.2% – – – – – – – –
Total bonus
2
66.0% NMF – – – – – – – –
Year-on-year change in pay for Directors compared to the Group’s employees as a whole for FY2020
Executive
Director
Non-Executive Directors
Average
employee
Archil
Gachechiladze
3
Neil
Janin
4
Hanna
Loikkanen
6
Al
Breach
7
Jonathan
Muir
Tamaz
Georgadze
8
Cecil
Quillen
Véronique
McCarroll
9
Total cash salary (2.8)% (16.7)% 0.0% 6.5% (1.8)% (0.6)% (0.6)% (0.6)% 7.2%
Total deferred
share salary
1
(27.3)% (22.4)% – – – – – – –
Taxable benefits (4.4)% (42.8)% – – – – – – –
Total bonus
2
(43.1)% NMF – – – – – – –
Notes:
1. The share prices at 31 December 2019 (US$ 21.466), 31 December 2020 (US$ 16.652), 31 December 2021 (US$ 22.480) and 31 December 2022 (US$ (31.362) were used for the
deferred shares salary comparison. Alternatively calculated using closing price at the date of the agreements, for FY2022 the y-o-y change was 57.8% for other employees
and 59.3% for the CEO for the deferred salary shares element. The number of salary shares under the CEO’s agreement remained constant at 75,000 shares per annum
for 2019, 2020 and 2021 but in accordance with the 2022 Policy and NBG requirements is based on a cash value for 2022 onwards.
2. Total bonus in each case is discretionary deferred share remuneration for Mr Gachechiladze, which was not granted for 2020 (hence NMF), and deferred discretionary share
remuneration and/or any cash bonus in the case of other employees of the Group.
3. Mr Gachechiladze’s 2020 cash salary was voluntarily reduced by 20% from 1 March 2020 to 31 December 2020 (as was the cash salary of senior management). The amount
was contributed to charity by Mr Gachechiladze – half of the remaining cash salary for that period – has not been taken into account. The increase in cash salary in 2021
compared to 2020 is therefore fully attributable to the reinstatement of the normal cash salary. Mr Gachechiladze was appointed on 28 January 2019 and therefore for the
FY2020 table (which shows the changes from 2019) his 2019 remuneration was scaled up pro rata to a full year for comparison reasons. Mr Gachechiladze did not receive
a bonus for FY2020 after the NBG informed the Remuneration Committee that, as the Bank had utilised the Pillar 2 or conservation buffers, no bonus should be granted –
please see the Chair’s Letter in the Directors’ Remuneration Report of the Annual Report and Accounts 2021 for further information.
4. Neil Janin stepped down from the PLC Board on 10 March 2022 and from the JSC Board on 31 March 2022.
5. Mel Carvill was appointed to the PLC Board on 10 March 2022. JSC Bank of Georgia fees include those paid for Supervisory Board member services performed pending
official approval from the NBG and technical registration, which was confirmed on 1 July 2022.
6. Hanna Loikkanen was appointed to the Remuneration Committee on 20 September 2019, and as its Chair on 26 September 2020.
7. Al Breach stepped down as Chair of the Remuneration Committee on 26 September 2020 but remained a member of the Committee.
8. Tamaz Georgadze stepped down as Chair of the Risk Committee on 31 December 2021 but remained a member of the Risk Committee.
9. Véronique McCarroll was appointed to the JSC Board on 11 February 2019. She was appointed as Chair of the Risk Committee on 1 January 2022.
10. Mariam Megvinetukhutsesi was appointed to the PLC Board, and as a member of the Risk Committee and the Nomination Committee, on 12 March 2021. She was
appointed to the JSC Board, and as a member of its Risk Committee and Nomination Committee, on 6 May 2021.
11. The Company has fewer than five UK (parent company) employees and the percentage changes could be considered distortive. Year-on-year changes for UK employees from
2019 to 2020 for cash salary was 1.8% and for bonus was 29.6%; year-on-year changes from 2020 to 2021 for cash salary was -4.0% and bonus was -2.9%; year-on-year
changes from 2021 to 2022 for cash salary was 12.2% and bonus was -4.4%; deferred share salary and taxable benefits are not applicable for all years.
Directors’ Remuneration report continued
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Financial Statements Additional Information
CEO’s pay and comparators – peers
It is noted that the Group has fewer than 250 UK employees and is therefore not required to disclose ratios of the CEO’s pay
against UK pay – indeed, given it in fact has fewer than five UK employees, to do so would be distortionary. Instead, the Committee
benchmarked the CEO’s remuneration against FTSE 250 and FTSE small cap companies in financial services. Moreover, CEO pay
was benchmarked against comparable peer financial services companies in emerging markets (in particular other former Soviet
republics and South Africa), comparable listed companies in financial services in the UK, and all UK-listed companies based in
Georgia: Halyk Savings Bank of Kazakhstan JSC; OTP Bank Nyrt; Moneta Money Bank a.s.; Erste Group Bank AG; FirstRand Ltd;
Raiffesen Bank International AG; Virgin Money UK PLC; One Savings Bank PLC; Close Brothers Group PLC; Nationwide Building
Society; Georgia Capital PLC and TBC Bank Group PLC.
The delayed receipt of the majority of salary and of all performance-based remuneration (in deferred shares vesting and being
released across several years) means that the time value of money and also the risk of salary and performance-based remuneration
not vesting (due to malus but also to shares lapsing in the event of early termination under certain circumstances) were factored in.
The view of the Board and the Committee is that Company’s CEO must fit a number of important criteria and that there are very
few candidates globally who could satisfy these criteria. Our CEO must be of high overall calibre, with significant international
training and experience, and in particular sufficient banking expertise effectively to run a systemically significant financial institution.
The CEO must be able to communicate with and lead Georgian colleagues, interact effectively with Georgian regulators and play
a role in the Company and in the larger national community which is commensurate with the Company’s significant role in the
Georgian economy. At the same time, the CEO must be an internationally credible investor-facing figure who can lead a premium-
listed FTSE 250 constituent of the London Stock Exchange.
The relevant candidate pool for a role such as this is understandably significantly limited and the number of persons who could
meet both these Georgian and international criteria is very small. Such persons are in very high demand and command generous
compensation. We aim to achieve fair and competitive remuneration commensurate with the size, nature and complexity of the
business and the roles, whilst ensuring compliance with institutional and regulatory policies.
The Committee carried out further research in early 2023, seeking to assess CEO compensation at comparable organisations, to the
extent practicable, although relevant available information is limited and often non-public for many such organisations. We have
also assessed relative compensation levels on the basis of approaches, over the past few years, to senior management talent from
organisations in surrounding countries, where remuneration packages for financial roles can be more generous and significantly higher,
for persons with relevant experience, than those which the Company provides.
Annual Report 2022 Bank of Georgia Group PLC
212
Further details of fixed and discretionary deferred share compensation granted during
2022 (audited)
The following table details nil-cost options over BOGG shares granted to Mr Gachechiladze in 2022.
Deferred share salary Discretionary deferred share remuneration
Number of underlying shares and
basis on which award was made
106,034 granted for the 2022 work year on the
basis of the 2022 Policy available at https://
www.bankofgeorgiagroup.com/governance/
documents
90,970 granted for the 2021 work year on the
basis of the 2019 Policy available at https://
bankofgeorgiagroup.com/reports/annual
Type of interest Nil-cost option Nil-cost option
Cost to Group US$ 2,200,000 US$ 1,791,927
Face value US$ 2,200,000
Cash payments equal to the dividends paid
on the underlying shares will be made upon
vesting (if applicable)
US$ 1,791,927
Cash payments equal to the dividends paid
on the underlying shares will be made upon
vesting (if applicable)
Percentage of award receivable if
minimum performance achieved
100% of the award will be receivable, since it
is part of salary set out in the service contract
and accordingly is not subject to performance
measures or targets over the vesting period.
100% of the award will be receivable, since it
is based on 2021 performance (and is not an
LTIP award) and accordingly is not subject to
performance measures or targets over the
vesting period.
Exercise price Nil. The options form part of the Executive
Director’s salary under the policy and so no
payment is required upon exercise. There has
been no change in exercise price.
Nil. The options form part of the Executive
Director’s performance-based remuneration
under the policy and so no payment is required
upon exercise. There has been no change in
exercise price.
Vesting period 100% of award vested in 2023 but is subject
to holding periods so that 40% is released in
2024, and 20% is released in each of 2025,
2026 and 2027.
40% will vest in 2024, and 60% in 2025. Each
tranche is subject to a further two-year
holding period.
Performance measures None. See the 2022 Policy available at https://
www.bankofgeorgiagroup.com/governance/
documents
See the 2019 Policy available at https://
www.bankofgeorgiagroup.com/governance/
documents
Notes: Figures calculated as described in note 2 of the ‘Single total figure of remuneration’ for the Executive Director.
Single total figure of remuneration for Non-executive Directors (audited)
The table below sets out the remuneration received by each Non-executive Director in 2021 and 2022.
Bank of Georgia Group PLC fees
(US$)
JSC Bank of Georgia fees
(US$)
Total fees
(US$)
6
2021 2022 2021 2022 2021 2022
Mel Carvill
1
– 83,934 – 157,735 – 241,669
Neil Janin
2
103,587 19,582 210,313 52,578 313,900 72,160
Alasdair Breach 53,405 53,405 96,391 96,391 149,796 149,796
Tamaz Georgadze
3
55,502 53,405 104,964 96,391 160,466 149,796
Hanna Loikkanen 71,582 71,582 129,022 129,022 200,604 200,604
Véronique McCarroll
4
46,835 48,932 87,631 96,204 134,466 145,136
Mariam Meghvinetukhutsesi
5
37,693 46,835 57,243 87,631 94,935 134,466
Jonathan Muir 53,405 53,405 96,391 96,391 149,796 149,796
Cecil Quillen 56,471 56,471 100,479 100,479 156,950 156,950
Total 478,480 487,551 882,434 912,822 1,360,914 1,400,373
Notes:
1. Mel Carvill was appointed to the PLC Board on 10 March 2022. JSC Bank of Georgia fees include fees paid for Supervisory Board member services performed
pending official approval from the NBG and technical registration, which was confirmed on 1 July 2022.
2. Neil Janin stepped down from the PLC Board on 10 March 2022 and from the JSC Board on 31 March 2022.
3. Tamaz Georgadze stepped down as Chair of the Risk Committee on 31 December 2021 but remained a member of the Committee.
4. Véronique McCarroll was appointed as Chair of the Risk Committee on 1 January 2022, having previously been a member.
5. Mariam Megvinetukhutsesi was appointed to the PLC Board, and as a member of the Risk Committee and the Nomination Committee, on 12 March 2021.
She was appointed to the JSC Board, and as a member of its Risk Committee and Nomination Committee, on 6 May 2021.
6. The maximum amount for Non-executive base fees, including the Chairman, as provided for in BOGG PLC’s Articles of Association, is GBP 750,000.
This does not affect JSC fees. The Non-executive Directors do not receive any taxable benefits, pension benefits or variable remuneration.
Directors’ Remuneration report continued
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Financial Statements Additional Information
Payments to former Directors and payments for loss of office
No payments were made to former Directors or in respect of loss of office during the year ended 31 December 2022.
Total Shareholder Return (‘TSR’)
We note that, given the demerger and the creation of two separate businesses with separate listed shares in May 2018, it is not
possible to compare a five-year TSR against other companies. The following graph compares the TSR of Bank of Georgia Group PLC
with the companies comprising the FTSE 250 index and the FTSE All Share index, for the period since BOGG’s listing on the Premium
segment of the LSE on 21 May 2018 until 31 December 2022.
Feb 19
Jan 19
Dec 18
Nov 18
Oct 18
Sep 18
Aug 18
Jul 18
Jun 18
May 18
Dec 19
Nov 19
Oct 19
Sep 19
Aug 19
Jul 19
Jun 19
May 19
Apr 19
Mar 19
Oct 21
Sep 20
Aug 20
Jul 20
Jun 20
May 20
Apr 20
Mar 20
Feb 20
Jan 20
Dec 21
Nov 21
Oct 21
Sep 21
Aug 21
Jul 21
Jun 21
May 21
Apr 21
Mar 21
Feb 21
Jan 21
Dec 21
Nov 21
Oct 22
Sep 22
Aug 22
Jul 22
Jun 22
May 22
Apr 22
Mar 22
Feb 22
Jan 22
Dec 22
Nov 22
Bank of Georgia Group PLC FTSE 250 (rebased) FTSE All Share (rebased)
20
40
60
80
100
120
140
160
Relative importance of spend on pay
The following table shows the difference in remuneration paid to all employees of the Group between 2021 and 2022, as well as the
difference in value of distribution paid to shareholders by way of dividends and buybacks between 2021 and 2022.
Remuneration paid to all
employees of the Group
Distributions to
shareholders by way of
dividends and buybacks
Year ended 31 December 2022 (US$) 131,910,967 106,060,435
Year ended 31 December 2021 (US$) 94,125,942 22,303,501
Percentage change 40.1% 375.5%
Notes:
1. Difference in remuneration paid to all employees of the Group were for reasons including salary and bonus increases, growth in number of employees and growth due to GEL
appreciation against the US Dollar.
2. The Company did not make any other significant distributions in 2021 and 2022. The 2021 amount was distributed in dividends alone. In July 2022 the Group commenced its
buyback programme in line with its capital allocation framework, with US$ 38,460,983 of the 2022 figures for buybacks and cancellation and US$ 67,400,181 for dividends.
Annual Report 2022 Bank of Georgia Group PLC
214
Directors’ interests in shares (audited)
The following table sets out the respective holdings of the Company’s shares of each Director as at 31 December 2022 and 2021.
As at 31 December 2021 As at 31 December 2022
Number of
BOGG shares
held directly
Number of
vested but
unexercised
BOGG shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)
Number of
unvested and
unexercised
held under
option BOGG
shares through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)
Total number
of interests in
BOGG shares
Number of
BOGG shares
held directly
Number of
vested but
unexercised
BOGG shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)
Number of
unvested and
unexercised
held under
option BOGG
shares through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)
Total number
of interests in
BOGG shares
Mel Carvill
1
– N/A N/A – – N/A N/A –
Archil
Gachechil-
adze
2
153,839 N/A 288,395 442,234 209,225 N/A 414,753 623,978
Alasdair
Breach
3
30,000 N/A N/A 30,000 30,000 N/A N/A 30,000
Tamaz
Georgadze 5,000 N/A N/A 5,000 5,000 N/A N/A 5,000
Hanna
Loikkanen – N/A N/A – – N/A N/A –
Véronique
McCarroll – N/A N/A – – N/A N/A –
Mariam
Megvinet-
Ukhutsesi
4
3,102 N/A N/A 3,102 4,102 N/A N/A 4,102
Jonathan Muir – N/A N/A – – N/A N/A –
Cecil Quillen 2,900 N/A N/A 2,900 2,900 N/A N/A 2,900
Notes:
1. Mel Carvill was appointed as a Director of the Board on 10 March 2022. On 13 May 2022, MDB Ltd, a PCA of Mel Carvill, acquired 19,018 BOGG shares.
2. On 24 March 2022, Mr Gachechiladze exercised options in respect of 70,646 Bank of Georgia Group PLC shares, of which 15,260 were withheld to satisfy tax liabilities.
The net gain of these options was US$1,113,601. On 31 May 2022, Mr Gachechiladze received 90,970 nil-cost options over ordinary shares in respect of discretionary deferred
shares for the 2021 work year and, on 8 September 2022, Mr Gachechiladze received 106,034 nil-cost options over ordinary shares in respect of deferred salary shares for
the 2022 work year. On 3 January 2023, Mr Gachechiladze received 71,694 nil-cost options over ordinary shares in respect of deferred salary shares for the 2023 work year.
On 24 February 2023, Mr Gachechiladze exercised options in respect of 106,688 shares, of which 23,045 were withheld to satisfy tax liabilities. As at the last practicable date
of 17 March 2023, Mr Gachechiladze’s total number of share interests is 672,627.
3. At 2022 year-end, Gemsstock Fund, which Mr Breach manages, held 1,373,779 beneficial holdings in ordinary shares or economic interests in financial instruments with
a similar economic effect. This is not included in the table.
4. On 7 March 2022, Mariam Megvinetukhutsesi acquired 1,000 shares.
As at 31 December 2022, Mr Gachechiladze’s total vested and unvested and direct shareholding was 623,978 shares, representing
approximately 1.3% of the share capital of BOGG. Mr Gachechiladze’s connected persons do not have any interests in the shares of
the Company.
The Policy is heavily weighted towards remuneration in deferred salary shares and discretionary compensation in deferred shares.
The Policy and the long vesting periods, even for salary shares, naturally results in the Executive Director and our senior management
team holding a significant number of unvested shares and achieves a delay between performance and vesting. This is reinforced
further by formal guidelines on shareholding and on post-employment shareholding in the Policy (200% of total salary to be built up
within five years). Further, Mr. Gachechiladze is expressly contractually bound to build up and to hold this level for two years post-
employment. As at 31 December 2022, Mr Gachechiladze met the shareholding requirement.
There are no shareholding requirements for Non-executive Directors, and they are not awarded incentive shares. Changes in
shareholding for PLC Directors between 31 December 2022 and the last practicable date of 17 March 2023 are as shown in the notes
to the table above.
Directors’ Remuneration report continued
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Financial Statements Additional Information
Executives’ interests in shares
In response to a shareholder feedback requests to show our top senior executives’ level of total shareholding, to demonstrate their
level of alignment with shareholders, below we disclose the shareholdings of our top executives as at 31 December 2022 (unvested
shares vest in tranches over several years):
Total vested and unvested and direct
shareholding in number of shares
Archil Gachechiladze 623,978
Sulkhan Gvalia 243,521
Zurab Kokosadze 76,667
Nutsa Gogilashvili 20,174
Levan Kulijanishvili 202,104
Mikheil Gomarteli 375,276
Andro Ratiani 4,587
Eter Iremadze 76,734
Zurab Masurashvili 21,271
Levan Gomshiashvili 8,807
Ana Kostava 21,719
David Chkonia 50,721
David Davitashvili 42,466
Levan Kobakhidze 8,122
Elene Okromchechlishvili 5,900
Details of Non-executive Directors’ terms of appointment
The Company has entered into letters of appointment with each Non-executive Director. The letters of appointment require
them to provide one month’s notice prior to termination and, for the majority of current Non-executive Directors (Hanna Loikkanen,
Al Breach, Tamaz Georgadze, Jonathan Muir and Cecil Quillen) are effective from 24 February 2018 – with Véronique McCarroll’s
letter of appointment being effective from 1 October 2018, Mariam Megvinetukhutsesi’s from 12 March 2021 and Mel Carvill’s from
10 March 2022. Each Non-executive Director is put forward for election at each AGM following his or her appointment. Continuation
of a Non-executive Director’s employment is conditional on his or her continued satisfactory performance and re-election by
shareholders at each AGM.
A succession plan adopted by the Board provides for a tenure of six years on the Bank of Georgia Group PLC Board. Upon the expiry
of such a tenure, the Board will consider if the appointment of the relevant Non-executive Director will cease at the next AGM. If the
Board determines that, in order to maintain the balance of appropriate skills and experience it requires, it is important to retain a
Non-executive Director beyond the relevant six-year period, the Board may offer the Non-executive Director a letter of appointment
for an additional one-year term. Such a ‘reappointment’ may be renewed no more than twice, and the usual six-year tenure
extended to a maximum of nine years, if circumstances were to warrant such extension.
Remuneration Committee effectiveness review
An external review was undertaken in 2020 by Farman and Partners, as documented in the 2020 Annual Report and Accounts,
and an internal review was undertaken in 2021, as documented in the 2021 Annual Report and Accounts. In 2022 the Committee
undertook an internal review, supported by the Company Secretary. The Committee concluded that it operated effectively, while
Committee members acknowledged the ongoing challenge with stakeholder communication. They also acknowledged that Hanna
Loikkanen in particular had worked diligently to balance all stakeholder demands, given the significant changes occurring around
remuneration – including those required by the NBG. The Committee intends to undertake an external review in 2023.
Annual Report 2022 Bank of Georgia Group PLC
216
Implementation of Remuneration Policy for 2023
Details of how the current Policy will be implemented for the 2023 financial year are set out below. There will be no significant
change in the way the 2022 Policy will be implemented in 2023, and no deviations from the procedure for the implementation of the
2022 Policy as set out in the Policy.
For Archil Gachechiladze:
Fixed pay
Total cash salary
(combined BOGG and Bank)
US$ 370,000
Total deferred share salary
(combined BOGG and Bank)
US$ 2,200,000 in deferred shares
Pension The Executive Director and the Company each contribute 0-2% and the Georgian Government
contributes between 0-2% of total remuneration from the Bank, all in line with Georgian
legislation and with the pension arrangements for the Georgian workforce.
Benefits Details of the benefits received by Executive Directors are on page 219.
There are circumstances in which unvested deferred shares may lapse, and very limited circumstances in which such shares may vest
immediately (i.e. when an Executive Director’s employment is terminated without cause) and these are summarised in the Policy.
Discretionary deferred share remuneration
Opportunity Maximum is 100% of total salary (total cash salary and total deferred share salary as explained in
the table and notes to the Policy) in deferred shares.
Deferral terms The Remuneration Committee will determine whether an award is merited, based on an Executive
Director’s achievement of the KPIs set for the work year and the performance of the Group
during the work year. Assuming the new Policy is approved by shareholders, if Mr Gachechiladze
is awarded discretionary deferred shares, 40% will vest immediately and 15% will vest on each of
the third, fourth, fifth and sixth anniversaries of the start of the work year. Each tranche will be
subject to a further holding period of two years. This decision will be set out in the 2023 Director’s
Remuneration Report.
Upon vesting, Mr Gachechiladze will receive (in addition to the vested shares) cash payments equal
to the dividends paid (if any) on the underlying shares between the date the award was made and
the vesting date.
Performance measures The Remuneration Committee has set Mr Gachechiladze’s KPIs for 2023:
1. Return on Average Equity (ROAE)
2. Cost to income ratio
3. Cost of risk ratio
4. Profit before tax (PBT)
5. NPS
6. eNPS
7. Developing ESG, in line with material areas of focus
8. Individual Key Business Objectives.
See the Policy available at https://www.bankofgeorgiagroup.com/governance/documents, for details of malus and clawback,
and of provisions lapse of shares in the event of termination of the contracts (natural malus).
Directors’ Remuneration report continued
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Financial Statements Additional Information
For Non-executive Directors:
The table below shows the fee structure for Non-executive Directors for 2023. Non-executive Directors’ fees are determined by
the Board. There will be no significant change in the way the 2022 Policy will be implemented in 2023, and no deviations from the
procedure for the implementation of the 2022 Policy as set out in the Policy.
Component Purpose and link to strategy Operation Opportunity
Base cash fee
The fee for the Board is
competitive enough to attract
and retain individuals.
The Chairman receives a fee that
reflects the extra time committed
and responsibility.
The Senior Independent Non-
executive Director receives a
higher base fee, which reflects the
extra time and responsibility.
Cash payment on
a quarterly basis.
The amount of remuneration may be
reviewed from time to time by the Board.
Fees may also be amended and varied
if there are genuinely unforeseen and
exceptional circumstances which
necessitate such review. In such
circumstances, any significant increase
shall be the minimum reasonably required.
The maximum aggregate BOGG PLC fees
for all Non-executive Directors which may
be paid by the PLC itself is GBP 750,000,
which is consistent with the PLC’s Articles
of Association.
Cash fee for each
Committee
membership
Additional fee to compensate for
additional time spent discharging
Committee duties.
Cash payment on
a quarterly basis.
The amount of remuneration for the
membership may be reviewed from time
to time by the Board.
The Chairman does not receive
Committee fees.
Summary of Directors’ Remuneration Policy
The Remuneration Policy was approved at the AGM on 16 June 2022. To comply with NBG requirements, as disclosed in
the 2021 Annual Report, the amendments to the Policy are deemed effective as of 1 January 2022. It is intended that
approval of the Remuneration Policy will be sought at three-year intervals, unless amendments to the Policy are required,
in which case further shareholder approval will be sought. No changes are proposed for 2023. The full policy is available at
https://www.bankofgeorgiagroup.com/governance/documents.
The tables in this section provide a summary of the Directors’ Remuneration Policy.
Remuneration Policy table for Executive Directors
Cash salary Purpose and link to strategy
To reflect the role and required duties, skills, experience
and individual contribution to the Group, and to encourage
commitment to the Group and recruit and retain high-
calibre talent.
Operation
Fixed in the Executive Director’s service agreements.
The level of cash salary is reviewed when a service
agreement is up for renewal or if there is a significant
change in circumstances, and the Executive Director and
Remuneration Committee agree to consequent changes
to their agreements.
Opportunity
The level of cash salary in Executive Directors’
service agreements will be no more than
the Remuneration Committee considers
reasonable, based on his or her duties, skills
and experience.
The total amount payable to the current
CEO and sole Executive Director,
Mr Gachechiladze, is US$ 370,000
per annum.
Performance measures
N/A
Annual Report 2022 Bank of Georgia Group PLC
218
Deferred share
salary
Purpose and link to strategy
To closely align the Executive Directors’ and shareholders’
interests, and to promote long-term value creation and
share price growth.
Operation
Awarded annually in the form of nil-cost options in respect
of the work year, and released over five years from the
start of the year in which the salary is earned, as follows:
100% of the deferred share salary vests on the first
anniversary of the start of the work year and is subject
to holding periods so that 40% is released on the second
anniversary, and 20% is released on each of the third,
fourth and fifth anniversaries of the start of the relevant
work year. Upon vesting, the Executive Director also
receives cash payments equal to the dividends paid on the
underlying shares between the date the award was made
and the vesting date.
Lapse provisions (natural malus) for an incomplete year
are built into the deferred share salary. Extended malus
and clawback provisions do not apply to the deferred
share salary as the awards attach to salary already
earned.
Opportunity
The value of deferred share salary for
Mr Gachechiladze is fixed at the equivalent of
US$ 2,200,000 per annum, to be awarded in
deferred shares. The number of shares shall
normally be calculated using the average
price of the shares over the five working days
prior to 25 December of the year immediately
preceding the year of award.
Performance measures
N/A
Discretionary
deferred shares
Purpose and link to strategy
In the context of overall Group performance, to motivate
and reward an Executive Director in relation to his or
her contribution to the achievement of the KPIs set for
him or her by the Remuneration Committee towards the
beginning of the year.
Performance-based remuneration is solely in the form
of deferred shares (no cash), designed to closely align
the interests of an Executive Director with shareholders,
avoid inappropriate risk-taking for short-term gain, and
encourage long-term commitment to the Group.
Operation
The Remuneration Committee will determine annually the
number of shares to be awarded, based on the Executive
Director’s achievement of his or her KPIs set for the work
year and the performance of the Group during that year.
Awards are made annually entirely in the form of nil-cost
options over shares based on performance against the
targets. There is no contractual right to discretionary
deferred shares and the Remuneration Committee
reserves the right to award no discretionary deferred
share remuneration if the Group’s performance
is unsatisfactory.
Discretionary deferred shares will vest as follows: 40%
vests immediately, and 15% will vest on each of the
third, fourth, fifth and sixth anniversaries of the start of
the work year. Each tranche will be subject to a further
holding period of two years (effectively, discretionary
deferred shares are released over eight years from the
beginning of the work year).
Upon vesting, the Executive Director also receives cash
payments equal to the dividends paid on the underlying
shares between the date the award was made and the
vesting date.
Extended malus and clawback applies as per the notes
to the Policy table approved at the 2022 AGM.
Opportunity
The maximum discretionary deferred shares
that may be awarded in respect of the
previous work year is capped at 100% of total
salary (which includes cash and deferred
share salaries), as set out in the notes to the
Policy table approved at the 2022 AGM.
Performance measures
KPIs for the Executive Director are set near
the start of each work year and reflect the
Executive Director’s targeted contribution
to the Group’s overall key strategic and
financial objectives for the work year. KPIs
may also include non-tangible factors such
as self-development, mentoring and social
responsibility.
Directors’ Remuneration report continued
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Financial Statements Additional Information
Pension Purpose and link to strategy
The Group complies with pension requirements set by the
Georgian Government.
Operation
Pension provision will be in line with Georgian pension
legislation, which may change from time to time. There
is no provision for the recovery or withholding of pension
payments.
Opportunity
In line with current Georgian legislation,
the Executive Director and the Bank each
contribute 0-2% of total remuneration from
the Bank, and the Georgian Government
may contribute a further small amount
(0-2% depending on income levels). Pension
contributions will only increase above this
level if mandated by Georgian legislation or if
mandated by any other applicable legislation.
The same arrangement applies to employees
across the Group in Georgia.
Performance measures
N/A
Benefits Purpose and link to strategy
Non-cash benefits are in line with Georgian market
practice and designed to be sufficient to attract and
retain high-calibre talent.
Operation
Benefits consist of: life insurance; health insurance;
incapacity/disability insurance; directors’ and officers’
liability insurance; physical examinations; tax gross-ups
and tax equalisation payments; company car and driver;
mobile phone costs; personal security arrangements
(if requested by the Executive Director); assistance with
completing tax returns (where required); relocation costs
for Executive Director; and close family and legal costs.
Other benefits may be provided from time to time if
considered reasonable and appropriate.
Opportunity
There is no prescribed maximum on the value
of benefits payable to an Executive Director.
The maximum amount payable depends
on the cost of providing such benefits to
an employee in the location at which the
Executive Director is based.
Performance measures
N/A
Shareholding
guidelines
Purpose and link to strategy
To ensure Executive Directors build and hold a significant
shareholding in the Group over the long term, and to align
Executive Directors’ interests with those of shareholders.
To ensure departing Executive Directors make long-term
decisions and maintain an interest in the ongoing success
of the Group, post-employment.
Operation
Executive Directors are required to build and then
maintain a shareholding with 200% equivalent of total
salary (which includes cash and deferred share salaries),
with such amount to be built up within a five-year period
from appointment as an Executive Director. All beneficially
owned shares, as well as unvested (net of tax) and vested
deferred share salary and discretionary deferred shares,
count towards the Required Shareholding (as such,
awards are not subject to any performance conditions
after grant).
Executive Directors are to retain the lower of the
Required Shareholding or the Executive Director’s actual
shareholding at the time employment ceases, for a
period of two years from the date on which employment
ceases, unless the Remuneration Committee determines
otherwise. It is noted that a good leaver may hold
substantially higher than this in unvested shares alone.
In very exceptional circumstances, for example in the
event of a serious conflict of interest, the Remuneration
Committee has the discretion to vary or waive the
Required Shareholding, but must explain any exercise of
its discretion in the Group’s next Remuneration Report.
It should be emphasised that there is no present intention
to use this discretion.
Opportunity
N/A
Performance measures
N/A
Annual Report 2022 Bank of Georgia Group PLC
220
Malus and clawback, and shareholding guidelines
Discretionary deferred shares are subject to malus and clawback for Executive Directors in the following circumstances:
• misconduct in the performance or substantial failure to perform duties by the Executive, or material breach of applicable
regulations and/or the Bank’s internal policies;
• significant financial losses, serious failure of risk management or serious damage to the reputation of BOGG or the Bank caused
by misconduct or gross negligence (including inaction) of the Executive;
• material misstatement or material errors in the financial statements that relate to the area of responsibility of the Executive or
can be attributed to action or inaction of the Executive’s performance of their duties;
• deliberately misleading BOGG or the Bank in relation to financial performance;
• failure to continue to meet the fitness and properness criteria for an Executive of the Bank;
• material increase with respect to the required regulatory capital of the Bank that can be attributed to the action or inaction of
the Executive;
• misconduct that contributed to the imposition of material regulatory or other similar sanctions;
• payments based on erroneous or misleading data, for which malus and clawback apply to discretionary deferred remuneration
awarded for the year in question; and
• significant increases in the Bank’s regulatory capital requirements (for clawback to apply such failures/problems are to have been
caused by or attributable to the actions or inactions of the Executive).
The Remuneration Committee has the right to withhold the release of already-awarded discretionary deferred share remuneration
if mandated by the needs of preservation of the Bank’s regulatory capital.
The above provisions form part of Mr Gachechiladze’s service contract. The Group has also amended the Executive Equity
Compensation plan to allow shares to be lapsed, including to zero, or clawed back in accordance with the provisions in the Executive’
Director’s contracts.
Clawback is for up to two years from vesting and, for Mr Gachechiladze, the Group also has unusually strong malus provisions where
unvested discretionary deferred shares lapse when the service contract is terminated under certain circumstances, including for
‘Cause’ such as gross misconduct, failure to perform duties, material breach of obligations and/or unethical behaviour. This may be
several years worth of discretionary deferred shares.
The shareholding guidelines, to build and then maintain a shareholding with a 200% equivalent of total salary and then to maintain
such for two years post-employment, are set as express provisions in Mr Gachechiladze’s contract.
Illustration of application of Remuneration Policy
The chart below shows an estimate of the remuneration that could be received by Mr Gachechiladze, our sole Executive Director and
CEO, in respect of 2022 under the Policy at three different performance levels. The chart represents a full year’s remuneration for
illustration purposes.
41%
50%
85%
50%
43%
15%
9%
7%
Maximum
Target
Minimum
US$ 000
Total 2,577
Total 4,376
Total 5,417
Fixed cash salaryFixed cash salary, pension and benefits Fixed share salary Discretionary deferred share compensation
The Group voluntarily discloses that there is no effect on share growth or decline in the value of awards at the time of award
because they are calculated using a fixed cash value as required by per the new NBG regulations.
Directors’ Remuneration report continued
221
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Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
(For long-term incentive awards which have performance targets or measures relating to more than one financial year, disclosure
of the value of the award in the event of a 50% share price appreciation is required by the Companies (Miscellaneous Reporting)
Regulations 2018. However, the Group is not subject to such disclosure requirements as performance measures for the discretionary
deferred share award are limited to one year. Such disclosure is also not required for salary compensation in the form of shares.)
Notes:
1. Salary is comprised of cash and deferred salary shares. Mr Gachechiladze’s total cash salary in 2022 in respect of his service agreement with the Group would be
US$ 370,000. The value of the deferred share salary is US$ 2,200,000, and for 2022 it will vest in January 2023, with 40% released from holding in January 2024,
and 20% released in each of January 2025, January 2026 and January 2027.
2. The means of determining the number of shares underlying the discretionary deferred share remuneration and terms and conditions applicable to this remuneration are
described in the Policy table. Discretionary deferred shares in respect of 2022 will be formally granted in 2023 and 40% will vest immediately but is subject to a two-year
holding period and so released in January 2023. 15% will vest in each of January 2025, January 2026, January 2027 and January 2028, subject to a further two-year holding
period and so released in January 2027, January 2028, January 2029 and January 2030.
3. Minimum opportunity reflects a scenario where Mr Gachechiladze receives only fixed remuneration of salary (cash and deferred share salary), pension contributions and
benefits, and where the Remuneration Committee considers the performance of the Group and/or Mr Gachechiladze in 2022 does not warrant any award of discretionary
deferred shares.
4. On-target opportunity reflects a scenario where Mr Gachechiladze receives fixed remuneration (as described in note 3 above) and discretionary deferred shares with a value
of US$ 1,799,000, being 70% of the maximum opportunity (as described in note 5 below). In this scenario, the Remuneration Committee considers the performance of the
Group and Mr Gachechiladze in 2022 is in line with the Group’s expectations.
5. Maximum opportunity reflects a scenario where Mr Gachechiladze receives fixed remuneration and discretionary deferred shares with a value of US$ 2,570,000 being 100%
of total salary (i.e. cash and deferred share salaries). In this scenario, the Remuneration Committee considers the performance of the Group and Mr Gachechiladze in 2022
warrants the highest possible level of discretionary deferred share remuneration.
Remuneration Policy table for the Non-executive Directors
Chairman’s and
Non-executive
Directors’ fees
Purpose and link to strategy
To attract and retain high-performing Non-executive
Directors with the requisite skills, knowledge, experience,
independence and other attributes to add value to the Group.
To reflect the responsibilities and time commitment dedicated
by Non-executive Directors.
Operation
All fees are paid in cash on a quarterly basis. Fees may be
reviewed from time to time by the Board (but not necessarily
changed), considering the time commitment, responsibilities
and technical skills required to make a valuable contribution
to the Board – with reference to comparators, benchmarking,
results of the annual review and other guidance. Fees may
also be amended and varied if there are genuinely unforeseen
and exceptional circumstances necessitating such review and,
in such circumstances, any significant increase shall be the
minimum reasonably required. The Board reserves the right
to structure Non-executive Directors’ fee differently at its
absolute discretion.
Non-executive Directors receive a base fee. Additional
Committee fees are payable to compensate for time spent
discharging Bank and Committee duties.
There is no remuneration in the form of deferred share salary
or discretionary deferred shares, pension contributions,
benefits or any variable or performance-linked remuneration
or incentives.
Non-executive Directors are reimbursed for reasonable
business expenses, including travel and accommodation,
which are incurred in the course of carrying out duties under
their letters of appointment, on provision of valid receipts.
Opportunity
The maximum aggregate BOGG PLC
fees for all Non-executive Directors which
may be paid for PLC fees under the PLC’s
Articles of Association is GBP 750,000.
A specific maximum has not been set for
the individual base cash fee.
The Senior Independent Non-executive
Director receives a higher base fee, which
reflects the extra time commitment and
responsibility.
The Chairman receives a fee that
reflects the extra time commitment and
responsibility. The Chairman does not
receive Committee fees.
Performance measures
N/A
Annual Report 2022 Bank of Georgia Group PLC
222
Directors’ Remuneration report continued
Service agreements
At the date of this Annual Report, Mr Gachechiladze is the sole Executive Director of the Company. Mr Gachechiladze has a service
agreement with an effective date of 28 January 2019 with BOGG for an indefinite term (subject to annual re-election at the AGM),
which is terminable by either party on four months’ notice unless for cause where notice served by BOGG shall have immediate effect.
Mr Gachechiladze also has a service agreement with JSC Bank of Georgia with an effective date of 1 January 2022 (as per the NBG
Code requirements, signed 22 June 2022 after the new Policy had been approved at AGM) for an employment term of three years from
the effective date, which is terminable by the Company with immediate effect and by the Executive Director on not less than four
months’ notice.
Non-executive Directors’ letters of appointment
Each Non-executive Director is required to submit himself or herself for annual re-election at the AGM. The letters of appointment
for Non-executive Directors provide for a one-month notice period, although the Group may terminate the appointment with
immediate effect without notice or pay in lieu of notice if the Non-executive Director has committed any serious breach or non-
observance of his or her obligations to the Group, is guilty of fraud or dishonesty, brings the Company or him/herself into disrepute,
or is disqualified as acting as a Non-executive Director, among other circumstances. Upon termination, the only remuneration a
Non-executive Director is entitled to is accrued fees as at the date of termination, together with reimbursement of properly incurred
expenses incurred prior to the termination date.
The service agreements and letters of appointment are available for inspection at the Company’s registered office.
Signed on behalf of the Remuneration Committee and the Board of Directors
Cecil Quillen
Chair of the Remuneration Committee
23 March 2023
223
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
Statement of Directors’ responsibilities
The Directors are responsible for
preparing the Annual Report and
consolidated and separate financial
statements in accordance with applicable
law and regulations.
Company law requires us to prepare
financial statements for each financial
year. As required, we have prepared
the accompanying consolidated and
separate statements in accordance with
UK-adopted international accounting
standards (IFRSs).
Directors cannot approve the
consolidated and separate financial
statements contained within this Annual
Report unless they are satisfied that
they are a true and fair reflection of the
state of affairs of Bank of Georgia Group
PLC (the ‘Company’) and the Group as
a whole, and of the profit or loss of the
Company and the Group for that period.
Under the Financial Conduct Authority’s
Disclosure Guidance and Transparency
Rules, Group financial statements are
required to be prepared in accordance
with UK-adopted international
accounting standards (IFRS).
In preparing the accompanying
consolidated and separate financial
statements, Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable, relevant and reliable;
• state whether applicable accounting
standards have been followed,
subject to any material departures
disclosed and explained in the financial
statements; and
• prepare the financial statements
on a going concern basis unless it is
inappropriate to presume that the
Company and Group will continue
in business.
Directors are also responsible for
keeping adequate accounting records
that sufficiently show and explain the
Company’s and the Group’s transactions,
to disclose with reasonable accuracy at
any time the financial position of the
Company and the Group, and to enable
us to ensure that the consolidated and
separate financial statements comply
with the Companies Act 2006. The
Directors are responsible for such internal
control as they determine necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and have general responsibility for
taking reasonable steps to safeguard the
assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that each comply with that law and
those regulations. Legislation in the
UK governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
The Directors are also responsible for
the maintenance and integrity of the
Company’s website.
Each of the Directors, whose names and
functions are listed in Board of Directors
on pages 179 to 181 confirm that, to the
best of their knowledge:
• the consolidated and separate
financial statements, prepared
in accordance with UK-adopted
international accounting standards
(IFRSs), give a true and fair view of
the assets, liabilities, financial position
and profit or loss of the Company and
the Group taken as a whole; and
• the Annual Report, including the
Strategic Report, includes a fair review
of the development and performance
of the business and the position of the
Company and the Group, together
with a description of the principal risks
and uncertainties that they face.
The Directors consider the Annual
Report and Accounts, taken as a whole,
are fair, balanced and understandable,
and give shareholders the information
needed to assess the Group’s position
and performance, business model
and strategy.
By order of the Board
Mel Carvill
Chairman
23 March 2023
Archil Gachechiladze
CEO
23 March 2023
Annual Report 2022 Bank of Georgia Group PLC
224
Directors’ report
The Directors present their Annual
Report and the audited consolidated
financial statements for the year ended
31 December 2022.
Strategic report
The Strategic Report on pages 4 to 167
was approved by the Board of Directors
on 23 March 2023 and signed on its behalf
by Archil Gachechiladze, Chief Executive
Officer.
Management report
This Directors’ Report, together with
the Strategic Report on pages 4 to 167,
forms the Management Report for the
basis of The Disclosure Guidance and
Transparency Rules 4.1.5 R.
Information contained elsewhere in the Annual Report
Information required to be included in this Directors’ Report can be found elsewhere in the Annual Report as indicated in the table
below and is incorporated into this report by reference:
Information Location in Annual Report
Future Developments, including Research and Development activities pages 4 to 167
Going Concern Statement page 83
Viability Statement page 83
Risk Management pages 56 to 61
Principal Risks and Uncertainties pages 62 to 81
Directors’ Governance Statement pages 169 to 178
The Board of Directors pages 179 to 181
Nomination Committee Report pages 186 to 191
Audit Committee Report pages 192 to 197
Risk Committee Report pages 198 to 201
Related Party Disclosures Note 32 on page 341
Details of Long-Term Incentive Schemes pages 202 to 215
Climate-related Financial Disclosures pages 103 to 117
Greenhouse Gas Emissions pages 113 to 116
Energy Consumption pages 101 to 102
Energy Efficient Action pages 101 to 117
Employee Matters, including Employee Engagement pages 122 to 134 and Nomination
Committee Report pages 186 to 191
Environmental Matters pages 84 to 148
Share Capital Note 22 on page 307
Engagement with suppliers, customers and others in a business relationship with
the Company
pages 149 to 153
Information on the Group’s financial risk management objectives and policies,
and its exposure to credit risk, foreign currency risk and financial instruments
Note 29 on pages 315 to 332
225
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
Information to be disclosed
in accordance with the
Listing Rule 9.8.4R
The following information required to
be disclosed in accordance with Listing
Rule 9.8.4R is not applicable unless
stated otherwise:
• the amount of interest capitalised
during the period under review and
details of any related tax relief;
• information in relation to the
publication of unaudited financial
information;
• any arrangements under which a
Director has waived emoluments,
or agreed to waive any future
emoluments, from the Group;
• details of any non-pre-emptive issues
of equity for cash by the Group;
• any non-pre-emptive issues of equity
for cash by the Group or by any
unlisted major subsidiary undertaking;
• parent participation in a placing by
a listed subsidiary;
• any contract of significance in which
a Director of Bank of Georgia Group
PLC is or was materially interested;
and
• any waiver of dividends by a
shareholder.
Articles of Association
The Articles of Association of Bank of
Georgia Group PLC may only be amended
by a special resolution at a general meeting
of the shareholders. The process for the
appointment and removal of Directors
is included in the Company’s Articles of
Association, available at:
https://www.bankofgeorgiagroup.com/
governance/documents.
Share capital and rights
attaching to the shares
Details of the movements in share capital
during the year are provided in Note 22 to
the consolidated financial statements on
page 307 of this Annual Report.
As at 31 December 2022, there was a
single class of 47,498,982 ordinary shares
of one pence each in issue, each with one
vote. As of 17 March 2023, there was a
single class of 47,498,982 ordinary shares,
of which 276,449 ordinary shares were
held in treasury pending cancellation.
The rights and obligations attaching to
the Company’s ordinary shares are set
out in its Articles of Association. Holders
of ordinary shares are entitled, subject
to any applicable law and the Company’s
Articles of Association, to:
• have shareholder documents made
available to them, including notice of
any general meeting;
• attend, speak and exercise voting
rights at general meetings, either
in person or by proxy; and
• participate in any distribution of
income or capital.
Under the terms of a demerger
agreement between the Company
and Georgia Capital PLC, the latter
has agreed that for so long as its
percentage holding in the Company
(directly or indirectly) is greater than
9.9% of the voting rights exercisable
at the Company’s general meetings,
these voting rights will be exercised in
general meetings of the Company in
accordance with votes cast by all other
shareholders. This agreement was put
in place to ensure Georgia Capital PLC
will not be able to influence the voting
outcomes of the Company’s shareholder
resolutions at general meetings. Votes
will be made in accordance with the
following mechanism:
• on a resolution proposed to a general
meeting, all shareholders of the
Company (other than JSC Georgia
Capital and its concert parties) will be
entitled to vote at their discretion on
a poll vote (each an ‘Initial Vote’); and
• following the closing of the Initial
Vote(s), the poll will reopen as soon
as possible for the sole purpose of
enabling the shares held by JSC
Georgia Capital (or its concert parties)
to be voted in each case proportionally
(calculated to two decimal places)
in accordance with the votes cast
on each resolution on an Initial Vote
(the ‘Proportional Voting Mechanism’).
As the latest practicable date before
annual report released of 17 March 2023
the “Effective Rule 9 Threshold” (as
defined in the Company’s 2018 listing
prospectus and in summary being the
level of holding of the Company’s shares
carrying voting rights above which a
mandatory offer would be triggered
under Rule 9 of the Takeover Code once
the shares held by Georgia Capital
are removed from the denominator)
is 9,544,849 shares representing 20.21%
of the Company’s issued share capital.
The latest Effective Rule 9 Threshold
is available on the FAQ section of
our website.
There are no other restrictions on
exercising voting rights, except in
situations where the Company is legally
entitled to impose such a restriction
(for example, under the Articles of
Association where amounts remain
unpaid in the shares after request,
or the holder is otherwise in default
of an obligation to the Company).
The Company is not aware of any
arrangements between shareholders that
may result in restrictions on the transfer
of securities or voting rights.
The Company is permitted to make
market purchases of its own shares
provided it is duly authorised by its
members in a general meeting, and
subject to and in accordance with section
701 of the Companies Act 2006. Authority
was given by special resolution at the
AGM of the Company on 20 June 2022
for the Group to purchase up to 4,916,943
shares (approximately 10%)
of the Group’s shares. This authority will
expire at the conclusion of the Company’s
AGM in 2023 or, if earlier, the close of
business on 20 July 2023. A renewal of
the authority to make market purchases
will be sought from shareholders at
each AGM of the Company. Purchases
of ordinary shares will be made within
guidelines established from time to
time by the Board. Any purchase of
ordinary shares would be made only
out of the available cash resources of
the Company. Ordinary shares purchased
by the Company may be held in treasury
or cancelled.
During 2022, Apex Group Fiduciary
Services Limited, acting as a trustee
of the BOG Group Employee Trust,
purchased 319,231 ordinary shares, with
a nominal value of one pence per share,
representing 0.672080% of the issued
share capital as at 31 December 2022.
Apex Group Services Limited, acting as
a trustee of the Rubicon Executive Equity
Compensation Trust, purchased 675,953
ordinary shares, with a nominal value
of one pence per share, representing
1.423% of the issued share capital as
at 31 December 2022. The trusts hold
the shares for the purpose of satisfying
awards to be awarded to beneficiaries.
At the 2022 AGM, the Directors were
given the power to (a) allot shares up
to a maximum nominal amount of GBP
163,898.09, representing approximately
one third of the Company’s issued share
capital as at 25 April 2022; and (b) to
allot equity securities up to an aggregate
nominal amount of GBP 163,898.09, in
connection with an offer by way of a rights
issue: (i) to holders of shares in proportion
(as close as practicable) to their existing
holdings; and (ii) to holders of other
equity securities as required by the rights
of those securities or, if the Directors
consider it necessary, as permitted by the
rights of those securities, such amount
to be reduced by the aggregate nominal
amount of shares allotted or rights to
subscribe for or to convert any securities
into shares granted under paragraph (a),
and subject to the Directors having the
right to make such exclusions or other
arrangements as they may deem necessary
or expedient in relation to treasury shares,
fractional entitlements, record dates or
Annual Report 2022 Bank of Georgia Group PLC
226
legal, regulatory or practical problems in,
or under the laws of, any territory. These
authorities will expire at the conclusion of
the 2023 AGM (or, if earlier, at the close
of business on 20 September 2023) and
approval will be sought at that meeting to
renew a similar authority for a further year.
None of the ordinary shares carry any
special rights regarding control of
the Company.
There are no restrictions on transfers
of shares other than:
• certain restrictions which may from
time to time be imposed by law or
regulations such as those relating
to insider dealing or pursuant to
the Company’s Inside Information
Disclosure Policy;
• pursuant to the Company’s Securities
Dealing Policy and Code, whereby the
Directors and designated employees
require approval to deal in the
Company’s shares or cannot deal
at certain times; and
• where a person with an interest in the
Company’s shares has been served
with a disclosure notice and has
failed to provide the Company with
information concerning interests in
those shares.
Results and dividends
The Group made a profit before taxation
and one-offs of GEL 1,243.55 million for
the year ended 31 December 2022. The
Group’s profit after taxation for the year
was GEL 1,444.00 million.
The Company may by ordinary resolution
declare dividends provided that no
such dividend shall exceed the amount
recommended by the Company’s
Directors. The Directors may also pay
such interim dividends as appear to
be justified by the profits of the Group
available for distribution. As Bank of
Georgia Group PLC is a holding company,
the Group relies primarily on dividends
and other statutorily (if any) and
contractually permissible payments
from its subsidiaries to generate the
funds necessary to meet its obligations
and pay dividends to its shareholders.
On 16 August 2022 the Group announced
that the Board declared an interim
dividend of GEL 1.85 per ordinary share
in respect of the period ended 30 June
2022, payable to ordinary shareholders
of the Group on 20 October 2022. The
Board of Directors approved a GEL
72.7 million share buyback in June 2022,
extended to a total of GEL 112.7 million
which concluded in December 2022. This
was consistent with the Group’s capital
and distribution policy, announced in
September 2021, to target a dividend/
share buyback payout ratio in the range
of 30-50% of annual profits. The Board
believed this to be in the best interests
of the Company and its shareholders.
The Board of Directors intend to
recommend a final dividend in respect of
the year ended 31 December 2022 of GEL
5.80 per ordinary share. On 16 February
2023, the Board approved an increase of
up to GEL 148 million in its share buyback
and cancellation programme commencing
on 16 February 2023.
Equity Settled
Option Plan (ESOP)
The Group operates two employee
benefit trusts (‘EBT’) – one for Executive
Management, and the other for
employees below the executive level
(the ‘ESOPs’) – which hold ordinary shares
on-trust for the benefit of employees
and former employees of the Group, and
their dependents, and which are used in
conjunction with the Group’s employee
share schemes. Whilst ordinary shares
are held in the EBT, the voting rights
in respect of these ordinary shares may
be exercised by the trustees of the EBT.
In accordance with ESOP documentation,
Apex Group Fiduciary Services Limited
has waived its right to receive any
dividends. This waiver will remain in
place indefinitely, unless otherwise
instructed by the Company. The
Company has committed that new
shares issued in satisfaction of deferred
share compensation from the time of
the Company’s listing on the premium
segment of the LSE will not exceed 10%
of Bank of Georgia Group PLC’s ordinary
share capital over any ten-year period.
Powers of Directors
The Directors may exercise all powers
of the Company subject to applicable
legislation and regulations and the
Company’s Articles of Association.
Conflicts of interest
In accordance with the Companies Act
2006, the Directors have adopted a policy
and procedure for the disclosure and
authorisation (if appropriate) of conflicts
of interest, and these have been followed
during 2022. The Company’s Articles of
Association also contain provisions to
allow the Directors to authorise potential
conflicts of interest so that a Director is not
in breach of their duty under Company Law.
Directors’ remuneration
Directors’ fees are determined by the
Remuneration Committee from time
to time. The remuneration of Directors
must be in accordance with the Directors’
Remuneration Policy, which was last
approved by shareholders in 2022. The fees
paid to the Non-executive Directors in 2022
pursuant to their letters of appointment
are shown on page 212. The fees paid to
our sole Executive Director for the period
1 January 2022 to 31 December 2022
pursuant to his service agreements are
shown on page 206.
Directors’ interests
The Directors’ beneficial interests in
ordinary shares of Bank of Georgia Group
PLC as at 31 December 2022 are shown
on page 214, together with any changes in
those interests between the financial year-
end and the date on which this Directors’
Report was approved by the Board.
Company Secretary
The Board appointed Computershare
Governance Services to act as Company
Secretary to Bank of Georgia Group
PLC on 25 November 2022, taking over
from Link Company Matters Limited.
Computershare is a global company
delivering governance solutions to
listed and private companies through
professional expertise and innovative
technologies.
Re-election of Directors
In line with the Code’s recommendations,
all Directors seek re-election every year
and accordingly, all Directors who wish
to continue on the Board will stand
for election or re-election in 2023. The
Board will set out in its AGM Notice
the qualifications of each Director and
support for re-election as applicable.
Annual General Meeting
The AGM Notice is circulated to all
shareholders at least 20 working days
prior to such meeting. All shareholders are
invited to attend the AGM, where there
is an opportunity to ask the Chairman
and the Chairs of the Board committees
questions. Shareholders are also invited
to submit questions ahead of the AGM
by email and responses are provided
ahead of the proxy voting deadline
where practicable.
As recommended by the Code, all
resolutions proposed at the 2023 AGM
will be voted on separately and the voting
results will be announced to the LSE and
made available on the Company’s website
as soon as practicable after the meeting.
These will include all votes cast for and
against and those withheld, and all
proxies lodged prior to the meeting.
For further Shareholder Information on
shareholder and stakeholder engagement
see pages 149 to 153.
Directors’ responsibilities
Statements explaining the responsibilities
of the Directors for preparing the Annual
Report and consolidated and separate
financial statements can be found on
page 223 of this Annual Report.
Directors’ report continued
227
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
A further statement is provided
confirming that the Board considers the
Annual Report, taken as a whole, to be
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
position and performance, business model
and strategy.
Indemnity
Subject to applicable legislation, every
current and former Director or other officer
of the Company (other than any person
engaged by the Company as auditor)
shall be indemnified by Bank of Georgia
Group PLC against (broadly) any liability
in relation to Bank of Georgia Group PLC,
other than (broadly) any liability to the
Company or a member of the Group, or any
criminal or regulatory fine. In addition, the
Company has put in place Directors’ and
Officers’ indemnity insurance.
Significant agreements
Bank of Georgia Group PLC is not party
to any significant agreements that take
effect, alter or terminate upon a change
of control of the Company. The Company
is not aware of any agreements between
holders of its ordinary shares that may
result in restrictions on the transfer of
its ordinary shares or on voting rights.
Presence outside of Georgia
We have our registered office in London
(see page 350), and additional offices in
Budapest, Istanbul and Tel Aviv, as well
as the BNB Bank in Belarus.
Political donations
The Group did not make any political
donations or expenditure during 2022.
Authority to make political donations and
incur political expenditure will be put to
shareholder vote at the 2023 AGM.
Code of Conduct and Ethics
The Board has adopted a Code of
Conduct and Ethics relating to the
lawful and ethical conduct of the
Business, supported by the Group’s
core values. The Code of Conduct and
Ethics has been communicated to all
Directors and employees, all of whom
are expected to observe high standards
of integrity and fair dealing in relation to
customers, staff and regulators in the
communities in which the Group operates.
Our Code of Conduct and Ethics is
available on our website: https://www.
bankofgeorgiagroup.com/governance/
documents.
Independent auditors
The NBG granted an extension of two
years in respect of the mandatory audit
rotation to allow Ernst & Young LLP
(‘EY’) to continue as auditor of Bank of
Georgia Group PLC for the 2023 audit.
A resolution to reappoint EY as auditor
of Bank of Georgia Group PLC will be put
to shareholders at the 2023 AGM.
Major interests in shares
As at 31 December 2022, the following
interests in the ordinary share capital of
the Company have been notified to the
Directors under DTR 5:
Shareholder
Number of
voting rights
% of voting
rights
JSC Georgia Capital
1
9,784,716 20.60%
M&G Investment Management Ltd 1,947,590 4.10%
Dimensional Fund Advisors (DFA) LP 1,741,806 3.67%
Vanguard Group Inc 1,518,347 3.20%
Fidelity Investments 1,498,734 3.16%
Source: Georgeson, Computershare
Notes:
1. JSC Georgia Capital will exercise its voting rights at the Group’s general meetings in accordance with the votes cast by all other Group Shareholders, as long as
JSC Georgia Capital’s percentage holding in Bank of Georgia Group PLC is greater than 9.9%.
For the period 1 January 2023 up to
and including 17 March 2023 (the latest
practicable date for inclusion in this
report), there have been no further
notifications pursuant to DTR 5.
It should be noted that these holdings
are likely to have changed since the
Company was notified. However,
notification of any change is not
required until the next notifiable threshold
is crossed. The respective regulatory
filings by shareholders are available
on the Company’s website:
https://bankofgeorgiagroup.com/news/
regulatory and the LSE website:
https://www.londonstockexchange.com.
Post balance sheet events
The Board approved an increase of up to
GEL 148 million in its share buyback and
cancellation programme commencing
on 16 February 2023. In accordance with
the authority granted by shareholders
at the 2022 AGM, the maximum number
of shares that may be repurchased is
4,916,943. As at 17 March, the company
has bought back 276,449 ordinary shares
pending cancellation.
Statement of disclosure of
information to the auditor
We confirm that, so far as we are aware,
there is no relevant audit information of
which the Company’s auditor is unaware,
and we have taken all steps that we
reasonably believe should be taken as
Directors in order to make ourselves
aware of any relevant audit information
and to establish that the Company’s
statutory auditor is aware of such
information
The Directors’ Report on pages 224
to 227 was approved by the Board
of Directors on 23 March 2023 and
signed on its behalf:
By order of the Board
Computershare Company Secretarial
Services Limited
Company Secretary
23 March 2023
228
Annual Report 2022 Bank of Georgia Group PLC
FINANCIAL
STATEMENTS
229
Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
Independent Auditor’s report
To the Members of Bank of Georgia Group PLC
Opinion
In our opinion:
• Bank of Georgia Group Plc’s (the ‘Group’) group financial statements and Bank of Georgia Group Plc (the ‘Parent Company’
or ‘Company’) financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Bank of Georgia Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2022 which comprise:
Group
• Consolidated statement of financial position as at
31 December 2022
• Consolidated income statement for the year then ended
• Consolidated statement of comprehensive income for
the year then ended
• Consolidated statement of changes in equity for the year
then ended
• Consolidated statement of cash flows for the year
then ended
• Related notes 1 to 34 to the financial statements,
including a summary of significant accounting policies
• Information marked as ‘audited’ within the Directors’
Remuneration Report
Parent company
• Statement of financial position as at 31 December 2022
• Statement of changes in equity for the year then ended
• Statement of cash flows for the year then ended
• Related notes 1 to 34 to the financial statements including
a summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards and as regards the Parent Company financial statements, as applied in accordance with section 408 of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in conducting the audit.
Annual Report 2022 Bank of Georgia Group PLC
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Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent
Company’s ability to continue to adopt the going concern basis of accounting included:
• Evaluating the appropriateness of management’s key assumptions made in the Group’s forecasts. In assessing the
reasonableness of management’s assumptions, we have considered the principal risks and uncertainties facing the Group
including the potential longer-term impacts of the ongoing conflict between Russia and Ukraine, as well as appropriate
mitigating factors.
• Assessing the level of liquidity available to the Group to support its ongoing needs and projected compliance with capital
requirements and external debt covenants for a period of 12 months from the date of authorisation of the financial statements.
• Evaluating the reasonableness of management’s adverse forecast scenarios and associated stress testing, and their impact on
the Group’s liquidity and capital positions and compliance with external debt covenants.
• Obtaining the reverse stress test performed by management and assessing the plausibility of management actions available
to mitigate the impact of the reverse stress test.
• Assessing the adequacy of the going concern disclosures provided within the financial statements by evaluating whether they
were consistent with management’s assessment and in compliance with the relevant reporting requirements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern
for a period of twelve months from when the financial statements are authorised for issue.
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of three components and audit
procedures on specific balances for a further three components.
• The components where we performed full or specific audit procedures accounted for 98% of adjusted
profit before tax and non-recurring items, 97% of Revenue and 98% of Total assets.
Key audit matters • Allowance for Expected Credit Loss
• Measurement of fair value of investment properties, assets held for sale and foreclosed assets
Materiality • Overall Group materiality of GEL 62m which represents 5% of adjusted profit before tax from
continuing operations, calculated by adjusting for non-underlying items.
Independent Auditor’s report continued
To the Members of Bank of Georgia Group PLC
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Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope
for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.
We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the
business environment, and other factors such as recent Internal audit results when assessing the level of work to be performed
at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, of the twenty-two reporting components of the Group, we selected
six components covering entities within the United Kingdom, Georgia and Belarus, which represent the principal business units
within the Group.
Of the six components selected, we performed an audit of the complete financial information of three components (‘full scope
components’) which were selected based on their size or risk characteristics. For the remaining three components (‘specific scope
components’), we performed audit procedures on specific accounts within that component that we considered had the potential
for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their
risk profile.
The components for which we performed full or specific scope procedures are set out below:
Component Scope Location/team
Bank of Georgia Group Plc Full London/primary team
BGEO Group Limited Full London/primary team
JSC Bank of Georgia Full Georgia/primary team
JSC BGEO Group Specific Georgia/primary team
Georgian Leasing Company LLC Specific Georgia/component team
JSC Belarusky Narodny Bank Specific Belarus/component team
The reporting components where we performed audit procedures accounted for 98% (2021: 98%) of the Group’s adjusted profit
before tax and non-recurring items, 97% (2021: 98%) of the Group’s Revenue and 98% (2021: 99%) of the Group’s Total assets. For
the current year, the full scope components contributed 87% (2021: 91%) of the Group’s adjusted profit before tax and non-recurring
items, 93% (2021: 92%) of the Group’s Revenue and 92% (2021: 93%) of the Group’s Total assets. The specific scope component
contributed 11% (2021: 7%) of the Group’s adjusted profit before tax and non-recurring items, 4% (2021: 6%) of the Group’s Revenue
and 6% (2021: 6%) of the Group’s Total assets. The audit scope of these components may not have included testing of all significant
accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.
Of the remaining sixteen components that together represent 2% of the Group’s adjusted profit before tax and non-recurring items,
none are individually greater than 0.07% of the Group’s adjusted profit before tax and non-recurring items. For these components,
we performed other procedures, including analytical review and testing of consolidation journal entries and intercompany
eliminations to respond to any potential risks of material misstatement to the Group financial statements.
The table below illustrates the coverage obtained from the work we performed:
2022 2021
No. Revenue Profit
3
Total assets No. Revenue Profit
3
Total assets
Full scope
1
3 93% 87% 92% 3 92% 91% 93%
Specific scope
2
3 4% 11% 6% 3 6% 7% 6%
Full and specific scope coverage 6 97% 98% 98% 6 98% 98% 99%
Remaining components
4
16 3% 2% 2% 16 2% 2% 1%
Total reporting components 22 100% 100% 100% 22 100% 100% 100%
1. We audited the complete financial information.
2. We audited specific account balances within these components. The audit scope of these components may not have included testing of all significant accounts of the
components but will have contributed to the coverage of significant accounts tested for the Group.
3. Relative absolute adjusted Profit from continuing operations before non-recurring items and tax.
4. We performed other procedures, including analytical review, and testing of consolidation journal entries and intercompany eliminations to respond to any potential risks
of material misstatement to the Group financial statements on remaining component entities.
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Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of
the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms and
another firm operating under our instruction. Of the three full scope components, audit procedures were performed on all three of
these directly by the primary audit team. For the three specific scope components, where the work was performed by component
auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the Group as a whole.
The Group audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior
Statutory Auditor visits component teams and holds a meeting with both the component team and client. During the current year’s
audit cycle, a visit was undertaken by the primary audit team to the component teams in Georgia. This visit involved oversight
of work undertaken at this location, discussion of the audit approach and any issues arising from their work, meeting with local
management, and reviewing relevant audit working papers on key risk areas. In addition to site visits, the primary team interacted
regularly with the component teams where appropriate during various stages of the audit, reviewed relevant working papers and
were responsible for the scope and direction of the audit process.
The programme of our visit to a component team located in Belarus was impacted by travel restrictions due to the war in Ukraine.
For this location, oversight of the work was performed remotely through video conference calls and through detailed review of
component team audit work.
This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group
financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Group. The Group has determined that climate-
related risk is an emerging risk as described on page 61 of the Risk Management section of the Annual Report. This is explained
on pages 103 to 117 in the required Task Force for Climate related Financial Disclosures and on page 81 in the Principal risks and
uncertainties section. Management also explained their climate commitments on pages 110 to 117. All of these disclosures form part
of the ‘Other information’, rather than the audited financial statements. Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially inconsistent with the financial statements, or our knowledge obtained
in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
The Group has explained in the ‘Risk management’ note the journey they are on as regards climate change and that currently they
perceive the risk as being low with no required changes to their methods of accounting.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, the effects of material climate risks disclosed on page 98 and
the Risk management in Note 29; and whether these have been appropriately reflected in the asset values and liabilities recognised.
As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists, to
determine the risks of material misstatement in the financial statements from climate change which needed to be considered
in our audit.
We also evaluated the Directors’ view of climate change risks on the assessment of going concern and viability and associated
disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to
impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Independent Auditor’s report continued
To the Members of Bank of Georgia Group PLC
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Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
Risk Our response to the risk
Key observations
communicated to
the Audit Committee
Allowance for Expected Credit
Loss (‘ECL’)
Expected credit loss allowance of
GEL 326m (2021: GEL 405m), Note 9
The ECL provision is calculated using a
combination of a collective provisioning
model and specific loan provisions
based on discounted cash flow analyses
and regression-based forward-looking
estimates.
Inputs and assumptions used to estimate
the impact of various economic scenarios
are likely to have changed from the
previous year end as a result of the
heightened economic uncertainty caused
by the ongoing conflict between Ukraine
and Russia, and the impact it has had
on the global economy. Consequently,
the allowance for expected credit loss
is highly judgemental and changes in
assumptions could have a material
impact on reported profits.
Both collective and specific provisioning
depend on a number of assumptions and
judgements including:
• allocation of loans to stage 1, 2, 3
or Purchased and Originated Credit-
Impaired (‘POCI’) using criteria set
in accordance with IFRS 9 ‘Financial
Instruments’;
• accounting interpretations and
modelling assumptions used to build
and run the models for calculating
the expected credit loss (‘ECL’);
• inputs and assumptions used to
estimate the impact of multiple
economic scenarios, including
weightings applied;
• appropriateness, completeness and
valuation of post model adjustments,
including the risk of double-counting
the effects of various assumptions;
• estimation of probability of default
(‘PD’), loss given default (‘LGD’) and
exposure at default (‘EAD’), including
the valuation of collateral; and
• measurement of individually assessed
provisions, including expected future
cash flows and the valuation of
collateral.
• We obtained an understanding, performed
walkthroughs and evaluated the design and
operating effectiveness of key controls across
the processes relevant to the ECL. This includes
controls over data accuracy and completeness,
credit monitoring, allocation of borrowers into their
respective impairment stages, individual provisioning
and production of journal entries and disclosures.
• Using our IFRS 9 specialists, we assessed and
challenged the Group’s IFRS 9 provisioning
methodology to determine whether the accounting
standard had been complied with consistently
and any changes made to the methodology were
appropriate.
• Using our modelling specialists, we tested the
assumptions, inputs and formulae used in the ECL
model to confirm that the model was consistent with
the stated methodology. This included assessing the
appropriateness of the model design and formulae
used, and recalculating the PD, LGD and EAD, on a
sample basis.
• We engaged specialists to perform a detailed review
and testing of the changes made in the models.
We performed a recalculation of the ECL on a
sample basis, including procedures over staging and
underlying risk parameters.
• We assessed the appropriateness of the
macroeconomic scenarios used by management and
tested whether they had been properly applied in the
ECL calculations.
• We tested the completeness and accuracy of key
data inputs used in the ECL model by reconciling
loans and advances between the underlying source
systems and the ECL model.
• We challenged the criteria used to allocate assets
to stage 1, 2, 3 or POCI in accordance with IFRS
9, including any management overlays applied
specifically to determine SICR and staging. For a
sample of loans, we independently assessed whether
they had been allocated to the appropriate stage,
considering potential indicators of significant
increase in credit risk or default and challenged
management as to the rationale for movements
between stages.
Although the estimation of
the expected credit loss is by
nature highly judgemental,
based on the results of
our audit procedures, we
concluded that the ECL
provision is appropriate
as at 31 December 2022.
Specifically, we highlighted
the following to the
Audit Committee:
• We considered the overall
valuation and treatment
of collateral to be
materially reasonable, but
noted there is increased
judgment regarding the
timing of realisation in the
current environment.
• Staging, inputs and
assumptions are
appropriately applied to
the ECL calculation.
• Financial statements
disclosures on loans
and receivables and
the ECL allowance are
in compliance with the
requirements of IFRS 9.
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Risk Our response to the risk
Key observations
communicated to
the Audit Committee
There are also risks related to:
• the accuracy and completeness of
underlying loan data used in the ECL
model; and
• the accuracy and adequacy of
financial statement disclosures.
As a consequence of the judgement
involved in establishing the allowance,
there is a greater risk of misstatement
in ECL charges, either by fraud or error,
including through the potential override of
controls by management. As a result, this
matter was one of the most significant
assessed risks of material mistatement.
The level of risk remains consistent with
the prior year.
• We performed procedures to address the existence
and valuation of collateral for loans where expected
cash flows from collateral were impacting the
estimation of loan losses. Using our valuation
specialists, we assessed the reasonableness of
the haircuts applied by management to collateral
valuation including its valuation. We ensured that
the Group has up to date valuations of collateral
and, for real estate collateral for indiviaully assessed
borrowers. We reviewed the details of the valuation
and validated the reasonableness of the new value
by benchmarking major inputs to publicly available
market data.
• We evaluated the adequacy and appropriateness
of disclosures for compliance with the requirements
of IFRS.
Valuation of investment properties held
at fair value, assets held for sale and
foreclosed assets
Investment property of GEL 167m (2021:
GEL 227m) Note 14, Real estate classified
as held for sale of GEL 30m (2021: GEL
47m), and Foreclosed Assets GEL120m
(2021:GEL 3m)
The Group applies the fair value model
for its investment property and available
for sale assets (‘AFS’), while it measures
foreclosed assets at the lower of cost
and net realisable value. They are largely
comprised of real estate assets that were
previously held as collateral against loans
that have now defaulted.
Real estate valuations are inherently
uncertain and subject to an estimation
process. Due to the Russia-Ukraine war,
Russian and Ukrainian people moved
to Georgia in large numbers. This has
resulted in an increase in demand for
real estate and a corresponding rise in
price. Whilst valuations are performed by
a combination of internal and external
appropriately qualified valuers, there
remains a risk that individual assets
might be inappropriately valued.
Due to heightened volatility in market
prices as a result of ongoing economic
uncertainty in the region, the level
of risk related to the valuation of
properties increased.
• We obtained an understanding, performed
walkthroughs and evaluated the design effectiveness
of key controls across the processes relevant to the
valuation of investment property, real estate assets
held for sale, and foreclosed assets.
• We evaluated the competence, professional
qualification and objectivity of the external experts
engaged by the Group to perform valuation of the
Group’s investment properties.
• Through reading the valuation reports and discussion
with management and the valuers, we obtained
an understanding of the objectives and scope of
the experts’ work, the methods and assumptions
that they had used and the conclusions that they
had reached.
• We involved the EY Property Valuation specialist
team to perform a revaluation of a sample of
properties in order to test the reasonableness of
management's expert valuation. We verified the
input data, the application of the methods and logic
as well as the reasoning applied by the appraisers.
Subsequently, we compared the results reached by
EY specialists to those of management’s experts
and investigated significant variances.
• We assessed the adjustments made by
management to the valuation of properties for
their reasonableness, more specifically, we verified
that the properties subject to repurchase options
had been capped at their repurchase price and that
an appropriate period had been applied in order to
discount the fair values of properties with restrictions.
• We performed testing over the addition and
disposal of properties including the transfer of
assets between investment properties, property and
equipment, other assets and assets held for sale.
• We reviewed the presentation and disclosure of real
estate in the financial statements are in accordance
with relevant accounting standards.
Based on the results
of our audit procedures,
we concluded that:
• Valuation of investment
properties, assets held for
sale and foreclosed assets
as at 31 December 2022
is reasonable, including
management's specialist
valuations and relevant
adjustments.
• The financial statements
disclosures were
appropriate and in
compliance with relevant
accounting standards.
Independent Auditor’s report continued
To the Members of Bank of Georgia Group PLC
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Annual Report 2022 Bank of Georgia Group PLC
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Financial Statements Additional Information
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of
our audit procedures.
We determined materiality for the Group to be GEL 62 million (2021: GEL40 million), which is 5% (2021: 5%) of adjusted profit
before tax and non-recurring items. We believe that an adjusted PBT and non-recurring items provides us with the most appropriate
measure for the users of the financial statements given the Group is profit making; it is consistent with the wider industry and is the
standard for listed and regulated entities and we believe it reflects the most useful measure for users of the financial statements.
We determined materiality for the Parent Company to be GEL 62 million (2021: GEL 40 million), which is the lower of GEL 66 million
(2% of equity) and the Group Materiality. We believe this reflects the most useful measure for users of the financial statements as
the Parent Company’s primary purpose is to act as a holding company with investments in the Group’s subsidiaries, not to generate
operating profits and therefore a profit based measure is not relevant.
Starting
basis
• GEL 1,634m
• Actual Profit before tax and non-recurring items adjustments
Adjustments
• GEL 391m
• Non-recurring item
Materiality
• Totals GEL 1,243m
• Materiality of GEL 62m (5% of materiality basis)
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was 50% (2021: 50%) of our planning materiality, namely GEL 31m (2021: GEL 20m). We have set
performance materiality at this percentage (which is at the lowest end of the range of our audit methodology) based on various
considerations including the past history of misstatements, the effectiveness of the control environment and other factors affecting
the entity and its financial reporting.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based
on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that
component. In the current year, the range of performance materiality allocated to components was GEL 4m to GEL 29m (2021: GEL
7.5 m to GEL 20m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of GEL 3m (2021:
GEL 2m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
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236
Other information
The other information comprises the information included in the annual report set out on pages 4 to 227 other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report which comprises:
• Strategic Report, including Overview, Strategy and Performance sections set out on pages 4 to 167.
• Governance section, including Directors’ Governance Statement, Board of Directors, Management team, Nomination
Committee Report, Audit Committee Report, Risk Committee Report, Directors’ Remuneration Report, Statement of Directors’
Responsibilities and Directors’ Report, set out on pages 168 to 227.
• Additional information, including GRI content index, References, Glossary and Shareholder information, set out on
pages 343 to 350.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 83;
• Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 83;
• Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets
its liabilities set out on page 83;
Independent Auditor’s report continued
To the Members of Bank of Georgia Group PLC
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Annual Report 2022 Bank of Georgia Group PLC
Strategic Report | PerformanceStrategic Report | StrategyStrategic Report | Overview Governance
Financial Statements Additional Information
• Directors’ statement on fair, balanced and understandable set out on page 223;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 63 to 81;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on page 178 and;
• The section describing the work of the audit committee set out on pages 192 to 197.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement on page 223, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of
the Group and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that
the most significant are the relevant regulations of the UK Listing Authority (“UKLA”), as well as the various Georgian legal
and regulatory requirements applying to the components of the Group, of which the most material are the regulations of the
National Bank of Georgia.
• We understood how Bank of Georgia Group plc is complying with those frameworks by making enquiries of management,
internal audit, and those responsible for legal and compliance matters. We also reviewed correspondence between the Group
and its regulators; reviewed minutes of the Board and its committees; and gained an understanding of the Group’s approach to
governance, demonstrated by the Board’s approval of the Group’s governance framework and the Board’s review of the Group’s
risk management framework (‘RMF’) and internal control processes.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur
by considering the controls that the Group has established to address risks identified by the entity, or that otherwise seek to
prevent, deter or detect fraud. We also considered areas of significant judgement, complex transactions, performance targets,
economic or external pressures and the impact these have on the control environment. Where this risk was considered to be
higher, we performed audit procedures to address each identified fraud risk which included management, internal audit and legal
enquiries, testing of internal control, journal entry testing, analytical procedures, tests of detail and focused testing as referred
to in the Key Audit Matters section above. These procedures were designed to provide reasonable assurance that the financial
statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved inquiries of Group legal counsel, money laundering reporting officer, internal audit, certain senior
management executives and focused testing. We also performed inspection of key regulatory correspondence from the relevant
regulatory authorities.
• The Group operates in the banking industry which is a highly regulated environment. As such, the Senior Statutory Auditor
considered the experience and expertise of the engagement team to ensure that the team had the appropriate competence and
capabilities which included the use of specialists where appropriate.
Annual Report 2022 Bank of Georgia Group PLC
238
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit Committee, we were appointed by the Group on 25 January 2018 to audit the
financial statements for the year ending 31 December 2017 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 6 years, covering the years
ending 31 December 2017 to 31 December 2022.
• The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Peter Wallace (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
23 March 2023
Independent Auditor’s report continued
To the Members of Bank of Georgia Group PLC
239
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Financial Statements Additional Information
Notes 2022 2021 2020
Assets
Cash and cash equivalents 6 3,584,843 1,520,562 1 ,9 70 ,9 5 5
Amounts due from credit institutions 7 2,433,028 1, 931,390 2,016,005
Investment securities 8 4,349 ,729 2,595,66 4 2,544 ,397
Loans to customers and finance lease receivables 9 16,861, 706 16, 168, 973 14,192,078
Accounts receivable and other loans 10 397 , 990 3,680 2,420
Prepayments 43,612 40,878 27 ,593
Inventories 17 ,096 11,514 10,340
Right-of-use assets 11 117 ,387 80, 186 83,208
Investment properties 14 166,54 6 226,849 231,241
Property and equipment 12 398,855 378,808 387 ,851
Goodwill 15 33,351 33,351 33,351
Intangible assets 13 1 4 9, 4 41 14 4,251 125,806
Income tax assets 16 86 4 292 22 ,033
Other assets 17 317 ,886 2 4 6 ,9 47 325, 994
Assets held for sale 29 ,566 46,731 62,6 48
Total assets 28, 901, 900 23,430,0 76 22,035,920
Liabilities
Client deposits and notes 18 18,261,397 14,038,002 14,020,209
Amounts owed to credit institutions 19 5,266,653 4 ,318,445 3,335, 966
Debt securities issued 20 645,968 1,518,685 1,585,545
Lease liability 11 114,470 8 7, 6 6 2 95,635
Accruals and deferred income 106,366 80, 157 53,894
Income tax liabilities 16 99 ,533 110,868 62,434
Other liabilities 17 158,691 183,349 332,322
Total liabilities 24,653,078 20,337 , 168 19 ,486,005
Equity 22
Share capital 1,563 1,618 1,618
Additional paid-in capital 506,304 492,243 526,634
Treasury shares (83) (75) (54)
Capital redemption reserve 55 – –
Other reserves 14 ,564 (3,223) 71,227
Retained earnings 3,7 09 , 170 2,588, 463 1, 939 , 122
Total equity attributable to shareholders of the Group 4,231,573 3,079,026 2,538,5 47
Non-controlling interests 17 ,249 13,882 11,368
Total equity 4,248,822 3,092, 908 2 , 5 4 9,9 1 5
Total liabilities and equity 28,901, 900 23,430,07 6 22,035, 920
The financial statements on pages 239 to 342 were approved by the Board of Directors on and signed on its behalf by:
Archil Gachechiladze
Chief Executive Officer
Bank of Georgia Group PLC
Registered No. 10917019
23 March 2023
The accompanying Notes on pages pages 247 to 342 are an integral part of these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2022 (Thousands of Georgian Lari)
Annual Report 2022 Bank of Georgia Group PLC
240
Consolidated Income Statement
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Notes 2022 2021 2020
Interest income calculated using EIR method 2 ,236,307 1,822,307 1,563,362
Other interest income 20,5 74 28,737 32 ,065
Interest income 2,256,881 1,851,044 1,59 5,427
Interest expense (1,056,829) (882,474) (806,37 0)
Deposit insurance fees (17 ,717) (14 ,629) (11, 415)
Net interest income 23 1,182,335 953,941 777 ,642
Fee and commission income 559 ,465 390,829 274,458
Fee and commission expense (241, 974) (158,398) (108, 955)
Net fee and commission income 24 3 1 7, 4 9 1 232,431 165,503
Net foreign currency gain 466,094 109, 099 99 ,040
Net gains/(losses) on extinguishment of debt (8,717) (2,892) (3,282)
One-off other income from settlement of legacy claim 10 391,100 – –
Net other gains/(losses) 44 ,809 73,098 51,756
Operating income 2,393, 112 1,365,677 1,090,659
Salaries and other employee benefits 25 (362,019) (281,087) (239 ,607)
Administrative expenses 25 (164 ,450) (129 ,524) (105,531)
Depreciation, amortisation and impairment 11, 12, 13 (111,089) (93,6 18) (82,937)
Other operating expenses (3,628) (3,723) (4,560)
Operating expenses (641, 186) (507 , 952) (432,635)
Profit/(loss) from associates 754 (3,781) 782
Operating income before cost of risk 1,752,680 853,944 658,806
Expected credit loss on loans to customers 26 (128,6 78) (1,452) (236, 983)
Expected credit loss on finance lease receivables 26 (3,208) (4 ,95 0) (8,025)
Other expected credit loss 26 (16, 189) 9 ,899 (23,222)
Impairment charge on other assets and provisions 26 29, 007 (54,909) (3 2 ,767)
Cost of risk (119 ,068) (51,412) (300, 997)
Net operating income before non-recurring items 1,633,612 80 2,532 357 ,809
Net non-recurring items 27 1,038 (590) (41,311)
Profit before income tax expense 1,634,650 801,9 42 3 16,498
Income tax expense 16 (190,651) (74,824) (21,555)
Profit for the year 1,443,999 727 , 118 294 ,943
Total profit attributable to:
– shareholders of the Group 1,439 ,507 723,806 293,584
– non-controlling interests 4, 492 3,312 1,359
1,443,999 727 , 118 294 ,943
Basic earnings per share 22 3 0 .9 9 4 6 15.2240 6. 1724
Diluted earnings per share 22 30.3328 14 .8801 6. 170 7
The accompanying Notes on pages 247 to 342 are an integral part of these financial statements.
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Financial Statements Additional Information
2022 2021 2020
Profit for the year 1,443,999 727 , 118 294 ,943
Other comprehensive income/(loss)
Other comprehensive income/(loss) to be reclassified to profit or loss in
subsequent years, net of tax:
– Net change in fair value on investments in debt instruments measured at fair
value through other comprehensive income (FVOCI) 29 ,232 (39 ,573) 77 ,728
– Realised gain on financial assets measured at FVOCI (7 , 921) (30,0 4 4) (3,585)
– Change in allowance for expected credit losses on investments in debt
instruments measured at FVOCI reclassified to the consolidated income
statement 6,568 (1,643) 458
– Loss from currency translation differences (18,278) (7 , 184) (2,4 80)
Net other comprehensive income/(loss) to be reclassified to profit or loss in
subsequent years, net of tax 9 ,601 (78, 44 4) 72,121
Other comprehensive loss not to be reclassified to profit or loss in subsequent
years:
– Net loss/(gain) on investments in equity instruments designated at FVOCI (1,369) 884 (519)
Net other comprehensive (loss)/income not to be reclassified to profit or loss in
subsequent years, net of tax (1,369) 88 4 (519)
Other comprehensive income/(loss) for the year, net of tax 8,232 (77 ,560) 71,602
Total comprehensive income for the year 1,452,231 649,558 366,545
Total comprehensive income attributable to:
– shareholders of the Group 1,447 ,816 6 4 6 ,749 36 4,727
– non-controlling interests 4 ,41 5 2,809 1,818
1,452,231 649,558 366,545
The accompanying Notes on pages pages 247 to 342 are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Annual Report 2022 Bank of Georgia Group PLC
242
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Attributable to shareholders of the Group
Non-
controlling
interests
Total
equity
Share
capital
Additional
paid-in
capital
Treasury
shares
Other
reserves
Capital
redemption
reserve
Retained
earnings Total
31 December 2019 1,618 49 2,07 2 (6 4) (7,481) – 1,655,256 2, 141,401 9 ,507 2, 150, 908
Profit for the year – – – – – 293,584 293,584 1,359 294,943
Other comprehensive income
for the year – – – 78,725 – (7 ,582) 71, 143 459 71,602
Total comprehensive income
for the year – – – 78,725 – 286,002 36 4,727 1,818 366,545
Increase in equity arising
from share-based payments – 53,728 21 – – – 53, 749 – 53, 74 9
Purchase of treasury shares
under share-based payments – (19 , 166) (11) – – – (19 , 177) – (19 , 177)
Dividends to shareholders of the
Group (Note 22) – – – – – (2, 136) (2, 136) – (2, 136)
Increase in share capital
of subsidiaries – – – (7) – – (7) 7 –
Non-controlling interests arising
on acquisition – – – (1 0) – – (1 0) 36 26
31 December 2020 1,618 526,634 (5 4) 71,227 – 1,939 ,122 2,538,547 11,368 2 , 5 4 9,9 1 5
Profit for the year – – – – – 723,806 723,806 3,312 727 , 118
Other comprehensive income for
the year – – – (74,430) – (2 ,627) (77 ,05 7) (5 03) (77 ,560)
Total comprehensive income for
the year – – – (7 4,430) – 721, 179 6 4 6 , 74 9 2,809 649 ,558
Increase in equity arising from
share-based payments – 45,289 18 – – – 45,307 – 45,307
Purchase of treasury shares
under share-based payments – (79 ,680) (39) – – – (79, 719) – (79, 719)
Dividends to shareholders of the
Group (Note 22) – – – – – (7 1,838) (71,838) – (71,838)
Increase in share capital
of subsidiaries – – – (20) – – (20) 20 –
Dividends of subsidiaries to
non-controlling shareholders – – – – – – – (315) (315)
31 December 2021 1,618 492,243 (75) (3,223) – 2 ,588,463 3,079,026 13,882 3,092,908
Profit for the year – – – – – 1,439 ,507 1,439 ,507 4 ,49 2 1, 443,999
Other comprehensive income
for the year – – – 17 ,876 – (9 ,567) 8,309 (77) 8,232
Total comprehensive income
for the year – – – 17 ,876 – 1,429, 940 1,447,816 4 ,415 1,452,231
Increase in equity arising from
share-based payments – 82,288 27 – – – 82,315 – 82,315
Purchase of treasury shares
under share-based payments – (68,227) (35) – – – (68,262) – (68,262)
Dividends to shareholders of
the Group (Note 22) – – – – – (196,514) (196,514) – (196,514)
Increase in share capital
of subsidiaries – – – (89) – – (8 9) 19 (70)
Purchase of treasury shares – – (112,719) – – – (112,719) – (112,719)
Cancellation of treasury shares (55) – 112,719 – 55 (112,719) – – –
Dividends of subsidiaries to non-
controlling shareholders – – – – – – – (1,067) (1,067)
31 December 2022 1,563 506,304 (83) 14,564 55 3,709 , 170 4,231,573 17 ,249 4,248,822
The accompanying Notes on pages 247 to 342 are an integral part of these financial statements.
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Financial Statements Additional Information
Notes 2022 2021 2020
Cash flows from operating activities
Interest received 2,299,639 1,866,371 1,440,328
Interest paid (1,018, 118) (898,342) (808,336)
Fees and commissions received 522,586 380,26 4 285,867
Fees and commissions paid (241, 974) (158,398) (108, 955)
Net cash inflow from real estate 7 , 111 2 7, 6 7 7 3,508
Net realised gain from foreign currencies 453, 998 13 4,851 98,392
Recoveries of loans to customers previously written off 9 84,542 81,329 4 4 , 47 2
Cash received from/(paid for) derivatives – (235) 1,601
Other income received 11,799 8,651 5,412
Salaries and other employee benefits paid (279 ,7 04) (235, 780) (185,858)
General and administrative and operating expenses paid (171,389) (140 , 191) (99,103)
Cash flows from operating activities before changes in operating assets
and liabilities 1,668,490 1,066, 197 677 ,328
Net (increase)/decrease in operating assets
Amounts due from credit institutions (902,255) (25,839) (146, 940)
Loans to customers and finance lease receivables (2,332,975) (2,750,486) (1,269 ,825)
Prepayments and other assets (18,612) (25,324) 6,018
Net increase/(decrease) in operating liabilities
Amounts due to credit institutions 1,019 ,092 1,090,386 (837 ,711)
Debt securities issued (73,772) 91,775 (167 ,144)
Client deposits and notes 5,509 ,461 5 20,03 4 2,863,289
Other liabilities 94,581 826 (46,587)
Net cash flows from/(used in) operating activities before income tax 4, 964,0 10 (32,431) 1,078,428
Income tax paid (202,558) (4 ,6 49) (18, 790)
Net cash flows from/(used in) operating activities 4,761,452 (37 ,080) 1,059 ,638
Cash flows (used in)/from investing activities
Net (purchases)/sales of investment securities (1,807 ,355) (86, 798) (673,284)
Proceeds from sale of investment properties and assets held for sale 92,690 124,805 75,388
Proceeds from sale of property and equipment and intangible assets 3,658 1,822 760
Purchase of property and equipment and intangible assets (121,666) (97 ,575) (108,342)
Dividends received – 401 3,29 9
Net cash flows used in investing activities (1,832,673) (57,345) (702, 179)
Cash flows (used in)/from financing activities
Repurchase of debt securities issued (617 , 194) (28,825) (120,549)
Repayment of the principal portion of the debt securities issued (31,581) (46,7 06) (4 4 0 , 41 0)
Proceeds from Additional Tier 1 148, 120 – –
Cash payments for the principal portion of the lease liability (25, 980) (29 ,518) (11,695)
Dividends paid (196,948) (71, 985) (2, 169)
Purchase of treasury shares under share-based payments (68,262) (79 ,719) (19 , 177)
Purchase of treasury shares (112,719) – –
Net cash used in financing activities (904,56 4) (256,753) (594,000)
Effect of exchange rates changes on cash and cash equivalents 40,400 (99 ,263) 53,809
Effect of expected credit losses on cash and cash equivalents (33 4) 48 63
Net increase/(decrease) in cash and cash equivalents 2,064 ,281 (450 ,393) (182,669)
Cash and cash equivalents, beginning of the year 6 1,520,562 1, 970, 955 2, 153,624
Cash and cash equivalents, end of the year 6 3,584 ,843 1,520,562 1, 970, 955
The accompanying Notes pages 247 to 342 are an integral part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Annual Report 2022 Bank of Georgia Group PLC
244
Separate Statement of Financial Position
As at 31 December 2022 (Thousands of Georgian Lari)
Bank of Georgia Group PLC has elected exemption not to present the separate income statement in accordance with section 408
of the Companies Act 2006. The Company’s individual balance sheet shows the Company’s profit and loss for the financial year
determined in accordance with this Act.
Notes 2022 2021 2020
Assets
Cash and cash equivalents 6 10,850 384 199
Investments in subsidiaries 2 4,981,658 4,981,658 4,981,658
Other assets 177 104 151
Total assets 4,992,685 4,982,146 4,982,008
Liabilities
Interest-bearing loans and borrowings 1,675,941 2,064,708 2,135,330
Other liabilities 802 46 86
Total liabilities 1,676,743 2,064,754 2,135,416
Equity
Share capital 22 1,563 1,618 1,618
Additional paid-in capital 599,084 599,084 599,084
Capital redemption reserve 55
Retained earnings 2,010,537 2,176,026 2,636,897
Net profit/(loss) for the period 704,703 140,664 (391,007)
Total equity 3,315,942 2,917,392 2,846,592
Total liabilities and equity 4,992,685 4,982,146 4,982,008
The financial statements on pages 239 to 342 were approved by the Board of Directors on and signed on its behalf by:
23 March 2023
Archil Gachechiladze
Chief Executive Officer
Bank of Georgia Group PLC
Registered No. 10917019
The accompanying Notes on pages 247 to 342 are an integral part of these financial statements.
245
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Financial Statements Additional Information
Share
capital
Additional
paid-in capital
Treasury
shares
Capital
redemption
reserve
Retained
earnings Total equity
31 December 2019 1,618 599,084 – – 2,636,897 3,237,599
Total comprehensive loss – – – – (391,007) (391,007)
Dividends to shareholders of the Group (Note 22) – – – – – –
31 December 2020 1,618 599,084 – – 2,245,890 2,846,592
Total comprehensive income – – – – 140,664 140,664
Dividends to shareholders of the Group (Note 22) – – – – (69,864) (69,864)
31 December 2021 1,618 599,084 – – 2,316,690 2,917,392
Total comprehensive income – – – – 705,284 705,284
Dividends to shareholders of the Group (Note 22) – – – – (194,015) (194,015)
Purchase of treasury shares – – (112,719) – – (112,719)
Cancellation of treasury shares (55) – 112,719 55 (112,719) –
31 December 2022 1,563 599,084 – 55 2,715,240 3,315,942
The accompanying Notes on pages 247 to 342 are an integral part of these financial statements.
Separate Statement of Changes in Equity
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Annual Report 2022 Bank of Georgia Group PLC
246
Separate Statement of Cash Flows
For the year ended 31 December 2022 (Thousands of Georgian Lari)
Notes 2022 2021 2020
Net cash flows used in operating activities
Interest income received 1,499 156 19
Fees and commissions paid (714) (759) (662)
Salaries and other employee benefits paid (3,064) (3,408) (2,735)
General and administrative expenses paid (2,269) (3,134) (3,047)
Cash flows used in operating activities before changes in operating assets
and liabilities (4,548) (7,145) (6,425)
Net cash flows used in operating activities (4,548) (7,145) (6,425)
Net cash flows from investing activities
Dividends received 322,717 70,185 –
Net cash flows from investing activities 322,717 70,185 –
Net cash (used in)/from financing activities
Borrowings received – 7,128 4,698
Dividends paid (194,015) (69,864) –
Purchase of treasury shares (112,719) – –
Net cash flows (used in)/from financing activities (306,734) (62,736) 4,698
Effect of exchange rates changes on cash and cash equivalents (969) (119) 81
Net increase/(decrease) in cash and cash equivalents 10,466 185 (1,646)
Cash and cash equivalents, beginning of the year 384 199 1,845
Cash and cash equivalents, end of the year 10,850 384 199
The accompanying Notes on pages 247 to 342 are an integral part of these financial statements.
247
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Financial Statements Additional Information
1. Principal activities
Bank of Georgia Group PLC (BOGG) is a public limited liability company incorporated in England and Wales with registered number
10917019. BOGG holds 99.55% of the share capital of JSC Bank of Georgia (‘the Bank’) as at 31 December 2022, representing
the Bank’s ultimate parent company. Together with the Bank and other subsidiaries, the Group makes up a group of companies
(the ‘Group’) and provides banking, leasing, brokerage and investment management services to corporate and individual customers.
The shares of BOGG (‘BOGG Shares’) are admitted to the premium listing segment of the Official List of the UK Listing Authority
and admitted to trading on the London Stock Exchange PLC’s Main Market for listed securities, effective 21 May 2018. The Bank
is the Group’s main operating unit and accounts for most of the Group’s activities.
JSC Bank of Georgia was established on 21 October 1994 as a joint stock company (‘JSC’) under the laws of Georgia. The Bank
operates under a general banking licence issued by the National Bank of Georgia (‘NBG’; the Central Bank of Georgia) on
15 December 1994.
The Bank accepts deposits from the public and extends credit, transfers payments in Georgia and internationally, and exchanges
currencies. Its main office is in Tbilisi, Georgia. At 31 December 2022, the Bank has 211 operating outlets in all major cities of Georgia
(31 December 2021: 211, 31 December 2020: 211). The Bank’s registered legal address is 29a Gagarini Street, Tbilisi 0160, Georgia.
BOGG’s registered legal address is 42 Brook Street, London, W1K 5DB, England.
As at 31 December 2022, 31 December 2021 and 31 December 2020, the following shareholders owned more than 3% of the total
outstanding shares of BOGG. Other shareholders individually owned less than 3% of the outstanding shares.
Shareholder
31 December
2022
31 December
2021
31 December
2020
JSC Georgia Capital** 20.60% 19.90% 19.90%
M&G Investment Management Ltd 4.10% 2.86% 1.69%
Dimensional Fund Advisors (DFA) LP 3.67% 3.13% 3.04%
Vanguard Group Inc 3.20% 2.42% 2.09%
Fidelity Investments 3.16% 4.00% 6.15%
Van Eck Associates Corporation 2.95% 3.46% 3.26%
Harding Loevner LP 2.87% 4.48% 4.50%
Others 59.45% 59.75% 59.37%
Total* 100.00% 100.00% 100.00%
* For the purposes of calculating percentage of shareholding, the denominator includes total number of issued shares, which includes shares held in the trust for the share-
based compensation purposes of the Group.
** JSC Georgia Capital will exercise its voting rights at the Group’s general meetings in accordance with the votes cast by all other Group shareholders, as long as JSC Georgia
Capital’s percentage holding in Bank of Georgia Group PLC is greater than 9.9%.
As at 31 December 2022, the members of the Board of Directors of BOGG owned 665,980 shares or 1.4% (31 December 2021: 516,116
shares or 1.0%, 31 December 2020: 208,146 shares or 0.4%) of BOGG. Interests of the members of the Board of Directors of BOGG
were as follows:
Shareholder
31 December
2022, shares
held
31 December
2021, shares
held
31 December
2020, shares
held
Neil Janin* N/A 32,880 32,880
Mel Carvill* – N/A N/A
Archil Gachechiladze 623,978 442,234 140,266
Al Breach 30,000 30,000 30,000
Tamaz Georgadze 5,000 5,000 5,000
Hanna Loikkanen – – –
Jonathan Muir – – –
Cecil Quillen 2,900 2,900 –
Véronique McCarroll – – –
Mariam Megvinetukhutsesi 4,102 3,102 N/A
Total 665,980 516,116 208,146
* Neil Janin stepped down from Board in 2022, and was replaced by Mel Carvill.
Notes to Consolidated
Financial Statements
(Thousands of Georgian Lari)
Annual Report 2022 Bank of Georgia Group PLC
248
2. Basis of preparation
General
In accordance with the exemption permitted under section 408 of the Companies Act 2006, the separate income statement
of BOGG is not presented as part of these financial statements. BOGG’s income for the year is disclosed within the separate
statement of financial position and the separate statement of changes in equity.
The financial statements of Bank of Georgia Group PLC are prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and prepared in accordance with UK-adopted international
accounting standards as at 31 December 2022.
These financial statements are prepared under the historical cost convention except for:
• the measurement at fair value of financial assets and investment securities, derivative financial assets and liabilities and
investment properties;
• the measurement of inventories at lower of cost and net realisable value; and
• the measurement of non-current assets classified as held for sale at lower of cost and fair value less costs to sell.
The financial statements are presented in thousands of Georgian Lari (GEL), except per-share amounts and unless
otherwise indicated.
Going concern
In adopting the going concern basis for preparing the consolidated financial statements, the Directors have considered the Group’s
business activities, objectives and strategy, principal risks and uncertainties in achieving its objectives, and performance. The
Directors have performed a robust assessment of the Group’s financial forecasts across a range of scenarios over 12-month from
the date the financial statements are authorised for issue by carrying out stress testing, incorporating extreme downside scenario
and reverse stress testing, which involved examining the level of disruption that may cause the Group to fail. Based on this, the
Directors confirm that they have a reasonable expectation that the Company and the Group, as a whole, have adequate resources
to continue in operational existence for the 12 months from the date the financial statements are authorised for issue. Furthermore,
management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a
going concern for the foreseeable future. Therefore, the financial statements continue to be prepared on the going concern basis.
Impact of climate-related risks on the Group’s financial position and performance
As described in Note 29 to the financial statements, the Group has identified Climate Risk as an emerging risk. However, qualitative
analysis of the impact of climate change and low-carbon transitions on traditional banking risk and on the sectors in which our
clients are active lead us to believe that there is currently no material short-to-medium term impact of climate change expected.
The Group will refine its assessment of such risks in 2023 and beyond and will re-assess whether the impact of climate-related risks
on its financial position and performance need to be considered.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
249
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Financial Statements Additional Information
2. Basis of preparation continued
Subsidiaries and associates
The consolidated financial statements as at 31 December 2022, 31 December 2021 and 31 December 2020 include the following
subsidiaries and associates:
Subsidiaries
Proportion of voting rights and
ordinary share capital held
Country of
incorporation Address Industry
Date of
incorporation
Date of
acquisition
31
December
2022
31
December
2021
31
December
2020
BGEO Group Limited 100.00% 100.00% 100.00% United
Kingdom
42 Brook Street,
London, W1K 5DB
Holding
Company
14/10/2011 –
JSC BGEO Group 100.00% 100.00% 100.00% Georgia 29a Gagarini
Street, Tbilisi,
0105
Investment 28/5/2015 –
JSC Idea 100.00% 100.00% 100.00% Georgia 3 Pushkin Street,
Tbilisi 0105
Insurance 26/12/2018 –
JSC Bank of Georgia 99.55% 99.55% 99.55% Georgia 29a Gagarini
Street, Tbilisi,
0105
Banking 21/10/1994 –
Bank of Georgia
Representative Office UK
Limited
100.00% 100.00% 100.00% United
Kingdom
42 Brook Street,
London, W1K 5DB
Information
sharing
and market
research
17/8/2010 –
Tree of Life Foundation NPO
(formerly known as Bank of
Georgia Future Foundation,
NPO)
100.00% 100.00% 100.00% Georgia 3 Pushkin Street,
Tbilisi 0105
Charitable
activities
25/8/2008 –
Bank of Georgia
Representative Office
Hungary
100.00% 100.00% 100.00% Hungary 1054 Budapest,
Szabadság tér 7;
Bank Center
Representative
office
18/6/2012 –
Representative Office of JSC
Bank of Georgia in Turkey
100.00% 100.00% 100.00% Turkey Süleyman Seba
Caddesi No:48
A Blok Daire 82
Akaretler Beşiktaş
34357 Istanbul
Representative
office
25/12/2013 –
Georgia Financial
Investments, LLC
100.00% 100.00% 100.00% Israel 7 Menahem Begin,
Ramat Gan 52681
Information
sharing
and market
research
9/2/2009 –
Benderlock Investments
Limited
100.00% 100.00% 100.00% Cyprus Arch. Makariou III
58, IRIS TOWER,
8th floor, Flat/
Office 702 P.C.
1075, Nicosia
Investments 12/5/2009 13/10/2009
JSC Belarusky Narodny Bank 99.98% 99.98% 99.98% Belarus Nezavisimosty
Avenue 87A,
Minsk, 220012
Banking 16/4/1992 3/6/2008
BNB Leasing, LLC 99.90% 99.90% 99.90% Belarus Nezavisimosty
Avenue 87A, room
3, Minsk, 220012
Leasing 30/3/2006 3/6/2008
Georgian Leasing Company,
LLC
100.00% 100.00% 100.00% Georgia 3-5 Kazbegi Street,
Tbilisi
Leasing 29/10/2001 31/12/2004
Prime Leasing 100.00% 100.00% 100.00% Georgia Didube-Chughureti
district, No:114,
Ak. Tsereteli
Avenue, Tbilisi
Leasing 27/1/2012 21/1/2015
JSC BG Financial 100.00% 100.00% 100.00% Georgia 79 David
Agmashenebeli
Avenue, 0102,
Tbilisi
Investment 7/8/2015 –
JSC Galt & Taggart 100.00% 100.00% 100.00% Georgia 79 David
Agmashenebeli
Avenue, 0102,
Tbilisi
Brokerage
and asset
management
19/12/1995 28/12/2004
Branch Office of “BG Kapital”
JSC in Azerbaijan
100.00% 100.00% 100.00% Azerbaijan 1C Mikayil Mushvig,
Kempinski Hotel
Badamdar, 6th
floor, Yasamal.
AZ1006, Baku
Representative
office
28/12/2013 –
Annual Report 2022 Bank of Georgia Group PLC
250
Subsidiaries
Proportion of voting rights and
ordinary share capital held
Country of
incorporation Address Industry
Date of
incorporation
Date of
acquisition
31
December
2022
31
December
2021
31
December
2020
Galt and Taggart Holdings
Limited
100.00% 100.00% 100.00% Cyprus Arch. Makariou III
58, IRIS TOWER,
8th floor, Flat/
Office 702 P.C.
1075, Nicosia
Investments 3/7/2006 –
BG Capital (Belarus), LLC 100.00% 100.00% 100.00% Belarus 5A-3H,
K.Chornogo lane,
Minsk, 220012
Brokerage 19/2/2008 –
JSC Digital Area (former JSC
Polymath Group)
100.00% 100.00% 100.00% Georgia 79 David
Agmashenebeli
Avenue, 0102,
Tbilisi
Digital 8/6/2018 –
JSC Extra area 99.34% 98.68% 97.82% Georgia 79 David
Agmashenebeli
Avenue, 0102,
Tbilisi
Digital 22/5/2019 –
Easy Box LLC 100.00% 100.00% 100.00% Georgia 41, Pekini Street,
Tbilisi
Transportation 22/12/2020 –
JSC Optimo Global* 100.00% 0.00% 0.00% Georgia 41, Pekini Street
Tbilisi
Digital 8/11/2022 –
Solo, LLC 100.00% 100.00% 100.00% Georgia 79 David
Agmashenebeli
Avenue, 0102,
Tbilisi
Trade 22/4/2015 –
JSC United Securities Registrar
of Georgia
100.00% 100.00% 100.00% Georgia 74a Chavchavadze
Avenue, Tbilisi,
0162
Registrar 29/5/2006 –
JSC Express Technologies 100.00% 100.00% 100.00% Georgia 1b, Budapest
Street, Tbilisi,
0160
Investments 29/10/2007 –
JSC Georgian Card 99.41% 99.41% 99.46% Georgia 221 Nutsubidze
Street, Tbilisi,
0168
Card processing 17/1/1997 20/10/2004
Direct Debit Georgia, LLC 100.00% 100.00% 100.00% Georgia Luxemburg 25,
Tbilisi, 0160
Electronic
payment
services
7/3/2006 –
LLC Didi Digomi Research
Center
100.00% 100.00% 100.00% Georgia 80-82,
D.Agmashenebeli
Street, Tbilisi,
0102
Communication
services
23/4/2007 –
Metro Service +, LLC 100.00% 100.00% 100.00% Georgia 74a Chavchavadze
Avenue, Tbilisi,
0162
Business
servicing
10/5/2006 –
Premium Compliance Advisory,
LLC
100.00% 100.00% 100.00% Georgia Kazbegi Street 3-5,
Tbilisi
Various 17/2/2012 –
Associates
Proportion of voting rights and
ordinary share capital held
Country of
incorporation Address Industry
Date of
incorporation
Date of
acquisition
31
December
2022
31
December
2021
31
December
2020
JSC Credit info 21.08% 21.08% 21.08% Georgia 2 Tarkhnishvili
Street, Tbilisi
Financial
intermediation
14/2/2005 14/2/2005
JSC Tbilisi Stock Exchange 24.04% 24.04% 24.04% Georgia 72 Vazha-Pshavela
Avenue, Tbilisi
Financial
intermediation
8/5/2015 23/12/2016
LLC Delivery** 25.75% 0.00% 0.00% Georgia 6 A. Andronikashvili
Street, II Dead
End, Tbilisi
Financial
intermediation
14/12/2017 8/11/2022
* JSC Digital Area established a new company JSC Optimo Global on 8 November 2022. Total investment amount in JSC Optimo Global amounts to GEL 100.
** JSC Digital Area invested GEL 1,260 in 25.75% stake of LLC Delivery on 8 November 2022. For the period ended 31 December 2022, the Group’s loss from associate
comprised GEL 65.
2. Basis of preparation continued
Subsidiaries and associates continued
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
251
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Financial Statements Additional Information
3. Summary of significant accounting policies
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2022.
The Group consolidates a subsidiary when it controls it. Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
• the contractual arrangement with the other vote holders of the investee;
• rights arising from other contractual arrangements; and
• the Group’s voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsidiary. Income and expenses of a subsidiary acquired or disposed of during the year
are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to
control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the
acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair
value or at the proportionate share of the acquiree’s identifiable net assets and other components of non-controlling interests at
their acquisition date fair values. Acquisition-related costs are expensed as incurred and included in administrative expenses.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised
for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. After
initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units
that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to
those units where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain
or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and
the portion of the cash-generating unit retained.
Investments in associates
Associates are entities in which the Group generally has between 20% and 50% of the voting rights, or is otherwise able to exercise
significant influence over, but which it does not control or jointly control. Investments in associates are accounted for under the
equity method and are initially recognised at cost, including goodwill. Subsequent changes in the carrying value reflect the post-
acquisition changes in the Group’s share of net assets of the associate. The Group’s share of its associates’ profits or losses is
recognised in the consolidated income statement, and its share of movements in reserves is recognised in other comprehensive
income. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not
recognise further losses, unless the Group is obliged to make further payments to, or on behalf of, the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Investment in an associate is assessed for impairment at each reporting date and recoverable value is determined if any indicators
are identified. Any impairment losses are recorded under profit or loss from associates.
Investments in subsidiaries and associates in parent company financial statements
For the purposes of parent company financial statements, investments in subsidiaries and associates are accounted at cost less any
impairment. Investments in subsidiaries and associates are accounted in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations when they are classified as held for sale or distribution. Dividends from a subsidiary or an associate are
recognised in the parent company financial statements when the parent’s right to receive the dividend is established.
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252
3. Summary of significant accounting policies continued
Fair value measurement
The Group measures financial instruments, such as trading and investment securities, certain loans to customers, derivatives and
non-financial assets such as investment properties, at fair value at each balance sheet date. Also, fair values of financial instruments
measured at amortised cost are disclosed in Note 30.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:
• in the principal market for the asset or liability; or
• in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured
using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act
in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability
to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 − Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable.
• Level 3 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
Financial assets and liabilities
Classification and measurement for financial assets and liabilities
The Group classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual
terms, measured at either:
• fair value through profit or loss (FVTPL);
• fair value through other comprehensive income (FVOCI) with recycling to profit or loss upon disposal for debt instruments;
• FVOCI without recycling to profit or loss for equity instruments; or
• amortised cost.
Classification and measurement
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVTPL if they are
held for trading.
Embedded derivatives are not separated from a host financial asset. Instead, financial assets are classified based on the business
model and their contractual terms.
All derivative instruments are measured at FVTPL.
Measurement of financial instruments at initial recognition
When financial instruments are recognised initially, they are measured at fair value, adjusted, in the case of instruments not at
FVTPL, for directly attributable fees and costs.
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price. If the Group
determines that the fair value at initial recognition differs from the transaction price, then:
• if the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on
a valuation technique that uses only data from observable markets, the Group recognises the difference between the fair value
at initial recognition and the transaction price as a gain or loss;
• in all other cases, the initial measurement of the financial instrument is adjusted to defer the difference between the fair value at
initial recognition and the transaction price. After initial recognition, the Group recognises that deferred difference as a gain or
loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account
when pricing the asset or liability.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
3. Summary of significant accounting policies continued
Financial assets and liabilities continued
Subsequent measurement of financial instruments
Financial instruments measured at amortised cost
The Group measures amounts due from credit institutions, loans to customers and other financial assets at amortised cost if both
of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows.
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
Business model
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective. The business model is not assessed on an instrument by instrument basis, but at a higher level of aggregated
portfolios per instrument type and is based on the following observable factors:
• The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed.
• How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
• How financial assets held within particular business model are evaluated and reported to key management personnel.
The expected frequency, value and timing of sales are also important aspects of the assessment. The business model assessment
is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after
initial recognition are realised in a way that is different from the Group’s original expectations, the Group does not change the
classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly
originated or newly purchased financial assets going forward.
There are three business models available under IFRS 9:
• Hold to collect: It is intended to hold the asset to maturity to earn interest, collecting repayments of principal and interest form
the counterparty.
• Hold to collect and sell: This model is similar to the hold to collect model, except that the entity may elect to sell some or all of the
assets before maturity as circumstances change or to hold the assets for liquidity purposes.
• Other: All those models that do not meet the ‘hold to collect’ or ‘hold to collect and sell’ qualifying criteria.
Solely Payments of Principal and Interest (SPPI)
If a financial asset is held in either to a ‘hold to collect’, or a ‘hold to collect and sell’ business model, then the Group assesses whether
contractual cash flows are SPPI on the principal amount outstanding at initial recognition to determine the classification. The SPPI
test is performed on an individual instrument basis.
Contractual cash flows that represent SPPI on the principal amount outstanding are consistent with basic lending arrangements.
Interest is consideration for the time value of money and the credit risk associated with the principal amount outstanding
during a particular period of time. It can also include consideration for other basic lending risks (e.g. liquidity risk) and costs
(e.g. administrative costs) associated with holding the financial asset for a particular period of time, and a profit margin that is
consistent with a basic lending arrangement.
In assessing whether the contractual cash flows are SPPI, the Group considers whether the contractual terms of the financial asset
contain a term that could change the timing or amount of contractual cash flows arising over the life of the instrument which could
affect whether the instrument is considered to meet the SPPI test.
If the SPPI test is failed, such financial assets are measured at FVTPL with interest earned recognised in other interest income.
Debt instruments at FVOCI
The Group measures debt investment securities at FVOCI when both of the following categories are met:
• The instrument is held within a business model, the objective of which is achieved by both collecting contractual cash flows,
selling financial assets and holding such financial instruments for liquidity management purposes.
• The contractual terms of the financial asset meet the SPPI test.
FVOCI debt investment securities are subsequently measured at fair value with gains and losses arising due to changes in fair
value recognised in OCI. Interest income and foreign exchange gains and losses are recognised in profit or loss in the same manner
as for financial assets measured at amortised cost. On derecognition, cumulative gains or losses previously recognised in OCI are
reclassified from OCI to profit or loss.
Annual Report 2022 Bank of Georgia Group PLC
254
3. Summary of significant accounting policies continued
Financial assets and liabilities continued
Subsequent measurement of financial instruments continued
Equity instruments at FVOCI – option
Upon initial recognition, the Group may elect to classify irrevocably its equity instruments as equity instruments at FVOCI when they
meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. Such classification is
determined on an instrument by instrument basis.
Gains and losses on these equity instruments are never recycled to profit or loss. Dividends received are recognised in profit or loss.
Equity instruments at FVOCI are not subject to impairment assessment.
Financial assets at FVTPL
Groups of financial assets for which the business model is other than ‘hold to collect’ and ‘hold to collect and sell’ are measured
at FVTPL.
Derivatives recorded at FVTPL
The Group enters into derivative transactions with various counterparties. These include interest rate swaps, forwards and other
similar instruments. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities
when their fair value is negative. Net changes in the fair value of derivatives are included in net gain/loss from financial instruments
measured at FVTPL, excluding gain/loss on foreign exchange derivatives which are presented in net foreign currency gain. From the
beginning of 2019, the Group enters into certain cross-currency swap agreements to match its funding costs in certain currencies
with the income generated from lending activities in these currencies. As a result, the Group economically hedges the interest rate
risk, however, no hedge accounting under IFRS 9 is applied. Net changes in the fair value of such derivative financial instruments,
which are presented in net foreign currency gain, excludes unwinding of the locked-in interest differential which is presented as part
of interest expense to reflect risk management objective of the Group.
Financial guarantees, letter of credits and other financial commitments
The Group enters into the financial guarantee contacts whereby it’s required to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payment when due. Financial guarantees, letter of credits and other financial
commitments are initially recognised in the financial statements at fair value, being the premium received. Subsequent to initial
recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognised, less cumulative
amortisation recognised in the consolidated income statement and an expected credit loss (ECL) provision.
Non-financial guarantees
The Group enters into non-financial guarantee contracts whereby it’s required to compensate to the holder in case another party
fails to meet its contractual obligations. Non-financial guarantees are initially recognised in the financial statements at fair value,
being the premium received, amortised on a straight-line basis over the life of the contract. Subsequent to initial recognition the
Group’s liability under non-financial guarantee is measured at the amount that represents the best estimate of the expenditure
required to settle the present obligation. The estimate takes into account the probability of another party defaulting on its
obligations as well as available collateral under the guarantee contracts and is recognised in the consolidated income statement as
part of other expected credit loss and provision for performance guarantees.
Offsetting
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when
there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, amounts due from central banks, excluding obligatory reserves with central
banks, and amounts due from credit institutions that mature within 90 days of the date of origination, and are free from
contractual encumbrances and readily convertible to known amounts of cash.
Borrowings
Issued financial instruments or their components are classified as liabilities, where the substance of the contractual arrangement
results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation
other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity instruments. Such
instruments include amounts due to credit institutions and amounts due to customers (including promissory notes issued). These are
initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition,
borrowings are subsequently measured at amortised cost, using the effective interest rate (EIR) method. Gains and losses are
recognised in the consolidated income statement when the borrowings are derecognised as well as through the amortisation process.
Issued Additional Tier 1 instruments with perpetual maturity and discretionary interest payments are classified as financial liabilities
when the instruments are not convertible into equity and the Group does not have unconditional right to avoid delivering cash upon
a predetermined trigger event. Such instruments are measured at amortised cost with respective interest presented as part of
interest expense in the consolidated income statement.
If the Group purchases its own debt, it is removed from the statement of financial position and the difference between the carrying
amount of the liability and the consideration paid is recognised in the consolidated income statement.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
3. Summary of significant accounting policies continued
Subordinated debt
Subordinated debt represents long-term funds attracted by the Bank on the international financial markets or domestic market.
The holders of subordinated debt would be subordinate to all other creditors to receive repayment of debt in case of the Bank’s
liquidation. Subordinated debt is carried at amortised cost.
Leases
The Group as a lessee
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group
considers the commencement date of the lease the date on which the lessor makes an underlying asset available for use to
the Group.
The Group’s main leasing activities include the leases of service centres, ATM spaces and warehouses. A non-cancellable lease period
is up to ten years. Lease payments are fixed in most cases. The contacts do not generally carry extension or termination options for
the lease term and do not impose any covenants.
Recognition of right-of-use asset and lease liability
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimated dismantling costs, if any. The right-of-use asset is
subsequently depreciated using the straight-line method over the lease term.
The lease liability is initially measured at the present value of the future lease payments excluding payments for VAT, discounted
using the Group’s incremental borrowing rate (IBR). The lease liability is subsequently measured at amortised cost using the IBR.
Recognition exemptions
The Group applies the recognition exemptions on lease contracts for which the lease term ends within 12 months as of the date
of initial application, and lease contracts for which the underlying asset is of low value. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
Modifications of lease contracts
If the lease contract is modified by either changing the scope of the lease, or the consideration for a lease that was not part of the
original terms and conditions of the lease, the Group determines whether the modification results in:
• a separate lease; or
• a change in the accounting for the existing lease.
For the lease modifications that are not accounted as separate leases, the Group re-measures the lease liability either by recognising
gain or loss relating to the partial or full termination of the lease or through adjusting respective right-of-use asset.
The Group as a lessor
At the inception of the lease, the Group classifies each of its leases as either an operating lease or a finance lease.
Finance lease
Leases that transfer substantially all the risks and benefits incidental to ownership of the lease item to the lessee are classified as
finance leases. All other leases are classified as operating leases. The Group recognises finance lease receivables in the consolidated
statement of financial position at a value equal to the net investment in the lease, starting from the date of commencement of the
lease term. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit
in the lease. Initial direct costs are included in the initial measurement of the finance lease receivables. Lease payments received
are apportioned between the finance income and the reduction of the outstanding lease receivable. Finance income is based on a
pattern reflecting a constant periodic rate of return on the net investment outstanding.
Operating lease
The Group presents assets subject to operating leases in the consolidated statement of financial position according to the nature of
the asset. Lease income from operating leases is recognised in the consolidated income statement on a straight-line basis over the
lease term as net other income. Initial direct costs incurred specifically to earn revenues from an operating lease are added to the
carrying amount of the leased asset.
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3. Summary of significant accounting policies continued
Impairment of financial assets
Overview of the ECL principles
The Group records an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan
commitments and financial guarantee contracts, in this section all referred to as ‘financial assets’. Equity instruments are not
subject to impairment under IFRS 9.
The allowance is based on the ECL associated with a probability of default (PD) in the next 12 months unless there has been a significant
increase in credit risk since origination, in which case the allowance is based on the ECL over the life of the asset (lifetime ECL). If the
financial asset meets the definition of purchased or originated credit-impaired (POCI), the allowance is based on the change in the
lifetime ECL.
The Group applies the simplified approach for trade, lease and other receivables and contract assets and records lifetime ECLs
on them.
In order to calculate ECL, the Group first evaluates individually whether objective evidence of impairment exists for loans that are
individually significant. It then collectively assesses loans that are not individually significant and loans which are significant but for
which there is no objective evidence of impairment (POCI) available under the individual assessment.
Staged approach to the determination of ECLs
The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial asset’s
credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the
remaining life of the financial instrument. Based on the above process, the Group groups its financial instruments into Stage 1,
Stage 2, Stage 3 and POCI, as described below:
• Stage 1: The Group recognises a credit loss allowance at an amount equal to 12-month ECL. This represents the portion of
lifetime ECL from default events that are expected within 12 months of the reporting date, assuming that credit risk has not
increased significantly after initial recognition. For those financial assets with a remaining maturity of less than 12 months,
a PD is used that corresponds to the remaining maturity.
• Stage 2: The Group recognises a credit loss allowance at an amount equal to lifetime ECL for those financial instruments which
are considered to have experienced a significant increase in credit risk since initial recognition. This requires the computation
of ECL based on lifetime PD (LTPD) that represents the PD occurring over the remaining lifetime of the financial instrument.
Allowance for expected credit losses is higher in this stage because of an increase in credit risk and the impact of a longer time
horizon being considered compared with 12 months in Stage 1. Financial instruments in Stage 2 are not yet deemed to be credit-
impaired.
• Stage 3: If the financial instrument is credit-impaired, it is then moved to Stage 3. The Group recognises a loss allowance at an
amount equal to lifetime ECL, reflecting a PD of 100% for those financial instruments that are credit-impaired.
Financial instruments within the scope of the impairment requirements of IFRS 9 are classified into one of the above three stages.
Unless credit-impaired, newly originated assets are classified as Stage 1 and remain in that stage unless there is considered to have
been a significant increase in credit risk since initial recognition, at which point the asset is reclassified to Stage 2.
POCI assets are financial instruments that are credit-impaired on initial recognition. POCI assets are recorded at fair value at
original recognition and interest income is subsequently recognised based on a credit adjusted EIR (CAEIR). CAEIR takes into
account all contractual terms of the financial asset and ECLs. ECLs are only recognised or released to the extent that there is a
subsequent change in the ECL where ECLs are calculated based on lifetime ECL. Once the financial asset is recognised as POCI,
it retains this status until derecognised.
Key judgements and estimates used under IFRS 9 are disclosed in note 4.
Derecognition of financial assets and liabilities
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised where:
• the rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from
the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’
arrangement; and
• the Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the
Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group
could be required to repay.
Notes to Consolidated
Financial Statements continued
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3. Summary of significant accounting policies continued
Derecognition of financial assets and liabilities continued
Derecognition of financial assets continued
Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar
provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that
the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on
an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the
transferred asset and the option exercise price.
Derecognition and modification of financial assets
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of financial assets. When this happens,
the Group assesses whether or not the new terms are substantially different to the original terms, based on qualitative and
quantitative criteria. The Group derecognises a financial asset, such as a loan to a customer, when the terms and conditions have
been renegotiated to the extent that, substantially, it becomes a new loan, except in cases when renegotiation of contractual
terms happens due to financial difficulties of the borrower. Once the financial asset is derecognised, the difference is recognised as
a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are
classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be POCI.
The Group applies derecognition of the financial asset if any of the following criteria are met:
• Change in currency of the loan.
• Change in interest rate type.
• Introduction of an equity feature.
• Change in counterparty.
• If the modification is such that the instrument would no longer meet the SPPI criterion.
If the terms are not substantially different, or the renegotiation is due to the financial difficulties of the borrower, such renegotiation
or modification does not result in derecognition, and the Group recalculates the gross carrying amount based on the revised
cash flows of the financial asset and recognises a modification gain or loss in interest income. The new gross carrying amount is
calculated by discounting the modified cash flows at the original EIR.
Forbearance and modified loans
The Group sometimes makes concessions or modifications to the original terms of the loans as a response to the borrower’s
financial difficulties, rather than taking possession or otherwise enforcing collection of collateral. The Group considers a loan
forborne when such concessions or modifications are provided as a result of the borrower’s present or expected financial difficulties
and the Group would not have agreed to them if the borrower had been financially healthy. Forbearance may involve extending
the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment
is measured using the original EIR as calculated before the modification of terms. Once the asset has been identified as forborne,
the assets are classified in Stage 3. The decision as to how long the asset remains in the forborne category is determined on a
case-by-case basis for commercial and SME loans, when a minimum six consecutive payments are required for the rest of the loans
to exit from the forbearance category and transfer to Stage 2. Once the loan is transferred to Stage 2, the Group continues to
reassess whether there has been a significant increase in credit risk, however, such assets remain in Stage 2 for a minimum 12-month
probation period before being transferred to Stage 1.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated income statement.
Foreclosed assets
All repossessed land and buildings were previously classified as investment properties at initial recognition given these assets were
managed with a view of capital appreciation or earning a rental income. Commencing from 2022, the Group updated its property
management strategy and decided to move majority of the realizations of such properties at a quicker pace. Respectively, all
repossessed collaterals, including land and buildings, are now classified either as Investment Properties or Foreclosed Assets depending
the Group’s intention in respect of recovery of these assets.
Foreclosed assets are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
The majority of the Group’s foreclosed assets consists of the real estate assets repossessed during recovery of defaulted loans. Such
assets are specific and not ordinarily interchangeable, respectively the Group applies specific identification of their individual costs.
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3. Summary of significant accounting policies continued
Non-current assets held for sale
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are
measured at the lower of their carrying amount and fair value less costs to sell unless scoped out of IFRS 5 in which case the existing
measurement provisions of IFRS apply.
Immediately before the initial classification of the asset as held for sale, the carrying amount of the asset is measured in accordance
with applicable IFRSs.
Property and equipment and intangible assets are not depreciated or amortised once classified as held for sale.
Assets and liabilities classified as held for sale are presented separately from other assets and liabilities in the statement of
financial position.
Taxation
The current income tax expense is calculated in accordance with the regulations in force in the respective territories in which BOGG
and its subsidiaries operate.
Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred income
taxes are provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for
financial reporting purposes, except where the deferred income tax arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at tax rates that are expected to
apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively
enacted at the reporting date.
Deferred tax liabilities are provided on temporary differences arising on investments in subsidiaries, associates and joint ventures,
except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Georgia and Belarus also have various operating taxes that are assessed on the Group’s activities. These taxes are included as a
component of other operating expenses.
Uncertain tax positions
The Group reassesses uncertain tax positions at the end of each reporting period. The assessment is based on the interpretation of
the tax laws that have been enacted or substantively enacted by the end of reporting period and any known court or other rulings
on such issues. Liabilities are recorded for income tax positions that are determined as more likely than not to result in additional tax
levied if the positions were to be challenged by the tax authorities. Liabilities for penalties, interest and taxes other than on income
are recognised based on the best estimate of the expenditure required to settle the obligations at the end of the reporting period.
Investment properties
Investment property is land or a building or a part of a building held to earn rental income or for capital appreciation and which is
not used by the Group.
Investment property is initially recognised at cost, including transaction costs, and subsequently re-measured at fair value reflecting
market conditions at the end of the reporting period. Fair value of the Group’s investment property is determined on the basis of
various sources including reports of independent appraisers, who hold a recognised and relevant professional qualification and who
have recent experience in valuation of property of similar location and category. With regards to certain investment properties with
repurchase options granted to previous owners, fair value of the property at the reporting date is capped at repurchase price.
Gains and losses resulting from changes in the fair value of investment property as well as earned rental income are recorded in the
income statement within net other income.
Notes to Consolidated
Financial Statements continued
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3. Summary of significant accounting policies continued
Property and equipment
Property and equipment is carried at cost less accumulated depreciation and any accumulated impairment in value. Such cost
includes the cost of replacing part of the equipment when that cost is incurred if the recognition criteria are met.
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that
the carrying value may not be recoverable.
Depreciation of an asset commences from the date the asset is ready and available for use. Depreciation is calculated on a straight-
line basis over the following estimated useful lives:
Years
Office buildings and service centres Up to 100
Furniture and fixtures 3–20
Computers and equipment 5–10
Motor vehicles 2–7
The assets’ residual values, useful lives and methods are reviewed, and adjusted as appropriate, at each financial year-end.
Assets under construction are stated at cost and are not depreciated until the time they are available for use and reclassified to
their respective group of property and equipment.
Leasehold improvements are depreciated over the shorter life of the related leased asset and the expected lease term.
Costs related to repairs and renewals are charged when incurred and included in other operating expenses, unless they qualify for
capitalisation.
Goodwill impairment
Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying
amount may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit
or group of units to which the goodwill is so allocated:
• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
• is not larger than a segment as defined in IFRS 8 Operating Segments.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to
which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less
than the carrying amount, an impairment loss is recognised. Impairment losses cannot be reversed in future periods.
Intangible assets
The Group’s intangible assets include computer software and licences.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is measured at fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated impairment losses. The economic lives of intangible assets are assessed to
be finite and amortised over four to 15 years and assessed for impairment whenever there is an indication that the intangible asset
may be impaired. Amortisation periods and methods for intangible assets are reviewed at least at each financial year-end.
Costs associated with maintaining computer software programmes are recorded as an expense as incurred. Software development
costs (relating to the design and testing of new or substantially improved software) are recognised as intangible assets only
when the Group can demonstrate the technical feasibility of completing the software so that it will be available for use or sale,
its intention to complete the asset and its ability to use or sell the asset, how the asset will generate future economic benefits,
the availability of resources to complete the asset, and the ability to measure reliably the expenditure during the development.
Other research and software development costs are recognised as an expense as incurred.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the
amount of obligation can be made.
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3. Summary of significant accounting policies continued
Share-based payment transactions
Employees (including senior executives) of the Group receive share-based remuneration, whereby they render services and receive
equity instruments of the Group (‘equity-settled transactions’) as consideration for the services provided.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are
granted. The awards of shares in monetary terms are measured by reference to the monetary value (as awarded) adjusted for the
time value of money where necessary.
The cost of equity-settled transactions is recognised together with the corresponding increase in equity as part of additional paid-
in capital, over the period in which the performance and/or service conditions are fulfilled, ending on the date when the relevant
employee is fully entitled to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate
of the number of equity instruments that will ultimately vest. The consolidated income statement charge or credit for the period
represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for the awards that do not ultimately vest except for the awards where vesting is conditional upon
market conditions which are treated as vesting irrespective of whether the market condition is satisfied, provided that all other
performance conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of the modification.
Where a new equity-settled award is designated as a replacement of a cancelled equity-settled award, the replacement of equity
instruments are accounted for as a modification.
Where an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as the replacement award on the date that it is granted, the cancelled and the new awards are treated as if they were a
modification of the original award, as described in the previous paragraph.
Equity
Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business
combination, are shown as a deduction from the proceeds in equity.
Additional paid-in capital
Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital.
Further, the effects of share-based payments are also recognised as part of the additional paid-in capital.
Treasury shares
Where BOGG or its subsidiaries purchase BOGG shares, the consideration paid, including any attributable transaction costs,
net of income taxes, is deducted from total equity as treasury shares until they are cancelled or reissued. Where such shares
are subsequently sold or reissued, any consideration received is included in equity. Treasury shares are stated at par value, with
adjustment of premiums against additional paid-in capital.
Dividends
Dividends are recognised as liabilities and deducted from equity at the reporting date only if they are declared before or on the
reporting date and do not require further approval. Dividends are disclosed when they are proposed before the reporting date or
proposed or declared after the reporting date but before the consolidated financial statements are authorised for issue. All expenses
associated with dividend distribution are added to dividend amount and recorded directly through equity.
Contingencies
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present
obligation where an outflow of the economic resources is either not expected to occur or can not be measured reliably.
Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed, unless the possibility
of any outflow in settlement is remote. A contingent asset is not recognised in the consolidated statement of financial position but
disclosed when an inflow of economic benefits is probable.
Notes to Consolidated
Financial Statements continued
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3. Summary of significant accounting policies continued
Income and expense recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be
reliably measured. The following specific recognition criteria must also be met before revenue and expense are recognised:
Interest and similar income and expense
For all financial instruments measured at amortised cost and interest-bearing securities, interest income or expense is recorded
at the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the
financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.
The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and
includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not
future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of
payments or receipts.
The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as interest
income or expense.
For financial instruments in Stage 1 and Stage 2, the Group calculates interest income by applying the EIR to the gross carrying
amount. Interest income for financial assets in Stage 3 is calculated by applying the EIR to the amortised cost (i.e. the gross carrying
amount less credit loss allowance). For financial instruments classified as POCI only, interest income is calculated by applying
a credit adjusted EIR to the amortised cost of these POCI assets. The Group presents interest revenue calculated using the EIR
method separately in the income statement.
Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee and commission
income are recognised when the Group satisfies a performance obligation. Fee income can be divided into the following categories:
Fee income earned from services that are provided over a certain period of time
Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission
incomes and asset management, custody, package services on bundled products and other management and advisory fees.
Loan commitment fees for loans that are likely to be drawn-down and other credit-related fees are deferred (together with any
incremental costs), and recognised as an adjustment to the EIR on the loan.
Customer loyalty programme
Customer loyalty programme points accumulated in the business are treated as deferred revenue and recognised in revenues
gradually as they are earned. The Group recognises gross revenue earned from customer loyalty programmes when the performance
obligation is satisfied, i.e. when the customer redeems the points or the points expire, where the Group acts as a principal.
Conversely, the Group measures its revenue as the net amount retained on its account representing the difference between the
consideration allocated to the award credits and the amount payable to the third party for supplying the awards as soon as
the award credits are granted, where the Group acts as an agent. At each reporting date, the Group estimates the portion of
accumulated points that is expected to be utilised by customers based on statistical data. These points are treated as a liability in
the statement of financial position and are only recognised in revenue when points are earned or expired.
Performance obligations satisfied at a point in time
Fees and commissions earned from providing transaction-type services such as settlement, brokerage, cash and currency conversion
operations are recognised when the service has been completed, provided such fees and commissions are not subject to refund or
another contingency beyond the control of the Group. Fees from currency conversion operations represent additional commission
(other than currency dealing revenue recognised in net foreign currency gain) charged on currency conversion service provided to
customers on cards used abroad.
Dividend income
Dividend revenue is recognised when the Group’s right to receive the payment is established.
Non-recurring items
The Group separately classifies and discloses those income and expenses that are non-recurring by nature. The Group defines non-
recurring income or expense as an income or expense triggered by, or originated from, an economic, business or financial event that
is not inherent to the regular and ordinary business course of the Group and is caused by uncertain or unpredictable external factors
that cannot be reasonably expected to occur in the future, and thus should not be taken into account when making projections of
future results.
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3. Summary of significant accounting policies continued
Functional, reporting currencies and foreign currency translation
The consolidated financial statements are presented in Georgian Lari, which is the Group’s presentation currency. BOGG’s and the
Bank’s functional currency is Georgian Lari. Each entity in the Group determines its own functional currency and items included in
the financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency
at the functional currency rate of exchange ruling at the reporting date.
Gains and losses resulting from the translation of foreign currency transactions are recognised in the consolidated income
statement as gains less losses from foreign currencies – translation differences. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was
determined. When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of
that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised
in profit or loss, any exchange component of that gain or loss is recognised in the income statement.
Differences between the contractual exchange rate of a certain transaction and the NBG exchange rate on the date of the
transaction are included in gains less losses from foreign currencies (dealing). The official NBG exchange rates at 31 December 2022,
31 December 2021 and 31 December 2020 were:
Lari to GBP Lari to USD Lari to EUR Lari to BYN
31 December 2022 3.2581 2.7020 2.8844 1.0730
31 December 2021 4.1737 3.0976 3.5040 1.2101
31 December 2020 4.4529 3.2766 4.0233 1.2647
As at the reporting date, the assets and liabilities of the entities whose functional currency is different from the presentation
currency of the Group are translated into Georgian Lari at the rate of exchange ruling at the reporting date and their income
statements are translated at the average exchange rates for the year. The exchange differences arising on the translation are taken
to other comprehensive income.
On disposal of a subsidiary or an associate whose functional currency is different from the presentation currency of the Group,
the deferred cumulative amount recognised in other comprehensive income relating to that particular entity is recognised in the
consolidated income statement.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and
liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations, and translated at the rate at the
reporting date.
Adoption of new or revised standards and interpretations
Amendments effective from 1 January 2022
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB issued amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets to clarify what costs
an entity considers in assessing whether a contract is onerous. The amendments specify that the ‘cost of fulfilling’ a contract
comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of
fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. General and administrative costs do
not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.
The amendment had no material impact on the Group’s consolidated financial statements.
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ Test for Derecognition of Financial Liabilities
As part of its 2018-2020 Annual Improvements to IFRS standards process, the IASB issued an amendment to IFRS 9. The
amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are
substantially different from the terms of the original financial liability. These fees include only those paid or received between the
borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the
amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which
the entity first applies the amendment.
The amendment had no material impact on the Group’s consolidated financial statements.
Amendments to IFRS 3 Business Combinations
The amendment updates a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting
requirements for business combinations. The amendment had no material impact on the Group’s consolidated financial statements.
Amendments to IAS 16 Property, Plant and Equipment
The amendment prohibits a company from deducting from the cost of property, plant and equipment amounts received from selling
items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds
and related cost in profit or loss. The amendment had no material impact on the Group’s consolidated financial statements.
Notes to Consolidated
Financial Statements continued
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3. Summary of significant accounting policies continued
Adoption of new or revised standards and interpretations continued
Amendments effective from 1 January 2022 continued
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities continued
Amendments to IFRS 1, ‘First-time Adoption of International Financial Reporting Standards’ – Subsidiary as a first-time adopter
The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences
using the amounts reported in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no
adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired
the subsidiary. This amendment is also applied to an associate or joint venture that elects to apply paragraph D16 (a) of IFRS 1. The
amendment had no material impact on the Group’s consolidated financial statements.
Reclassifications
To improve the quality and understandability of its consolidated income statement, the Group has revisited the presentation
of gains/losses resulting from its debt extinguishment. The Group considered it more appropriate to present such gains/losses
separately from other gains/losses. Comparative amounts were reclassified in line with the updated presentation.
The following reclassifications were made to year ended 31 December 2021 and 31 December 2020 consolidated income statement
to conform to the year ended 31 December 2022 presentation requirements:
Consolidated income statement for the year ended 31 December 2021
As previously
reported Reclassification As reclassified
Net gains/(losses) on extinguishment of debt – (2,892) (2,892)
Net other gains/(losses) 70,206 2,892 73,098
Consolidated income statement for the year ended 31 December 2020
As previously
reported Reclassification As reclassified
Net gains/(losses) on extinguishment of debt – (3,282) (3,282)
Net other gains/(losses) 48,474 3,282 51,756
Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the
Group’s consolidated financial statements are disclosed below. The Group intends to adopt these new and amended standards and
interpretations, if applicable, when they become effective.
IAS 1 Presentation of Financial Statements
In January 2020 and July 2020, the IASB issued amendments to IAS 1 “Presentation of Financial Statements: Classification of
Liabilities as Current or Non-Current”. They clarify that the classification of liabilities as current or non-current should be based
on rights that are in existence at the end of the reporting period. The amendments also clarify that classification is unaffected by
expectations about whether an entity will exercise its right to defer settlement of a liability and make clear that settlement refers to
the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments will be effective for annual
periods beginning on or after January 1, 2023 with early adoption permitted. The Group is assessing the potential effect of the
amendment on its consolidated financial statements.
IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17, Insurance Contracts, which sets out the accounting requirements for contractual rights and
obligations that arise from insurance contracts issued and reinsurance contracts held. IFRS 17 is effective from 1 January 2023.
The Group is assessing the standard, but does not expect it to have a material effect on its consolidated financial statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
In May 2021 the Board issued Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction,
that clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The
amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 (recognition exemption) so that
it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.
The amendments to IAS 12 are applicable for annual periods beginning on or after 1 January 2023 with earlier application permitted.
The Group does not expect it to have a material effect on its consolidated financial statements.
Narrow-scope amendments
Definition of Accounting Estimates – Amendments to IAS 8:
In February 2021, the IASB issued amendments to IAS 8, in which it
introduces a definition of ‘accounting estimates’. The amendments clarify the distinction between changes in accounting estimates
and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and
inputs to develop accounting estimates.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting
policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long
as this fact is disclosed.
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3. Summary of significant accounting policies continued
Standards issued but not yet effective continued
Narrow-scope amendments continued
The amendments are not expected to have a material impact on the Group’s consolidated financial statements.
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement: 2
In February 2021, the IASB issued
amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to
help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting
policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with
a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in
making decisions about accounting policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023 with earlier application permitted.
The Group is assessing the potential effect of the amendment on its consolidated financial statements.
4. Significant accounting judgements and estimates
Estimates involved in measurement of investment properties, assets held for sale and foreclosed assets
Fair values of investment properties, assets held for sale and foreclosed assets is determined by independent, professionally
qualified appraisers. Fair value is determined using a combination of the internal capitalisation method (also known as discounted
future cash flow method) and the sales comparison method.
The Group performs valuation of its investment properties, assets held for sale and foreclosed assets with a sufficient regularity
to ensure that the carrying amount does not differ materially from that which would be determined using fair value and respective
measurement principles at the end of the reporting period.
The last valuation was performed in 2022. Results of this valuation are presented in Note 14, while valuation inputs and techniques
are presented in Note 30. The Group’s properties are spread across the different parts of the country. While the secondary market
in Georgia provides adequate market information for fair value measurements for small and medium sized properties, valuation
of large properties involves application of various observable and unobservable inputs to determine adjustments to the available
comparable sale prices. These estimates and assumptions are based on the best available information, however, actual results could
be different.
Allowance for financial assets
IFRS 9 requires management to make a number of judgements, assumptions and estimates based on management’s knowledge
and historical experience that affect the allowance for ECL. A summary of the key judgements made by management is set
out below.
Definition of default, credit-impaired and cure (Note 29)
The Group’s definition of default is based on quantitative and qualitative criteria. The definition may differ across products.
The definition is consistent with the definition used for internal credit risk management purposes and it corresponds with internal
financial instrument risk classification rules. A counterparty is classified as defaulted at the latest when payments of interest,
principal or fees are overdue for more than 90 days or when bankruptcy, fraud, insolvency proceedings of enforced liquidation have
commenced, or there is other evidence that the payment obligations will not be fully met. The determination of whether a financial
instrument is credit-impaired focuses on default risk, without taking into consideration the effects of credit risk mitigations such as
collateral or guarantees.
An instrument is classified as credit-impaired if the counterparty is defaulted and/or the instrument is POCI.
Once the financial asset is classified as credit-impaired (except for POCIs) it remains as such unless all past due amounts have
been rectified or there is general evidence of credit recovery. A minimum period of six consecutive months’ payment is applied as
exit criteria to financial assets restructured due to credit risk other than corporate loan portfolio and debt instruments measured
at FVOCI, where exit criteria are determined as exit from bankruptcy or insolvency status, disappearance of liquidity problems or
existence of other general evidence of credit recovery assessed on individual basis.
For other credit-impaired financial instruments, exit criteria is determined as repayment of the entire overdue amount other than
through refinancing or foreclosure.
Once a credit-impaired financial asset meets default exit criteria, it remains in Stage 2 at least for the next 12 consecutive months.
In case no default status is assigned during the 12 consecutive months, it is transferred to Stage 1 if its credit risk is not significantly
higher than at origination date.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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4. Significant accounting judgements and estimates continued
Estimates involved in measurement of investment properties, assets held for sale and foreclosed assets continued
Significant increase in credit risk (SICR)
A SICR is not a defined term per IFRS 9, and is determined by management, based on their experience and judgement. In assessing
whether the credit risk has significantly increased, the Group has identified a series of qualitative and quantitative criteria based
on undertaking the holistic analysis of various factors including those which are specific to a particular financial instrument or to a
borrower as well as those applicable to particular sub-portfolios. These criteria are:
• A significant increase in credit risk, expressed in the relative and/or absolute increase in the risk of default since initial recognition.
SICR is determined based on comparison between credit risk ratings (internal or external) as of the origination date and credit
risk ratings as of the reporting date for each financial asset individually. Thresholds are determined separately for corporate,
retail, SME and other financial instrument portfolios, depending on initial grade assigned at origination.
• Existence of forecast of adverse changes in commercial, financial or economic conditions that adversely affect the
creditworthiness of the borrower.
• Modification of the contractual terms due to financial problems of the borrower other than default.
• The days past due on individual contract level breached the threshold of 30 days.
• Other qualitative indicators, such as external market indicators of credit risk or general economic conditions, which indicate that
the level of risk has increased significantly since origination.
The above noted SICR indicators are identified at financial instrument level in order to track changes in credit risk since initial
recognition date.
Measurement of ECLs
ECL reflects an unbiased, probability-weighted estimate based on a combination of the following principal factors: PD, loss given
default (LGD), and exposure at default (EAD), which are further explained below:
PD estimation:
The Group estimates PD based on a combination of rating model calibration results and a migration matrices
approach which is further adjusted for macroeconomic expectations for a minimum three years onwards for all portfolios, to
represent the forward-looking estimators of the PD parameters. The migration matrix is built in a way to reflect the weighted
average yearly migration over the historical data period. The risk groups are determined in a way to ensure intra-group homogeneity
and differentiation of expected PD levels. For loan portfolios other than corporate loans, PD is further adjusted considering time
since financial instrument origination. The models incorporate both qualitative and quantitative information and, where practical,
build on information from top rating agencies, Credit Bureau or internal credit rating systems. Since Stage 3 financial instruments
are defaulted, the PD in this case is equal to 100%.
EAD:
The EAD represents an estimate of the exposure to credit risk at the time of a potential default occurring during the life of a
financial asset. It represents the cash flows outstanding at the time of default, considering expected repayments, interest payments
and accruals discounted at the EIR. To calculate EAD for a Stage 1 financial instrument, the Group assesses the possible default
events within 12 months for the calculation of the 12 months ECL. For Stage 2 and POCI financial instruments, the EAD is considered
for events over the lifetime of the instruments. The Group determines EAD differently for products with repayment schedules and
those without repayment schedules. For financial instruments with repayment schedules, the Group estimates forward-looking
EAD using the contractual cash flow approach with further corrections for expected prepayments and overdue days. For products
without the repayment schedules such as credit cards, credit lines and financial guarantees, the Group estimates the forward-
looking EAD using the limit utilisation approach. Under the above approach EAD is calculated using the expected utilisation rate
based on historical data of actual draw-down amounts.
LGD:
LGD is defined as the likely loss in case of a counterparty default. It provides an estimation of the exposure that cannot
be recovered in a default event and therefore captures the severity of a loss. The determination of the LGD takes into account
expected future cash flows from collateral and other credit enhancements, or expected payouts from bankruptcy proceedings for
unsecured claims, and where applicable, time to realisation of collateral and the seniority of claims. The Group segments its financial
instruments into homogeneous portfolios, based on key characteristics that are relevant to the estimation of future cash flows. The
applied data is based on historically collected loss data and involves a wider set of transaction characteristics (e.g. product type,
wider range of collateral types). Based on this information, the Group estimates the recovery rate (other than through collateral),
cure rate and probability of re-default. Recovery through collateral is further considered in LGD calculations individually for each
financial instrument.
Assets considered in the ECL calculations
IFRS 9 requires cash flows expected from collateral and other credit enhancements to be reflected in the ECL calculation. The
treatment and reflection of collateral for IFRS 9 purposes is in line with general risk management principles, policies and processes of
the Group. Collateral, unless repossessed, is not recorded on the Group’s statement of financial position. The fair value of collateral
affects the calculation of ECLs. It is generally assessed at inception and reassessed on an annual basis for all material exposures.
During the period where real estate prices are subject to significant fluctuation, those collaterals not revalued during the last three
months before the end of the reporting date were further adjusted with respective real estate price index movement. The effect of the
noted adjustment amounted to a GEL 26 million decrease of ECL in the 2022 consolidated financial statements (2021: Nil, 2020: Nil).
Annual Report 2022 Bank of Georgia Group PLC
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4. Significant accounting judgements and estimates continued
Estimates involved in measurement of investment properties, assets held for sale and foreclosed assets continued
Management Overlays and improvements to the ECL methodology
In prior periods the Group applied number of management overlays to the existing ECL methodology due to the unprecedented
nature of the COVID-19 pandemic and the uncertainties associated with it. Such overlays related to staging of COVID-19
restructured loans as well as cure and recovery rates. Given a reasonable time has passed for the statistics to properly reflect
effects of COVID-19, the Group decided to remove respective management overlays which positively affected overall ECL of the
Group. In addition, management re-estimated collateral realisation period for LGD calculations resulting in increase of ECL. This
together with removal of management overlays and other minor improvements to the methodology resulted in decrease of ECL by
GEL 21.4 million for the Group.
Forward-looking information
Under IFRS 9, the allowance for expected credit losses is based on reasonable and supportable forward-looking information
obtainable without undue cost or effort, which takes into consideration past events, current conditions and forecasts of future
economic conditions.
To incorporate forward-looking information into the Group’s allowance for expected credit losses, the Group uses the
macroeconomic forecasts provided by the NBG for Group companies operating in Georgia, while data used by Belarusky Narodny
Bank (BNB) is provided by a non-governmental research centre operating in Belarus. Macroeconomic variables covered by these
forecasts and which the Group incorporated in its ECL assessment model include GDP growth, foreign exchange rate and inflation
rate. These forward-looking macroeconomic variables are generally updated on a semi-annual basis for Georgian companies and on
a quarterly basis for BNB.
The determination of the probability-weighted ECL requires evaluating a range of diverse and relevant future economic conditions.
To accommodate this requirement, the Group uses three different economic scenarios in the ECL calculation: an upside (weight 0.25),
a base case (weight 0.50) and a downside (weight 0.25) scenario relevant for each respective portfolio. A weight is calculated for each
scenario by using a probabilistic economic model that considers recent information as well as historical data provided by the NBG.
The Group considers these forecasts to represent its best estimate of the possible outcomes, based on reliable available information.
Forward-looking variable assumptions
The most significant period end assumptions used for ECL estimate as at 31 December 2022 per geographical segments are set out
below. The scenarios ‘base’, ‘upside’ and ‘downside’ were used for all portfolios.
Georgia
Key drivers
ECL
scenario
Assigned
weight
As at 31 December 2022
Assigned
weight
As at 31 December 2021
Assigned
weight
As at 31 December 2020
2023 2024 2025 2022 2023 2024 2021 2022 2023
GDP growth in %
Upside 25% 6.00% 5.00% 5.00% 25% 6.00% 5.00% 4.50% 25% -3.00% 6.00% 5.00%
Base case 50% 4.00% 5.50% 5.00% 50% 5.00% 4.00% 4.50% 50% -4.00% 4.50% 5.00%
Downside 25% 2.00% 4.00% 5.00% 25% 2.00% 4.00% 5.00% 25% -9.00% 2.50% 4.00%
GEL/USD exchange rate %
Upside 25% 2.00% 0.00% 0.00% 25% 4.00% 2.00% 2.00% 25% 5.00% 5.00% 0.00%
Base case 50% 0.00% 0.00% 0.00% 50% 0.00% 0.00% 0.00% 50% 0.00% 0.00% 0.00%
Downside 25% -15.00% 5.00% 5.00% 25% -10.00% 2.00% 3.00% 25% -10.00% -5.00% 5.00%
CPI inflation rate in %
Upside 25% 5.00% 3.00% 3.00% 25% 5.50% 3.00% 3.00% 25% 5.50% 4.00% 3.00%
Base case 50% 5.30% 3.10% 3.00% 50% 7.00% 2.50% 3.00% 50% 4.50% 1.50% 2.50%
Downside 25% 9.00% 6.00% 3.00% 25% 8.00% 4.00% 3.00% 25% 7.00% 2.00% 2.50%
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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4. Significant accounting judgements and estimates continued
Forward-looking variable assumptions continued
Belarus
Key drivers
ECL
scenario
Assigned
weight
As at 31 December 2022
Assigned
weight
As at 31 December 2021
Assigned
weight
As at 31 December 2020
2023 2024 2022 2023 2021 2022
GDP growth in %
Upside 10% 2.66% 4.26% 25% 2.92% 5.01% 10% 2.28% 4.74%
Base case 50% 0.31% 0.50% 50% 0.56% 1.24% 50% -0.06% 0.98%
Downside 40% -2.05% -3.26% 25% -1.80% -2.52% 40% -2.44% -2.81%
BYN/USD exchange rate %
Upside 10% 0.71% 0.65% 25% 0.56% 0.52% 10% -0.48% -1.17%
Base case 50% 2.53% 1.65% 50% 2.44% 1.37% 50% 1.45% 0.06%
Downside 40% 4.09% 2.41% 25% 4.05% 1.98% 40% 3.29% 1.08%
CPI inflation rate in %
Upside 10% 0.38% -0.58% 25% -0.07% -0.85% 10% 0.72% 0.69%
Base case 50% 2.20% 1.66% 50% 1.83% 1.38% 50% 1.36% 1.42%
Downside 40% 3.93% 3.76% 25% 3.63% 3.46% 40% 1.99% 2.14%
All other parameters held constant, increase in GDP growth and decrease in foreign exchange rate and inflation would result
in decrease in ECL, with opposite changes resulting in ECL increase. GDP growth input has the most significant impact on ECL,
followed by foreign exchange rate and inflation. Retail portfolio ECL is less affected by foreign exchange rate inputs due to larger
share of GEL-denominated exposures. However, retail portfolio ECL is affected by inflation, which does not have a significant
impact on corporate ECL.
The table below shows the sensitivity of the recognised ECL amounts to the forward-looking assumptions used in the model.
For these purposes, 100% weight is assigned to each macroeconomic scenario separately and respective ECL is recalculated.
Sensitivity of ECL to forward looking assumptions
Key drivers
As at 31 December 2022
Reported ECL
Reported ECL
coverage
ECL coverage by scenarios
Upside Base case Downside
Commercial loans 91,557 1.72% 1.58% 1.70% 1.81%
Residential mortgage loans 30,055 0.72% 0.71% 0.71% 0.73%
Micro and SME loans 63,502 1.66% 1.61% 1.65% 1.70%
Consumer loans 135,450 3.76% 3.70% 3.74% 3.84%
Gold – pawn loans 5,441 3.31% 3.30% 3.30% 3.31%
As at 31 December 2021
Key drivers Reported ECL
Reported ECL
coverage
ECL coverage by scenarios
Upside Base case Downside
Commercial loans 159,215 2.87% 2.82% 2.84% 2.86%
Residential mortgage loans 33,038 0.82% 0.80% 0.81% 0.85%
Micro and SME loans 74,441 1.99% 1.93% 1.96% 2.13%
Consumer loans 136,035 4.56% 4.46% 4.54% 4.70%
Gold – pawn loans 2,075 1.25% 1.25% 1.25% 1.26%
As at 31 December 2020
Key drivers Reported ECL
Reported ECL
coverage
ECL coverage by scenarios
Upside Base case Downside
Commercial loans 178,556 3.49% 3.46% 3.48% 3.53%
Residential mortgage loans 48,609 1.28% 1.05% 1.06% 1.95%
Micro and SME loans 102,352 3.13% 2.79% 2.83% 4.06%
Consumer loans 113,801 5.15% 4.78% 4.82% 6.18%
Gold – pawn loans 228 0.22% 0.21% 0.21% 0.23%
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4. Significant accounting judgements and estimates continued
Forward-looking variable assumptions continued
Aggregation of financial instruments for collective assessment
For the purpose of a collective evaluation of impairment, financial instruments are grouped within homogeneous pools as follows:
corporate loan portfolio is grouped on the basis of loan repayment source type; and retail loan portfolio is grouped on the basis of
credit risk characteristics such as an asset type, collateralisation level, repayment source type and other relevant factors. As for SME
and micro loan portfolios, financial instruments are grouped based on asset type, overdue buckets, collateralisation level and other
relevant factors.
Determination of expected life for revolving facilities
For revolving products, the expected life of financial instruments is determined either with reference to the next renewal date
or with reference to the behavioural expected life of the financial instrument estimated based on the empirical observation of
the lifetime.
Write-offs
The Group writes off financial assets when there is no reasonable expectation of recovery. For mortgages and other loans secured
by real estate, the number of overdue days after which the balances are considered to be irrecoverable and are to be written off
comprised 1,460 days. If the amount to be written off is greater than the accumulated loan loss allowance, the difference is first
treated as an ECL expense. Any subsequent recoveries are credited to ECL expense.
Backtesting of ECL calculation model
In order to monitor the quality and reliability of the Group’s ECL calculation model, the Group periodically performs backtesting
and benchmarking procedures, whereby model outcomes are compared with actual results, based on internal experience as well
as externally observed results. For PD, the Group uses statistical modelling to derive a predicted distribution of the number of
defaults. The observed number of defaults is then compared with this distribution, allowing the Group to derive a statistical level
of confidence in the model. For LGD, the backtesting compares observed losses with predicted LGDs. If any statistically significant
deviations or shortcomings in parameterisations are observed, the relevant models are redefined and recalibrated. Any changes in
the model as a result of backtesting procedures are accounted as changes in accounting estimates with prospective application.
Impact of climate-related risks on accounting judgements and estimates
While the effects of climate change represent a source of uncertainty, the Group does not consider there to be a material impact
on its judgements and estimates from the physical and transition risks in the short-to-medium term. For further information, see
Note 29 on emerging risks.
5. Segment information
The Group disaggregated revenue from contracts with customers by products and services for each of the segments, as the Group
believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
For management purposes, the Group is organised into the following operating segments based on products and services as follows:
RB – Retail Banking (excluding Retail Banking of BNB) – principally provides consumer loans, mortgage loans, overdrafts, credit
cards and other credit facilities, funds transfers and settlement services, and handling of customers’ deposits for both
individuals and legal entities. The Retail Banking business targets the mass retail, mass affluent and high-net-worth client
segments, together with small and medium-sized enterprises, and micro businesses.
CIB – Corporate Investment Banking – comprises Corporate Banking and Investment Management operations in Georgia.
Corporate Banking principally provides loans and other credit facilities, funds transfers and settlement services, trade
finance services, documentary operations support and handles saving and term deposits for corporate and institutional
customers. The Investment Management business principally provides brokerage services through Galt & Taggart.
BNB – Comprising JSC Belarusky Narodny Bank mainly, principally providing retail and corporate banking services in Belarus.
Management monitors the operating results of its segments separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance, as explained in the table below, is measured in the same manner as
profit or loss in the consolidated income statement.
Transactions between operating segments are on an arm’s length basis in a similar manner to transactions with third parties.
The Group’s operations are primarily concentrated in Georgia, except for BNB, which operates in Belarus.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s operating
income in 2022, 2021 or 2020.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
5. Segment information continued
The following table presents the income statement and certain asset and liability information regarding the Group’s operating
segments as at and for the year ended 31 December 2022:
Retail Banking
Corporate
Investment
Banking BNB Eliminations
Group
Total
Net interest income 767,968 376,771 37,511 85 1,182,335
Net fee and commission income 256,287 49,543 11,500 161 317,491
Net foreign currency gain 277,608 123,993 64,493 – 466,094
Net (losses)/gains on extinguishment of debt (2,673) (5,740) (304) – (8,717)
Other income from settlement of legacy claim – 391,100 – – 391,100
Net other gains/(losses) 24,074 20,039 1,474 (778) 44,809
Operating income 1,323,264 955,706 114,674 (532) 2,393,112
Operating expenses (480,654) (105,632) (55,432) 532 (641,186)
Profit from associates 754 – – – 754
Operating income before cost of risk 843,364 850,074 59,242 – 1,752,680
Cost of risk (172,702) 79,461 (25,827) – (119,068)
Net operating income before non-recurring items 670,662 929,535 33,415 – 1,633,612
Net non-recurring items 1,241 – (203) – 1,038
Profit before income tax 671,903 929,535 33,212 – 1,634,650
Income tax expense (105,274) (77,693) (7,684) – (190,651)
Profit for the year 566,629 851,842 25,528 – 1,443,999
Assets and liabilities
Total assets 18,663,720 9,006,313 1,381,366 (149,499) 28,901,900
Total liabilities 16,345,880 7,226,769 1,229,928 (149,499) 24,653,078
Other segment information
Property and equipment 73,452 2,304 2,241 – 77,997
Intangible assets 33,819 1,965 4,886 – 40,670
Capital expenditure 107,271 4,269 7,127 – 118,667
Depreciation, amortisation and impairment (99,739) (5,292) (6,058) – (111,089)
The following table presents the income statement and certain asset and liability information regarding the Group’s operating
segments as at and for the year ended 31 December 2021:
Retail Banking
Corporate
Investment
Banking BNB Eliminations
Group
Total
Net interest income 582,531 331,706 39,676 28 953,941
Net fee and commission income 178,928 47,869 5,476 158 232,431
Net foreign currency gain 58,139 37,619 13,341 – 109,099
Net gains/(losses) on extinguishment of debt (456) (1,333) (1,103) – (2,892)
Net other gains/(losses) 26,325 45,312 2,345 (884) 73,098
Operating income 845,467 461,173 59,735 (698) 1,365,677
Operating expenses (389,915) (79,060) (39,675) 698 (507,952)
Loss from associates (3,781) – – – (3,781)
Operating income before cost of risk 451,771 382,113 20,060 – 853,944
Cost of risk (72,351) 22,662 (1,723) – (51,412)
Net operating income before non-recurring items 379,420 404,775 18,337 – 802,532
Net non-recurring items 20 (78) (532) – (590)
Profit before income tax 379,440 404,697 17,805 – 801,942
Income tax expense (32,956) (38,473) (3,395) – (74,824)
Profit for the year 346,484 366,224 14,410 – 727,118
Assets and liabilities
Total assets 14,865,640 7,683,923 980,920 (100,407) 23,430,076
Total liabilities 13,017,394 6,573,918 846,263 (100,407) 20,337,168
Other segment information
Property and equipment 48,095 3,103 2,031 – 53,229
Intangible assets 37,144 2,921 4,992 – 45,057
Capital expenditure 85,239 6,024 7,023 – 98,286
Depreciation, amortisation and impairment (80,127) (8,551) (4,940) – (93,618)
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5. Segment information continued
The following table presents the income statement and certain asset and liability information regarding the Group’s operating
segments as at and for the year ended 31 December 2020:
Retail Banking
Corporate
Investment
Banking BNB Eliminations
Group
Total
Net interest income 497,155 244,224 36,249 14 777,642
Net fee and commission income 121,973 37,597 5,678 255 165,503
Net foreign currency gain 59,677 33,161 6,202 – 99,040
Net gains/(losses) on extinguishment of debt (1,182) (1,260) (840) – (3,282)
Net other gains/(losses) 25,937 23,827 2,652 (660) 51,756
Operating income 703,560 337,549 49,941 (391) 1,090,659
Operating expenses (331,029) (69,047) (32,950) 391 (432,635)
Profit from associates 782 – – – 782
Operating income before cost of risk 373,313 268,502 16,991 – 658,806
Cost of risk (183,160) (113,856) (3,981) – (300,997)
Net operating income before non-recurring items 190,153 154,646 13,010 – 357,809
Net non-recurring items (39,898) (1,288) (125) – (41,311)
Profit before income tax 150,255 153,358 12,885 – 316,498
Income tax expense (6,137) (12,684) (2,734) – (21,555)
Profit for the year 144,118 140,674 10,151 – 294,943
Assets and liabilities
Total assets 13,447,451 7,635,107 1,018,652 (65,290) 22,035,920
Total liabilities 12,002,660 6,662,538 886,097 (65,290) 19,486,005
Other segment information
Property and equipment 66,707 4,300 616 – 71,623
Intangible assets 36,453 2,681 2,291 – 41,425
Capital expenditure 103,160 6,981 2,907 – 113,048
Depreciation, amortisation and impairment (70,151) (8,539) (4,247) – (82,937)
6. Cash and cash equivalents
2022 2021 2020
Cash on hand 1,052,055 751,063 703,459
Current accounts with central banks, excluding obligatory reserves 805,503 126,627 158,588
Current accounts with credit institutions 965,046 414,214 590,331
Time deposits with credit institutions with maturities of up to 90 days 762,590 228,683 518,648
Cash and cash equivalents, gross 3,585,194 1,520,587 1,971,026
Less – Allowance for expected credit loss (351) (25) (71)
Cash and cash equivalents, net 3,584,843 1,520,562 1,970,955
As at 31 December 2022, GEL 1,453,844 (2021: GEL 419,324, 2020: GEL 985,848) was placed on current and time deposit accounts
with internationally recognised OECD banks and central banks that are the counterparties of the Group in performing international
settlements. The Group earned between 0.00-11.10% interest per annum on these deposits (2021: up to 0.07%, 2020: up to 0.21%).
Management does not expect any losses from non-performance by the counterparties holding cash and cash equivalents, and there
are no material differences between their book and fair values.
As at 31 December 2022, cash and cash equivalents held by BOGG of GEL 10,850 (2021: GEL 384, 2020: GEL 199) is represented by
placements on current accounts with Georgian and OECD banks.
Notes to Consolidated
Financial Statements continued
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7. Amounts due from credit institutions
2022 2021 2020
Obligatory reserves with central banks 2,354,470 1,898,052 1,994,662
Time deposits with maturities of more than 90 days 15,721 28,939 8,424
Restricted cash 68,155 4,730 1,856
Inter-bank loan receivables – – 11,463
Amounts due from credit institutions, gross 2,438,346 1,931,721 2,016,405
Less – Allowance for expected credit loss (5,318) (331) (400)
Amounts due from credit institutions, net 2,433,028 1,931,390 2,016,005
Obligatory reserves with central banks represent amounts deposited with the NBG and the National Bank of the Republic of Belarus
(the ‘NBRB’). Credit institutions are required to maintain cash deposits (obligatory reserve) with the NBG and with the NBRB, the
amount of which depends on the level of funds attracted by the credit institution. The Group’s ability to withdraw these deposits
is restricted by regulation. The Group earned up to 0.00% interest on obligatory reserves with NBG and NBRB for the years ended
31 December 2022 (2021: 0.00%, 2020: 1.25%).
As at 31 December 2022, inter-bank loan receivables does not include any deposits placed with non-OECD banks (2021: Nil,
2020: GEL 11,464).
8. Investment securities
2022 2021 2020
Investment securities measured at FVOCI – debt instruments 3,960,299 2,586,083 2,539,019
Investment securities designated as at FVOCI – equity investments 10,893 9,581 5,378
Investment securities 3,971,192 2,595,664 2,544,397
2022 2021 2020
Investment securities measured at amortised cost, gross 381,735 – –
Less – Allowance for expected credit loss (3,198) – –
Investment securities measured at amortised cost, net 378,537 – –
2022 2021 2020
Ministry of Finance of Georgia treasury bonds 1,470,473 1,312,001 1,344,404
Ministry of Finance of Georgia treasury bills 176,483 82,196 36,879
Foreign treasury bills 1,062,095 – –
Foreign treasury bonds 92,817 79,156 159,537
Certificates of deposit of central banks 17,675 39,410 –
Other debt instruments 1,140,756 1,073,320 998,199
Investment securities measured at FVOCI – debt instruments 3,960,299 2,586,083 2,539,019
2022 2021 2020
Ministry of Finance of Georgia treasury bonds 119,918 – –
Foreign treasury bonds 12,230 – –
Other debt instruments 249,587 – –
Investment securities measured at amortised cost – debt instruments, gross 381,735 – –
Less – Allowance for expected credit loss (3,198) – –
Investment securities measured at amortised cost – debt instruments, net 378,537 – –
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8. Investment securities continued
Pledged treasury bonds 2022 2021 2020
For short-term loans from the NBG 709,597 490,592 1,044,066
For repo-operations with commencial banks 380,065 – –
For deposits of Ministry of Finance of Georgia 97,109 220,480 –
For cash kept by the NBG at the Group’s premises under cash custodian services – 14,720 8,188
Total 1,186,771 725,792 1,052,254
Pledged treasury bills 2022 2021 2020
For cash kept by the NBG at the Group’s premises under cash custodian services 24,180 – –
Total 24,180 – –
Pledged corporate bonds 2022 2021 2020
For short-term loans from the NBG 121,592 – 685,901
For deposits of Ministry of Finance of Georgia 205,079 109,109 –
Total 326,671 109,109 685,901
Other debt instruments as at 31 December 2022 mainly comprises bonds issued by the European Bank for Reconstruction
and Development of GEL 531,351 (2021: GEL 521,394, 2020: GEL 312,144), GEL-denominated bonds issued by the International
Finance Corporation of GEL 56,523 (2021: GEL 203,351, 2020: GEL 211,250), GEL-denominated bonds issued by the Netherlands
Development Finance Company of GEL 131,126 (2021: GEL 163,593, 2020: GEL 162,949), GEL-denominated bonds issued by the Black
Sea Trade and Development Bank of GEL 200,913 (2021: GEL 65,407, 2020: GEL 151,592), USD-denominated bonds issued by the
National Bank Of Uzbekistan of GEL 12,230 (2021: Nil, 2020: Nil) and GEL-denominated bonds issued by the Asian Development
Bank of GEL 107,835 (2021: GEL 61,609, 2020: GEL 61,350).
Foreign treasury bonds and bills comprise of US Treasury Notes in the amount of GEL 1,062,095 (2021: Nil, 2020: GEL 52,992),
Ministry of Finance of the Republic of Lithuania treasury bonds in the amount of GEL Nil (2021: GEL 15,992, 2020: GEL 26,982),
United Kingdom treasury bonds in the amount of GEL 32,516 (2021: GEL Nil, 2020: Nil) and Ministry of Finance of the Republic of
Belarus treasury bonds in the amount of GEL 60,301 (2021: GEL 63,164, 2020: GEL 79,563).
For the period ended 31 December 2022 net gains on derecognition of investment securities comprised GEL 7,921 (2021: GEL 30,044,
2020: GEL 3,585) which is included in net other income.
As at 31 December 2022, allowance for ECL on investment securities comprised GEL 2,236 (2021: GEL 3,145, 2020: GEL 4,875).
9. Loans to customers and finance lease receivables
2022 2021 2020
Commercial loans 5,315,666 5,554,184 5,123,393
Residential mortgage loans 4,193,204 4,022,058 3,796,384
Micro and SME loans 3,825,663 3,731,756 3,269,454
Consumer loans 3,602,054 2,981,305 2,208,013
Gold – pawn loans 164,554 165,417 103,384
Loans to customers at amortised cost, gross 17,101,141 16,454,720 14,500,628
Less – Allowance for expected credit loss (326,005) (404,804) (443,546)
Loans to customers at amortised cost, net 16,775,136 16,049,916 14,057,082
Finance lease receivables, gross 95,348 124,952 139,372
Less – Allowance for expected credit loss (8,778) (5,895) (4,376)
Finance lease receivables, net 86,570 119,057 134,996
Total loans to customers and finance lease receivables 16,861,706 16,168,973 14,192,078
As at 31 December 2022, loans to customers carried at GEL 1,092,475 (2021: GEL 1,125,955, 2020: GEL 692,052) were pledged for
short-term loans from the NBG.
Notes to Consolidated
Financial Statements continued
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9. Loans to customers and finance lease receivables continued
Expected credit loss
Movements of the gross loans and respective allowance for expected credit loss/impairment of loans to customers by class are
provided in the table below, within which the new financial asset originated or purchased and the assets repaid during the year
include the effects from revolving loans and increase of exposure to clients, where existing loans have been repaid with new
contracts issued during the year. All new financial assets are originated either in Stage 1 or POCI category. Utilisation of additional
tranches on existing financial assets are reflected in Stage 2 or Stage 3 if the credit risk of the borrower has deteriorated since
initiation. Currency translation differences relate to loans issued by the subsidiaries of the Group whose functional currency is
different from the presentation currency of the Group, while foreign exchange movement relates to foreign currency denominated
loans issued by the Group. Net other changes in gross loan balances includes the effects of changes in accrued interest. Net other
measurement of ECL includes the effect of changes in ECL due to post-model adjustments, changes in PDs and other inputs, as well
as the effect from ECL attributable to changes in accrued interest.
Commercial loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 4,934,312 374,933 226,925 18,014 5,554,184
New financial asset originated or purchased 4,574,787 34,779 693 6,969 4,617,228
Transfer to Stage 1 202,422 (202,422) – – –
Transfer to Stage 2 (773,437) 803,734 (30,297) – –
Transfer to Stage 3 (5,553) (98,586) 104,139 – –
Assets derecognised due to pass-through arrangement (23,721) (20) (83) – (23,824)
Assets repaid (4,092,938) (217,064) (83,154) (9,763) (4,402,919)
Resegmentation 194,578 2,622 (6,567) – 190,633
Impact of modifications 1,330 1,983 184 2 3,499
Write-offs – – (55,962) – (55,962)
Recoveries of amounts previously written off – – 42,501 2,865 45,366
Unwind of discount – – (1,921) 359 (1,562)
Currency translation differences (33,751) (1,051) (1,888) – (36,690)
Foreign exchange movement (512,131) (89,055) (24,259) (1,843) (627,288)
Net other changes 45,923 1,454 6,277 (653) 53,001
Balance at 31 December 2022 4,511,821 611,307 176,588 15,950 5,315,666
Individually assessed – – 159,486 13,603 173,089
Collectively assessed 4,511,821 611,307 17,102 2,347 5,142,577
Balance at 31 December 2022 4,511,821 611,307 176,588 15,950 5,315,666
Commercial loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 14,338 6,893 135,061 2,923 159,215
New financial asset originated or purchased 23,237 166 230 2,997 26,630
Transfer to Stage 1 4,323 (4,323) – – –
Transfer to Stage 2 (6,172) 12,308 (6,136) – –
Transfer to Stage 3 (485) (1,503) 1,988 – –
Impact on ECL of exposures transferred between stages
during the year (2,382) (3,448) 28,233 – 22,403
Assets derecognised due to pass-through arrangement (62) – (34) – (96)
Assets repaid (10,492) (4,325) (59,872) (3,151) (77,840)
Resegmentation 5,404 (27) (997) – 4,380
Impact of modifications 30 104 1 2 137
Write-offs – – (55,962) – (55,962)
Recoveries of amounts previously written off – – 42,501 2,865 45,366
Unwind of discount – – (1,921) 359 (1,562)
Currency translation differences (793) (1,079) (2,941) – (4,813)
Foreign exchange movement (921) (1,696) (10,613) (883) (14,113)
Net other measurement of ECL (6,810) 20,460 (25,291) (547) (12,188)
Balance at 31 December 2022 19,215 23,530 44,247 4,565 91,557
Individually assessed – – 37, 492 4,493 41,985
Collectively assessed 19,215 23,530 6,755 72 49,572
Balance at 31 December 2022 19,215 23,530 44,247 4,565 91,557
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Residential mortgage loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 3,629,369 259,970 104,514 28,205 4,022,058
New financial asset originated or purchased 1,466,957 14 – 13,524 1,480,495
Transfer to Stage 1 403,540 (403,398) (142) – –
Transfer to Stage 2 (375,932) 443,567 (67,635) – –
Transfer to Stage 3 (45,171) (49,817) 94,988 – –
Assets repaid (901,792) (57,945) (49,096) (10,849) (1,019,682)
Resegmentation (603) – – – (603)
Impact of modifications 179 37 (2,949) (169) (2,902)
Write-offs – – (4,445) (730) (5,175)
Recoveries of amounts previously written off – – 3,937 357 4,294
Unwind of discount – – 182 109 291
Currency translation differences (4,670) (98) (23) – (4,791)
Foreign exchange movement (254,899) (20,553) (10,022) (2,527) (288,001)
Net other changes 8,928 (2,211) 348 155 7,220
Balance at 31 December 2022 3,925,906 169,566 69,657 28,075 4,193,204
Individually assessed – – 2,940 – 2,940
Collectively assessed 3,925,906 169,566 66,717 28,075 4,190,264
Balance at 31 December 2022 3,925,906 169,566 69,657 28,075 4,193,204
Residential mortgage loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 9,703 3,803 17,039 2,493 33,038
New financial asset originated or purchased 14,452 – – 2,403 16,855
Transfer to Stage 1 5,673 (5,608) (65) – –
Transfer to Stage 2 (3,236) 15,977 (12,741) – –
Transfer to Stage 3 (7,463) (1,484) 8,947 – –
Impact on ECL of exposures transferred between stages
during the year (1,807) (10,903) 6,767 – (5,943)
Assets repaid (1,731) (961) (11,220) (2,103) (16,015)
Resegmentation – – – – –
Impact of modifications 4 1 937 64 1,006
Write-offs – – (4,445) (730) (5,175)
Recoveries of amounts previously written off – – 3,937 357 4,294
Unwind of discount – – 182 109 291
Foreign exchange movement (244) (122) (1,652) (498) (2,516)
Net other measurement of ECL (6,487) 1,898 6,399 2,412 4,222
Balance at 31 December 2022 8,862 2,601 14,085 4,507 30,055
Individually assessed – – 576 – 576
Collectively assessed 8,862 2,601 13,509 4,507 29,479
Balance at 31 December 2022 8,862 2,601 14,085 4,507 30,055
Notes to Consolidated
Financial Statements continued
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Micro and SME loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 3,280,149 293,473 151,499 6,635 3,731,756
New financial asset originated or purchased 2,953,940 7,854 1,859 2,435 2,966,088
Transfer to Stage 1 337,049 (337,049) – – –
Transfer to Stage 2 (442,020) 501,877 (59,857) – –
Transfer to Stage 3 (50,683) (106,474) 157,157 – –
Assets repaid (2,142,937) (125,830) (71,105) (5,917) (2,345,789)
Resegmentation (224,709) (4,680) 5,034 – (224,355)
Impact of modifications 194 139 (2,627) (36) (2,330)
Write-offs – – (37,629) (98) (37,727)
Recoveries of amounts previously written off – – 11,875 79 11,954
Unwind of discount – – 1,262 58 1,320
Currency translation differences (11,551) (1,097) (1,147) – (13,795)
Foreign exchange movement (275,010) (27,918) (17,669) (350) (320,947)
Net other changes 51,417 168 7,865 38 59,488
Balance at 31 December 2022 3,475,839 200,463 146,517 2,844 3,825,663
Individually assessed – – 39,448 – 39,448
Collectively assessed 3,475,839 200,463 107,069 2,844 3,786,215
Balance at 31 December 2022 3,475,839 200,463 146,517 2,844 3,825,663
Micro and SME loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 28,177 6,556 39,584 124 74,441
New financial asset originated or purchased 38,841 81 97 281 39,300
Transfer to Stage 1 7,921 (7,921) – – –
Transfer to Stage 2 (8,873) 20,802 (11,929) – –
Transfer to Stage 3 (8,295) (7,503) 15,798 – –
Impact on ECL of exposures transferred between stages
during the year (962) (9,903) 29,077 – 18,212
Assets repaid (13,663) (3,065) (24,514) (496) (41,738)
Resegmentation (5,935) (129) 541 – (5,523)
Impact of modifications 10 (24) (1,147) 16 (1,145)
Write-offs – – (37,629) (98) (37,727)
Recoveries of amounts previously written off – – 11,875 79 11,954
Unwind of discount – – 1,262 58 1,320
Currency translation differences (143) (96) (764) – (1,003)
Foreign exchange movement (1,071) (114) (3,448) (67) (4,700)
Net other measurement of ECL (15,929) 6,764 18,514 762 10,111
Balance at 31 December 2022 20,078 5,448 37,317 659 63,502
Individually assessed – – 10,552 – 10,552
Collectively assessed 20,078 5,448 26,765 659 52,950
Balance at 31 December 2022 20,078 5,448 37,317 659 63,502
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Consumer loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 2,635,438 215,026 107,642 23,199 2,981,305
New financial asset originated or purchased 3,313,393 7,566 969 15,493 3,337,421
Transfer to Stage 1 344,640 (344,445) (195) – –
Transfer to Stage 2 (534,425) 608,146 (73,721) – –
Transfer to Stage 3 (121,557) (167,897) 289,454 – –
Assets repaid (2,357,992) (102,236) (64,593) (12,241) (2,537,062)
Resegmentation 30,506 2,058 1,578 34,142
Impact of modifications 1,152 (84) (24,515) (1,236) (24,683)
Write-offs – – (171,142) (4,431) (175,573)
Recoveries of amounts previously written off – – 22,074 879 22,953
Unwind of discount – – 4,252 922 5,174
Currency translation differences (14,540) (80) (163) (14,783)
Foreign exchange movement (86,830) (4,100) (1,319) (610) (92,859)
Net other changes 33,406 (79) 31,671 1,021 66,019
Balance at 31 December 2022 3,243,191 213,875 121,992 22,996 3,602,054
Individually assessed – – 2,650 – 2,650
Collectively assessed 3,243,191 213,875 119,342 22,996 3,599,404
Balance at 31 December 2022 3,243,191 213,875 121,992 22,996 3,602,054
Consumer loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 57,083 19,410 58,731 811 136,035
New financial asset originated or purchased 131,916 1,199 478 4,325 137,918
Transfer to Stage 1 26,886 (26,872) (14) – –
Transfer to Stage 2 (36,429) 72,075 (35,646) – –
Transfer to Stage 3 (61,445) (37,845) 99,290 – –
Impact on ECL of exposures transferred between stages
during the year (3,821) (29,191) 48,501 – 15,489
Assets repaid (41,829) (8,884) (38,047) (3,763) (92,523)
Resegmentation 531 156 456 1,143
Impact of modifications 121 (12) (10,792) 122 (10,561)
Write-offs – – (171,142) (4,431) (175,573)
Recoveries of amounts previously written off – – 22,074 879 22,953
Unwind of discount – – 4,252 922 5,174
Currency translation differences (36) (11) (201) (248)
Foreign exchange movement (191) (60) (763) (63) (1,077)
Net other measurement of ECL (32,188) 29,344 90,779 8,785 96,720
Balance at 31 December 2022 40,598 19,309 67,956 7,587 135,450
Individually assessed – – 1,054 – 1,054
Collectively assessed 40,598 19,309 66,902 7,587 134,396
Balance at 31 December 2022 40,598 19,309 67,956 7,587 135,450
Notes to Consolidated
Financial Statements continued
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Gold – pawn loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 152,787 10,116 2,514 – 165,417
New financial asset originated or purchased 122,438 1 54 – 122,493
Transfer to Stage 1 17,460 (17,460) – – –
Transfer to Stage 2 (24,040) 25,642 (1,602) – –
Transfer to Stage 3 (7,251) (2,757) 10,008 – –
Assets repaid (112,603) (6,938) (4,054) – (123,595)
Resegmentation 228 – (45) – 183
Write-offs – – (635) – (635)
Recoveries of amounts previously written off – – (25) – (25)
Unwind of discount – – 1 – 1
Foreign exchange movement (33) (4) 4 – (33)
Net other changes (1,461) 13 2,196 – 748
Balance at 31 December 2022 147,525 8,613 8,416 – 164,554
Individually assessed – – 4,337 – 4,337
Collectively assessed 147,525 8,613 4,079 – 160,217
Balance at 31 December 2022 147,525 8,613 8,416 – 164,554
Gold – pawn loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 1,823 11 241 – 2,075
New financial asset originated or purchased – – – – –
Transfer to Stage 1 27 (27) – – –
Transfer to Stage 2 (16) 149 (133) – –
Transfer to Stage 3 (2,502) (6) 2,508 – –
Assets repaid (18) (6) (30) – (54)
Write-offs – – (635) – (635)
Recoveries of amounts previously written off – – (25) – (25)
Unwind of discount – – 1 – 1
Net other measurement of ECL 756 (89) 3,412 – 4,079
Balance at 31 December 2022 70 32 5,339 – 5,441
Individually assessed – – 4,337 – 4,337
Collectively assessed 70 32 1,002 – 1,104
Balance at 31 December 2022 70 32 5,339 – 5,441
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Commercial loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 4,491,078 382,118 241,821 8,376 5,123,393
New financial asset originated or purchased 4,357,093 34,815 3,202 10,032 4,405,142
Transfer to Stage 1 231,287 (229,399) (1,888) – –
Transfer to Stage 2 (373,532) 394,553 (21,021) – –
Transfer to Stage 3 (13,813) (52,529) 66,342 – –
Assets derecognised due to pass-through arrangement (28,338) (2,048) (124) – (30,510)
Assets repaid (3,479,338) (159,200) (102,689) (144) (3,741,371)
Resegmentation 109,367 35,325 2,164 – 146,856
Impact of modifications 686 258 152 (22) 1,074
Write-offs – – (4,574) – (4,574)
Recoveries of amounts previously written off – – 47,192 69 47,261
Unwind of discount – – 2,959 4 2,963
Currency translation differences (12,742) (358) (866) – (13,966)
Foreign exchange movement (361,065) (27,796) (9,555) (380) (398,796)
Net other changes 13,629 (806) 3,810 79 16,712
Balance at 31 December 2021 4,934,312 374,933 226,925 18,014 5,554,184
Individually assessed – – 203,431 9,566 212,997
Collectively assessed 4,934,312 374,933 23,494 8,448 5,341,187
Balance at 31 December 2021 4,934,312 374,933 226,925 18,014 5,554,184
Commercial loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 33,823 8,157 136,572 4 178,556
New financial asset originated or purchased 20,591 1,973 312 3,481 26,357
Transfer to Stage 1 2,934 (2,932) (2) – –
Transfer to Stage 2 (2,904) 11,116 (8,212) – –
Transfer to Stage 3 (1,769) (374) 2,143 – –
Impact on ECL of exposures transferred between stages
during the year (1,373) (6,710) 10,153 – 2,070
Assets derecognised due to pass-through arrangement (138) (74) (70) – (282)
Assets repaid (9,412) (3,694) (67,366) (80) (80,552)
Resegmentation 192 298 – – 490
Impact of modifications 11 (2) 12 (14) 7
Write-offs – – (4,574) – (4,574)
Recoveries of amounts previously written off – – 47,192 69 47,261
Unwind of discount – – 2,959 4 2,963
Currency translation differences (132) (76) (382) – (590)
Foreign exchange movement (942) (141) (5,254) 10 (6,327)
Net other measurement of ECL (26,543) (648) 21,578 (551) (6,164)
Balance at 31 December 2021 14,338 6,893 135,061 2,923 159,215
Individually assessed – – 126,724 2,837 129,561
Collectively assessed 14,338 6,893 8,337 86 29,654
Balance at 31 December 2021 14,338 6,893 135,061 2,923 159,215
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Residential mortgage loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 3,287,844 314,215 168,476 25,849 3,796,384
New financial asset originated or purchased 1,549,472 238 103 13,615 1,563,428
Transfer to Stage 1 428,840 (407,795) (21,045) – –
Transfer to Stage 2 (344,981) 588,640 (243,659) – –
Transfer to Stage 3 (158,425) (129,954) 288,379 – –
Assets repaid (975,730) (94,131) (73,544) (9,287) (1,152,692)
Resegmentation 5,514 970 – – 6,484
Impact of modifications 988 670 143 (283) 1,518
Write-offs – – (5,750) (561) (6,311)
Recoveries of amounts previously written off – – 993 205 1,198
Unwind of discount – – 244 17 261
Currency translation differences (1,910) (45) 2 (2) (1,955)
Foreign exchange movement (155,793) (11,366) (9,238) (1,648) (178,045)
Net other changes (6,450) (1,472) (590) 300 (8,212)
Balance at 31 December 2021 3,629,369 259,970 104,514 28,205 4,022,058
Individually assessed – – 277 – 277
Collectively assessed 3,629,369 259,970 104,237 28,205 4,021,781
Balance at 31 December 2021 3,629,369 259,970 104,514 28,205 4,022,058
Residential mortgage loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 8,652 11,410 25,236 3,311 48,609
New financial asset originated or purchased 29,065 3 4 887 29,959
Transfer to Stage 1 15,750 (12,962) (2,788) – –
Transfer to Stage 2 (5,679) 46,641 (40,962) – –
Transfer to Stage 3 (18,908) (5,725) 24,633 – –
Impact on ECL of exposures transferred between stages
during the year (5,562) (37,935) 22,414 – (21,083)
Assets repaid (2,621) (2,674) (12,902) (1,763) (19,960)
Resegmentation 21 1 – – 22
Impact of modifications – – 438 (198) 240
Write-offs – – (5,750) (561) (6,311)
Recoveries of amounts previously written off – – 993 205 1,198
Unwind of discount – – 244 17 261
Currency translation differences – – – – –
Foreign exchange movement (470) 101 (1,732) (409) (2,510)
Net other measurement of ECL (10,545) 4,943 7,211 1,004 2,613
Balance at 31 December 2021 9,703 3,803 17,039 2,493 33,038
Individually assessed – – 7 – 7
Collectively assessed 9,703 3,803 17,032 2,493 33,031
Balance at 31 December 2021 9,703 3,803 17,039 2,493 33,038
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Micro and SME loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 2,649,107 439,405 177,471 3,471 3,269,454
New financial asset originated or purchased 3,303,744 17,798 1,152 7,599 3,330,293
Transfer to Stage 1 384,411 (377,752) (6,659) – –
Transfer to Stage 2 (571,845) 678,669 (106,824) – –
Transfer to Stage 3 (108,524) (112,029) 220,553 – –
Assets repaid (1,987,068) (282,948) (96,106) (4,718) (2,370,840)
Resegmentation (247,911) (40,492) (2,790) (5) (291,198)
Impact of modifications 319 210 (4,384) (11) (3,866)
Write-offs – – (40,195) (214) (40,409)
Recoveries of amounts previously written off – – 12,628 686 13,314
Unwind of discount – – 265 23 288
Currency translation differences (5,494) (473) (386) 2 (6,351)
Foreign exchange movement (180,781) (27,138) (9,910) (271) (218,100)
Net other changes 44,191 (1,777) 6,684 73 49,171
Balance at 31 December 2021 3,280,149 293,473 151,499 6,635 3,731,756
Individually assessed – – 23,466 – 23,466
Collectively assessed 3,280,149 293,473 128,033 6,635 3,708,290
Balance at 31 December 2021 3,280,149 293,473 151,499 6,635 3,731,756
Micro and SME loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 26,157 20,571 55,560 64 102,352
New financial asset originated or purchased 58,476 804 92 81 59,453
Transfer to Stage 1 20,352 (18,841) (1,511) – –
Transfer to Stage 2 (14,284) 35,909 (21,625) – –
Transfer to Stage 3 (13,914) (7,459) 21,373 – –
Impact on ECL of exposures transferred between stages
during the year (4,218) (18,652) 27,259 – 4,389
Assets repaid (16,879) (7,632) (26,573) (968) (52,052)
Resegmentation (1,280) (476) (182) – (1,938)
Impact of modifications 2 (7) (2,180) 1 (2,184)
Write-offs – – (40,195) (214) (40,409)
Recoveries of amounts previously written off – – 12,628 686 13,314
Unwind of discount – – 265 23 288
Currency translation differences (62) (34) (268) – (364)
Foreign exchange movement (1,020) (184) (2,826) (79) (4,109)
Net other measurement of ECL (25,153) 2,557 17,767 530 (4,299)
Balance at 31 December 2021 28,177 6,556 39,584 124 74,441
Individually assessed – – 10,613 – 10,613
Collectively assessed 28,177 6,556 28,971 124 63,828
Balance at 31 December 2021 28,177 6,556 39,584 124 74,441
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Consumer loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 1,904,182 194,366 100,950 8,515 2,208,013
New financial asset originated or purchased 2,747,021 7,001 1,718 19,540 2,775,280
Transfer to Stage 1 270,620 (253,910) (16,710) – –
Transfer to Stage 2 (367,600) 489,718 (122,118) – –
Transfer to Stage 3 (134,641) (123,558) 258,199 – –
Assets repaid (1,849,334) (100,322) (65,394) (4,297) (2,019,347)
Resegmentation 110,449 3,487 706 5 114,647
Impact of modifications 246 82 (9,482) (46) (9,200)
Write-offs – – (72,832) (415) (73,247)
Recoveries of amounts previously written off – – 19,405 148 19,553
Unwind of discount – – 397 345 742
Currency translation differences (6,094) (33) (68) – (6,195)
Foreign exchange movement (51,792) (1,590) (688) (223) (54,293)
Net other changes 12,381 (215) 13,559 (373) 25,352
Balance at 31 December 2021 2,635,438 215,026 107,642 23,199 2,981,305
Individually assessed – – 1,481 – 1,481
Collectively assessed 2,635,438 215,026 106,161 23,199 2,979,824
Balance at 31 December 2021 2,635,438 215,026 107,642 23,199 2,981,305
Consumer loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 40,597 25,533 46,641 1,030 113,801
New financial asset originated or purchased 153,477 1,570 546 251 155,844
Transfer to Stage 1 33,951 (26,256) (7,695) – –
Transfer to Stage 2 (26,684) 75,148 (48,464) – –
Transfer to Stage 3 (57,627) (20,176) 77,803 – –
Impact on ECL of exposures transferred between stages
during the year (12,239) (40,279) 53,664 – 1,146
Assets repaid (47,437) (11,239) (36,001) (1,449) (96,126)
Resegmentation 548 83 182 – 813
Impact of modifications (2) (1) (5,036) 5 (5,034)
Write-offs – – (72,832) (415) (73,247)
Recoveries of amounts previously written off – – 19,405 148 19,553
Unwind of discount – – 397 345 742
Currency translation differences (10) (3) (15) – (28)
Foreign exchange movement (153) (37) (643) (29) (862)
Net other measurement of ECL (27,338) 15,067 30,779 925 19,433
Balance at 31 December 2021 57,083 19,410 58,731 811 136,035
Individually assessed – – 585 – 585
Collectively assessed 57,083 19,410 58,146 811 135,450
Balance at 31 December 2021 57,083 19,410 58,731 811 136,035
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Gold – pawn loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 97,775 3,879 1,730 – 103,384
New financial asset originated or purchased 170,198 1,117 219 – 171,534
Transfer to Stage 1 10,556 (10,148) (408) – –
Transfer to Stage 2 (21,129) 23,266 (2,137) – –
Transfer to Stage 3 (3,856) (2,531) 6,387 – –
Assets repaid (123,964) (6,222) (3,071) – (133,257)
Resegmentation 22,581 710 (80) – 23,211
Write-offs – – (253) – (253)
Recoveries of amounts previously written off – – 3 – 3
Unwind of discount – – (1) – (1)
Foreign exchange movement (18) (6) (3) – (27)
Net other changes 644 51 128 – 823
Balance at 31 December 2021 152,787 10,116 2,514 – 165,417
Collectively assessed 152,787 10,116 2,514 – 165,417
Balance at 31 December 2021 152,787 10,116 2,514 – 165,417
Gold – pawn loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 40 16 172 – 228
Transfer to Stage 1 34 (10) (24) – –
Transfer to Stage 2 – 85 (85) – –
Transfer to Stage 3 (2) (4) 6 – –
Impact on ECL of exposures transferred between stages
during the year (24) – – – (24)
Assets repaid (177) (27) (24) – (228)
Write-offs – – (253) – (253)
Recoveries of amounts previously written off – – 3 – 3
Unwind of discount – – (1) – (1)
Foreign exchange movement – – – – –
Net other measurement of ECL 936 (281) 447 – 1,102
Balance at 31 December 2021 1,823 11 241 – 2,075
Collectively assessed 1,823 11 241 – 2,075
Balance at 31 December 2021 1,823 11 241 – 2,075
Notes to Consolidated
Financial Statements continued
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Financial Statements Additional Information
9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Commercial loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 3,583,051 349,494 161,744 7,661 4,101,950
New financial asset originated or purchased 3,223,279 45,618 2,156 – 3,271,053
Transfer to Stage 1 370,266 (370,266) – – –
Transfer to Stage 2 (578,928) 626,550 (47,622) – –
Transfer to Stage 3 (58,408) (79,014) 137,422 – –
Assets derecognised due to pass-through arrangement (30,363) (10,340) (52) – (40,755)
Assets repaid (2,637,752) (218,169) (61,392) (575) (2,917,888)
Resegmentation 21,133 – – – 21,133
Impact of modifications (809) 94 (4) (7) (726)
Write-offs – – (6,595) – (6,595)
Recoveries of amounts previously written off – – 13,531 127 13,658
Unwind of discount – – 9,691 6 9,697
Currency translation differences (19,819) (471) (1,455) – (21,745)
Foreign exchange movement 634,072 37,831 31,097 928 703,928
Net other changes (14,644) 791 3,300 236 (10,317)
Balance at 31 December 2020 4,491,078 382,118 241,821 8,376 5,123,393
Individually assessed – – 237,593 – 237,593
Collectively assessed 4,491,078 382,118 4,228 8,376 4,885,800
Balance at 31 December 2020 4,491,078 382,118 241,821 8,376 5,123,393
Commercial loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 16,903 3,414 77,995 298 98,610
New financial asset originated or purchased 4,099 1,253 572 – 5,924
Transfer to Stage 1 3,906 (3,906) – – –
Transfer to Stage 2 (2,773) 8,026 (5,253) – –
Transfer to Stage 3 (541) (12,002) 12,543 – –
Impact on ECL of exposures transferred between stages
during the year (27,165) (2,523) 24,295 – (5,393)
Assets derecognised due to pass-through arrangement (9) (294) (12) – (315)
Assets repaid (9,935) (10,052) (29,340) (304) (49,631)
Resegmentation 140 – – – 140
Impact of modifications 1 8 (6) – 3
Write-offs – – (6,595) – (6,595)
Recoveries of amounts previously written off – – 13,531 127 13,658
Unwind of discount – – 9,691 6 9,697
Currency translation differences 791 335 2,281 – 3,407
Foreign exchange movement 4,407 (782) 12,544 20 16,189
Net other measurement of ECL 43,999 24,680 24,326 (143) 92,862
Balance at 31 December 2020 33,823 8,157 136,572 4 178,556
Individually assessed – – 134,424 – 134,424
Collectively assessed 33,823 8,157 2,148 4 44,132
Balance at 31 December 2020 33,823 8,157 136,572 4 178,556
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Residential mortgage loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 2,764,959 160,038 109,413 32,273 3,066,683
New financial asset originated or purchased 1,239,637 430 259 3,101 1,243,427
Transfer to Stage 1 460,728 (419,122) (41,606) – –
Transfer to Stage 2 (541,668) 600,415 (58,747) – –
Transfer to Stage 3 (155,514) (40,638) 196,152 – –
Assets repaid (788,737) (37,503) (51,790) (13,696) (891,726)
Resegmentation (945) – – – (945)
Impact of modifications (8,730) 954 (134) (854) (8,764)
Write-offs – – (5,368) (215) (5,583)
Recoveries of amounts previously written off – – 734 767 1,501
Unwind of discount 2 – 292 91 385
Currency translation differences (1,837) (1) (3) – (1,841)
Foreign exchange movement 287,057 23,746 12,847 3,604 327,254
Net other changes 32,892 25,896 6,427 778 65,993
Balance at 31 December 2020 3,287,844 314,215 168,476 25,849 3,796,384
Individually assessed – – 3,517 – 3,517
Collectively assessed 3,287,844 314,215 164,959 25,849 3,792,867
Balance at 31 December 2020 3,287,844 314,215 168,476 25,849 3,796,384
Residential mortgage loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 461 160 6,588 1,808 9,017
New financial asset originated or purchased 848 2 9 162 1,021
Transfer to Stage 1 14,030 (7,452) (6,578) – –
Transfer to Stage 2 (2,420) 10,027 (7,607) – –
Transfer to Stage 3 (75) (856) 931 – –
Impact on ECL of exposures transferred between stages
during the year (19,497) (6,049) 2,719 – (22,827)
Assets repaid (3,281) (965) (8,598) (3,399) (16,243)
Impact of modifications (15) 468 499 (213) 739
Write-offs – – (5,368) (215) (5,583)
Recoveries of amounts previously written off – – 734 767 1,501
Unwind of discount 2 – 292 91 385
Currency translation differences (11) – – – (11)
Foreign exchange movement 136 (63) 1,029 474 1,576
Net other measurement of ECL 18,491 16,138 40,586 3,836 79,051
Balance at 31 December 2020 8,652 11,410 25,236 3,311 48,609
Collectively assessed 8,652 11,410 24,833 3,311 48,206
Balance at 31 December 2020 8,652 11,410 25,236 3,311 48,609
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Micro and SME loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 2,426,866 113,130 118,475 1,749 2,660,220
New financial asset originated or purchased 2,089,047 6,772 887 2,928 2,099,634
Transfer to Stage 1 453,063 (439,267) (13,796) – –
Transfer to Stage 2 (891,350) 925,785 (34,435) – –
Transfer to Stage 3 (58,496) (104,533) 163,029 – –
Assets repaid (1,593,656) (154,459) (70,067) (1,224) (1,819,406)
Resegmentation (19,958) – – – (19,958)
Impact of modifications (6,109) (786) (2,560) (1) (9,456)
Write-offs – – (30,561) (976) (31,537)
Recoveries of amounts previously written off – – 7,831 102 7,933
Unwind of discount – – 1,319 25 1,344
Currency translation differences (8,429) (1,001) (569) – (9,999)
Foreign exchange movement 254,683 35,131 13,036 293 303,143
Net other changes 3,446 58,633 24,882 575 87,536
Balance at 31 December 2020 2,649,107 439,405 177,471 3,471 3,269,454
Individually assessed – – 25,900 – 25,900
Collectively assessed 2,649,107 439,405 151,571 3,471 3,243,554
Balance at 31 December 2020 2,649,107 439,405 177,471 3,471 3,269,454
Micro and SME loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 12,890 5,803 24,976 876 44,545
New financial asset originated or purchased 1,636 739 24 50 2,449
Transfer to Stage 1 24,865 (21,624) (3,241) – –
Transfer to Stage 2 (10,906) 17,875 (6,969) – –
Transfer to Stage 3 (562) (9,162) 9,724 – –
Impact on ECL of exposures transferred between stages
during the year (25,202) (2,771) 8,310 – (19,663)
Assets repaid (13,883) (9,024) (21,668) (270) (44,845)
Resegmentation (123) – – – (123)
Impact of modifications (158) (173) (1,148) – (1,479)
Write-offs – – (30,561) (976) (31,537)
Recoveries of amounts previously written off – – 7,831 102 7,933
Unwind of discount – – 1,319 25 1,344
Currency translation differences 368 134 142 – 644
Foreign exchange movement 661 37 2,140 76 2,914
Net other measurement of ECL 36,571 38,737 64,681 181 140,170
Balance at 31 December 2020 26,157 20,571 55,560 64 102,352
Individually assessed – – 12,976 – 12,976
Collectively assessed 26,157 20,571 42,584 64 89,376
Balance at 31 December 2020 26,157 20,571 55,560 64 102,352
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Consumer loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 1,856,795 110,158 108,414 9,741 2,085,108
New financial asset originated or purchased 1,613,372 7,125 2,925 1,016 1,624,438
Transfer to Stage 1 291,916 (245,014) (46,902) – –
Transfer to Stage 2 (394,422) 435,335 (40,913) – –
Transfer to Stage 3 (100,329) (49,583) 149,912 – –
Assets repaid (1,412,334) (80,602) (70,082) (3,242) (1,566,260)
Resegmentation (230) – 263 – 33
Impact of modifications (12,300) (1,149) (3,328) (148) (16,925)
Write-offs – – (34,940) (8) (34,948)
Recoveries of amounts previously written off – – 21,309 65 21,374
Unwind of discount – – 431 18 449
Currency translation differences (10,713) (32) (57) – (10,802)
Foreign exchange movement 16,413 3,656 3,549 419 24,037
Net other changes 56,014 14,472 10,369 654 81,509
Balance at 31 December 2020 1,904,182 194,366 100,950 8,515 2,208,013
Individually assessed – – 1,346 – 1,346
Collectively assessed 1,904,182 194,366 99,604 8,515 2,206,667
Balance at 31 December 2020 1,904,182 194,366 100,950 8,515 2,208,013
Consumer loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 16,823 6,345 49,325 214 72,707
New financial asset originated or purchased 15,299 1,736 907 374 18,316
Transfer to Stage 1 45,315 (23,886) (21,429) – –
Transfer to Stage 2 (17,770) 38,726 (20,956) – –
Transfer to Stage 3 (577) (8,973) 9,550 – –
Impact on ECL of exposures transferred between stages
during the year (39,380) (13,541) (5,993) – (58,914)
Assets repaid (29,641) (10,116) (44,922) (439) (85,118)
Impact of modifications (519) (171) (1,704) (7) (2,401)
Write-offs – – (34,940) (8) (34,948)
Recoveries of amounts previously written off – – 21,309 65 21,374
Unwind of discount – – 431 18 449
Currency translation differences (186) (7) (49) – (242)
Foreign exchange movement 138 46 744 21 949
Net other measurement of ECL 51,095 35,374 94,368 792 181,629
Balance at 31 December 2020 40,597 25,533 46,641 1,030 113,801
Individually assessed – – 354 – 354
Collectively assessed 40,597 25,533 46,287 1,030 113,447
Balance at 31 December 2020 40,597 25,533 46,641 1,030 113,801
Notes to Consolidated
Financial Statements continued
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Financial Statements Additional Information
9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Gold – pawn loans at amortised cost, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 80,794 1,114 3,632 – 85,540
New financial asset originated or purchased 139,676 – 475 – 140,151
Transfer to Stage 1 6,565 (4,313) (2,252) – –
Transfer to Stage 2 (10,625) 11,552 (927) – –
Transfer to Stage 3 (5,331) (877) 6,208 – –
Assets repaid (113,508) (3,726) (5,053) – (122,287)
Resegmentation – – (263) – (263)
Write-offs – – (58) – (58)
Recoveries of amounts previously written off – – 6 – 6
Unwind of discount – – 6 – 6
Foreign exchange movement 148 8 (167) – (11)
Net other changes 56 121 123 – 300
Balance at 31 December 2020 97,775 3,879 1,730 – 103,384
Collectively assessed 97,775 3,879 1,730 – 103,384
Balance at 31 December 2020 97,775 3,879 1,730 – 103,384
Gold – pawn loans at amortised cost, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 9 1 244 – 254
New financial asset originated or purchased – – – – –
Transfer to Stage 1 79 (6) (73) – –
Transfer to Stage 2 (10) 45 (35) – –
Transfer to Stage 3 (1) (1) 2 – –
Impact on ECL of exposures transferred between stages
during the year (82) (1) – – (83)
Assets repaid (17) (4) (227) – (248)
Write-offs – – (58) – (58)
Recoveries of amounts previously written off – – 6 – 6
Unwind of discount – – 6 – 6
Foreign exchange movement (1) – 1 – –
Net other measurement of ECL 63 (18) 306 – 351
Balance at 31 December 2020 40 16 172 – 228
Collectively assessed 40 16 172 – 228
Balance at 31 December 2020 40 16 172 – 228
The contractual amounts outstanding on loans to customers that have been written off during the reporting period but are still
subject to enforcement activity was GEL 188,545 (2021: GEL 95,469, 2020: GEL 50,718).
Collateral and other credit enhancements
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are
implemented regarding the acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:
• For commercial lending, charges over real estate properties, equipment and machinery, corporate shares, inventory, trade
receivables, third-party corporate guarantees and personal guarantees of shareholders.
• For retail lending, mortgages over residential properties, cars, gold and jewellery, third-party corporate guarantees and personal
guarantees of shareholders.
Management requests additional collateral in accordance with the underlying agreement and monitors the market value of
collateral obtained during its review of the adequacy of the allowance for expected credit loss/impairment of loans.
It is the Group’s policy to dispose of repossessed properties in an orderly fashion or to hold them for capital appreciation or earning
rentals, as appropriate in each case. In general, the Group does not occupy repossessed properties for business use.
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9. Loans to customers and finance lease receivables continued
Expected credit loss continued
Without taking into account the discounted value of collateral, the ECL for credit-impaired loans would be as follows:
2022
ECL for credit-
impaired loans
ECL without
taking into
account the
discounted value
of collateral
Commercial loans 48,812 187,653
Residential mortgage loans 18,592 67,534
Micro and SME loans 37,976 131,404
Consumer loans 75,543 103,597
Gold – pawn loans 5,339 6,947
Total 186,262 497,135
2021
ECL for credit-
impaired loans
ECL without
taking into
account the
discounted value
of collateral
Commercial loans 137,984 231,968
Residential mortgage loans 19,532 93,804
Micro and SME loans 39,708 140,929
Consumer loans 59,542 87,891
Gold – pawn loans 241 1,802
Total 257,007 556,394
2020
ECL for credit-
impaired loans
ECL without
taking into
account the
discounted value
of collateral
Commercial loans 136,576 243,178
Residential mortgage loans 28,547 146,945
Micro and SME loans 55,624 160,862
Consumer loans 47,671 85,569
Gold – pawn loans 172 1,430
Total 268,590 637,984
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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9. Loans to customers and finance lease receivables continued
Concentration of loans to customers
As at 31 December 2022, the concentration of loans granted by the Group to the ten largest third-party borrowers comprised
GEL 1,017,629 accounting for 6% of the gross loan portfolio of the Group (2021: GEL 1,375,536 and 8% respectively, 2020: GEL 1,415,618
and 10% respectively). An allowance of expected credit loss of GEL 8,209 (2021: GEL 2,770, 2020: GEL 13,612) was established against
these loans.
As at 31 December 2022, the concentration of loans granted by the Group to the ten largest third-party group of borrowers (borrower
and its related parties) comprised GEL 1,736,614 accounting for 10% of the gross loan portfolio of the Group (2021: GEL 2,136,228 and
13% respectively, 2020: GEL 2,051,055 and 14% respectively). An allowance of expected credit loss of GEL 17,392 (2021: GEL 7,386, 2020:
GEL 16,927) was established against these loans.
As at 31 December 2022, 31 December 2021 and 31 December 2020, loans were principally issued within Georgia, and their
distribution by industry sector was as follows:
2022 2021 2020
Individuals 10,011,378 9,184,255 7,900,831
Trade 1,135,693 1,189,036 1,112,910
Manufacturing 1,065,693 1,377,023 1,338,778
Real estate 1,024,364 1,025,298 1,050,823
Hospitality 828,577 946,224 829,635
Electricity, gas and water supply 458,415 384,554 251,829
Construction 512,345 379,813 269,250
Service 302,442 307,602 306,520
Financial intermediation 291,778 244,215 197,409
Transport and communication 190,175 234,512 171,406
Mining and quarrying 148,489 183,270 199,484
Other 1,131,792 998,918 871,753
Loans to customers, gross 17,101,141 16,454,720 14,500,628
Less – Allowance for expected credit loss (326,005) (404,804) (443,546)
Loans to customers, net 16,775,136 16,049,916 14,057,082
Loans have been extended to the following types of customers:
2022 2021 2020
Individuals 10,011,378 9,184,255 7,900,831
Private companies 7,086,069 7,257,993 6,579,663
State-owned entities 3,694 12,472 20,134
Loans to customers, gross 17,101,141 16,454,720 14,500,628
Less – Allowance for expected credit loss (326,005) (404,804) (443,546)
Loans to customers, net 16,775,136 16,049,916 14,057,082
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9. Loans to customers and finance lease receivables continued
Finance lease receivables
2022 2021 2020
Minimum lease payments receivable 120,740 168,508 189,959
Less – Unearned finance lease income (25,392) (43,556) (50,587)
Finance lease receivables, gross 95,348 124,952 139,372
Less – Allowance for expected credit loss/impairment loss (8,778) (5,895) (4,376)
Finance lease receivables, net 86,570 119,057 134,996
The difference between the minimum lease payments to be received in the future and the finance lease receivables represents
unearned finance income.
As at 31 December 2022, finance lease receivables carried at GEL 16,965 were pledged for inter-bank loans received from several
credit institutions (2021: GEL 67,556, 2020: 75,134).
As at 31 December 2022, the concentration of investment in the five largest lease receivables comprised GEL 20,515 or 22% of
total finance lease receivables (2021: GEL 22,417 or 18%, 2020: GEL 20,486 or 15%). An allowance of GEL 973 (2021: GEL 956, 2020:
GEL 1,176) was established against these lease receivables.
Future minimum lease payments to be received after 31 December 2022, 31 December 2021 and 31 December 2020 are as follows:
2022 2021 2020
Within 1 year 51,944 76,407 92,391
From 1 to 2 years 22,480 35,929 45,482
From 2 to 3 years 18,109 24,390 28,145
From 3 to 4 years 7,613 14,996 15,936
From 4 to 5 years 3,036 3,159 5,189
More than 5 years 17,559 13,627 2,815
Minimum lease payment receivables 120,740 168,508 189,959
Movements of the gross finance lease receivables and respective allowance for expected credit loss/impairment of finance lease
receivables are as follows:
Finance lease receivables, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 81,174 17,584 16,612 9,582 124,952
New financial asset originated or purchased 47,812 – – 12,081 59,893
Transfer to Stage 1 25,182 (19,801) (5,381) – –
Transfer to Stage 2 (26,267) 33,605 (7,338) – –
Transfer to Stage 3 (3,139) (15,782) 18,921 – –
Assets repaid (60,440) (8,077) (5,299) (6,537) (80,353)
Impact of modifications 278 – – – 278
Write-offs – – (2,724) – (2,724)
Unwind of discount – – 105 – 105
Currency translation differences (6,273) (1,022) (1,040) – (8,335)
Foreign exchange movement 865 (66) 86 – 885
Net other changes 339 10 213 85 647
Balance at 31 December 2022 59,531 6,451 14,155 15,211 95,348
Individually assessed – – 1,245 – 1,245
Collectively assessed 59,531 6,451 12,910 15,211 94,103
Balance at 31 December 2022 59,531 6,451 14,155 15,211 95,348
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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9. Loans to customers and finance lease receivables continued
Finance lease receivables continued
Finance lease receivables, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2021 1,126 763 2,810 1,196 5,895
New financial asset originated or purchased 1,537 – – – 1,537
Transfer to Stage 1 1,686 (1,044) (642) – –
Transfer to Stage 2 (1,241) 2,013 (772) – –
Transfer to Stage 3 (188) (1,253) 1,441 – –
Impact on ECL of exposures transferred between stages
during the year (1,513) 586 2,104 – 1,177
Assets repaid (664) (299) (1,645) (1,856) (4,464)
Write-offs – – (480) – (480)
Unwind of discount – – 105 – 105
Currency translation differences 18 (18) 51 (1) 50
Net other measurement of ECL 27 (487) 611 4,741 4,892
Balance at 31 December 2022 852 258 3,588 4,080 8,778
Individually assessed – – 352 – 352
Collectively assessed 852 258 3,236 4,080 8,426
Balance at 31 December 2022 852 258 3,588 4,080 8,778
Finance lease receivables, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 67,346 53,276 18,750 – 139,372
New financial asset originated or purchased 90,739 – 465 3,107 94,311
Transfer to Stage 1 34,761 (34,715) (46) – –
Transfer to Stage 2 (43,879) 57,480 (13,601) – –
Transfer to Stage 3 (3,925) (33,434) 37,359 – –
Assets repaid (60,625) (23,912) (4,116) (122) (88,775)
Impact of modifications 20 – – – 20
Write-offs – – (21,232) – (21,232)
Unwind of discount – – 10 13 23
Currency translation differences (2,087) (1,057) (931) – (4,075)
Foreign exchange movement (641) (47) (66) (249) (1,003)
Net other changes (535) (7) 20 6,833 6,311
Balance at 31 December 2021 81,174 17,584 16,612 9,582 124,952
Individually assessed – – 2,746 – 2,746
Collectively assessed 81,174 17,584 13,866 9,582 122,206
Balance at 31 December 2021 81,174 17,584 16,612 9,582 124,952
Finance lease receivables, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2020 649 1,109 2,618 – 4,376
New financial asset originated or purchased 1,570 – 256 – 1,826
Transfer to Stage 1 684 (683) (1) – –
Transfer to Stage 2 (976) 2,371 (1,395) – –
Transfer to Stage 3 (85) (1,975) 2,060 – –
Impact on ECL of exposures transferred between stages
during the year (12) 1,036 2,151 – 3,175
Assets repaid (461) (467) (361) – (1,289)
Impact of modifications – – – – –
Write-offs – – (2,704) – (2,704)
Unwind of discount – – 10 13 23
Currency translation differences (36) (550) (152) (12) (750)
Foreign exchange movement – – – – –
Net other measurement of ECL (207) (78) 328 1,195 1,238
Balance at 31 December 2021 1,126 763 2,810 1,196 5,895
Individually assessed – – 1,236 – 1,236
Collectively assessed 1,126 763 1,574 1,196 4,659
Balance at 31 December 2021 1,126 763 2,810 1,196 5,895
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9. Loans to customers and finance lease receivables continued
Finance lease receivables continued
Finance lease receivables, gross: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 130,232 12,498 16,461 – 159,191
New financial asset originated or purchased 77,711 – 2,254 – 79,965
Transfer to Stage 1 53,417 (49,918) (3,499) – –
Transfer to Stage 2 (130,587) 148,126 (17,539) – –
Transfer to Stage 3 (12,089) (55,528) 67,617 – –
Assets repaid (57,227) (6,157) (13,094) – (76,478)
Write-offs – – (34,933) – (34,933)
Currency translation differences (1,402) (90) (107) – (1,599)
Foreign exchange movement 5,801 5,312 1,891 – 13,004
Net other changes 1,490 6 (86) – 1,410
Balance at 31 December 2020 67,346 53,276 18,750 – 139,372
Collectively assessed 67,346 53,276 15,611 – 136,233
Balance at 31 December 2020 67,346 53,276 18,750 – 139,372
Finance lease receivables, ECL: Stage 1 Stage 2 Stage 3 POCI Total
Balance at 31 December 2019 759 95 1,443 – 2,297
New financial asset originated or purchased 869 – 945 – 1,814
Transfer to Stage 1 305 (292) (13) – –
Transfer to Stage 2 (1,162) 1,513 (351) – –
Transfer to Stage 3 (812) (4,588) 5,400 – –
Impact on ECL of exposures transferred between stages
during the year 1,396 4,449 1,416 – 7,261
Assets repaid (528) (70) (347) – (945)
Write-offs – – (6,161) – (6,161)
Currency translation differences 200 (4) 35 – 231
Foreign exchange movement 5 27 191 – 223
Net other measurement of ECL (383) (20) 94 – (309)
Balance at 31 December 2020 649 1,109 2,618 – 4,376
Collectively assessed 649 1,109 1,596 – 3,354
Balance at 31 December 2020 649 1,109 2,618 – 4,376
10. Accounts receivable and other loans
In 2016 the Group disbursed a loan to the client with the purpose to finance the purchase of an industrial asset from one of the
Bank’s defaulted borrowers. As part of the overall financing package, the Group entered into the dual option agreement with the
shareholders of the new borrower over the shares in the new borrower. A dispute has arisen over the terms of the concluded option
agreement. The outstanding legacy claim was settled at the end of 2022 and the Group recognised GEL 391,100 one-off income with
respective receivable estimated at fair value in its consolidated financial statements. On 9 January 2023 the Group received part
of the settlement in amount of GEL 371,922. The Group does not expect any material tax consequences from this settlement in the
foreseeable future.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
11. Right-of-use assets and lease liabilities
2022 2021 2020
Right-of-use assets 117,387 80,186 83,208
Lease liability 114,470 87,662 95,635
Administrative expenses include occupancy and rent expenses on lease contracts where the recognition exemptions have
been applied:
2022 2021 2020
Short-term leases (4,672) (3,982) (4,142)
Leases of low-value assets (1,585) (1,908) (1,835)
(6,257) (5,890) (5,977)
Movement in liabilities arising from financing activities
Movement in
liabilities arising
from financing
activities
Carrying amount at 1 January 2020 115,220
Cash payments for the principal portion of the lease liability (11,695)
Change in accrued interest 737
Additions 12,027
Other movements* (20,654)
Carrying amount at 31 December 2020 95,635
Cash payments for the principal portion of the lease liability (29,518)
Change in accrued interest 342
Additions 42,242
Other movements* (21,039)
Carrying amount at 31 December 2021 87,662
Cash payments for the principal portion of the lease liability (25,980)
Change in accrued interest 1,151
Additions 70,553
Other movements* (18,916)
Carrying amount at 31 December 2022 114,470
* Other movement mainly includes translation effect of foreign currency contracts and cancelled lease contracts.
The movements in right-of-use assets were as follows:
Office buildings
and service
centres
Computers and
equipment Total
Cost
31 December 2021 127,080 2,631 129,711
Additions 74,231 – 74,231
Disposals (19,135) – (19,135)
Currency translation differences (949) (298) (1,247)
31 December 2022 181,227 2,333 183,560
Accumulated depreciation
31 December 2021 48,661 864 49,525
Depreciation charge 25,406 345 25,751
Disposals (8,838) – (8,838)
Currency translation differences (156) (109) (265)
31 December 2022 65,073 1,100 66,173
Net book value
31 December 2021 78,419 1,767 80,186
31 December 2022 116,154 1,233 117,387
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11. Right-of-use assets and lease liabilities continued
Office buildings
and service
centres
Computers and
equipment Total
Cost
31 December 2020 115,970 2,749 118,719
Additions 42,728 – 42,728
Disposals (31,478) – (31,478)
Transfers – – –
Currency translation differences (140) (118) (258)
31 December 2021 127,080 2,631 129,711
Accumulated depreciation
31 December 2020 34,995 516 35,511
Depreciation charge 21,628 388 22,016
Disposals (7,906) – (7,906)
Transfers – – –
Currency translation differences (56) (40) (96)
31 December 2021 48,661 864 49,525
Net book value
31 December 2020 80,975 2,233 83,208
31 December 2021 78,419 1,767 80,186
Office buildings
and service
centres
Computers and
equipment Total
Cost
1 January 2020 115,220 – 115,220
Additions 11,988 – 11,988
Disposals (7,794) – (7,794)
Transfers (2,965) 2,965 –
Currency translation differences (479) (216) (695)
31 December 2020 115,970 2,749 118,719
Accumulated depreciation
1 January 2020 19,125 – 19,125
Depreciation charge 18,466 391 18,857
Disposals (2,061) – (2,061)
Transfers (139) 139 –
Currency translation differences (396) (14) (410)
31 December 2020 34,995 516 35,511
Net book value
1 January 2020 96,095 – 96,095
31 December 2020 80,975 2,233 83,208
Notes to Consolidated
Financial Statements continued
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12. Property and equipment
The movements in property and equipment were as follows:
Office buildings
and service
centres
Furniture and
fixtures
Computers and
equipment Motor vehicles
Leasehold
improvements
Assets under
construction Total
Cost
31 December 2021 216,897 188,890 252,861 6,911 29,328 1,680 696,567
Additions 171 10,853 32,951 2,860 119 31,043 77,997
Transfers 23,333 32 414 – 3,804 (27,583) –
Transfers to investment
properties 769 – – – – – 769
Transfers to other assets – (1,571) (2,135) (265) – (231) (4,202)
Disposals (3,011) (135) (1,507) (489) (27) (1) (5,170)
Write-offs (29) (4,750) (2,513) (241) (4,053) (146) (11,732)
Currency translation
differences (2,881) (216) (812) (47) (87) (7) (4,050)
31 December 2022 235,249 193,103 279,259 8,729 29,084 4,755 750,179
Accumulated impairment
31 December 2021 2,557 36 98 8 – – 2,699
31 December 2022 2,557 36 98 8 – – 2,699
Accumulated depreciation
31 December 2021 28,859 113,399 154,941 4,095 13,766 – 315,060
Depreciation charge 4,278 13,814 28,737 1,076 4,369 146 52,420
Transfers (13) 13 – – – – –
Transfers to investment
properties (155) – – – – – (155)
Transfers to other assets – (916) (2,479) (230) – – (3,625)
Disposals (795) (183) (998) (176) (25) – (2,177)
Write-offs 2 (4,598) (2,473) (130) (4,029) (146) (11,374)
Currency translation
differences (851) (114) (468) (20) (71) – (1,524)
31 December 2022 31,325 121,415 177,260 4,615 14,010 – 348,625
Net book value
31 December 2021 185,481 75,455 97,822 2,808 15,562 1,680 378,808
31 December 2022 201,367 71,652 101,901 4,106 15,074 4,755 398,855
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12. Property and equipment continued
Office buildings
and service
centres
Furniture and
fixtures
Computers and
equipment Motor vehicles
Leasehold
improvements
Assets under
construction Total
Cost
31 December 2020 216,795 178,481 231,436 6,768 34,275 4,732 672,487
Additions 2,056 11,958 31,048 986 10 7,171 53,229
Transfers 6,408 3 976 – 2,493 (9,880) –
Transfers to investment
properties (9,175) – – – – – (9,175)
Transfers to assets held
for sale 2,245 – – – – – 2,245
Transfers to other assets – (998) (8,647) – – (183) (9,828)
Disposals (764) (433) (1,719) (224) – (46) (3,186)
Write-offs – (71) (1) (602) (7,416) – (8,090)
Currency translation
differences (668) (50) (232) (17) (34) (114) (1,115)
31 December 2021 216,897 188,890 252,861 6,911 29,328 1,680 696,567
Accumulated impairment
31 December 2020 2,557 36 98 8 – – 2,699
31 December 2021 2,557 36 98 8 – – 2,699
Accumulated depreciation
31 December 2020 25,216 102,137 133,958 3,833 16,793 – 281,937
Depreciation charge 4,201 12,916 24,699 931 4,416 – 47,163
Transfers to investment
properties (238) – – – – – (238)
Transfers to other assets – (1,224) (2,643) – – – (3,867)
Disposals (51) (318) (910) (85) – – (1,364)
Write-offs 5 (51) 3 (576) (7,416) – (8,035)
Currency translation
differences (274) (61) (166) (8) (27) – (536)
31 December 2021 28,859 113,399 154,941 4,095 13,766 – 315,060
Net book value
31 December 2020 189,022 76,308 97,380 2,927 17,482 4,732 387,851
31 December 2021 185,481 75,455 97,822 2,808 15,562 1,680 378,808
Notes to Consolidated
Financial Statements continued
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Financial Statements Additional Information
12. Property and equipment continued
Office buildings
and service
centres
Furniture and
fixtures
Computers and
equipment Motor vehicles
Leasehold
improvements
Assets under
construction Total
Cost
31 December 2019 204,753 178,391 207,329 5,624 30,589 10,046 636,732
Additions 274 8,908 33,186 1,602 110 27,543 71,623
Transfers 21,600 (439) 4,158 41 6,625 (31,985) –
Transfers to investment
properties (11,068) – – (22) – – (11,090)
Transfers to assets held
for sale 1,333 – – (46) – – 1,287
Transfers to other assets (101) (4,930) (8,895) – – (867) (14,793)
Disposals – (257) (476) (220) – – (953)
Write-offs (293) (3,029) (3,452) (174) (2,990) – (9,938)
Currency translation
differences 297 (163) (414) (37) (59) (5) (381)
31 December 2020 216,795 178,481 231,436 6,768 34,275 4,732 672,487
Accumulated impairment
31 December 2019 2,557 36 98 8 – – 2,699
31 December 2020 2,557 36 98 8 – – 2,699
Accumulated depreciation
31 December 2019 23,731 93,751 119,081 3,051 14,631 – 254,245
Depreciation charge 4,085 12,497 22,008 1,072 4,927 – 44,589
Transfers – (138) – 4 134 – –
Transfers to investment
properties (2,160) – – (20) – – (2,180)
Transfers to assets held
for sale – – – (30) – – (30)
Transfers to other assets – (1,111) (3,077) – – – (4,188)
Disposals – (105) (274) (103) – – (482)
Write-offs (263) (2,635) (3,418) (121) (2,857) – (9,294)
Currency translation
differences (177) (122) (362) (20) (42) – (723)
31 December 2020 25,216 102,137 133,958 3,833 16,793 – 281,937
Net book value
31 December 2019 178,465 84,604 88,150 2,565 15,958 10,046 379,788
31 December 2020 189,022 76,308 97,380 2,927 17,482 4,732 387,851
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13. Intangible assets
The movements in intangible assets were as follows:
Software and
licence Other Total
Cost
31 December 2021 219,073 27,286 246,359
Additions 40,506 164 40,670
Disposals (7,331) – (7,331)
Write-offs (2,889) (1) (2,890)
Currency translation differences (1,416) – (1,416)
31 December 2022 247,943 27,4 49 275,392
Accumulated impairment
31 December 2021 – – –
Impairment charge 2,358 – 2,358
31 December 2022 2,358 – 2,358
Accumulated amortisation
31 December 2021 96,311 5,797 102,108
Amortisation charge 30,392 168 30,560
Disposals (5,683) – (5,683)
Write-offs (2,889) (1) (2,890)
Currency translation differences (502) – (502)
31 December 2022 117,629 5,964 123,593
Net book value
31 December 2021 122,762 21,489 144,251
31 December 2022 127,956 21,485 149,441
Software and
licence Other Total
Cost
31 December 2020 177,012 26,944 203,956
Additions 44,715 342 45,057
Disposals (741) – (741)
Write-offs (1,385) – (1,385)
Currency translation differences (528) – (528)
31 December 2021 219,073 27,286 246,359
Accumulated amortisation
31 December 2020 72,532 5,618 78,150
Amortisation charge 26,090 179 26,269
Disposals (747) – (747)
Write-offs (1,385) – (1,385)
Currency translation differences (179) – (179)
31 December 2021 96,311 5,797 102,108
Net book value
31 December 2020 104,480 21,326 125,806
31 December 2021 122,762 21,489 144,251
Notes to Consolidated
Financial Statements continued
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Financial Statements Additional Information
13. Intangible assets continued
Software and
licence Other Total
Cost
31 December 2019 139,750 26,797 166,547
Additions 41,262 163 41,425
Disposals (235) – (235)
Write-offs (3,329) (16) (3,345)
Currency translation differences (436) – (436)
31 December 2020 177,012 26,944 203,956
Accumulated amortisation
31 December 2019 56,789 3,468 60,257
Amortisation charge 18,985 2,165 21,150
Disposals (235) – (235)
Write-offs (2,884) (15) (2,899)
Currency translation differences (123) – (123)
31 December 2020 72,532 5,618 78,150
Net book value
31 December 2019 82,961 23,329 106,290
31 December 2020 104,480 21,326 125,806
14. Investment properties
2022 2021 2020
At 1 January 226,849 231,241 225,073
Additions 5,871 83,912 79,761
Disposals (54,713) (68,713) (44,908)
Net gains from revaluation of investment property 7,421 437 20,346
Transfers from (to) assets held for sale (16,955) (28,390) (56,810)
Transfers from (to) property and equipment (924) 8,937 8,910
Transfers from (to) finance lease receivables – – 532
Transfers from (to) other assets – inventories – – (277)
Currency translation differences (1,003) (575) (1,386)
At 31 December 166,546 226,849 231,241
Investment properties are stated at fair value. The fair value represents the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date. As at 31 December 2022, the fair values of the properties
are based on valuations performed by accredited independent valuers. Refer to Note 30 for details on fair value measurements of
investment properties.
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15. Goodwill
Movements in goodwill were as follows:
2022 2021 2020
Cost
1 January 57,745 57,745 57,745
At 31 December 57,745 57,745 57,745
Accumulated impairment
1 January 24,394 24,394 24,394
At 31 December 24,394 24,394 24,394
Net book value:
1 January 33,351 33,351 33,351
At 31 December 33,351 33,351 33,351
Impairment test for goodwill
Goodwill acquired through business combinations with indefinite lives have been allocated to two individual cash-generating units
(CGUs), for impairment testing: Corporate Banking and Retail Banking.
The carrying amount of goodwill allocated to each of the CGUs is as follows:
2022 2021 2020
Retail Banking 23,386 23,386 23,386
Corporate Banking 9,965 9,965 9,965
Total 33,351 33,351 33,351
Key assumptions used in value-in-use calculations
The recoverable amounts of the CGUs have been determined based on a value-in-use calculation, using cash flow projections based
on financial budgets approved by senior management covering a one to three-year period. Discount rates were not adjusted for
either a constant or a declining growth rate beyond the three-year periods covered in financial budgets. For the purposes of the
impairment test, a 3% permanent growth rate has been assumed when assessing the future operating cash flows of the CGU
beyond the three-year period covered in financial budgets.
The following discount rates were used by the Group for Corporate Banking and Retail Banking:
Corporate Banking Retail Banking
2022 2021 2020 2022 2021 2020
Discount rate 4.3% 3.9% 4.4% 8.4% 8.1% 7.7%
Discount rates
Discount rates reflect management’s estimate of return required in each business. This is the benchmark used by management to
assess operating performance and to evaluate future investment proposals. Discount rates are calculated by using pre-tax weighted
average cost of capital (WACC).
For the Retail Banking and Corporate Banking CGUs, the following additional assumptions were made:
• stable, business as usual growth of loans and deposits;
• no material changes in cost/income structure or ratio; and
• stable, business as usual growth of trade finance and other documentary businesses.
Sensitivity to changes in assumptions
Management believes that reasonable possible changes to key assumptions used to determine the recoverable amount for each
CGU will not result in an impairment of goodwill. The excess of value-in-use over carrying value is determined by reference to the
net book value as at 31 December 2022. Possible change was taken as +/-3% in discount rate and growth rate.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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16. Taxation
The corporate income tax expense in the income statement comprises:
2022 2021 2020
Current income benefit/(expense) (137,430) (111,652) 4,539
Deferred income tax benefit/(expense) (53,221) 36,828 (26,094)
Income tax expense (190,651) (74,824) (21,555)
The income tax rate applicable to most of the Group’s income is the income tax rate applicable to subsidiaries’ income, which ranges
from 15% to 25% (2021: from 15% to 25%, 2020: from 15% to 25%).
On 12 June 2018, an amendment to the current corporate taxation model applicable to financial institutions, including banks and
insurance businesses, became effective. The change implied a zero corporate tax rate on retained earnings and a 15% corporate
tax rate on distributed earnings starting from 1 January 2023. On 16 December 2022, an amendment to the corporate tax code
was passed into law abolishing the expected transition to taxation on distributed earnings from 1 January 2023. According to the
amendment, effective from 1 January 2023, existing taxation rules for financial institutions, including banks, will be maintained.
At the same time, the existing corporate tax rate for banks will be increased from 15% to 20% from 2023 going forward. In addition,
with effect from 2023, taxable interest income and deductible ECLs on loans to customers will be defined as per IFRS, instead of
local NBG regulations. Transition differences in ECLs will be taxed one-off at 15%. The amended law lacks clarification in treatment
of transition differences in interest income. Management considers it reasonable that an approach similar to ECL on transition is
applicable on interest income and calculates deferred tax respectively.
The change had an immediate impact on deferred tax asset and deferred tax liability balances attributable to previously recognised
temporary differences arising from prior periods. As at 31 December 2022, deferred tax assets and liabilities balances have been re-
measured, in line with the updated legislation. The change resulted in a material one-off deferred tax charge as previously the Bank
recognised deferred taxes only to the extent they were expected to realise before 1 January 2023.
The effective income tax rate differs from the statutory income tax rates. As at 31 December 2022, 31 December 2021 and
31 December 2020, a reconciliation of the income tax expense based on statutory rates with the actual expense is as follows:
2022 2021 2020
Profit before income tax expense 1,634,650 801,942 316,498
Statutory tax rate in Georgia 15% 15% 15%
Theoretical income tax expense at average tax rate (245,198) (120,291) (47,475)
Non-taxable income 115,636 50,671 35,910
Non-deductible expenses (3,229) (2,931) (6,425)
Correction of prior year declarations (2,846) (15) (3,343)
Tax at the domestic rates applicable to profits in each country (1,991) (2,401) (525)
Effects from changes in tax legislation (53,074) – –
Other 51 143 303
Income tax expense (190,651) (74,824) (21,555)
Applicable taxes in Georgia and Belarus include corporate income tax (profit tax), individuals’ withholding taxes, property tax and
value added tax, among others. However, regulations are often unclear or non-existent and few precedents have been established.
This creates tax risks in Georgia and Belarus, substantially more significant than typically found in countries with more developed tax
systems. Management believes that the Group is in substantial compliance with the tax laws affecting its operations. However, the
risk remains that relevant authorities could take differing positions with regard to interpretative issues.
As at 31 December 2022, 31 December 2021 and 31 December 2020, income tax assets and liabilities consist of the following:
2022 2021 2020
Current income tax assets 224 109 21,841
Deferred income tax assets 640 183 192
Income tax assets 864 292 22,033
Current income tax liabilities 20,258 85,270 –
Deferred income tax liabilities 79,275 25,598 62,434
Income tax liabilities 99,533 110,868 62,434
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16. Taxation continued
Deferred tax assets and liabilities as at 31 December 2022, 31 December 2021 and 31 December 2020, and their movements for the
respective years, are as follows:
Origination and reversal of temporary differences
2019
In the income
statement 2020
In the income
statement 2021
In the income
statement
Tax effect of deductible
temporary differences:
Amounts due to credit
institutions 63 (63) – – – 193 193
Investment securities 66 (66) – – – 294 294
Investment properties 228 (169) 59 108 167 1,954 2,121
Property and equipment 2,127 258 2,385 29 2,414 (182) 2,232
Intangible assets 199 (199) – – – – –
Assets held for sale – – – – – 465 465
Lease liability 8,306 (2,300) 6,006 (2,236) 3,770 19,389 23,159
Accruals and deferred income 1,691 5,514 7,205 12,539 19,744 18,388 38,132
Other assets and liabilities 2,759 (2,692) 67 368 435 3,845 4,280
Deferred tax assets 15,439 283 15,722 10,808 26,530 44,346 70,876
Tax effect of taxable
temporary differences:
Amounts due to credit
institutions 1,950 278 2,228 59 2,287 1,660 3,947
Debt securities issued 2,311 (687) 1,624 (932) 692 1,259 1,951
Cash and cash equivalents 2,070 (2,070) – – – – –
Investment securities 208 (208) – – – – –
Loans to customers and
finance lease receivables 25,696 28,370 54,066 (24,192) 29,874 30,697 60,571
Client deposits and notes 35 141 176 (176) – – –
Property and equipment 9,151 (130) 9,021 (3,121) 5,900 37,342 43,242
Right-of-use assets 8,465 (2,955) 5,510 (2,294) 3,216 20,606 23,822
Investment properties 228 112 340 625 965 7,822 8,787
Intangible assets 21 (21) – – – – –
Assets held for sale 1,227 313 1,540 (1,055) 485 (485) –
Accruals and deferred income 225 68 293 (180) 113 (113) –
Other assets and liabilities – 3,166 3,166 5,246 8,412 (1,221) 7,191
Deferred tax liabilities 51,587 26,377 77,96 4 (26,020) 51,944 97,567 149,511
Net deferred tax liabilities (36,148) (26,094) (62,242) 36,828 (25,414) (53,221) (78,635)
For more details on temporary differences associated with investments in subsidiaries for which no deferred tax has been recognised
refer to Note 10.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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17. Other assets and other liabilities
Other assets comprise:
2022 2021 2020
Foreclosed assets 119,924 3,216 5,989
Receivables from remittance operations 86,742 35,041 26,045
Derivative financial assets 39,270 135,079 9,154
Derivatives margin 21,053 18,586 210,816
Other receivables 17,365 17,534 14,174
Investments in associates 11,606 10,079 14,261
Operating tax assets 4,809 8,169 8,398
Investment securities at FVTPL 2,660 2,146 5,731
Assets purchased for finance lease purposes 2,140 13,093 39,742
Other 29,542 18,487 6,663
Other assets, gross 335,111 261,430 340,973
Less – Allowance for impairment of other assets (17,225) (14,483) (14,979)
Other assets, net 317,886 246,947 325,994
Other liabilities comprise:
2022 2021 2020
Derivative financial liabilities 59,020 7,865 247,520
Creditors 29,562 25,814 30,678
Payables for remittance operations 24,671 8,457 8,597
Other taxes payable 6,504 12,498 10,045
Accounts payable 5,605 7,708 11,651
Provisions 5,127 6,993 15,325
Dividends payable to non-controlling shareholders 2,379 1,746 1,578
Advances received 838 268 731
Derivatives margin – 98,844 –
Other 24,985 13,156 6,197
Other liabilities 158,691 183,349 332,322
The amount of write down of foreclosed assets recognised as an expense in the period amounts to GEL 2,440. The amount of
foreclosed assets recognized as an expense amounted to GEL 5,423.
In 2020, the Bank’s derivative financial liabilities comprised mainly of USD-EUR contracts, the balance on which has significantly
increased as a result of a devaluation of USD as compared to EUR. The Bank was also required to provide respective collateral for
the exposure in the form of a derivatives margin.
The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their
notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset or liability, reference rate
or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of
transactions outstanding at the year-end and are not indicative of the credit risk.
2022
Notional
amount
Fair value
Asset Liability
Foreign exchange contracts
Forwards and swaps – domestic 1,392,118 5,688 2,873
Forwards and swaps – foreign 4,615,758 33,234 56,147
Interest rate contracts
Forwards and swaps – foreign (IR) 1,209 348 –
Total derivative assets/liabilities 6,009,085 39,270 59,020
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17. Other assets and other liabilities continued
2021 2020
Notional
amount
Fair value
Notional
amount
Fair value
Asset Liability Asset Liability
Foreign exchange contracts
Forwards and swaps – domestic 1,065,639 931 3,141 574,563 6,881 2,908
Forwards and swaps – foreign 5,678,727 131,321 3,339 7,057,736 724 243,510
Interest rate contracts
Forwards and swaps – foreign (IR) 1,129 296 – – – –
Options – foreign (IR) 7,434 2,531 1,385 7,864 1,549 1,102
Total derivative assets/liabilities 6,752,929 135,079 7,865 7,640,163 9,154 247,520
18. Client deposits and notes
The amounts due to customers include the following:
2022 2021 2020
Current accounts 11,002,863 6,997,946 5,995,109
Time deposits 7,258,534 7,040,056 8,025,100
Client deposits and notes 18,261,397 14,038,002 14,020,209
At 31 December 2022, amounts due to customers of GEL 2,107,058 (12%) were due to the ten largest customers (2021: GEL 1,953,107
(14%), 2020: GEL 2,951,893 (21%)).
Amounts due to customers include accounts with the following types of customers:
2022 2021 2020
Individuals 11,188,080 8,501,021 7,836,351
Private enterprises 6,382,083 4,914,845 4,268,313
State and state-owned entities 691,234 622,136 1,915,545
Client deposits and notes 18,261,397 14,038,002 14,020,209
The breakdown of customer accounts by industry sector is as follows:
2022 2021 2020
Individuals 11,188,080 8,501,021 7,836,351
Financial intermediation 1,261,530 1,280,955 777,786
Trade 1,158,977 853,307 842,355
Construction 796,019 664,695 587,632
Manufacturing 759,005 444,095 315,192
Service 709,442 345,130 387,108
Government services 682,809 613,710 1,866,342
Transport and communication 513,099 418,243 538,950
Real estate 232,508 214,082 159,038
Electricity, gas and water supply 186,517 112,244 75,197
Hospitality 173,639 70,375 65,042
Other 599,772 520,145 569,216
Client deposits and notes 18,261,397 14,038,002 14,020,209
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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19. Amounts owed to credit institutions
Amounts due to credit institutions comprise:
2022 2021 2020
Short-term loans from the NBG 1,715,257 1,413,333 590,293
Borrowings from international credit institutions 1,439,136 1,839,921 1,583,056
Time deposits and inter-bank loans 777,638 226,015 258,920
Correspondent accounts 660,767 170,410 196,049
4,592,798 3,649,679 2,628,318
Non-convertible subordinated debt 537,794 668,766 707,648
Additional Tier 1 136,061 – –
Amounts due to credit institutions 5,266,653 4,318,445 3,335,966
During the year ended 31 December 2022, the Group paid up to 7.52% on USD borrowings from international credit institutions
(2021: up to 4.18%, 2020: up to 5.49%). During the year ended 31 December 2022, the Group paid up to 10.73% on USD subordinated
debt (2021: up to 7.75%, 2020: up to 9.39%).
Some long-term borrowings from international credit institutions are received upon certain conditions (the ‘Lender Covenants’)
that the Group maintains different limits for capital adequacy, liquidity, currency positions, credit exposures, leverage and others.
At 31 December 2022, 31 December 2021 and 31 December 2020, the Group complied with all the Lender Covenants of the
significant borrowings from international credit institutions.
On 31 May 2022, the Bank signed a US$ 50 million Additional Tier 1 Capital Perpetual Subordinated Syndicated Facility with the
European Bank for Reconstruction and Development and Swedfund International AB as lenders. The amount was fully utilised as at
31 December 2022.
In June 2022, the Bank repaid the outstanding US$ 70 million of its initial US$ 90 million subordinated loan facility from the
International Finance Corporation, out of which US$ 42 million qualified as Tier II capital.
20. Debt securities issued
Debt securities issued comprise:
2022 2021 2020
Additional Tier 1 capital notes issued 267,702 306,239 323,320
Eurobonds and notes issued 226,725 932,260 1,019,120
Local bonds 44,520 151,703 102,187
Certificates of deposit 107,021 128,483 140,918
Debt securities issued 645,968 1,518,685 1,585,545
Changes in liabilities arising from financing activities
Eurobonds and
notes issued
Additional Tier
1 capital notes
issued
Carrying amount at 31 December 2019 1,406,200 282,407
Repurchase of debt securities issued (120,549) –
Repayment of the principal portion of the debt securities issued (440,410) –
Other movements 173,879 40,913
Carrying amount at 31 December 2020 1,019,120 323,320
Repurchase of debt securities issued (28,825) –
Repayment of the principal portion of the debt securities issued (46,706) –
Other movements (11,329) (17,081)
Carrying amount at 31 December 2021 932,260 306,239
Repurchase of debt securities issued (617,194) –
Repayment of the principal portion of the debt securities issued (31,581) –
Other movements (56,760) (38,537)
Carrying amount at 31 December 2022 226,725 267,702
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21. Commitments and contingencies
Legal
Sai-invest
As at 31 December 2022, the Bank was engaged in litigation with Sai-Invest LLC (Sai-Invest) in relation to a deposit pledge in the
amount of EUR 7 million for the benefit LTD Sport Invest’s loans owing to JSC Bank of Georgia. Sai-Invest LLC has challenged the
validity of the deposit pledge in the Georgian courts, and its challenge has been substantially sustained in the Court of Appeal, a
determination which the Bank believes to be erroneous and without merit, and which the Bank has appealed to the Supreme Court.
The matter is currently under review by the Supreme Court, and a decision is expected during 2023. The Bank’s management is of
the opinion that the probability of incurring material losses on this claim is low, and, accordingly, no provision has been made in these
consolidated financial statements.
Financial commitments and contingencies
As at 31 December 2022, 31 December 2021 and 31 December 2020, the Group’s financial commitments and contingencies comprised
the following:
2022 2021 2020
Credit-related commitments
Financial and performance guarantees issued* 1,717,308 1,686,913 1,490,028
Letters of credit 116,309 71,676 125,031
Undrawn loan facilities 869,061 809,481 685,533
2,702,678 2,568,070 2,300,592
Less – Cash held as security against letters of credit and guarantees (Note 18) (121,753) (117,379) (131,946)
Less – Provisions (5,127) (6,993) (15,325)
Operating lease commitments
Not later than 1 year 1,975 1,875 2,356
Later than 1 year but not later than 5 years 2,592 2,486 2,774
Later than 5 years 451 986 1,657
5,018 5,347 6,787
Capital expenditure commitments 6,790 4,539 2,863
* Out of total guarantees issued as at 31 December 2022 financial and performance guarantees of the Group comprised GEL 988,094 (31 December 2021: GEL 1,030,122,
31 December 2020: GEL 888,905) and GEL 729,214 (31 December 2021: GEL 656,791, 31 December 2020: GEL 601,123), respectively.
The Group discloses its undrawn loan facility balances based on the contractual terms and existing practice in regards to
disbursement of these amounts. The balances are disclosed as commitments if the Group has an established practice of disbursing
undrawn amounts without any subsequent approval.
22. Equity
Share capital
As at 31 December 2022, 31 December 2021 and 31 December 2020, issued share capital comprised 47,498,982 common shares of
BOGG, all of which were fully paid. Each share has a nominal value of one (1) British penny. Shares issued and outstanding as at
31 December 2022 are described below:
Number of
ordinary shares
Share
Capital
31 December 2019 49,169,428 1,618
31 December 2020 49,169,428 1,618
31 December 2021 49,169,428 1,618
Buyback and cancellation of own shares (1,670,446) (55)
31 December 2022 47,498,982 1,563
In the second half of 2022, the Group commenced a share buyback and cancellation programme in amount of GEL 112,700 with
the purpose to reduce its share capital and consistent with its capital and distribution policy to target a dividend/share buyback
payout ratio in the range of 30-50% of annual profits. The Group appointed Numis Securities Limited to manage the programme
and purchase shares in the open market. The share buyback and cancellation programme was completed by the end of 2022 with
purchased and cancelled ordinary shares of 1,670,446.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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22. Equity continued
Treasury shares
Treasury shares are held by the Group solely for the purpose of future employee share-based compensation.
The number of treasury shares held by the Group as at 31 December 2022, comprised 2,516,151 (31 December 2021: 2,268,446,
31 December 2020: 1,638,844), with a nominal amount of GEL 83 (31 December 2021: GEL 75, 31 December 2020: GEL 54).
Dividends
Shareholders are entitled to dividends in pounds sterling.
In 2022, 2021 and 2020 the Group distributed dividends on the shares vested and exercised during 2022, 2021 and 2020, respectively.
On 16 August 2022, the shareholders of Bank of Georgia Group PLC declared an interim dividend for 2022 of Georgian Lari 1.85 per
share. The currency conversion period was set to be for the period 3 October to 7 October 2022, with the official GEL:GBP exchange
rate of 3.1671, resulting in a GBP-denominated final dividend of 0.5841 per share. Payment of the total GEL 84,418 interim dividends
was received by shareholders on 20 October 2022.
On 20 June 2022, the shareholders of Bank of Georgia Group PLC declared a final dividend for 2021 of Georgian Lari 2.33 per share.
The currency conversion period was set to be for the period 27 June to 1 July 2022, with the official GEL:GBP exchange rate of
3.5858, resulting in a GBP-denominated final dividend of 0.6498 per share. Payment of the total GEL 112,096 final dividends was
received by shareholders on 11 July 2022.
On 17 August 2021, the Board of Bank of Georgia Group PLC declared an interim dividend for 2021 of Georgian Lari 1.48 per share.
The currency conversion period was set to be 18 to 22 October 2021, with the official GEL:GBP exchange rate of 4.3219, resulting
in a GBP-denominated final dividend of 0.3424 per share. Payment of the total GEL 71,838 interim dividends was received by
shareholders on 5 November 2021.
No other dividends have been declared by Bank of Georgia Group PLC in 2020.
Nature and purpose of other reserves
Unrealised gains and losses on investment securities
This reserve records fair value changes on investment securities.
Unrealised gains and losses from dilution or sale/acquisition of shares in existing subsidiaries
This reserve records unrealised gains and losses from dilution or sale/acquisition of shares in existing subsidiaries.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of subsidiaries with functional currency other than GEL.
Movements on this account during the years ended 31 December 2022, 31 December 2021 and 31 December 2020, are presented in
the statements of other comprehensive income.
Earnings per share
2022 2021 2020
Basic earnings per share
Profit for the year attributable to ordinary shareholders of the Group 1,439,507 723,806 293,584
Weighted average number of ordinary shares outstanding during the year 46,443,820 47,543,881 47,563,734
Basic earnings per share 30.9946 15.2240 6.1724
2022 2021 2020
Diluted earnings per share
Effect of dilution on weighted average number of ordinary shares:
Dilutive unvested share options 1,013,330 1,098,682 13,690
Weighted average number of ordinary shares adjusted for the effect of dilution 47,457,150 48,642,563 47,577,424
Diluted earnings per share 30.3328 14.8801 6.1707
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23. Net interest income
2022 2021 2020
Interest income calculated using EIR method 2,236,307 1,822,307 1,563,362
From loans to customers 1,917,053 1,614,647 1,371,392
From investment securities 297,528 199,802 170,281
From amounts due from credit institutions 47,864 18,312 19,002
Net (losses)/gains on modification of financial assets (26,138) (10,454) 2,687
Other interest income 20,574 28,737 32,065
From finance lease receivable 20,574 28,727 31,999
From other assets – 10 66
Interest income 2,256,881 1,851,044 1,595,427
On client deposits and notes (569,436) (497,742) (443,616)
On amounts owed to credit institutions (426,950) (297,953) (267,306)
On debt securities issued (84,990) (112,431) (142,373)
Interest element of cross-currency swaps 29,402 30,632 52,312
On lease liability (4,855) (4,980) (5,387)
Interest expense (1,056,829) (882,474) (806,370)
Deposit insurance fees (17,717) (14,629) (11,415)
Net interest income 1,182,335 953,941 777,642
In 2020, a GEL 39,730 (Note 27) net one-off loss on modification of financial assets was recorded in relation to the three-month
payment holidays on principal and interest offered to our Retail Banking clients, as an immediate response to the COVID-19 pandemic
outbreak, in order to reduce the requirement for customers to physically visit Bank branches and reduce the risk of the virus spreading.
The net loss incurred as a result of these modifications has been classified as a non-recurring item in the income statement.
24. Net fee and commission income
2022 2021 2020
Settlements operations 446,092 307,471 213,865
Guarantees and letters of credit 35,283 34,402 28,373
Currency conversion operations 34,546 15,783 8,438
Cash operations 26,896 14,439 11,883
Brokerage service fees 7,676 6,912 6,501
Advisory 4,241 5,981 1,463
Other 4,731 5,841 3,935
Fee and commission income 559,465 390,829 274,458
Settlements operations (197,089) (134,390) (90,357)
Cash operations (27,211) (9,626) (8,903)
Currency conversion operations (6,403) (2,571) (2,256)
Brokerage service fees (5,079) (4,894) (3,847)
Guarantees and letters of credit (323) (724) (505)
Advisory (316) (653) (63)
Other (5,553) (5,540) (3,024)
Fee and commission expense (241,974) (158,398) (108,955)
Net fee and commission income 317,491 232,431 165,503
Revenue from customers
In 2022, the Group recognised GEL 481,375 revenue from contracts with customers in the income statement, including fee and
commission as well as net other income (2021: GEL 341,873, 2020: GEL 242,238).
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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24. Net fee and commission income continued
Contract assets and liabilities
As at 31 December 2022, the Group has recognised GEL 50,451 revenue-related contract liabilities (2021: GEL 40,878, 2020:
GEL 36,653). Accounts receivable are recognised when the right to consideration becomes unconditional. Deferred revenue is
recognised as revenue as we perform under the contract.
The Group does not adjust the promised amount of consideration for the effects of a significant financing component if the Group
expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and
when the customer pays for that good or service will be one year or less.
In 2022, the Group recognised GEL 38,495 revenue (2021: GEL 10,619, 2020: GEL 11,802) that relates to carried-forward contract
liabilities and was previously included in the deferred income.
Transaction price allocated to the remaining performance obligations
The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied
at the reporting date:
In 1 year In 2 years In 3 years In 3 to 5 years In 5 to 10 years Total
As at 31 December 2022 47,793 2,466 128 46 18 50,451
As at 31 December 2021 39,292 1,119 388 76 3 40,878
As at 31 December 2020 12,905 1,544 1,303 2,198 18,703 36,653
25. Salaries and other employee benefits, and general and administrative expenses
Salaries and other employee benefits
2022 2021 2020
Salaries and bonuses (350,758) (272,148) (232,097)
Social security costs (6,818) (5,107) (4,410)
Pension costs (4,443) (3,832) (3,100)
Salaries and other employee benefits (362,019) (281,087) (239,607)
In 2022, salaries and bonuses include GEL 82,025 of the Equity Compensation Plan costs (2021: GEL 45,307, 2020: GEL 53,741),
associated with the existing share-based compensation scheme approved by the Group (Note 28).
The average number of staff employed by the Group for the years ended 31 December 2022, 31 December 2021 and 31 December
2020, comprised:
2022 2021 2020
The Bank 6,324 6,012 5,758
BNB 654 540 545
Other 1,041 1,035 960
Average total number of staff employed 8,019 7,587 7,263
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25. Salaries and other employee benefits, and general and administrative
expenses continued
General and administrative expenses
2022 2021 2020
Repairs and maintenance (47,943) (40,257) (24,320)
Marketing and advertising (35,316) (23,264) (17,394)
Legal and other professional services (17,396) (14,682) (14,508)
Operating taxes (13,539) (13,393) (14,183)
Office supplies (8,571) (6,562) (6,275)
Communication (7,959) (6,440) (5,830)
Occupancy and rent (6,257) (5,890) (5,977)
Travel expenses (5,387) (3,808) (3,231)
Insurance (3,945) (3,685) (3,420)
Security (3,219) (3,461) (2,782)
Corporate hospitality and entertainment (6,181) (2,022) (1,380)
Personnel training and recruitment (4,304) (1,895) (1,726)
Other (4,433) (4,165) (4,505)
General and administrative expenses (164,450) (129,524) (105,531)
Auditor remuneration
Auditor remuneration comprises:
2022 2021 2020
Fees payable for the audit of the Company’s current year Annual Report 770 635 587
Fees payable for other services:
Audit of the Company’s subsidiaries 905 968 973
Total audit fees 1,675 1,603 1,560
Audit-related assurance services:
Review of the Company’s and subsidiaries’ interim accounts 397 366 339
Other assurance services 32 31 307
Total audit-related fees 429 397 646
Non-audit services:
Other assurance services 12 12 –
Total other services fees 12 12 –
Total fees 2,116 2,012 2,206
The figures shown in the above table relate to fees of Ernst & Young LLP (EY) and its associates. In 2022, fees paid to other auditors
not associated with EY in respect of the audit of the Parent and Group’s subsidiaries were GEL 247 (2021: GEL 273, 2020: GEL 257),
and in respect of other services of the Group were GEL 579 (2021: GEL 823, 2020: GEL 377).
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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26. Cost of risk
The table below shows ECL charges on financial instruments and provision for guarantees for the year recorded in the
income statement:
Stage 1 Stage 2 Stage 3
POCI TotalIndividual Collective Collective Individual Collective
Cash and cash equivalents – (334) – – – – (334)
Amounts due from credit institutions – (5,179) – – – – (5,179)
Investment securities measured at amortised cost –
debt instruments – (2,387) – – – – (2,387)
Investment securities measured at FVOCI –
debt instruments – (3,896) – – – – (3,896)
Loans to customers at amortised cost – 21,327 (15,433) 53,195 (177,169) (10,598) (128,678)
Finance lease receivables – 292 487 784 (1,886) (2,885) (3,208)
Accounts receivable and other loans – – – (255) – – (255)
Other financial assets – (4,205) – – – – (4,205)
Financial and performance guarantees – (437) 6 32 2 – (397)
Letter of credit to customers – (33) – 65 – – 32
Other financial commitments – 140 292 – – – 432
For the year ended 31 December 2022 – 5,288 (14,648) 53,821 (179,053) (13,483) (148,075)
Stage 1 Stage 2 Stage 3
POCI TotalIndividual Collective Collective Individual Collective
Cash and cash equivalents – 48 – – – – 48
Amounts due from credit institutions – 66 – – – – 66
Investment securities measured at FVOCI –
debt instruments – 1,090 – – – – 1,090
Loans to customers at amortised cost – (2,059) 28,901 4,632 (31,291) (1,635) (1,452)
Finance lease receivables – (513) (204) (264) (2,774) (1,195) (4,950)
Accounts receivable and other loans (117) – – – – – (117)
Other financial assets – (2,621) – – – – (2,621)
Financial and performance guarantees – 6,599 53 3,733 (7) – 10,378
Letter of credit to customers – 1,543 – 328 – – 1,871
Other financial commitments – (1,136) (443) – – – (1,579)
For the year ended 31 December 2021 (117) 3,780 28,307 8,429 (34,072) (2,830) 3,497
Stage 1 Stage 2 Stage 3
POCI TotalIndividual Collective Collective Individual Collective
Cash and cash equivalents – 63 – – – – 63
Amounts due from credit institutions – (56) – – – – (56)
Investment securities measured at FVOCI –
debt instruments – (458) – – – – (458)
Loans to customers at amortised cost – (61,219) (49,502) (62,612) (62,439) (1,211) (236,983)
Finance lease receivables – 310 (1,018) (967) (6,350) – (8,025)
Accounts receivable and other loans – – – – – – –
Financial and performance guarantees – (4,091) (33) (3,091) – – (7,215)
Letter of credit to customers – (1,317) – (380) – – (1,697)
Other financial commitments – 158 (69) – – – 89
For the year ended 31 December 2020 – (80,558) (50,622) (67,050) (68,789) (1,211) (268,230)
In addition, in 2022 ECL charge includes GEL 16,105 cost incurred by the Group through synthetic agreement to accelerate the
recovery process related to one of its defaulted borrowers. Such cost is not reflected in the ECL movement, but recorded directly
through the consolidated income statement.
Impairment charge on other assets and provisions comprise:
2022 2021 2020
Litigation provision reversal/(charge) 46,645 (35,584) (19,538)
Impairment (charge)/reversal on assets held for sale (4,296) (3,805) (6,640)
Other impairment charge (13,342) (15,520) (6,589)
Impairment charge on other assets and provisions 29,007 (54,909) (32,767)
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27. Net non-recurring items
2022 2021 2020
Modification loss of financial assets* – – (39,730)
Corporate social responsibility expense** – – (1,454)
Other 1,038 (590) (127)
Net non-recurring gains/(losses) 1,038 (590) (41,311)
* Modification loss of financial assets: in response to the COVID-19 outbreak, the Group implemented an initiative to grant a three-month grace period to its borrowers with
the interest accrued for grace period being deferred and either allocated over the original repayment schedule till maturity on a straight-line basis (i.e. no compounding
applied) or in some cases beyond maturity (i.e. maturity extended by three months). The payment holiday was intended to reduce customer traffic to branches and thus
reduce chances of a rapid spread of the virus in the country. The noted immediate social response to the COVID-19 pandemic resulted in modification loss in amount of
GEL 39,730. Given the initiative was driven by high social responsibility motives and was similar to a CSR cost with high degree of abnormality and extraordinary nature,
such modification losses were presented as a non-recurring item in the Group’s consolidated financial statements.
** In 2020, corporate social responsibly expense: in order to assist in the fight against the COVID-19 pandemic the Group purchased and donated laboratory tests, respiratory
equipment, etc. to the Government of Georgia on a one-off basis.
28. Share-based payments
Executives’ Equity Compensation Plan (EECP) and Employees’ Equity Compensation Plan
In 2015, the Group set up the Executive Equity Compensation Trustee – Apex Group Fiduciary Services Limited (previously known
as Sanne Fiduciary Services Limited) Limited (the ‘Trustee’) which acts as the trustee of the Group’s EECP. In 2022, the Trustee has
repurchased 695,750 shares (2021: 699,998 shares, 2020: 0 shares).
In 2019, the Group set up the Group’s Employee Equity Compensation Trustee – Apex Group Fiduciary Services Limited (previously
known as Sanne Fiduciary Services Limited) Limited (the ‘Trustee’) which acts as the trustee of Employees’ Equity Compensation
Plan. In 2022, the Trustee has repurchased 319,231 shares (2021: 485,820 shares, 2020: 234,563 shares).
Share-based payment transactions fixed in monetary terms
In 2022, the Group introduced the new remuneration policy for the Management Board and Key Material Risk Taker (MRT) employees.
Under the new policy, part of the fixed component of the remuneration is fixed in monetary terms at the date of the contract and
shall be paid by award of the number of shares equivalent to the fixed monetary value as at the date of the award. Such awards
vest immediately following the award year and are subject to up to four-year holding period. For the CEO, annual remuneration
paid in shares are fixed every three years, whereas for other members of the Management Board and MRTs the remuneration is
set on annual basis. As for the variable share remuneration, it is awarded annually in the form of nil-cost options over the shares of
BOGG PLC and is also fixed in monetary terms at the date of the contract. Such awards are subject to vesting and holding periods.
The awards of shares in monetary terms are accounted as equity-settled transactions and are measured by reference to the
monetary value (as awarded) adjusted for the time value of money where necessary. The cost of equity-settled transactions is
recognised together with the corresponding increase in equity as part of additional paid-in capital, over the period in which the
service conditions are fulfilled, ending on the date when the relevant employee is fully entitled to the award (the ‘vesting date’).
In January 2022, BOGG’s Remuneration Committee resolved to award 350,017 ordinary shares of Bank of Georgia Group PLC to the
members of the Management Board and 54,851 ordinary shares of Bank of Georgia Group PLC to the Group’s 13 executives. Shares
awarded to the Management Board are subject to two-year vesting and two-year holding periods, while those awarded to the
other 13 executives are subject to three-year vesting periods with continuous employment being the only vesting condition for both
awards. The Group considers 31 January 2022 as the grant date. The Group estimates that the fair value of the shares awarded on
31 January 2022 was Georgian Lari 59.98 per share.
In March 2021, BOGG’s Remuneration Committee resolved to award 20,100 ordinary shares of Bank of Georgia Group PLC to
the members of the Management Board and 176,218 ordinary shares of Bank of Georgia Group PLC to the Group’s 46 executives.
Shares awarded to the Management Board and to the other 46 executives are subject to three-year vesting periods with continuous
employment being the only vesting condition for both awards. The Group considers 11 March 2021 as the grant date. The Group
estimates that the fair value of the shares awarded on 11 March 2021 was Georgian Lari 50.12 per share.
In January 2020, BOGG’s Remuneration Committee resolved to award 271,460 ordinary shares of Bank of Georgia Group PLC to
the members of the Management Board and 315,869 ordinary shares of Bank of Georgia Group PLC to the Group’s 49 executives.
Shares awarded to the Management Board are subject to two-year vesting and two-year holding periods, while those awarded
to the other 49 executives are subject to three-year vesting periods with continuous employment being the only vesting condition
for both awards. The Group considers 31 January 2020 as the grant date. The Group estimates that the fair value of the shares
awarded on 31 January 2020 was Georgian Lari 56.98 per share.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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28. Share-based payments continued
Executives’ Equity Compensation Plan (EECP) and Employees’ Equity Compensation Plan continued
Share-based payment transactions fixed in monetary terms continued
In 2022, Management Board members signed fixed contingent share-based compensation agreements, with fixed contract values
of GEL 46,168. The Group considers 1 January 2022 and 30 June 2022 as the grant dates for the awards. The Group estimated the
value of the shares were Georgian Lari 64.10 and 60.77 per share respectively, based on the five working day average share price
before the 25 December 2021, respectively. The awards will be subject to one-year vesting and three-year holding periods.
In 2022, the Group’s other executive members signed fixed contingent share-based compensation agreements, with fixed contract
values of GEL 4,493. The Group considers 1 January 2022 and 1 July 2022 as the grant dates for the awards. The Group estimated
the value of the shares were Georgian Lari 64.10 and 60.76 per share respectively, based on the five working day average share price
before the 25 December 2021, respectively. The awards will be subject to one-year vesting and three-year holding periods.
In 2021, key executive members signed fixed contingent share-based compensation agreements with the total of 10,000 ordinary
shares of BOGG. The awards will be subject to three-year vesting periods. The Group considers 1 March 2021 as the grant dates for
the awards. The Group estimated that the fair value of the shares awarded on 1 March 2021 were Georgian Lari 45.89 per share.
In 2021, the Group’s other executive members signed fixed contingent share-based compensation agreements, with fixed contract
values of GEL 2,065. The Group considers 1 May 2021 and 1 October 2021 as the grant dates for the awards. The Group estimated
the value of the shares were Georgian Lari 51.57 and 66.12 per share, respectively, based on the five working day average share price
before the grant dates of 1 May 2021 and 1 October 2021, respectively. The awards will be subject to one-year vesting and three-year
holding periods.
In 2020, new Management Board members and one key executive signed new three-year fixed contingent share-based compensation
agreements with the total of 120,000 and 30,000 ordinary shares of BOGG, respectively. The total amount of shares fixed to each
executive will be awarded in three equal instalments during the three consecutive years, of which each award will be subject to a
three-year vesting period. The Group considers 3 June 2020 and 29 December 2020 as the grant dates for the awards. The Group
estimated that the fair value of the shares awarded on 3 June 2020 and 29 December 2020 were Georgian Lari 39.91 and 54.61 per
share, respectively.
In 2020, existing Management Board members’ share-based compensation agreements were amended with the total effect of
33,333 ordinary shares of BOGG. The Group considers 23 December 2020 as the grant date for the awards. The Group estimated
that the fair value of the shares awarded on 23 December 2020 were Georgian Lari 53.48 per share.
The Bank grants share compensation to its non-executive employees. In January 2022, March 2021 and January 2020, the
Supervisory Board of the Bank resolved to award 212,327, 188,694 and 252,614 ordinary shares, respectively, to its certain non-
executive employees. All these awards are subject to three-year vesting periods, with continuous employment being the only
vesting condition for all awards. The Group considers 31 January 2022, 11 March 2021 and 31 January 2020 as the grant dates of
these awards, respectively. The Group estimated that the fair values of the shares awarded on 31 January 2022, 11 March 2021 and
31 January 2020 were Georgian Lari 59.98, 50.12 and 56.98 per share, respectively.
Summary
Fair value of the shares granted at the measurement date is determined based on available market quotations.
The weighted average fair value of share-based awards at the grant date was Georgian Lari 62.25 per share in year ended
31 December 2022 (31 December 2021: Georgian Lari 50.93 per share, 31 December 2020: Georgian Lari 55.91).
The Group’s total share-based payment expenses for the year ended 31 December 2022 amounted to GEL 82,025 (31 December 2021:
GEL 45,307, 31 December 2020: GEL 53,741) and are included in ‘salaries and other employee benefits’, as ‘salaries and bonuses’.
Below is the summary of the share-based payments-related data:
2022 2021 2020
Total number of equity instruments awarded 1,405,389 434,770 1,023,276
– Among them, to the Management Board
1,071,053 30,100 424,793
Weighted average value at grant date, per share (GEL in full amount) 62.25 50.93 55.91
Value at grant date, total (GEL) 87,481 22,143 57,211
Total expense recognised during the year (GEL) (82,025) (45,307) (53,741)
During 2022 BOGG Directors exercised 70,646 (2021: 16,965) share options with fair value of GEL 3,602 (2021: 966). Weighted average
share price was GEL 19.61 per share. During 2020 BOGG Directors did not exercise any share options.
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29. Risk management
Introduction
Risk is inherent in the Group’s activities, but it is managed through a process of ongoing identification, measurement and monitoring,
subject to risk limits and other controls. This process of risk management is critical to the Group’s continuing profitability and each
individual within the Group is accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to credit
risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also subject to operational risks.
The independent risk control process does not include business risks such as changes in the environment, technology and industry.
They are monitored through the Group’s strategic planning process.
Risk management structure
The Bank’s risk management framework and risk appetite framework policies are based on the three lines of defence model and
reflect the requirements of the Corporate Governance Code adopted by the NBG. The three lines of defence model enhances the
understanding of risk management and control by clarifying roles and responsibilities within the Bank’s different risk management
bodies and business units in order to increase the effective management of risk and control.
Audit Committee
The Audit Committee assists the Board in relation to the oversight of the Group’s financial and reporting processes. It monitors
the integrity of the financial statements and is responsible for governance around both the Internal Audit function and external
auditor, reporting back to the Board. It reviews the effectiveness of the policies, procedures and systems in place related to, among
other operational risks, compliance, IT and internal security (including cyber-security), and works closely with the Risk Committee
in connection with assessing the effectiveness of the risk management and internal control framework.
Risk Committee
The Risk Committee assists the Board in relation to the oversight of risk. It reviews the Group’s risk appetite in line with strategy,
identifies and monitors risk exposure and the risk management infrastructure, oversees the implementation of strategy to address
risk, and in conjunction with the Audit Committee, assesses the strength and effectiveness of the risk management and internal
control framework.
Management Board
The Management Board has overall responsibility for the Bank’s asset, liability and risk management activities, policies and
procedures. In order to effectively implement the risk management system, the Management Board delegates individual risk
management functions to each of the various decision-making and execution bodies within the Bank.
Credit Committees
The Bank has five Credit Committees, each responsible for supervising and managing the Bank’s credit risks in respect of loans and
counterparty credit exposures. Each Credit Committee comprises tiers of subcommittees and approves individual loan transactions.
Lower tier subcommittees meet on a daily basis, whereas higher tier ones meet as needed, typically one or two times a week. Each
of the subcommittees of the Credit Committees makes its decisions by a majority vote of its members.
Bank Asset and Liability Management Committee
The Bank’s Asset and Liability Management Committee (ALCO) is the core asset liability management (ALM) and risk management
body that establishes policies and guidelines with respect to capital adequacy, market risks and respective limits, funding liquidity
risk and respective limits, interest rate and prepayment risks and respective limits, money market general terms and credit exposure
limits. ALCO designs and implements respective risk management and stress testing models, regularly monitors compliance with
the pre-set risk limits, and approves treasury deals with non-standard terms.
Internal Audit
The Internal Audit function is responsible for the annual audit of the Group’s risk management, internal control and corporate
governance processes, with the aim of reducing the levels of operational and other risks, auditing the Group’s internal control
systems and detecting any infringements or errors on the part of the Group’s departments and divisions. It examines both the
adequacy and the Group’s compliance with those procedures. The Group’s Internal Audit department discusses the results of all
assessments with management, and reports its findings and recommendations to the Audit Committee.
Risk measurement and reporting systems
The Bank applies a variety of risk metrics to measure its exposures, ranging from operational indicators to forward looking/
statistical model-based approaches and stress scenarios.
The Bank has established risk appetite limits for its principal risks, which are approved by the Supervisory Board. Monitoring and
controlling of these risks are performed with reference to these limits. They reflect the business strategy and market environment
in which the Bank operates and they set the boundaries for the level of risk the Bank is willing to take in pursuit of its strategic
objectives. The Bank continuously monitors the landscape to ensure that any significant changes in the underlying assumptions
and/or conditions are identified and adapted in a timely manner.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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29. Risk management continued
Introduction continued
Risk measurement and reporting systems continued
Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks. This
information is presented and explained to the Management Board, and the head of each business division. The reports include
aggregate credit exposures, liquidity ratios and changes to the risk profile. Senior management assesses the appropriateness of the
ECL on a monthly basis. The Management Board receives a comprehensive credit risk report and ALCO report. These reports are
designed to provide all the necessary information to assess and conclude on the risks of the Bank.
For all levels throughout the Bank, specifically tailored risk reports are prepared and distributed in order to ensure that all business
divisions have access to extensive, relevant and up-to-date information.
A daily briefing is given to the Management Board and all other relevant employees of the Group on the utilisation of market limits,
proprietary investments and liquidity, plus any other risk developments.
Risk mitigation
As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from
changes in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. While these
are intended for hedging, they do not qualify for hedge accounting.
The Group actively uses collateral to reduce its credit risks (see below for more detail).
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same
geographic region, or these counterparties represent related parties to each other, or have similar economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
Concentrations also involve combined, aggregate exposures of large and significant credits compared with the total outstanding
balance of the respective financial instrument. Concentrations indicate the relative sensitivity of the Group’s performance to
developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risks, the Group’s policies and procedures include specific guidelines to focus on,
maintaining a diversified portfolio of financial assets. Identified concentrations of credit risks or liquidity/repayment risks are
controlled and managed accordingly.
Credit risk
Credit risk is the risk that the Group will incur a loss because its customers fail to discharge their contractual obligations. The Group
manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for
geographical, industry, product and currency concentrations, and by monitoring exposures in relation to such limits.
The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness
of counterparties, including regular collateral revisions. Counterparty limits are established by the use of a credit risk classification
system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision.
The credit quality review process allows the Group to assess the potential loss as a result of the risks to which it is exposed and take
corrective action. The maximum credit exposure is limited to the carrying value of respective instruments and notional amounts of
guarantees and commitments provided.
Derivative financial instruments
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the
statement of financial position.
Credit-related commitment risks
The Group makes available to its customers guarantees and letters of credit which may require that the Group make payments on
their behalf. Such payments are collected from customers based on the terms of the guarantee and letter of credit. They expose the
Group to similar risks to loans and these are mitigated by the same control processes and policies.
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets
The credit quality of financial assets is managed by the Group through internal and external credit ratings used in ECL calculations.
For corporate loan portfolios, the Group runs an internal rating model in which its customers are rated from 1 to 7 using internal
grades. The models incorporate both qualitative and quantitative information and, in addition to information specific to each
borrower, utilising supplemental external information that could affect the borrower’s behaviour. It is the Group’s policy to maintain
accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and
the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported
by a variety of financial analytics to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are
tailored to the various categories and are derived in accordance with the Group’s rating policy. Attributable risk ratings are assessed
and updated regularly.
For Retail, Micro and SME loans, the Group uses external ratings provided by Credit Bureau.
The Group’s treasury, trading and inter-bank relationships and counterparties comprise financial services institutions, banks and
broker-dealers. For these, where external ratings provided by rating agencies are available, the Group Credit Risk department uses
such external ratings. For those where external ratings are not available internal ratings are assigned.
The table below shows internal and external grades used in ECL calculating.
Internal rating description* Internal rating grades
External rating grades
Credit Bureau Standard & Poor’s
High grade
Aaa 1 A AAA
Aa1 2+ B AA+
Aa2 2 C1 AA
Aa3 2- C2 AA-
A1 3+ C3 A+
A2 3 A
A3 3- A-
Baa1 4+ BBB+
Baa2 4 BBB
Baa3 4- BBB-
Standard grade
Ba1 5+ D1 BB+
Ba2 5 D2 BB
Ba3 5- D3 BB-
B1 6+ B+
B2 6 B
Low grade
B3 6- E1 B-
Caa1 7+ E2 CCC+
Caa2 7 E3 CCC
Caa3 7- CCC-
Ca CC
C
* Grades are not supposed to be linked to each other across the rating categories above.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
The table below shows the credit quality by class of asset in the statement of financial position, presented in gross amounts, based
on the Group’s credit rating system.
A defaulted financial asset that is past due more than 90 days is assessed as a non-performing loan or as determined on individual
basis based on other available information regarding financial difficulties of the borrower.
Cash and cash equivalents, excluding cash on hand Stage 1 Total
High grade 1,372,649 1,372,649
Standard grade 610,846 610,846
Low grade 18,466 18,466
Not rated 531,178 531,178
Balance at 31 December 2022 2,533,139 2,533,139
Amounts due from credit institutions Stage 1 Total
High grade 2,396,898 2,396,898
Standard grade 11,871 11,871
Low grade – –
Not rated 29,577 29,577
Balance at 31 December 2022 2,438,346 2,438,346
Investment securities measured at amortised cost – debt instruments Stage 1 Total
High grade 129,670 129,670
Standard grade 197,658 197,658
Not rated 54,407 54,407
Balance at 31 December 2022 381,735 381,735
Investment securities measured at FVOCI – debt instruments Stage 1 Stage 3 Total
High grade 2,337,628 – 2,337,628
Standard grade 1,546,907 – 1,546,907
Low grade – – –
Not rated 76,381 1,619 78,000
Balance at 31 December 2022 3,960,916 1,619 3,962,535
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Commercial loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,484,436 78,817 – – 2,563,253
Standard grade 1,466,457 123,274 – 310 1,590,041
Low grade 238,808 391,875 – 1,187 631,870
Not rated 322,120 17,341 3,605 – 343,066
Defaulted
Non-performing – – 169,661 14,453 184,114
Other – – 3,322 – 3,322
Balance at 31 December 2022 4,511,821 611,307 176,588 15,950 5,315,666
Residential mortgage loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 3,020,624 22,479 – 4,103 3,047,206
Standard grade 657,117 37,241 – 4,446 698,804
Low grade 107,484 108,764 – 3,402 219,650
Not rated 140,681 1,082 – – 141,763
Defaulted
Non-performing – – 53,073 13,650 66,723
Other – – 16,584 2,474 19,058
Balance at 31 December 2022 3,925,906 169,566 69,657 28,075 4,193,204
Micro and SME loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,026,620 43,580 – 347 2,070,547
Standard grade 1,022,762 67,959 – 361 1,091,082
Low grade 145,066 75,782 – 45 220,893
Not rated 281,391 13,142 10 207 294,750
Defaulted
Non-performing – – 135,965 1,658 137,623
Other – – 10,542 226 10,768
Balance at 31 December 2022 3,475,839 200,463 146,517 2,844 3,825,663
Consumer loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,003,630 13,253 – 2,412 2,019,295
Standard grade 872,122 39,737 – 1,763 913,622
Low grade 202,919 159,751 – 2,021 364,691
Not rated 164,520 1,134 103 – 165,757
Defaulted
Non-performing – – 70,885 11,279 82,164
Other – – 51,004 5,521 56,525
Balance at 31 December 2022 3,243,191 213,875 121,992 22,996 3,602,054
Gold – pawn loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 61,635 195 – – 61,830
Standard grade 43,456 1,077 – – 44,533
Low grade 39,509 7,339 – – 46,848
Not rated 2,925 2 493 – 3,420
Defaulted
Non-performing – – 1,318 – 1,318
Other – – 6,605 – 6,605
Balance at 31 December 2022 147,525 8,613 8,416 – 164,554
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Finance lease receivables Stage 1 Stage 2 Stage 3 POCI Total
High grade 17,702 4,495 – – 22,197
Standard grade – 694 – – 694
Low grade – – – – –
Not rated 41,829 1,262 5,101 – 48,192
Defaulted
Non-performing – – 3,814 11,909 15,723
Other – – 5,240 3,302 8,542
Balance at 31 December 2022 59,531 6,451 14,155 15,211 95,348
Accounts receivable Stage 1 Total
Not rated 400,111 400,111
Balance at 31 December 2022 400,111 400,111
Other financial assets Stage 1 Total
Not rated 104,107 104,107
Balance at 31 December 2022 104,107 104,107
Financial and performance guarantees issued Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,049,817 103 – – 1,049,920
Standard grade 241,914 4,357 – – 246,271
Low grade 223,983 20,097 – – 244,080
Not rated 163,278 111 – – 163,389
Other – – 13,648 – 13,648
Balance at 31 December 2022 1,678,992 24,668 13,648 – 1,717,308
Letters of credit Stage 1 Stage 2 Stage 3 POCI Total
High grade 76,091 – – – 76,091
Standard grade 39,671 – – – 39,671
Not rated 547 – – – 547
Balance at 31 December 2022 116,309 – – – 116,309
Undrawn loan facilities Stage 1 Stage 2 Stage 3 POCI Total
High grade 498,164 306 – – 498,470
Standard grade 259,919 6,168 – – 266,087
Low grade 7,719 7,829 – – 15,548
Not rated 87,136 82 – 1 87,219
Defaulted
Non-performing – – 1,537 1 1,538
Other – – 199 – 199
Balance at 31 December 2022 852,938 14,385 1,736 2 869,061
Cash and cash equivalents, excluding cash on hand Stage 1 Total
High grade 480,889 480,889
Standard grade 78,953 78,953
Low grade 134 134
Not rated 209,548 209,548
Balance at 31 December 2021 769,524 769,524
Amounts due from credit institutions Stage 1 Total
Standard grade 1,903,301 1,903,301
Not rated 28,420 28,420
Balance at 31 December 2021 1,931,721 1,931,721
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Investment securities measured at FVOCI – debt instruments Stage 1 Total
High grade 1,031,369 1,031,369
Standard grade 1,464,107 1,464,107
Low grade 13,804 13,804
Not rated 79,948 79,948
Balance at 31 December 2021 2,589,228 2,589,228
Commercial loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,815,718 11,769 – – 2,827,487
Standard grade 1,318,613 166,392 – – 1,485,005
Low grade 369,056 176,236 – 7,131 552,423
Not rated 430,925 20,536 3,524 – 454,985
Defaulted
Non-performing – – 212,134 10,883 223,017
Other – – 11,267 – 11,267
Balance at 31 December 2021 4,934,312 374,933 226,925 18,014 5,554,184
Residential mortgage loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,751,165 67,134 – 2,163 2,820,462
Standard grade 616,665 84,564 – 4,284 705,513
Low grade 112,440 106,454 – 5,083 223,977
Not rated 149,099 1,818 – – 150,917
Defaulted
Non-performing – – 31,140 3,767 34,907
Other – – 73,374 12,908 86,282
Balance at 31 December 2021 3,629,369 259,970 104,514 28,205 4,022,058
Micro and SME loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,733,636 103,160 – 308 1,837,104
Standard grade 932,109 90,631 – 1,588 1,024,328
Low grade 108,045 69,942 – 561 178,548
Not rated 506,359 29,740 11 – 536,110
Defaulted
Non-performing – – 115,794 2,125 117,919
Other – – 35,694 2,053 37,747
Balance at 31 December 2021 3,280,149 293,473 151,499 6,635 3,731,756
Consumer loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,415,629 23,339 – 858 1,439,826
Standard grade 758,684 54,826 – 1,640 815,150
Low grade 272,104 135,897 – 2,259 410,260
Not rated 189,021 964 267 – 190,252
Defaulted
Non-performing – – 41,757 1,141 42,898
Other – – 65,618 17,301 82,919
Balance at 31 December 2021 2,635,438 215,026 107,642 23,199 2,981,305
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Gold – pawn loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 58,481 295 – – 58,776
Standard grade 41,990 2,606 – – 44,596
Low grade 19,639 7,215 – – 26,854
Not rated 32,677 – – – 32,677
Defaulted
Non-performing – – 1,003 – 1,003
Other – – 1,511 – 1,511
Balance at 31 December 2021 152,787 10,116 2,514 – 165,417
Finance lease receivables Stage 1 Stage 2 Stage 3 POCI Total
High grade 8,585 3,221 – – 11,806
Standard grade 8,337 2,733 – – 11,070
Low grade 8,515 5,850 – – 14,365
Not rated 55,737 5,780 – – 61,517
Defaulted
Non-performing – – 605 – 605
Other – – 16,007 9,582 25,589
Balance at 31 December 2021 81,174 17,584 16,612 9,582 124,952
Accounts receivable Stage 1 Total
Not rated 6,097 6,097
Balance at 31 December 2021 6,097 6,097
Other financial assets Stage 1 Total
Not rated 52,575 52,575
Balance at 31 December 2021 52,575 52,575
Financial and performance guarantees issued Stage 1 Stage 2 Stage 3 POCI Total
High grade 307,607 24,337 – – 331,944
Standard grade 91,528 7,799 – – 99,327
Low grade 58,376 3,334 – – 61,710
Not rated 1,193,179 9 – – 1,193,188
Defaulted
Other – – 744 – 744
Balance at 31 December 2021 1,650,690 35,479 744 – 1,686,913
Letters of credit Stage 1 Stage 2 Stage 3 POCI Total
High grade 67,925 – – – 67,925
Standard grade 1,743 – – – 1,743
Low grade 410 – – – 410
Not rated 1,598 – – – 1,598
Balance at 31 December 2021 71,676 – – – 71,676
Undrawn loan facilities Stage 1 Stage 2 Stage 3 POCI Total
High grade 581,310 1,415 – – 582,725
Standard grade 121,376 3,011 – – 124,387
Low grade 12,986 4,561 – – 17,547
Not rated 83,653 240 9 – 83,902
Defaulted
Non-performing – – 5 – 5
Other – – 909 6 915
Balance at 31 December 2021 799,325 9,227 923 6 809,481
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Cash and cash equivalents, excluding cash on hand Stage 1 Total
High grade 1,077,536 1,077,536
Standard grade 98,062 98,062
Low grade 87,355 87,355
Not rated 4,614 4,614
Balance at 31 December 2020 1,267,567 1,267,567
Amounts due from credit institutions Stage 1 Total
Standard grade 1,986,932 1,986,932
Not rated 29,473 29,473
Balance at 31 December 2020 2,016,405 2,016,405
Investment securities measured at FVOCI – debt instruments Stage 1 Total
High grade 1,010,177 1,010,177
Standard grade 1,414,785 1,414,785
Low grade 11,003 11,003
Not rated 107,929 107,929
Balance at 31 December 2020 2,543,894 2,543,894
Commercial loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,801,003 41,693 – – 1,842,696
Standard grade 1,343,887 110,608 – – 1,454,495
Low grade 361,573 194,295 – 7,402 563,270
Not rated 984,615 35,522 – – 1,020,137
Defaulted
Non-performing – – 236,992 974 237,966
Other – – 4,829 – 4,829
Balance at 31 December 2020 4,491,078 382,118 241,821 8,376 5,123,393
Residential mortgage loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 2,521,205 108,883 – 1,283 2,631,371
Standard grade 534,592 102,058 – 4,390 641,040
Low grade 111,250 101,843 – 4,968 218,061
Not rated 120,797 1,431 – – 122,228
Defaulted
Non-performing – – 110,378 6,056 116,434
Other – – 58,098 9,152 67,250
Balance at 31 December 2020 3,287,844 314,215 168,476 25,849 3,796,384
Micro and SME loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,278,947 151,938 – 409 1,431,294
Standard grade 834,885 135,345 – 309 970,539
Low grade 96,053 86,728 – 1,987 184,768
Not rated 439,222 65,394 – 11 504,627
Defaulted
Non-performing – – 144,323 706 145,029
Other – – 33,148 49 33,197
Balance at 31 December 2020 2,649,107 439,405 177,471 3,471 3,269,454
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Consumer loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 1,041,103 31,976 – 412 1,073,491
Standard grade 514,395 51,890 – 965 567,250
Low grade 150,067 109,522 – 2,388 261,977
Not rated 198,617 978 – – 199,595
Defaulted
Non-performing – – 66,765 1,619 68,384
Other – – 34,185 3,131 37,316
Balance at 31 December 2020 1,904,182 194,366 100,950 8,515 2,208,013
Gold – pawn loans at amortised cost Stage 1 Stage 2 Stage 3 POCI Total
High grade 31,764 262 – – 32,026
Standard grade 42,352 703 – – 43,055
Low grade 21,929 2,914 – – 24,843
Not rated 1,730 – – – 1,730
Defaulted
Non-performing – – 406 – 406
Other – – 1,324 – 1,324
Balance at 31 December 2020 97,775 3,879 1,730 – 103,384
Finance lease receivables Stage 1 Stage 2 Stage 3 POCI Total
High grade 12,756 7,605 – – 20,361
Standard grade 8,673 17,403 – – 26,076
Low grade 201 12,767 – – 12,968
Not rated 45,716 15,501 – – 61,217
Defaulted
Non-performing – – 3,595 – 3,595
Other – – 15,155 – 15,155
Balance at 31 December 2020 67,346 53,276 18,750 – 139,372
Accounts receivable Stage 1 Total
Not rated 4,935 4,935
Balance at 31 December 2020 4,935 4,935
Other financial assets Stage 1 Total
Not rated 40,219 40,219
Balance at 31 December 2020 40,219 40,219
Financial and performance guarantees issued Stage 1 Stage 2 Stage 3 POCI Total
High grade 160,612 7,628 – – 168,240
Standard grade 40,554 7,414 – – 47,968
Low grade 39,485 5,250 – – 44,735
Not rated 1,198,042 6 – – 1,198,048
Defaulted
Other – – 31,037 – 31,037
Balance at 31 December 2020 1,438,693 20,298 31,037 – 1,490,028
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29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
Letters of credit Stage 1 Stage 2 Stage 3 POCI Total
High grade 49,162 – – – 49,162
Standard grade 10,970 – – – 10,970
Low grade 261 – – – 261
Not rated 58,698 – – – 58,698
Defaulted
Other – – 5,940 – 5,940
Balance at 31 December 2020 119,091 – 5,940 – 125,031
Undrawn loan facilities Stage 1 Stage 2 Stage 3 POCI Total
High grade 450,119 2,683 – – 452,802
Standard grade 62,708 878 – – 63,586
Low grade 15,682 14,740 – – 30,422
Not rated 136,726 799 – – 137,525
Defaulted
Other – – 1,198 – 1,198
Balance at 31 December 2020 665,235 19,100 1,198 – 685,533
Types of collateral the Group accepts include real estate, movable properties as well as financial assets (deposits, shares and
guarantees) and other registered liens. Measurement and processing of collateral is governed by generally acceptable standards
and collateral-specific instructions. These transactions are structured under legally verified standard agreements where the pledges
are secured through public registry where eligible. The following table shows the ratio of the loan portfolio to the market value of
collateral held by the Group in respect of the portfolio. As at 31 December 2022, up to 78.6% of the collateral held has been revalued
within the last two years (2021: 76.0%, 2020: 76.2%). For residential mortgage loans, in cases where the collateral for a loan may not
be officially registered until its construction is complete, respective loan is shown as unsecured, even though it is usually secured by
the corporate guarantee of the construction company.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
29. Risk management continued
Credit risk continued
Credit quality per class of financial assets continued
As at 31 December 2022
Total gross
carrying
amount Unsecured
Loan-to-value %
Less than
50% 50-80% 80-90% 90-100% 100-200% 200-300% 300-400%
More than
400%
Commercial loans 5,315,666 714,675 1,037,528 900,866 158,713 245,750 1,243,415 340,917 70,694 603,108
ECL coverage 1.72% 2.79% 0.56% 1.18% 0.82% 1.56% 3.14% 1.18% 1.31% 1.01%
Residential mortgage
loans 4,193,204 120,439 981,034 1,859,064 532,412 441,719 230,274 8,114 2,665 17,483
ECL coverage 0.72% 2.45% 0.01% 0.38% 1.00% 1.45% 3.07% 4.42% 1.43% 4.06%
Micro and SME loans 3,825,663 405,004 885,724 966,056 278,684 280,462 800,119 73,083 30,447 106,084
ECL coverage 1.66% 4.73% 0.02% 0.41% 0.92% 1.48% 2.92% 3.42% 4.59% 5.88%
Consumer loans 3,602,054 1,794,035 629,846 694,153 217,045 174,755 83,286 4,926 1,196 2,812
ECL coverage 3.76% 6.79% 0.03% 0.51% 1.36% 1.59% 4.58% 7.69% 0.92% 1.53%
Gold – pawn loans 164,554 1 8,589 58,481 94,082 2,044 1,338 – – 19
ECL coverage 3.31% N/A 50.54% 0.07% 0.30% 13.65% 35.87% N/A N/A 84.21%
Loans to customers
at amortised cost,
gross 17,101,141 3,034,154 3,542,721 4,478,620 1,280,936 1,144,730 2,358,432 427,040 105,002 729,506
As at 31 December 2021
Total gross
carrying
amount Unsecured
Loan-to-value %
Less than
50% 50-80% 80-90% 90-100% 100-200% 200-300% 300-400%
More than
400%
Commercial loans 5,554,184 670,741 474,531 1,396,633 167,960 238,995 1,193,148 814,879 197,306 399,991
ECL coverage 2.87% 1.51% 1.43% 0.69% 1.04% 2.71% 2.50% 10.60% 1.87% 1.17%
Residential mortgage
loans 4,022,058 94,513 715,692 1,556,323 651,029 519,179 440,231 11,085 4,739 29,267
ECL coverage 0.82% 4.19% 0.02% 0.09% 0.66% 1.19% 3.41% 9.24% 2.15% 3.32%
Micro and SME loans 3,731,756 429,366 725,310 933,874 272,270 328,758 835,894 90,748 34,841 80,695
ECL coverage 1.99% 5.89% 0.10% 0.27% 0.66% 1.65% 3.11% 4.59% 2.43% 9.47%
Consumer loans 2,981,305 1,560,864 443,343 514,287 178,141 143,989 132,295 3,634 731 4,021
ECL coverage 4.56% 8.07% 0.07% 0.36% 1.02% 1.43% 2.67% 11.23% 2.60% 3.13%
Gold – pawn loans 165,417 1 4,182 37,427 118,095 4,568 1,128 – – 16
ECL coverage 1.25% N/A 0.02% 4.83% 0.09% 2.47% 2.48% N/A N/A 75.00%
Loans to customers
at amortised cost,
gross 16,454,720 2,755,485 2,363,058 4,438,544 1,387,495 1,235,489 2,602,696 920,346 237,617 513,990
As at 31 December 2020
Total gross
carrying
amount Unsecured
Loan-to-value %
Less than
50% 50-80% 80-90% 90-100% 100-200% 200-300% 300-400%
More than
400%
Commercial loans 5,123,393 499,548 635,950 1,147,875 114,903 146,474 1,018,590 147,898 750,360 661,795
ECL coverage 3.49% 3.10% 0.45% 1.14% 5.01% 8.62% 9.36% 6.17% 2.48% 0.87%
Residential mortgage
loans 3,796,384 90,628 972,294 1,896,005 438,750 200,236 129,234 9,315 2,236 57,686
ECL coverage 1.28% 3.19% 0.03% 0.77% 2.59% 3.55% 7.87% 4.64% 3.31% 2.86%
Micro and SME loans 3,269,454 353,143 919,622 938,206 264,999 217,848 494,492 38,622 7,581 34,941
ECL coverage 3.13% 10.74% 0.10% 1.12% 2.08% 5.71% 5.30% 7.79% 13.78% 13.82%
Consumer loans 2,208,013 1,118,714 460,494 436,194 90,076 48,783 49,946 1,055 640 2,111
ECL coverage 5.15% 9.38% 0.13% 1.01% 2.36% 0.71% 2.66% 4.83% 1.72% 1.94%
Gold – pawn loans 103,384 – 3,340 23,313 72,392 1,748 2,576 2 – 13
ECL coverage 0.22% N/A 0.09% 0.06% 0.20% 2.06% 0.78% 0.00% N/A 76.92%
Loans to customers
at amortised cost,
gross 14,500,628 2,062,033 2,991,700 4,441,593 981,120 615,089 1,694,838 196,892 760,817 756,546
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29. Risk management continued
Credit risk continued
Carrying amount per class of financial assets whose terms have been renegotiated
During the year, the Group modified the contractual cash flows on certain loans and advances to customers. All such loans had
previously been transferred to at least Stage 2, with a loss allowance measured at an amount equal to lifetime ECL.
The following table provides information on financial assets that were modified while they had a loss allowance measured at
an amount equal to lifetime ECL:
Financial assets modified during 2022:
Amortised
cost before
modification
Net gain/(loss)
arising from
modification
Commercial loans 621,067 2,169
Residential mortgage loans 73,863 (3,081)
Micro and SME loans 173,382 (2,524)
Consumer loans 305,726 (25,835)
Gold – pawn loans – –
Loans to customers 1,174,038 (29,271)
Finance lease receivables – –
Total loans to customers and finance lease receivables 1,174,038 (29,271)
Financial assets modified during 2021:
Amortised
cost before
modification
Net gain/(loss)
arising from
modification
Commercial loans 437,979 388
Residential mortgage loans 132,638 530
Micro and SME loans 243,217 (4,185)
Consumer loans 271,896 (9,446)
Gold – pawn loans – –
Loans to customers 1,085,730 (12,713)
Finance lease receivables – –
Total loans to customers and finance lease receivables 1,085,730 (12,713)
Financial assets modified during 2020:
Amortised
cost before
modification
Net gain/(loss)
arising from
modification
Commercial loans 117,119 83
Residential mortgage loans 364,619 (34)
Micro and SME loans 347,449 (3,347)
Consumer loans 347,562 (4,625)
Gold – pawn loans – –
Loans to customers 1,176,749 (7,923)
Finance lease receivables 52,188 (1,172)
Total loans to customers and finance lease receivables 1,228,937 (9,095)
The gross carrying value of loans that have previously been modified (when they were in Stage 2 or 3) which are now categorised
as Stage 1, with loss allowance measured at an amount equal to 12 months expected losses, are shown in the table below:
Financial assets modified since initial recognition, as at 31 December 2022
Gross carrying
amount
Corresponding
ECL
Commercial loans 10,100 (24)
Residential mortgage loans 72,919 (104)
Micro and SME loans 40,925 (129)
Consumer loans 19,482 (204)
Loans to customers 143,426 (461)
Finance lease receivables – –
Total loans to customers and finance lease receivables 143,426 (461)
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
29. Risk management continued
Credit risk continued
Carrying amount per class of financial assets whose terms have been renegotiated continued
Financial assets modified since initial recognition, as at 31 December 2021
Gross carrying
amount
Corresponding
ECL
Commercial loans 19,521 (121)
Residential mortgage loans 81,892 (231)
Micro and SME loans 35,301 (347)
Consumer loans 25,063 (633)
Loans to customers 161,777 (1,332)
Finance lease receivables – –
Total loans to customers and finance lease receivables 161,777 (1,332)
Financial assets modified since initial recognition, as at 31 December 2020
Gross carrying
amount
Corresponding
ECL
Commercial loans 14,952 (1)
Residential mortgage loans 100,079 (444)
Micro and SME loans 68,748 (1,023)
Gold – pawn loans – –
Loans to customers 226,187 (3,430)
Finance lease receivables 717 (3)
Total loans to customers and finance lease receivables 226,904 (3,433)
The geographical concentration of the Group’s assets and liabilities is set out below:
2022
Georgia OECD
CIS and other
foreign countries Total
Assets:
Cash and cash equivalents 1,508,225 1,453,844 622,774 3,584,843
Amounts due from credit institutions 2,358,551 54,175 20,302 2,433,028
Investment securities 1,798,172 2,436,465 115,092 4,349,729
Loans to customers and finance lease receivables 16,339,883 – 521,823 16,861,706
All other assets 1,473,703 120,271 78,620 1,672,594
23,478,534 4,064,755 1,358,611 28,901,900
Liabilities:
Client deposits and notes 13,017,449 966,722 4,277,226 18,261,397
Amounts owed to credit institutions 2,622,787 2,142,083 501,783 5,266,653
Debt securities issued 312,053 333,915 – 645,968
Lease Liability 101,402 – 13,068 114,470
All other liabilities 275,030 81,893 7,667 364,590
16,328,721 3,524,613 4,799,744 24,653,078
Net balance sheet position 7,149,813 540,142 (3,441,133) 4,248,822
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29. Risk management continued
Credit risk continued
Carrying amount per class of financial assets whose terms have been renegotiated continued
2021 2020
Georgia OECD
CIS and
other foreign
countries Total Georgia OECD
CIS and
other foreign
countries Total
Assets:
Cash and cash equivalents 836,325 419,324 264,913 1,520,562 742,844 985,848 242,263 1,970,955
Amounts due from credit
institutions 1,922,671 – 8,719 1,931,390 1,995,963 – 20,042 2,016,005
Investment securities 1,477,367 970,901 147,396 2,595,664 1,421,642 939,964 182,791 2,544,397
Loans to customers and
finance lease receivables 15,524,427 – 644,546 16,168,973 13,504,237 – 687,841 14,192,078
All other assets 977,703 178,765 57,019 1,213,487 1,020,701 247,355 44,429 1,312,485
20,738,493 1,568,990 1,122,593 23,430,076 18,685,387 2,173,167 1,177,366 22,035,920
Liabilities:
Client deposits and notes 11,180,811 894,192 1,962,999 14,038,002 11,211,760 875,634 1,932,815 14,020,209
Amounts owed to credit
institutions 1,609,565 2,619,885 88,995 4,318,445 872,239 2,393,872 69,855 3,335,966
Debt securities issued 450,155 1,061,203 7,327 1,518,685 102,104 1,449,374 34,067 1,585,545
Lease Liability 84,875 – 2,787 87,662 91,217 – 4,418 95,635
All other liabilities 309,068 55,291 10,015 374,374 178,246 246,109 24,295 448,650
13,634,474 4,630,571 2,072,123 20,337,168 12,455,566 4,964,989 2,065,450 19,486,005
Net balance sheet position 7,104,019 (3,061,581) (949,530) 3,092,908 6,229,821 (2,791,822) (888,084) 2,549,915
Liquidity risk and funding management
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and stress
circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, manages
assets with liquidity in mind, and monitors future cash flows and liquidity on a regular basis. This incorporates an assessment of
expected cash flows and the availability of high-grade collateral which could be used to secure additional funding if required.
The Group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an unforeseen
interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs. In addition,
the Group maintains a cash deposit (obligatory reserve) with the NBG, the amount of which depends on the level of customer
funds attracted.
The liquidity position is assessed and managed by the Group primarily on a standalone Bank basis, based on certain liquidity ratios
established by the NBG. Banks are required to maintain a liquidity coverage ratio, which is defined as the ratio of high-quality liquid
assets to net cash outflow over the next 30 days. The order requires that, absent a stress-period, the value of the ratio be no lower
than 100%. The liquidity coverage ratio as at 31 December 2022 was 132.4% (2021: 124.0%, 2020: 138.6%).
The Bank holds a comfortable buffer on top of Net Stable Funding Ratio (NSFR) requirement of 100%, which came into effect on
1 September 2019. A solid buffer over NSFR provides stable funding sources over a longer time span. This approach is designed to
ensure that the funding framework is sufficiently flexible to secure liquidity under a wide range of market conditions. NSFR as at
31 December 2022 was 131.9%, (2021: 132.5%, 2020: 137.5%), all comfortably above the NBG’s minimum regulatory requirements.
The Group also matches the maturity of financial assets and financial liabilities and regularly monitors negative gaps compared
with the Bank’s standalone total regulatory capital calculated per NBG regulation.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted repayment
obligations. Repayments that are subject to notice are treated as if notice were to be given immediately. However, the Group
expects that many customers will not request repayment on the earliest date the Bank could be required to pay, and the table
does not reflect the expected cash flows indicated by the Bank’s deposit retention history.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
29. Risk management continued
Liquidity risk and funding management continued
Financial liabilities, as at 31 December 2022
Less than 3
months
3 to 12
months
1 to 5
years
Over
5 years Total
Client deposits and notes 8,278,805 8,366,525 1,946,856 342,592 18,934,778
Amounts owed to credit institutions 3,300,204 623,612 1,310,937 654,002 5,888,755
Debt securities issued 7,843 343,014 411,265 – 762,122
Lease liability 7,633 22,444 77,028 16,756 123,861
Derivative financial liabilities 43,876 14,401 743 – 59,020
Other liabilities 98,779 455 319 118 99,671
Total undiscounted financial liabilities 11,737,140 9,370,451 3,747,148 1,013,468 25,868,207
Financial liabilities, as at 31 December 2021
Less than 3
months
3 to 12
months
1 to 5
years
Over
5 years Total
Client deposits and notes 5,301,533 7,317,413 1,657,540 352,824 14,629,310
Amounts owed to credit institutions 1,815,989 628,686 1,870,941 610,949 4,926,565
Debt securities issued 37,678 310,707 1,432,079 – 1,780,464
Lease liability 6,145 16,729 66,981 10,992 100,847
Derivative financial liabilities 3,206 2,972 1,687 – 7,865
Other liabilities 174,322 816 328 18 175,484
Total undiscounted financial liabilities 7,338,873 8,277,323 5,029,556 974,783 21,620,535
Financial liabilities, as at 31 December 2020
Less than 3
months
3 to 12
months
1 to 5
years
Over
5 years Total
Client deposits and notes 5,974,433 6,593,251 1,651,120 353,414 14,572,218
Amounts owed to credit institutions 982,039 811,129 1,553,898 558,866 3,905,932
Debt securities issued 72,994 143,409 1,408,547 345,886 1,970,836
Lease liability 6,342 19,057 69,248 21,751 116,398
Derivative financial liabilities 92,554 130,785 24,181 – 247,520
Other liabilities 75,519 2,525 6,656 102 84,802
Total undiscounted financial liabilities 7,203,881 7,700,156 4,713,650 1,280,019 20,897,706
The table below shows the contractual expiry by maturity of the Group’s financial commitments and contingencies.
Less than 3
months
3 to 12
months
1 to
5 years
Over
5 years Total
31 December 2022 1,280,906 625,011 778,275 30,294 2,714,486
31 December 2021 1,010,650 663,865 885,895 17,546 2,577,956
31 December 2020 857,416 492,293 933,097 27,436 2,310,242
The Group expects that not all guarantees or commitments will be drawn before expiry of the commitment.
The maturity analysis does not reflect the historical stability of current accounts. Their liquidation has historically taken place over a
longer period than indicated in the tables above. These balances are included in amounts due in less than three months in the tables
above. Perpetual Tier 1 capital notes are presented in ‘Over 5 years’ category given the fact that management does not consider
them to be covered earlier than that.
Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market
variables such as interest rates, foreign exchanges, and equity prices. The Group classifies exposures to market risk into either
trading or non-trading portfolios. Trading and non-trading positions are managed and monitored using sensitivity analysis.
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29. Risk management continued
Market risk continued
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial
instruments. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other
variables held constant, on the Group’s consolidated income statement.
The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the net interest
income for the year, based on the floating rate non-trading financial assets and financial liabilities held at 31 December 2022.
Changes in basis points are calculated as standard deviations of daily changes in floating rates over the last month multiplied by
respective floating rates. During the years ended 31 December 2022, 2021 and 2020, sensitivity analysis did not reveal any significant
potential effect on the Group’s equity.
2022
Currency
Increase
in basis points
Sensitivity
of net interest
income
Sensitivity
of other
comprehensive
income
GEL 14 2,432 1,348
EUR 24 3,732 107
USD 21 1,624 1,022
2022
Currency
Decrease in
basis points
Sensitivity of
net
interest income
Sensitivity
of other
comprehensive
income
GEL 14 (2,432) (1,348)
EUR 24 (3,732) (107)
USD 21 (1,624) (1,022)
2021
Currency
Increase
in basis points
Sensitivity
of net
interest income
Sensitivity
of other
comprehensive
income
GEL 53 6,733 5,516
EUR 2 238 –
USD 5 355 –
2021
Currency
Decrease in
basis points
Sensitivity of
net
interest income
Sensitivity
of other
comprehensive
income
GEL 53 (6,733) (5,516)
EUR 2 (238) –
USD 5 (355) –
2020
Currency
Increase in basis
points
Sensitivity of
net
interest income
Sensitivity
of other
comprehensive
income
GEL 15 1,427 1,452
EUR 2 242 –
USD 3 13 –
2020
Currency
Decrease in
basis points
Sensitivity of
net
interest income
Sensitivity
of other
comprehensive
income
GEL 15 (1,427) (1,452)
EUR 2 (242) –
USD 3 (13) –
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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29. Risk management continued
Market risk continued
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The Management Board has set limits on positions by currency based on the NBG regulations. Positions are monitored daily.
The tables below indicate the currencies to which the Group had significant exposure at 31 December 2022 on its monetary assets
and liabilities. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Georgian Lari,
with all other variables held constant on the income statement. The reasonably possible movement of the currency rate against
the Georgian Lari is calculated as a standard deviation of daily changes in exchange rates over the 12 months. A negative amount
in the table reflects a potential net reduction in income statement or equity, while a positive amount reflects a net potential
increase. During the years ended 31 December 2022, 31 December 2021 and 31 December 2020, sensitivity analysis did not reveal
any significant potential effect on the Group’s equity.
Currency
2022 2021 2020
Change in
currency
rate in %
Effect on profit
before tax
Change in
currency
rate in %
Effect on profit
before tax
Change in
currency
rate in %
Effect on profit
before tax
EUR 13.4% 1,251 8.6% 209 15.1% 2,527
USD 10.9% 806 6.4% 1,027 13.0% 3,049
Prepayment risk
Prepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay or request
repayment earlier than expected, such as fixed rate mortgages when interest rates fall, or other credit facilities, for similar reasons.
The Group calculates the effect of early repayments by calculating the weighted average rates of early repayments across each
loan product individually, applying these historical rates to the outstanding carrying amount of respective products as at the
reporting date and multiplying by the weighted average effective annual interest rates for each product. The model does not make a
distinction between different reasons for repayment (e.g. relocation, refinancing or renegotiation) and takes into account the effect
of any prepayment penalties on the Group’s income.
The estimated effect of prepayment risk on net interest income of the Group for the years ended 31 December 2022, 31 December
2021 and 31 December 2020, is as follows:
Effect on net
interest income
2022 (51,899)
2021 (52,552)
2020 (40,748)
Operational risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform,
operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot
expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks,
the Group is able to manage the risks. Controls include effective segregation of duties, access, authorisation and reconciliation
procedures, staff education and assessment processes, including the use of Internal Audit.
Operating environment
Most of the Group’s business is concentrated in Georgia. As an emerging market, Georgia does not possess a well-developed
business and regulatory infrastructure that would generally exist in a more mature market economy. Operations in Georgia may
involve risks that are not typically associated with those in developed markets (including the risk that the Georgian Lari is not freely
convertible outside the country, and that Georgia has undeveloped debt and equity markets). However, over the last few years the
Georgian Government has made a number of developments that positively affect the overall investment climate of the country,
specifically implementing the reforms necessary to create banking, judicial, taxation and regulatory systems.
This includes the adoption of a new body of legislation (including a new tax code and procedural laws). In the view of the Board,
these steps contribute to mitigating the risks of doing business in Georgia.
The existing tendency aimed at the overall improvement of the business environment is expected to persist. The future stability
of the Georgian economy is largely dependent upon these reforms and developments, and the effectiveness of economic, financial
and monetary measures undertaken by the Government. However, the Georgian economy is vulnerable to market downturns and
economic slowdowns elsewhere in the world.
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29. Risk management continued
Emerging risks
Information compiled from all the businesses is examined and processed in order to analyse, control and identify emerging risks.
The Group has identified climate risk as an emerging risk. Climate-related risk is the risk of financial loss and/or damage to the
Group’s reputation as a result of accelerating transition to a lower-carbon economy as well as the materialisation of actual physical
damage as a result of acute or chronic weather events. Among other things, transitional and physical risks may impact
the performance and financial position of our customers and their ability to repay their loans.
The Bank conducted a qualitative analysis to understand how, under different scenarios, the transition and physical effects of
climate change can drive credit, liquidity, capital, market, operational and reputational risk for the Bank over ‘short-term’ (i.e. one
to two years) to ‘very long-term’ (i.e. over eight years) time horizons. Risks are perceived to be low over the coming years. However,
reputational risks can occur if our climate action lacks ambition and credibility. Moreover, the Bank conducted a qualitative analysis
of the transition and physical risks for the sectors in which our corporate and MSME clients are active. The results of this analysis
showed that although both strong climate policy (transition risks) and untamed climate change (physical risks) can negatively affect
borrowers’ repayment capacity and value of collateral in the future (from 2030 and beyond), risks over the next years are expected
to be low for our commercial portfolio and are not likely to affect current expectations of credit loss. We thus do not currently
consider the impacts of climate change in individual clients’ credit risk assessment. However, we have started collecting data from
clients to refine our assessment of their climate-related risks as part of standard due diligence. Transition and physical risks for
retail clients still have to be assessed.
Overall, many of the effects of climate change will be longer term in nature, with an inherent level of uncertainty, and have no effect
on accounting judgements and estimates for the current period. As a result, there are no additional notes provided in the financial
statements. Potential impacts of climate-related risks will be subject to further analysis in the future.
The Group acknowledges climate change risk as an emerging risk. For further details please refer to principal risks and uncertainties
on page 81.
The Group has described climate-related risks in line with the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations in the climate-related disclosures on pages 103 to 117.
30. Fair value measurements
Fair value hierarchy
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability. The following tables show analysis of assets and liabilities measured at fair value or
for which fair values are disclosed by level of the fair value hierarchy:
At 31 December 2022 Level 1 Level 2 Level 3 Total
Assets measured at fair value
Total investment properties – – 166,546 166,546
Land
– – 9,008 9,008
Residential properties
– – 112,890 112,890
Non-residential properties
– – 44,648 44,648
Investment securities 5,285 3,960,360 5,547 3,971,192
Other assets – derivative financial assets – 39,270 – 39,270
Other assets – investment securities at FVTPL 2,660 – – 2,660
Assets for which fair values are disclosed
Cash and cash equivalents 3,584,843 – – 3,584,843
Amounts due from credit institutions – 2,433,028 – 2,433,028
Loans to customers and finance lease receivables – – 16,266,826 16,266,826
Liabilities measured at fair value
Other liabilities – derivative financial liabilities – 59,020 – 59,020
Liabilities for which fair values are disclosed
Client deposits and notes – 18,228,352 – 18,228,352
Amounts owed to credit institutions – 4,033,727 1,209,141 5,242,868
Debt securities issued – 490,559 151,808 642,367
Lease liability – 13,068 104,670 117,738
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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30. Fair value measurements continued
Fair value hierarchy continued
At 31 December 2021 Level 1 Level 2 Level 3 Total
Assets measured at fair value
Total investment properties – – 226,849 226,849
Land
– – 11,762 11,762
Residential properties
– – 152,167 152,167
Non-residential properties
– – 62,920 62,920
Investment securities 5,823 2,586,152 3,689 2,595,664
Other assets – derivative financial assets – 135,079 – 135,079
Other assets – investment securities at FVTPL 2,146 – – 2,146
Assets for which fair values are disclosed
Cash and cash equivalents 1,520,562 – – 1,520,562
Amounts due from credit institutions – 1,931,390 – 1,931,390
Loans to customers and finance lease receivables – – 15,787,725 15,787,725
Liabilities measured at fair value
Other liabilities – derivative financial liabilities – 7,865 – 7,865
Liabilities for which fair values are disclosed
Client deposits and notes – 14,013,500 – 14,013,500
Amounts owed to credit institutions – 3,635,353 683,092 4,318,445
Debt securities issued – 1,310,806 280,109 1,590,915
Lease liability 35 3,574 90,760 94,369
At 31 December 2020 Level 1 Level 2 Level 3 Total
Assets measured at fair value
Total investment properties – – 231,241 231,241
Land
– – 10,981 10,981
Residential properties
– – 147,585 147,585
Non-residential properties
– – 72,675 72,675
Investment securities 3,229 2,539,092 2,076 2,544,397
Other assets – derivative financial assets – 9,154 – 9,154
Other assets – investment securities at FVTPL 5,731 – – 5,731
Assets for which fair values are disclosed
Cash and cash equivalents 1,970,955 – – 1,970,955
Amounts due from credit institutions – 2,016,005 – 2,016,005
Loans to customers and finance lease receivables – – 13,896,221 13,896,221
Liabilities measured at fair value
Other liabilities – derivative financial liabilities – 247,520 – 247,520
Liabilities for which fair values are disclosed
Client deposits and notes – 14,007,521 – 14,007,521
Amounts owed to credit institutions – 2,899,263 436,703 3,335,966
Debt securities issued – 1,402,958 241,976 1,644,934
Lease liability – – 103,012 103,012
The following is a description of the determination of fair value for financial instruments which are recorded at fair value using
valuation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing
the instruments.
Derivative financial instruments
Derivative financial instruments valued using a valuation technique with market observable inputs are mainly interest rate swaps,
currency swaps, forward foreign exchange contracts and option contracts. The most frequently applied valuation techniques
include forward pricing and swap models, using present value calculations, as well as standard option pricing models. The models
incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate
curves and implied volatilities.
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30. Fair value measurements continued
Fair value hierarchy continued
Trading securities and investment securities
Trading securities and a certain part of investment securities are quoted equity and debt securities. Investment securities
valued using a valuation technique or pricing models consist of unquoted equity and debt securities. These securities are valued
using models which sometimes only incorporate data observable in the market and at other times use both observable and
non-observable data. The non-observable inputs to the models include assumptions regarding the future financial performance
of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the
investee operates.
Assets and liabilities not measured at fair value but for which fair value is disclosed
The fair values in the level 2 and level 3 of the fair value hierarchy are estimated using the discounted cash flows valuation technique.
Current interest rates for new instruments with similar credit risk, currency and remaining maturity is used as discount rate in the
valuation model.
Movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets which are recorded at
fair value:
At 31 December
2019
Purchase of
securities
At 31 December
2020
Purchase of
securities
At 31 December
2021
Purchase of
securities
At 31 December
2022
Level 3 financial assets
Equity investment securities 973 1,103 2,076 1,613 3,689 1,858 5,547
Movements in Level 3 non-financial assets measured at fair value
All investment properties are Level 3. Reconciliations of their opening and closing amounts are provided in Note 14.
Impact on fair value of Level 3 financial instruments measured at fair value of changes to key assumptions
The following table shows the impact on the fair value of Level 3 instruments of using reasonably possible alternative assumptions:
2022 2021 2020
Carrying
amount
Effect of
reasonably
possible
alternative
assumptions
Carrying
amount
Effect of
reasonably
possible
alternative
assumptions
Carrying
amount
Effect of
reasonably
possible
alternative
assumptions
Level 3 financial assets
Equity investment securities 5,547 +/- 826 3,689 +/- 549 2,076 +/- 309
In order to determine reasonably possible alternative assumptions, the Group’s adjusted key unobservable model inputs are
as follows:
For equities, the Group adjusted the price-over-book-value multiple by increasing and decreasing the ratio by 10%, which is
considered by the Group to be within a range of reasonably possible alternatives based on the price-over-book-value multiples used
across peers within the same geographic area of the same industry.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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30. Fair value measurements continued
Fair value hierarchy continued
Description of significant unobservable inputs to valuations of non-financial assets
The following tables show descriptions of significant unobservable inputs to Level 3 valuations of investment properties:
2022
Valuation
technique
Significant
unobservable
inputs MIN MAX
Weighted
average
Other key
information MIN MAX
Weighted
average
Investment
property
166,546
Land 9,008
Development
land
6,872 Market
approach
Price per
square
metre
0.012 2.220 1.033 Square
metres,
land
32 20,000 4,026
Agricultural
land
2,136 Income
approach
Rent per
square
metre
0.006 0.006 0.006 Square
metres,
land
5,178 26,796 23,295
Occupancy
rate
65% 65% 65%
Market
approach
Price per
square
metre
0.001 0.709 0.337 Square
metres,
land
310 140,000 19,296
Residential
properties
112,890 Market
approach
Price per
square
metre
0.049 5.466 1.004 Square
metres,
building
18 3,170 225
Non-residential
properties
44,648
40,611 Market
approach
Price per
square
metre
22.870 3,838.861 1,321.071 Square
metres,
land
50 23,884 2,684
Square
metres,
building
32 3,000 984
4,037 Income
approach
Rent per
square
metre
0.006 0.006 0.006 Square
metres,
building
1,701 12,706 358
Occupancy
rate
65% 65% 65%
* Price, rate and cost of unobservable inputs in this table are presented in Georgian Lari (“GEL”), unless otherwise indicated.
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30. Fair value measurements continued
Fair value hierarchy continued
Description of significant unobservable inputs to valuations of non-financial assets continued
Set out below is an overview of all financial instruments, other than cash and short-term deposits, held by the Group as at
31 December 2022, 31 December 2021 and 31 December 2020:
At 31 December 2022
Amortised
cost FVOCI FVTPL
Financial assets
Cash and cash equivalents 3,584,843 – –
Amounts due from credit institutions 2,433,028 – –
Loans to customers and finance lease receivables 16,861,706 – –
Accounts receivable and other loans 397,990 – –
Equity instruments – 10,893 –
Debt instruments 378,537 3,960,299 –
Interest rate contracts – – 348
Foreign currency derivative financial instruments – – 38,922
Investment securities at FVTPL – – 2,660
Total 23,656,104 3,971,192 41,930
Financial liabilities
Client deposits and notes 18,261,397 – –
Amounts owed to credit institutions 5,266,653 – –
Debt securities issued 645,968 – –
Lease liability 114,470 – –
Trade and other payables (in other liabilities) 68,721 – –
Foreign currency derivative financial instruments – – 59,020
Total 24,357,209 – 59,020
At 31 December 2021 At 31 December 2020
Amortised
cost FVOCI FVTPL
Amortised
cost FVOCI FVTPL
Financial assets
Cash and cash equivalents 1,520,562 – – 1,970,955 – –
Amounts due from credit institutions 1,931,390 – – 2,016,005 – –
Loans to customers and finance lease
receivables 16,168,973 – – 14,192,078 – –
Accounts receivable and other loans 3,680 – – 2,420 – –
Equity instruments – 9,581 – – 5,378 –
Debt instruments – 2,586,083 – – 2,539,019 –
Interest rate contracts – – 2,827 – – 1,549
Foreign currency derivative financial
instruments – – 132,252 – – 7,605
Investment securities at FVTPL – – 2,146 – – 5,731
Total 19,624,605 2,595,664 137,225 18,181,458 2,544,397 14,885
Financial liabilities
Client deposits and notes 14,038,002 – – 14,020,209 – –
Amounts owed to credit institutions 4,318,445 – – 3,335,966 – –
Debt securities issued 1,518,685 – – 1,585,545 – –
Lease liability 87,662 – – 95,635 – –
Trade and other payables (in other liabilities) 56,223 – – 53,952 – –
Interest rate contracts – – 1,385 – – 1,102
Foreign currency derivative financial
instruments – – 6,480 – – 246,418
Total 20,019,017 – 7,865 19,091,307 – 247,520
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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30. Fair value measurements continued
Fair value of financial instruments that are carried in the financial statements not at fair value
Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments that are carried
in the financial statements. The table does not include the fair values of non-financial assets and non-financial liabilities, fair values
of other smaller financial assets and financial liabilities, or cash and short-term deposits, fair values of which are materially close to
their carrying values.
2022
Carrying value Fair value
Unrecognised
gain/(loss)
Financial assets
Cash and cash equivalents 3,584,843 3,584,843 –
Amounts due from credit institutions 2,433,028 2,433,028 –
Loans to customers and finance lease receivables 16,861,706 16,266,826 (594,880)
Financial liabilities
Client deposits and notes 18,261,397 18,228,352 33,045
Amounts owed to credit institutions 5,266,653 5,242,868 23,785
Debt securities issued 645,968 642,367 3,601
Lease liability 114,470 117,738 (3,268)
Total unrecognised change in unrealised fair value (537,717)
2021 2020
Carrying value Fair value
Unrecognised
gain/(loss) Carrying value Fair value
Unrecognised
gain/(loss)
Financial assets
Cash and cash equivalents 1,520,562 1,520,562 – 1,970,955 1,970,955 –
Amounts due from credit institutions 1,931,390 1,931,390 – 2,016,005 2,016,005 –
Loans to customers and finance lease
receivables 16,168,973 15,787,725 (381,248) 14,192,078 13,896,221 (295,857)
Financial liabilities
Client deposits and notes 14,038,002 14,013,500 24,502 14,020,209 14,007,521 12,688
Amounts owed to credit institutions 4,318,445 4,318,445 – 3,335,966 3,335,966 –
Debt securities issued 1,518,685 1,590,915 (72,230) 1,585,545 1,644,934 (59,389)
Lease liability 87,662 94,369 (6,707) 95,635 103,012 (7,377)
Total unrecognised change in unrealised
fair value (435,683) (349,935)
The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are
not already recorded at fair value in the consolidated financial statements.
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months), it is assumed that
the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without
a specific maturity, and variable rate financial instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest
rates when they were first recognised with current market rates offered for similar financial instruments. The estimated fair value of
fixed interest-bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar
credit risk and maturity. For financial assets and financial liabilities maturing in less than a year, it is assumed that the carrying
amounts approximate to their fair value.
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31. Maturity analysis of financial assets and liabilities
The table below shows an analysis of financial assets and liabilities according to their contractual maturities, except for current
accounts and credit card loans as described below. See Note 29 “Risk management” for the Group’s contractual undiscounted
repayment obligations.
At 31 December 2022
On
demand
Up to
3 months
Up to
6 months
Up to
1 year
Up to
3 years
Up to
5 years
Over
5 years Total
Financial assets
Cash and cash equivalents 2,853,938 730,905 – – – – – 3,584,843
Amounts due from credit
institutions 2,396,574 733 2,257 2,885 8,986 1,291 20,302 2,433,028
Investment securities 953,357 2,315,414 536,088 217,956 142,195 182,498 2,221 4,349,729
Loans to customers and
finance lease receivables 4,204 2,087,706 1,238,926 2,103,947 4,575,809 2,420,979 4,430,135 16,861,706
Accounts receivable and
other loans 2,057 375,736 35 1,518 18,644 – – 397,990
Total 6,210,130 5,510,494 1,777,306 2,326,306 4,745,634 2,604,768 4,452,658 27,627,296
Financial liabilities
Client deposits and notes 5,406,670 2,812,580 1,298,966 6,963,532 1,229,394 283,703 266,552 18,261,397
Amounts owed to credit
institutions 701,207 2,599,102 168,560 396,759 677,401 363,797 359,827 5,266,653
Debt securities issued – 7,816 51,107 281,519 109,683 195,843 – 645,968
Lease liability – 6,899 7,161 14,146 46,624 26,963 12,677 114,470
Total 6,107,877 5,426,397 1,525,794 7,655,956 2,063,102 870,306 639,056 24,288,488
Net 102,253 84,097 251,512 (5,329,650) 2,682,532 1,734,462 3,813,602 3,338,808
Accumulated gap 102,253 186,350 437,862 (4,891,788) (2,209,256) (474,794) 3,338,808
At 31 December 2021
On
demand
Up to
3 months
Up to
6 months
Up to
1 year
Up to
3 years
Up to
5 years
Over
5 years Total
Financial assets
Cash and cash equivalents 1,291,890 228,672 – – – – – 1,520,562
Amounts due from credit
institutions 1,893,732 8,003 7,74 4 – 9,652 3,540 8,719 1,931,390
Investment securities 1,162,051 1,282,493 7,478 12,486 39,734 88,776 2,646 2,595,664
Loans to customers and
finance lease receivables 2,966 3,046,387 926,061 1,976,611 4,005,985 2,281,105 3,929,858 16,168,973
Accounts receivable and
other loans 261 1,608 9 1,802 – – – 3,680
Total 4,350,900 4,567,163 941,292 1,990,899 4,055,371 2,373,421 3,941,223 22,220,269
Financial liabilities
Client deposits and notes 2,455,123 2,783,998 1,177,931 6,048,073 852,196 454,304 266,377 14,038,002
Amounts owed to credit
institutions 170,410 1,638,683 221,013 355,637 996,956 526,697 409,049 4,318,445
Debt securities issued – 37,515 16,364 233,824 1,008,104 222,878 – 1,518,685
Lease liability – 6,198 5,782 10,355 35,238 22,808 7,281 87,662
Total 2,625,533 4,466,394 1,421,090 6,647,889 2,892,494 1,226,687 682,707 19,962,794
Net 1,725,367 100,769 (479,798) (4,656,990) 1,162,877 1,146,734 3,258,516 2,257,475
Accumulated gap 1,725,367 1,826,136 1,346,338 (3,310,652) (2,147,775) (1,001,041) 2,257,475
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
31. Maturity analysis of financial assets and liabilities continued
At 31 December 2020
On
demand
Up to
3 months
Up to
6 months
Up to
1 year
Up to
3 years
Up to
5 years
Over
5 years Total
Financial assets
Cash and cash equivalents 1,452,379 518,576 – – – – – 1,970,955
Amounts due from credit
institutions 1,987,538 12,054 539 1,931 4,161 1,203 8,579 2,016,005
Investment securities 309,234 2,101,428 23,996 11,165 12,013 31,404 55,157 2,544,397
Loans to customers and
finance lease receivables – 2,671,296 842,716 1,594,714 3,482,213 2,189,857 3,411,282 14,192,078
Accounts receivable and
other loans 101 1,942 29 348 – – – 2,420
Total 3,749,252 5,305,296 867,280 1,608,158 3,498,387 2,222,464 3,475,018 20,725,855
Financial liabilities 2,167,103 3,761,867 1,164,650 5,349,181 971,894 345,709 259,805 14,020,209
Client deposits and notes 196,049 781,139 225,093 558,857 721,802 501,080 351,946 3,335,966
Amounts owed to credit
institutions – 72,550 36,352 98,412 1,144,567 46,258 187,406 1,585,545
Debt securities issued – 6,229 6,234 11,846 34,630 22,802 13,894 95,635
Lease liability
Total 2,363,152 4,621,785 1,432,329 6,018,296 2,872,893 915,849 813,051 19,037,355
Net 1,386,100 683,511 (565,049) (4,410,138) 625,494 1,306,615 2,661,967 1,688,500
Accumulated gap 1,386,100 2,069,611 1,504,562 (2,905,576) (2,280,082) (973,467) 1,688,500
The Group’s capability to discharge its liabilities relies on its ability to realise equivalent assets within the same period of time.
In the Georgian marketplace, where most of the Group’s business is concentrated, many short-term credits are granted with
the expectation of renewing the loans at maturity. As such, the ultimate maturity of assets may be different from the analysis
presented above. To reflect the historical stability of current accounts, the Group calculates the minimal daily balance of current
accounts over the past two years and includes the amount in the ‘Up to 1 year’ category in the table above. The remaining current
accounts are included in the ‘On demand’ category. To match the coverage of short-term borrowings from the NBG with the
investment securities pledged to secure it, those securities are included in the ‘On demand’ category. Considering credit cards
have no contractual maturities, the above allocation per category is done based on the statistical coverage rates observed.
The Group’s principal sources of liquidity are as follows:
• deposits;
• borrowings from international credit institutions;
• inter-bank deposit agreements;
• debt issues;
• proceeds from sale of securities;
• principal repayments on loans;
• interest income; and
• fees and commissions income.
As at 31 December 2022, client deposits and notes amounted to GEL 18,261,397 (2021: GEL 14,038,002, 2020: GEL 14,020,209) and
represented 74% (2021: 69%, 2020: 72%) of the Group’s total liabilities. These funds continue to provide a majority of the Group’s
funding and represent a diversified and stable source of funds. As at 31 December 2022, amounts owed to credit institutions
amounted to GEL 5,266,653 (2021: GEL 4,318,445, 2020: GEL 3,335,966) and represented 21% (2021: 21%, 2020: 17%) of total
liabilities. As at 31 December 2022, debt securities issued amounted to GEL 645,968 (2021: GEL 1,518,685, 2020: GEL 1,585,545)
and represented 3% (2021: 7%, 2020: 8%) of total liabilities.
In the Board’s opinion, liquidity is sufficient to meet the Group’s present requirements.
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31. Maturity analysis of financial assets and liabilities continued
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled,
except for current accounts which are included in the 'Up to 1 year' category in the table above, noting that respective contractual
maturity may expand over significantly longer periods:
At 31 December 2022
Less than
1 year
More than
1 year Total
Cash and cash equivalents 3,584,843 – 3,584,843
Amounts due from credit institutions 2,402,449 30,579 2,433,028
Investment securities 4,022,815 326,914 4,349,729
Loans to customers and finance lease receivables 5,434,783 11,426,923 16,861,706
Accounts receivable and other loans 379,346 18,644 397,990
Prepayments 40,020 3,592 43,612
Inventories 17,096 – 17,096
Right-of-use assets – 117,387 117,387
Investment properties – 166,546 166,546
Property and equipment – 398,855 398,855
Goodwill – 33,351 33,351
Intangible assets – 149,441 149,441
Income tax assets 224 640 864
Other assets 189,080 128,806 317,886
Assets held for sale 29,566 – 29,566
Total assets 16,110,222 12,801,678 28,901,900
Client deposits and notes 16,481,748 1,779,649 18,261,397
Amounts owed to credit institutions 3,865,628 1,401,025 5,266,653
Debt securities issued 340,442 305,526 645,968
Lease liability 28,206 86,264 114,470
Accruals and deferred income 73,660 32,706 106,366
Income tax liabilities 20,258 79,275 99,533
Other liabilities 157,948 743 158,691
Total liabilities 20,967,890 3,685,188 24,653,078
Net (4,867,668) 9,116,490 4,248,822
At 31 December 2021 At 31 December 2020
Less than
1 year
More than
1 year Total
Less than
1 year
More than
1 year Total
Cash and cash equivalents 1,520,562 – 1,520,562 1,970,955 – 1,970,955
Amounts due from credit institutions 1,909,479 21,911 1,931,390 2,002,062 13,943 2,016,005
Investment securities 2,464,508 131,156 2,595,664 2,445,823 98,574 2,544,397
Loans to customers and finance lease
receivables 5,952,025 10,216,948 16,168,973 5,108,726 9,083,352 14,192,078
Accounts receivable and other loans 3,680 – 3,680 2,420 – 2,420
Prepayments 39,276 1,602 40,878 26,467 1,126 27,593
Inventories 11,514 – 11,514 10,340 – 10,340
Right-of-use assets – 80,186 80,186 – 83,208 83,208
Investment properties – 226,849 226,849 – 231,241 231,241
Property and equipment – 378,808 378,808 – 387,851 387,851
Goodwill – 33,351 33,351 – 33,351 33,351
Intangible assets – 144,251 144,251 – 125,806 125,806
Income tax assets 109 183 292 21,841 192 22,033
Other assets 235,049 11,898 246,947 288,602 37,392 325,994
Assets held for sale 46,731 – 46,731 62,648 – 62,648
Total assets 12,182,933 11,247,143 23,430,076 11,939,884 10,096,036 22,035,920
Client deposits and notes 12,465,125 1,572,877 14,038,002 12,442,801 1,577,408 14,020,209
Amounts owed to credit institutions 2,385,743 1,932,702 4,318,445 1,761,138 1,574,828 3,335,966
Debt securities issued 287,703 1,230,982 1,518,685 207,314 1,378,231 1,585,545
Lease liability 22,335 65,327 87,662 24,309 71,326 95,635
Accruals and deferred income 53,346 26,811 80,157 30,536 23,358 53,894
Income tax liabilities 85,270 25,598 110,868 – 62,434 62,434
Other liabilities 182,070 1,279 183,349 306,299 26,023 332,322
Total liabilities 15,481,592 4,855,576 20,337,168 14,772,397 4,713,608 19,486,005
Net (3,298,659) 6,391,567 3,092,908 (2,832,513) 5,382,428 2,549,915
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
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Financial Statements Additional Information
32. Related party disclosures
In accordance with IAS 24 ‘Related Party Disclosures’, parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making financial or operational decisions. In considering each
possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not
be affected on the same terms, conditions and amounts as transactions between unrelated parties. All transactions with related
parties disclosed below have been conducted on an arm’s length basis.
The volumes of related party transactions, outstanding balances at the year-end, and related expenses and income for the year
are as follows:
At 31 December 2022 At 31 December 2021 At 31 December 2020
Associates
Key
management
personnel* Associates
Key
management
personnel* Associates
Key
management
personnel*
Loans outstanding at 1 January, gross – 12,050 – 10,646 – 6,718
Loans issued during the year – 7,090 – 8,944 – 7,798
Loan repayments during the year – (7,246) – (6,531) – (5,322)
Other movements – (2,075) – (1,009) – 1,452
Loans outstanding at 31 December, gross – 9,819 – 12,050 – 10,646
Less: allowance for impairment at
31 December – (67) – (27) – (9)
Loans outstanding at 31 December, net – 9,752 – 12,023 – 10,637
Interest income on loans – 745 – 644 – 424
Expected credit loss – (200) – – – (69)
Deposits at 1 January 202 31,127 166 32,619 3 30,475
Deposits received during the year – 9,212 36 21,490 163 23,211
Deposits repaid during the year – (15,773) – (32,337) – (19,565)
Other movements 41 (11,933) – 9,355 – (1,502)
Deposits at 31 December 243 12,633 202 31,127 166 32,619
Interest expense on deposits – (959) – (1,368) – (1,249)
* Key management personnel includes members of BOGG’s Board of Directors and key executives of the Group.
Details of Directors’ emoluments are included in the Remuneration Report on pages 202 to 222. Compensation of key management
personnel comprised the following:
2022 2021 2020
Salaries and other benefits 11,841 12,915 11,932
Share-based payments compensation 58,208 25,048 27,188
Social security costs – – –
Total key management compensation 70,049 37,963 39,120
Key management personnel do not receive cash-settled compensation, except for fixed salaries. The major part of the total
compensation is share-based (Note 28). The number of key management personnel at 31 December 2022 was 23 (31 December 2021:
21, 31 December 2020: 20).
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342
33. Capital adequacy
The Group maintains an actively managed capital base to cover risks inherent to the business. The adequacy of the Group’s capital
is monitored using, among other measures, the ratios established by the NBG in supervising the Bank.
During the year ended 31 December 2022, the Bank and the Group complied in full with all its externally imposed capital
requirements.
The primary objectives of the Group’s capital management are to ensure that the Bank complies with externally imposed capital
requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and
to maximise shareholder value. The Group manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were
made in the objectives, policies and processes from the previous years.
NBG (Basel III) capital adequacy ratio
In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy requirements, including
amendments to the regulation on capital adequacy requirements for commercial banks, and introduced new requirements on the
determination of the countercyclical buffer rate, on the identification of systematically important banks, on determining systemic
buffer requirements and on additional capital buffer requirements for commercial banks within Pillar 2. The NBG requires the Bank
to maintain a minimum total capital adequacy ratio of risk-weighted assets, computed based on the Bank’s standalone special-
purpose financial statements prepared in accordance with NBG regulations and pronouncements, based on Basel III requirements.
As at 31 December 2022, 31 December 2021 and 31 December 2020, the Bank’s capital adequacy ratio on this basis was as follows:
2022 2021 2020
Tier 1 capital 3,388,048 2,691,000 1,989,190
Tier 2 capital 618,232 784,800 830,145
Total capital 4,006,280 3,475,800 2,819,335
Risk-weighted assets 20,279,424 17,977,949 16,040,094
Tier 1 capital ratio 16.7% 15.0% 12.4%
Total capital ratio 19.8% 19.3% 17.6%
Min. requirement for Tier 1 capital ratio 13.8% 13.6% 9.2%
Min. requirement for Total capital ratio 17.2% 17.7% 13.8%
34. Events after the reporting period
On 16 February 2023, the Group’s Board of Directors approved a GEL 148 million share buyback and cancellation programme which
commenced from 16 February 2023. The shares will be purchased in the open market. The purpose of the buyback is to reduce the
share capital, and the cancellation of the treasury shares will be executed on a monthly basis.
Notes to Consolidated
Financial Statements continued
(Thousands of Georgian Lari)
343
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ADDITIONAL
INFORMATION
Annual Report 2022 Bank of Georgia Group PLC
344
GRI content index
Bank of Georgia Group PLC has reported the information cited in this GRI content index for the period (1 January 2022–
31 December 2022) with reference to the GRI Standards.
GRI 1 used
GRI 1: Foundation 2021
GRI indicator Description Report section or other documentation
GRI 2: General Disclosures 2021
The organization and its reporting practices
2-1 Organizational details About Us (page 01)
2-2 Entities included in the organization’s
sustainability reporting
Sustainable Business (page 85)
Notes to Consolidated Financial Statements
(pages 248 to 250)
2-3 Reporting period, frequency and
contact point
Sustainable Business (page 85)
2-4 Restatements of information Not applicable
2-5 External assurance We have not sought external
assurance for sustainability reporting
Activities and workers
2-6 Activities, value chain, and other business
relationships
About Us (page 01)
Our Purpose and Strategy Framework
(pages 18 to 19)
2-7 Employees Sustainable Business (page 122)
2-8 Workers who are not employees Sustainable Business (page 122)
Governance
2-9 Governance structure
and composition
Directors’ Governance Statement
(pages 171 to 178)
Board of Directors (pages 179 to 181)
2-10 Nomination and selection of the
highest governance body
Nomination Committee Report
(pages 186 to 191)
2-11 Chair of the highest governance body Directors’ Governance Statement (page 171)
Board of Directors (page 179)
2-12 Role of the highest governance body
in overseeing the management
of impacts
Directors’ Governance Statement
(pages 172 to 174; pages 177 to 178)
2-13 Delegation of responsibility for
managing impacts
Sustainable Business (page 89)
Directors’ Governance Statement
(pages 171 to 173; pages 177 to 178)
2-14 Role of the highest governance body
in sustainability reporting
Sustainable Business (pages 85 and 89)
Directors’ Governance Statement (page 174)
Audit Committee Report (page 194)
2-15 Conflicts of interest Audit Committee Report (page 196)
Directors’ Remuneration Report
(page 219; page 205)
Directors’ Report (page 226)
2-16 Communication of critical concerns Audit Committee Report (page 196)
2-17 Collective knowledge of the highest
governance body
Nomination Committee Report
(page 187)
2-18 Evaluation of the performance
of the highest governance body
Directors’ Governance Statement
(pages 177 to 178)
2-19 Remuneration policies Directors’ Remuneration Report
(pages 202 to 222)
2-20 Process to determine remuneration Directors’ Remuneration Report
(pages 202 to 222)
2-21 Annual total compensation ratio Directors’ Remuneration Report
(page 211; page 213)
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GRI indicator Description Report section or other documentation
Strategy, Policies and Practices
2-22 Statement on sustainable
development strategy
Chairman’s Statement (page 08)
Chief Executive Officer’s Statement
(page 10)
Sustainable Business (pages 85 to 86)
2-23 Policy commitments https://bankofgeorgiagroup.com/
governance/documents
Sustainable Business (pages 84 to 148)
2-24 Embedding policy commitments Risk Management (pages 56 to 61)
Principal Risks and Uncertainties
(pages 62 to 81)
Sustainable Business (pages 84 to 148)
Directors’ Governance Statement
(pages 171 to 178)
2-25 Processes to remediate negative impacts Principal Risks and Uncertainties
(pages 62 to 81)
Sustainable Business (page 88; pages 141
to 145)
2-26 Mechanisms for seeking advice and
raising concerns
Sustainable Business (pages 87 to 88;
page 123)
https://bankofgeorgiagroup.com/
governance/documents
2-27 Compliance with laws and regulations Principal Risks and Uncertainties
(page 71)
Sustainable Business (pages 141 to 142)
2-28 Membership associations Sustainable Business (page 90)
Stakeholder Engagement
2-29 Approach to stakeholder engagement Engaging with our stakeholders for shared
success (pages 20 to 21)
Section 172(1) statement (pages 149 to 151)
2-30 Collective bargaining agreements Not applicable
Sustainable Business (page 88)
GRI 3: Material Topics
GRI 3: Material Topics
3-1 Process to determine material topics Sustainable Business (page 85)
3-2 List of material topics Sustainable Business (page 85)
Annual Report 2022 Bank of Georgia Group PLC
346
Topic-specific disclosures
GRI indicator Description Report section or other documentation
GRI 200: Economic
GRI 201: Economic Performance 2016
GRI 3: Material topics 2021 3-3 Management of material topics Our Purpose and Strategy Framework
(pages 18 to 19)
Strategy and Performance
(pages 22 to 46)
Sustainable Business (pages 84 to 148)
201-1 Direct economic value generated and
distributed
Overview of Financial Results
(pages 154 to 167)
201-2 Financial implications and other risks and
opportunities due to climate change
Sustainable Business (pages 95 to 117)
GRI 203: Indirect Economic Performance 2016
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 85 to 87;
pages 93 to 94)
203-2 Significant indirect economic impacts Sustainable Business (pages 85 to 87;
pages 93 to 94)
GRI 205: Anti-corruption 2016
GRI 3: Material topics 2021 3-3 Management of material topics Principal Risks and Uncertainties
(pages 72 to 73)
Sustainable Business (page 88)
205-3 Confirmed incidents of corruption
and actions taken
Sustainable Business (page 88)
GRI 400: Social
GRI 401: Employment 2016
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 122 to 134)
401-1 New employee hires and employee turnover Sustainable Business (page 127)
401-3 Parental leave Sustainable Business (page 125)
GRI 404: Training and Education 2016
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 127 to 131)
404-1 Average hours of training per year per
employee
Sustainable Business (page 131)
404-3 Percentage of employees receiving regular
performance and career development
reviews
Sustainable Business (page 129)
GRI 405: Diversity and Equal Opportunity 2016
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 91 to 92)
https://bankofgeorgiagroup.com/
governance/documents
405-1 Diversity of governance bodies and
employees
Sustainable Business (page 122)
Nomination Committee Report
(page 187)
405-2 Ratio of the basic salary and remuneration
of women to men
Sustainable Business (page 124)
GRI 418: Customer Privacy 2016
GRI 3: Material topics 2021 3-3 Management of material topics Principal Risks and Uncertainties
(pages 72 to 76)
Sustainable Business (pages 144 to 145)
418-1 Substantiated complaints concerning
breaches of customer privacy and losses
of customer data
Sustainable Business (page 145)
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Financial Statements Additional Information
GRI indicator Description Report section or other documentation
Non-GRI Disclosures
Customer protection
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business
(page 121)
Topic-specific indicator NPS Sustainable Business (page 120)
Customer experience
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business
(page 120)
Topic-specific indicator NPS Sustainable Business (page 120)
Financial inclusion and empowerment
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 92 to 94)
Topic-specific indicator Digital MAU;
Payments MAU;
sCoolApp MAU;
Number of self-employed borrowers
Sustainable Business (page 86)
Product innovation
GRI 3: Material topics 2021 3-3 Management of material topics Business Model and Strategy
(pages 24 to 25; pages 40 to 41)
Topic-specific indicator Number of active digital users;
Number of mBank/iBank
transactions;
Offloading rate
Key Performance Indicators
(pages 54 to 55)
Ethical business
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 87 to
page 88)
Topic-specific indicator Number of ethics-related concerns received Sustainable Business (page 87)
Climate, environmental, and social management of loan portfolio
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (page 97; page 101)
Topic-specific indicator % exposure to carbon-related assets
in loan portfolio;
% exposure to fossil fuel and coal-related
assets in loan portfolio
Sustainable Business (page 109)
Human rights
GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (page 87;
page 89)
Sustainable Business (page 91;
page 94)
Topic-specific indicator eNPS Sustainable Business (page 132)
Risk management
GRI 3: Material topics 2021 3-3 Management of material topics Risk Management (pages 56 to 61)
Topic-specific indicator Risk indicators Principal Risks and Uncertainties
(pages 62 to 81)
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348
References
The Bank, BOG, or
Bank of Georgia
JSC Bank of Georgia
The Company Bank of Georgia Group PLC
The Board The Board of Directors of Bank of Georgia Group PLC
The Code The UK Corporate Governance Code published in 2018
The Directors Members of the Board of Directors
The Group Bank of Georgia Group PLC and its group companies as a whole
Supervisory Board Supervisory Board of the Bank
Executive
Management
Management Team of the Group as presented on the Group’s website at https://bankofgeorgiagroup.com/
governance/people/management; in some contexts related to Bank of Georgia, it refers to Management Team
of the Bank as presented on the Bank’s website at https://bankofgeorgia.ge/en/about/management.
We/our/us References to ‘we’, ‘our’ or ‘us’ are primarily references to the Group throughout this Report. However, the Group
comprises and operates through its subsidiaries which are legal entities with their own relevant management
and governance structures (as set out in relevant parts of this Report). In that regard, when using ‘we’, ‘our’ or
‘us’ in the context of the banking business in Georgia, we refer to JSC Bank of Georgia. Likewise, ‘we’, ‘our’ or ‘us’
in the context of Georgian capital markets and investment banking activities, we refer to JSC Galt & Taggart,
unless otherwise specifically indicated in this Annual Report.
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Financial Statements Additional Information
Active merchant At least one transaction
executed within the past month;
Alternative performance measures
(APMs) In this announcement the
management uses various APMs, which
they believe provide additional useful
information for understanding the
financial performance of the Group.
These APMs are not defined by
International Financial Reporting
Standards, and also may not be directly
comparable with other companies
who use similar measures. We
believe that these APMs provide the
best representation of our financial
performance as these measures are used
by management to evaluate the Group’s
operating performance and make day-to-
day operating decisions;
Basic earnings per share Profit for the
year attributable to shareholders of the
Group divided by the weighted average
number of outstanding ordinary shares
over the same year;
Book value per share Total equity
attributable to shareholders of the Group
divided by ordinary shares outstanding at
year end; net ordinary shares outstanding
equals total number of ordinary shares
outstanding at year end less number of
treasury shares at year end;
Constant currency basis Changes
assuming constant exchange rate;
Cost of deposits Interest expense on
client deposits and notes of the period
divided by monthly average client deposits
and notes;
Cost of funds Interest expense of the
year divided by monthly average interest-
bearing liabilities;
Cost of credit risk Expected loss/
impairment charge for loans to customers
and finance lease receivables for the year
divided by monthly average gross loans to
customers and finance lease receivables
over the same year;
Cost to income ratio Operating expenses
divided by operating income;
Gross loans to customers throughout this
Annual Report are presented net of ECL
on contractually accrued interest income;
Interest-bearing liabilities Amounts owed
to credit institutions, client deposits and
notes, and debt securities issued;
Interest earning assets (excluding cash)
Amounts due from credit institutions,
investment securities (but excluding
corporate shares) and net loans to
customers and finance lease receivables;
Leverage (times) Total liabilities divided
by total equity;
Liquid assets Cash and cash equivalents,
amounts due from credit institutions and
investment securities;
Liquidity coverage ratio (LCR) High-
quality liquid assets (as defined by NBG)
divided by net cash outflow over the next
30 days (as defined by NBG);
Loan yield Interest income from loans to
customers and finance lease receivables
divided by monthly average gross loans to
customers and finance lease receivables;
Monthly active digital user (MAU) A user
with at least one login within past month
in mBank/iBank;
NBG (Basel III) Common Equity Tier I
(CET1) capital adequacy ratio Common
Equity Tier I capital divided by total
risk-weighted assets, both calculated in
accordance with the requirements of the
National Bank of Georgia;
NBG (Basel III) Tier I capital adequacy
ratio Tier I capital divided by total risk-
weighted assets, both calculated in
accordance with the requirements of the
National Bank of Georgia;
NBG (Basel III) Total capital adequacy
ratio Total regulatory capital divided
by total risk-weighted assets, both
calculated in accordance with the
requirements of the National Bank
of Georgia;
Net interest margin (NIM) Net interest
income for the year divided by monthly
average interest earning assets excluding
cash for the same year;
Net stable funding ratio (NSFR) Available
amount of stable funding (as defined by
NBG) divided by the required amount of
stable funding (as defined by NBG);
Net loans In all sections of the Annual
Report, except for the consolidated
audited financial statements, net loans
are defined as gross loans to customers
and finance lease receivables less
allowance for expected credit loss;
Non-performing loans (NPLs) The
principal and/or interest payments on
loans overdue for more than 90 days; or
the exposures experiencing substantial
deterioration of their creditworthiness
and the debtors assessed as unlikely
to pay their credit obligation(s) in full
without realisation of collateral.
NPL coverage ratio Allowance for
expected credit loss of loans to customers
and finance lease receivables divided
by NPLs;
NPL coverage ratio adjusted for
discounted value of collateral Allowance
for expected credit loss of loans to
customers and finance lease receivables
plus discounted value of collateral, divided
by NPLs;
One-off items Significant items that
do not arise during ordinary course of
business
Operating leverage Percentage change in
operating income less percentage change
in operating expenses;
Return on average total assets (ROAA)
Profit for the year divided by monthly
average total assets for the same year;
Return on average total equity (ROAE)
Profit for the year attributable to
shareholders of BOGG divided by
monthly average equity attributable to
shareholders of BOGG for the same year;
Weighted average number of ordinary
shares Average of daily outstanding
number of shares less daily outstanding
number of treasury shares;
Weighted average diluted number of
ordinary shares weighted average
number of ordinary shares plus weighted
average dilutive number of shares known
to management during the same year.
NMF Not meaningful
Glossary
Annual Report 2022 Bank of Georgia Group PLC
350
Our website
All shareholders and potential shareholders can gain access to the Annual Report, presentations to investors, key financial
information, regulatory news, share and dividend data, AGM documentation and other significant information about Bank of
Georgia Group PLC at http://www.bankofgeorgiagroup.com.
Our registered address
Bank of Georgia Group PLC
42 Brook Street
London W1K 5DB
United Kingdom
Annual General Meeting
The Annual General Meeting of Bank of Georgia Group PLC (the ‘AGM’) will be held at Baker & McKenzie LLP, 100 New Bridge Street,
London EC4V 6JA. Details of the date, time and business to be conducted at the AGM is contained in the Notice of AGM, which will be
available on the Group’s website: https://www.bankofgeorgiagroup.com/information/meetings.
Shareholder enquiries
Bank of Georgia Group PLC’s share register is maintained by Computershare Investor Services PLC. Any queries about the
administration of holdings of ordinary shares, such as change of address or change of ownership, should be directed to the
address or telephone number immediately below. Holders of ordinary shares may also check details of their shareholding,
subject to passing an identity check, by visiting the Registrar’s website: www.investorcentre.co.uk or by calling the Shareholder
Helpline on +44 (0)370 873 5866.
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Contact information
Bank of Georgia Group PLC Investor Relations
Email: ir@bog.ge
Forward-looking statements
Certain statements in this Annual Report and Accounts contain forward-looking statements, including, but not limited to,
statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or
performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and
weaknesses, plans or goals relating to financial position and future operations and development. Although Bank of Georgia Group
PLC believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can
be given that such expectations and opinions will prove to have been correct. By their nature, these forward-looking statements
are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ
materially from those currently being anticipated as reflected in such statements. Important factors that could cause actual results
to differ materially from those expressed or implied in forward-looking statements, certain of which are beyond our control, and
certain of which include, among other things, those described in “Principal risks and uncertainties” included in this Annual Report
and Accounts, see pages 62 to 81. No part of these results or report constitutes, or shall be taken to constitute, an invitation or
inducement to invest in Bank of Georgia Group PLC or any other entity and must not be relied upon in any way in connection with
any investment decision. Bank of Georgia Group PLC undertakes no obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise, except to the extent legally required. Nothing in this document should be
construed as a profit forecast.
Shareholder Information
BANK OF GEORGIA GROUP PLC Annual Report 2022
www.bankofgeorgiagroup.com