BANK OF GEORGIA GROUP PLC Annual Report 2023

Annual Report 2023 Bank of Georgia Group PLC

2023

Annual Report 2023 Bank of Georgia Group PLC

About us

Helping people achieve

more of their potential

Bank of Georgia Group PLC is a FTSE 250 holding

company whose subsidiaries provide banking

and financial services focused in the high-growth

Georgian and Armenian markets through leading,

customer-centric, universal banks – Bank of

Georgia in Georgia and Ameriabank in Armenia.

By building on our competitive strengths, we are

committed to driving business growth, sustaining

high profitability, and generating strong returns,

while creating opportunities for our stakeholders

and making a positive contribution in the

communities where we operate.

As at 31 December 2023, the main operating subsidiary of Bank of Georgia Group PLC was JSC Bank of Georgia (constituting 95.3% of the Group’s total assets). The Group also

included other smaller subsidiaries, including Belarusky Narodny Bank, a banking subsidiary in Belarus.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Contents

Governance

184-253

Governance at a Glance 185

Board Independence 187

Directors’ Governance Statement 188

Board of Directors 198

Management Team 201

Nomination Committee Report 206

Audit Committee Report 214

Risk Committee Report 224

Directors’ Remuneration Report 229

Statement of Directors’ Responsibilities 248

Directors’ Report 249

Financial

Statements

254-362

Independent Auditor’s Report 255

Consolidated Statement of Financial Position 263

Consolidated Income Statement 264

Consolidated Statement of Comprehensive Income 265

Consolidated Statement of Changes in Equity 266

Consolidated Statement of Cash Flows 267

Separate Statement of Financial Position 268

Separate Statement of Changes in Equity 269

Separate Statement of Cash Flows 270

Notes to Consolidated Financial Statements 271

Additional

Information

363-371

GRI Index 364

References 368

Glossary 369

Shareholder Information 371

Strategic Report

1-183

Overview

History 5

Track record of strong

performance since demerger 6

Track record of capital distribution 7

Financial highlights 8

Strategic and ESG highlights 8

Georgia in key figures 9

Acquisition of Ameriabank CJSC 13

Chairman’s statement 15

Chief Executive Officer’s statement 16

Strategy and Performance

Our purpose and strategy framework 18

Key performance indicators 21

Addressing financial and

lifestyle needs of our customers 25

Fulfilling business customer needs 40

Digital Area snapshot 50

Section 172(1) statement 52

Sustainable Business

Empowering people by

creating sustainable opportunities 61

Governance and integrity 66

Financial inclusion 86

Sustainable finance 92

TCFD 99

Empowering employees 119

Empowering communities 133

Non-financial and sustainability

information statement 141

Risk Management

Risk management 144

Principal risks and uncertainties 150

Going Concern and

Viability Statements

Going concern 170

Viability statement 170

Overview of

Financial Results

Overview of financial results 172

Annual Report 2023 Bank of Georgia Group PLC

OVERVIEW

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

History

Before IPO

Listing on LSE

After demerger

BGEO demerges into

two separately listed

and independently

managed public

companies – Bank of

Georgia Group PLC, the

banking business, and

Georgia Capital PLC,

the investment business

Bank of Georgia Group PLC

has a new management

and develops a new

strategy – focused on

accelerating digitalisation

and embedding customer-

centricity across the

business

The Group successfully

recovers from the pandemic

Bank of Georgia launches

PLUS card – the first debit

card project with American

Express in the EMEA region

The Group redefines its

Environmental, social and

governance (ESG) strategy

and produces its first Task

Force on Climate-related

Financial Disclosures

(TCFD) report

Bank of Georgia rolls

out sCoolApp, the

first financial mobile

application for school

students in Georgia

Bank of Georgia’s

digital monthly active

users (Digital MAU)

exceed one million retail

customers

Bank of Georgia

is established

Bank of Georgia issues the

first plastic card

Bank of Georgia installs the

first ATM in Georgia

The European Bank for

Reconstruction and

Development (EBRD)

becomes a shareholder of

the Group

Bank of Georgia acquires

TbilUniversalBank, the

ninth largest bank, and

Georgian Card, a card

processing platform

1994

2018

1996

2019

1998

2021

2004

Bank of Georgia is listed on

the London Stock Exchange

(LSE), in the form

of Global Depositary

Receipts (GDRs)

Bank of Georgia launches

internet banking (iBank)

and mobile banking

(mBank)

2006

Bank of Georgia issues

US$ 200 million Eurobond,

the first international bond

offering from Georgia

2007

Bank of Georgia launches

SOLO, a premium banking

brand to serve the mass

affluent customer base

2009

BGEO moves to the

premium listing on the

LSE and becomes part

of the FTSE 250, being

the first public company

from the Caucasus

region in the list

2012

2022

Annual Report 2023 Bank of Georgia Group PLC

1,357

1,121

853

699

520

355

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

30.7% CAGR

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

26.4%

26.1%

13.0%

25.8%

32.4%

29.9%

2018 2019 2020 2021 2022 2023

20.2

16.9

16.2

14.2

11.9

9.4

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

16.6% CAGR

1,375

1,132

727

295

514

435

2018 2019 2020 2021 2022 2023

25.9% CAGR

20.5

18.3

14.014.0

10.1

8.1

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

20.3% CAGR

Track record of strong performance since

Demerger in 2018

When describing the development of

the Group over the past few years,

two adjectives come to mind: digital

and customer-centric. The Group has

achieved significant progress in becoming

a digital banking leader in Georgia and

a truly customer-centric organisation

with a high-level Net Promoter Score

(NPS). This progress has translated into

loan and deposit portfolio growth and

ultimately into strong profit generation

and profitability. This strong foundation

will support ongoing growth and value-

creation by the Group.

Digital MAU

(thousands)

Loan portfolio

(GEL billions)

Profit (adjusted for one-off items)

(GEL millions)

NPS

Deposit portfolio

(GEL billions)

Adjusted return on average equity (ROAE)

1. 2023 figures have been adjusted for a one-off GEL 22.6 million other income due to the fair value revaluation of the receivable as part of the settlement of a legacy claim.

2022 figures have been adjusted for a one-off GEL 391.1 million other income due to the settlement of a legacy claim, and a one-off GEL 79.3 million tax expense due to an

amendment to the corporate taxation model applicable to financial institutions in Georgia.

2019 figures have been adjusted for GEL 14.2 million (net of income tax) termination costs of a former CEO and executive management.

2018 figures have been adjusted for GEL 30.3 million demerger-related costs, GEL 8.0 million demerger-related corporate income tax gain, GEL 30.3m one-off impact of

remeasurement of deferred tax balances and GEL 3.9 million (net of income tax) termination costs of a former CEO.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Total dividend paid for the year (GEL millions)

Share buyback and cancellation (GEL millions)

124

122

102

188

162

347

352

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

535

514

257

184

No dividend

paid due to

Covid-19

pandemic

PAYOUT

RATIO

36% 33% 34% 32% 30% 30% 35% 37% 37%

45.8

47.5

49.2

Dec-21 Dec-22

Dec-23

Track record of capital distribution

Number of shares outstanding

(period-end)

(millions)

1. For the purpose of total payout ratio calculation, total buyback amount is divided by outstanding shares before the beginning of the respective programme.

2. This includes a final dividend of GEL 4.94 per share that the Board intends to recommend at the 2024 AGM.

3. The final dividend of GEL 4.94 per share that the Board intends to recommend at the 2024 AGM.

GEL 3.06

dividend per share

GEL 62M

share buyback

programme

GEL 4.94

dividend per share

GEL 100M

share buyback

programme

Interim dividend and buyback Final dividend and buyback

Capital distribution for 2023

Share buyback and cancellation programme

6.9%

The Company’s issued share capital cancelled as of

31 December 2023

Since the beginning of the first share buyback and

cancellation programme in 2022, the Company has

cancelled 3,403,135 ordinary shares, representing 6.9%

of ordinary shares before the start of the programme.

Annual Report 2023 Bank of Georgia Group PLC

Profit (adjusted)

GEL 1,374.7M

+21.4% y-o-y

Profit (reported)

GEL 1,397.3M

-3.2% y-o-y

Digital MAU

1,357.2K

+21.0% y-o-y

Monthly active individual clients

1,808.9K

+10.8% y-o-y

Net loans

GEL 20,232.7M

+20.0% y-o-y

Share of products activated through

digital channels

(4Q23)

70.3%

+25.1 ppts y-o-y

Client deposits

GEL 20,522.7M

+12.4% y-o-y

Acquiring market share (Dec-23)

54.9%

+3.7 ppts y-o-y

ROAE (adjusted)

29.9%

-2.5 ppts y-o-y

NPS

58 in 4Q22

Self-employed borrowers

54.7K

+14.9% y-o-y

ROAE (reported)

30.4%

-11.0 ppts y-o-y

Employee Net Promoter Score (eNPS)

53 in 4Q22

sCoolApp MAU

89.6K

+170.3% y-o-y

Financial highlights 2023

Strategic and ESG highlights 2023

Figures given for JSC Bank of Georgia standalone

1. 2023 figures have been adjusted for a one-off GEL 22.6 million other income due to the fair value revaluation of the receivable as part of the settlement of a legacy claim.

The comparatives are also adjusted for one-off items.

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.

3. In 2Q23, we changed the methodology of calculating the share of products sold digitally and currently include all types of products sold by Bank of Georgia.

The previous periods have been restated.

4. Based on external research by IPM Georgia.

5. Based on internal survey.

6. Individuals whose share of income from self-employment exceeds 50% and who do not own a business/are not registered as individual entrepreneurs.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Georgia in key figures

Duty-free access to 2.3 billion-person market: Free Trade Agreements with the European Union

(EU), China, Turkey, EFTA, the UK, Ukraine and CIS

Business bribery ranking

(2023)

#35

Out of 194 countries

Source: TRACE Association

Estimated fiscal deficit as %

of GDP in 2023

2.4%

-0.6 ppts y-o-y

Source: Ministry of Finance of Georgia

Estimated public debt as %

of GDP in 2023

39.0%

-0.2 ppts y-o-y

Source: Ministry of Finance of Georgia

Gross international reserves

in months of goods and

services imports in 2023

3.4 months

+29.3% y-o-y growth in net reserves

Source: National Bank of Georgia, Geostat

Economic freedom ranking

(2023)

#35

Out of 176 countries

Source: The Heritage Foundation

Corruption perception ranking

(2023)

#49

Out of 180 countries

Source: Transparency International

Agency: Fitch

Rating: BB

Outlook: Positive

Date: January 2024

Agency: S&P

Rating: BB

Outlook: Stable

Date: February 2024

Agency: Moody’s

Rating: Ba2

Outlook: Stable

Date: March 2024

Business friendly environment

Steady ratings with improved outlook from global rating agencies

Prudent macroeconomic policy

Annual Report 2023 Bank of Georgia Group PLC

The Georgian economy continued to demonstrate resilience in 2023 amid the

turbulent macroeconomic environment of tighter global financial conditions and

unresolved regional conflicts.

Georgia managed to navigate and

adapt to the major changes in the region

triggered by Russia’s war in Ukraine. The

surge in external sector inflows caused

by relocation of capital and rerouting of

trade flows in 2022 started to stabilise

in mid-2023, with a gradual slowdown

afterwards. The slowing external sector

inflows were swiftly substituted by robust

domestic demand, enabling the economy

to maintain a strong growth momentum.

Georgia’s economy grew by 7.5% in

2023 after double-digit growth rates in

2021-2022.

Macro overview

External merchandise trade slowed in 2023 given the record-high base of the

previous year and declining global commodity prices.

Export of services continued to deliver

strong growth due to the ongoing

recovery in international tourism and

impressive gains in information and

communication technology (ICT) and

transport services benefiting from the

relocation of international companies

to Georgia and the rerouting of trade

flows. Money transfers weakened, posting

a 5.7% y-o-y decline in 2023, reflecting

the conclusion of capital relocation

from regional economies. The decline

was partially offset by strong growth

in remittances from EU countries and

the US. Overall, the external balance

improved further in 2023 with a

historically low current account deficit

of 4.3% of GDP. As the slowdown in

external sector inflows was gradual and

anticipated given the extraordinarily high

numbers of the previous year, this has

not caused any undue pressures on the

exchange rate.

In 2023, the Georgian Lari strengthened

against the US Dollar by an additional

0.5% on top of the 12.5% appreciation in

2022.

Strong domestic demand underpinned by

consumption and investment spending

balanced the slowing external sector

inflows in 2023. As inflation eased, real

incomes of households started to recover,

boosting consumption expenditure.

Meanwhile, investment spending

remained robust due to the positive

growth outlook and the proven track

record in sound macroeconomic policies.

Georgia’s favourable geographical

location in the Middle Corridor

and business-friendly environment

also contributed to its investment

attractiveness with equity foreign direct

investment (FDI) inflows increasing

by 68.3% y-o-y in 2023. Transport and

logistics, ICT and education sectors have

demonstrated strong growth and export

potential. Investment activity was also

supported by domestic bank lending with

business loans issued to legal entities up

19.9% y-o-y in constant currency terms in

2023.

Overall, the current mix of Georgia’s

growth drivers, including consumption

and investment spending coupled with

service exports, provides a solid basis for

sustaining the current growth momentum

in the medium term.

The European Council granting Georgia

EU candidate status in December 2023 is

expected to provide an additional boost

to the economy by improving sentiment

among consumers and investors. Sustained

geopolitical instability in the region and

tight global financial conditions pose

downside risks to the outlook. However,

increased fiscal space and replenished

international reserves cushion the economy

from possible shocks.

Amid strong economic growth in 2023, labour market conditions continued to

improve with decreasing unemployment and rising participation rate, while

nominal wage pressures subsided thanks to slower growth in consumer prices.

Inflation declined substantially

throughout the year with a persistent

decrease in import prices and a slowdown

in domestic price growth. Headline

Consumer Prices Index (CPI) inflation

retreated to 0.4% in December 2023

and averaged 2.5% for the full year,

driven by falling global commodity prices,

strong GEL and tight monetary policy.

Given the improved inflation outlook, the

NBG started a gradual exit from tight

monetary policy in mid-2023, cutting the

refinancing rate by a total of 1.5 ppts

throughout the year.

Thanks to favourable macroeconomic conditions, the build-up of policy buffers

continued in 2023.

The National Bank of Georgia (NBG)

took advantage of strong external

sector inflows in the first half of the

year by purchasing record-high amounts

of foreign currency. As a result, net

international reserves reached US$ 2.8

billion by end-2023, increasing by US$

0.6 billion during the year. Meanwhile,

the Government continued fiscal

consolidation supported by strong tax

revenue growth. In 2023, the estimated

fiscal deficit improved by an additional

0.6 ppts versus 2022 to 2.4% of GDP,

while the total public debt reached an

estimated 39.0% of GDP, decreasing by

an additional 0.2 ppts throughout the

year. The adequate level of international

reserves, coupled with declining public-

debt-to-GDP ratio, will help protect the

economy against possible external shocks

down the road.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

2019

5.4%

2020 2021 2022 2023

-6.3%

10.6%

11.0%

7.5%

5.7%

5.2%

5.0%

4.4%

3.2%

3.1%

2.6%

2.3%

Georgia

Uzbekistan

Armenia

Kyrgyz Rep.

Türkiye

Kazakhstan

Russia

Azerbaijan

The banking sector is one of the main

drivers of the Georgian economy – fully

privately owned, with the two largest

banks accounting for 76.9% of total

banking assets at 31 December 2023.

Prudent supervision by the NBG ensured

the resilience of the banking system to

previous external shocks. Along with

strong economic activity in 2023, demand

for credit remained robust. However,

globally increasing interest rates resulted

in higher cost of credit in foreign currency.

A prudently managed banking sector

To mitigate the adverse impact of global tightening and ensure uninterrupted access to credit, the NBG made several amendments

to the macroprudential regulations in 2023:

Composition of real GDP growth by types of

expenditure in Georgia

Consumption

Net export

Investment

Real GDP

2023E 2024F

Source: GeoStat, Bank of Georgia

Source: Latest country reports by International Monetary Fund (IMF) as at

31 March 2024

Real GDP growth forecasts by IMF in regional

economies

Changes in macroprudential regulations in 2023

Effective: 1-Jan-24

Effective: 15-Mar-24

Effective: 1-Nov-23

Effective: 1-Jan-24

Effective: 7-Dec-23

Introduction of the minimum requirement

for own funds and eligible liabilities

(MREL) for systematically important

commercial banks

Minimum foreign exchange (FX) loan

limit increased from GEL 200,000 (≈US$

74,000) to GEL 300,000 (≈US$ 111,000)

Extension of the accumulation period for

neutral countercyclical buffer from one

year to four years

Maturity limit on unsecured consumer

loans increased back to four years (after

reduction to three years in August 2022)

Currency-hedged borrowers exempt from

minimum FX loan limit

Reduction in the upper limit of the

minimum reserve requirement on short-

term foreign currency liabilities from 25%

to 20%

Annual Report 2023 Bank of Georgia Group PLC

20.0%

16.2%

9.6%

17.6%

17.1%

10.1%

2019 2020 2021 2022 2023E

Lithuania

Estonia

Czech Rep.

Türkiye

Georgia

Slovenia

Slovakia

Latvia

Azerbaijan

Armenia

Romania

Poland

North Macedonia

Hungary

Uzbekistan

Croatia

Bulgaria

Bosnia & Herz.

Belarus

Russia

Cyprus

Montenegro

Moldova

Greece

7.0%

6.7%

6.6%

5.9%

5.3%

4.1%

3.8%

3.5%

3.3%

2.7%

2.6%

2.5%

2.4%

2.0%

1.5%

1.4%

1.2%

1.0%

0.4%

Thanks to the strong economic activity and

recent easing of prudential regulations,

bank lending growth remained healthy

in 2023, accelerating to 17.1% y-o-y on a

constant currency basis after a 12.1% y-o-y

growth in the previous year. Local currency

and foreign currency lending contributed

equally to overall credit growth, leading to

a roughly unchanged loan dollarisation of

45.2% as at 31 December 2023. In contrast,

deposit dollarisation continued to decrease

to 50.7% (-5.4 ppts y-o-y). The banking

sector maintained high profitability with a

24.7% return on equity (ROE) in 2023, while

loan book quality remained sound with

non-performing loan (NPL) ratio at 1.5%.

The Georgian banking sector remains

committed to complying with relevant

anti-money laundering (AML) regulations

and the sanctions adopted by the UK, US,

and EU against Russia. The international

credibility and sound performance of the

Georgian financial sector has made it one

of the largest FDI recipients in recent years,

according to Geostat.

Macro outlook

Nominal GDP growth, y-o-y

Bank credit growth, y-o-y

Bank credit growth in constant currency terms, y-o-y

Source: GeoStat, NBG

NPLs to total gross loans in selected countries,

end-2023 or latest available

Source: IMF

We expect strong economic growth to be

sustained in 2024, underpinned by robust

consumption and investment spending

We anticipate a stable GEL/US$ exchange

rate, supported by resilient external sector

inflows and positive growth outlook

We expect that inflation will remain close

to the NBG’s 3.0% target, supported by

the prudent monetary policy and stable

GEL

We do not rule out additional interest

rate cuts throughout the year amid the

improved inflation outlook

Bank lending growth in Georgia

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Ameriabank at a glance

Key financial and non-financial highlights

On 19 February 2024, Bank of Georgia

Group PLC announced that it and its

subsidiary, JSC Bank of Georgia, had

conditionally agreed to acquire 100%

of the total issued share capital of

Ameriabank, a leading universal bank in

Armenia offering a broad suite of retail

and corporate and investment banking

services.

Having received all necessary shareholder

and regulatory approvals as of 29 March

2024, Bank of Georgia Group PLC

acquired 60% and JSC Bank of Georgia

acquired 30% of issued share capital.

EBRD retained a 10% shareholding in

Ameriabank’s total issued share capital,

subject to the Shareholders’ Put and Call

Option Agreement as disclosed in the

class 1 circular published by the Company

on 19 February 2024.

We believe Ameriabank is a good

strategic fit to the Group and that the

Acquisition is attractive as it is expected

to provide significant commercial and

financial benefits.

Ameriabank is a highly attractive

franchise displaying many complementary

characteristics to the Group. Ameriabank

is the market leader in Armenia by

total loan portfolio (19.6% market

share as at 31 December 2023) and the

second largest bank by total deposits

(17.3% market share as at December

2023), with a strong loan and deposit

portfolio growth. Over the last few years

Ameriabank has significantly expanded

its loan portfolio, especially in retail,

with its mortgages and consumer loan

portfolio exhibiting high growth rates

(combined CAGR of 24.1% in 2020-2022).

Ameriabank also has a particularly strong

foothold in the corporate segment, being

a market leader with a market position

(22.5% market share) in loans to legal

entities as at 31 December 2023. We

believe that Ameriabank has significant

growth potential and further scope

to improve commercial performance,

particularly in retail. This is expected to

be achieved by combining Ameriabank’s

existing franchise strengths with the

Group’s expertise, stemming from

the Group’s proven track record and

leading digital products and payments

capabilities. Although Ameriabank is

a leading player in its own market, it

had fewer than 420,000 individual

customers as at 31 December 2023

(out of a population of approximately

3.0 million). We believe that there is a

significant scope for growth in this area,

Acquisition of Ameriabank CJSC

A leading universal bank in Armenia with #1 rank by loans and #2 by deposits

The leading corporate and investment banking franchise and #1 in mortgages in the retail segment

Strong brand in the local market – the “top-of-mind” bank in Armenia

Delivering double-digit ROAE in four out of five prior years

Experienced management team and strong governance with focus on ESG principles

Ameriabank is one of the leading universal banks in Armenia and has an

attractive franchise with significant upside potential from leveraging BOGG’s

customer focus and digital capabilities.

GEL 309M 24.9%

Net income (FY23) ROAE

(FY23)

19.6%/#1 #1 419K

Loans market share (Dec-23) Armenian bank by brand

awareness

Individual customers (Dec-23)

1,812 GEL 9,378M GEL 1,303M

Employees (Dec-23) Total assets (Dec-23) Shareholder’s equity (Dec-23)

1. Based on 4Q23 research by Invia CJSC.

2. Calculated based on average shareholder’s equity as at December 31, 2022 and as at December 31, 2023 based on IFRS financial statements of the bank converted to GEL.

36%

Share of Digital MAU in total

individual customers (Dec-23)

Annual Report 2023 Bank of Georgia Group PLC

and that the Group’s existing assets and

infrastructure will enable it to realise

these potential growth benefits, as the

Group has already proven in Georgia.

Ameriabank is also one of the leading

payments acquirers in Armenia, with

further potential upside on the back

of the Group’s strong expertise in this

area, as well as supported by favourable

market fundamentals, as the Armenian

economy is predicted to become

increasingly cashless over the next

fewyears.

We believe the acquisition will create

strong value for our shareholders. It is

expected to provide immediate EPS and

ROAE uplift, no dilution for shareholders

as the acquisition was fully funded by

cash

. In addition, the acquisition had

a limited negative impact of 1.0%-1.1%

on Bank of Georgia’s capital ratios,

which remained comfortably above

the minimum regulatory requirements.

The Company’s dividend and capital

distribution policy and payout ratio of

30-50% has not changed following the

acquisition.

Macroeconomic overview of Armenia

The Armenian economy and banking sector have certain attractive characteristics

similar to those in our current principal operating country, Georgia.

Armenia’s banking sector remains sound with robust credit growth, decent asset quality and high capitalisation

In 2023, bank lending growth accelerated

to approximately 21% y-o-y in constant

currency basis supported by favourable

economic conditions. In the meantime,

asset quality remained high with non-

performing loans to total loans at 2.4%

as of December 2023. This healthy credit

growth resulted in robust profitability of

estimated 20% return on adjusted equity

in 2023. Armenian banks maintained

solid capital buffers with 19.9% capital

adequacy ratio as at end-2023. Similar

to Georgia, the Armenian banking sector

is distinguished by relatively high, albeit

decreasing, dollarisation. Loan and

deposit dollarisation stood at 35.6%

and 50.5% at end-2023, respectively

(vs.36.3% and 55.1% at end-2022).

Giventhe positive economic outlook and

bank lending to GDP ratio below its long-

term trend in Armenia, strong lending

growth isexpected to be sustained in the

following years.

Armenia is one of the fastest growing economies in the region distinguished by prudent macroeconomic policies,

lowinflation and stable exchange rate

In 2023, Armenia maintained strong

growth momentum after a surge in

economic growth in 2022 driven by

increased inflows of capital, inbound

migration, and relocation of businesses,

particularly from Russia, triggered by

Russia’s invasion of Ukraine. These

developments bolstered domestic

demand and strengthened the local

currency. The Armenian economy

registered 8.7% real GDP growth in 2023,

on top of 12.6% expansion in the previous

year, driven by trade, information and

communication, and construction sectors.

Armenia also benefited from increased

transit trade resulting from rerouted

trade flows in the region.

The elevated inflation in previous years

receded in 2023 due to tight monetary

policy, strong Armenian Dram and

declining global commodity prices.

In the first half of 2023, the central bank

of Armenia (CBA) maintained tight

monetary policy with the historically high

policy rate at 10.75%. As inflation eased,

it gradually reduced rates by 1.5 ppts by

end-2023. The Armenian currency remains

stable after gaining byapproximately

16% in value against theUS dollar during

2022-2023.

The regional security risks have receded substantially at the end of 2023. However, the geopolitical landscape

remains fragile in the region as border issues between Armenia and Azerbaijan are still unresolved.

In late 2023, Azerbaijan assumed full

control of Nagorno-Karabakh, prompting

approximately 100,000 ethnic Armenians

to flee into Armenia. The government

of Armenia swiftly implemented policy

measures to address the refugees’ urgent

needs, which created short-lived fiscal

pressures. In the medium term, however,

the refugees can provide additional boost

to the economy by integrating in the

local labour market. Meanwhile, Armenia

is actively seeking to negotiate a peace

agreement with Azerbaijan, which could

unlock new opportunities for Armenia and

for the overall region in terms of greater

connectivity encouraging more trade and

capital movements.

In recent years, Armenia has intensified

efforts to strengthen relations with the

European Union, which has also been

actively involved in the resolution of the

conflict between Armenia and Azerbaijan.

In March 2024, European Parliament

passed resolution proposing consideration

of EU membership candidacy for

Armenia. These developments reflect

Armenia’s attempts to reduce economic

and security dependence on a single

country, particularly Russia. Stronger

integration in the EU can open up vast

opportunities for Armenia resulting in

improved medium-term growth prospects

and more resilient economy.

Despite slowing inflows from Russia since the second half of 2023, Armenia is expected to maintain strong growth

momentum supported by resilient private consumption coupled with government spending and investment.

Strong focus on the IT sector as well

as ongoing reforms in the education

system can help Armenia transform into

a service-based and export-led economy.

Sound macroeconomic policies and the

fiscal reform agenda supported by the

ongoing IMF programme reinforce the

growth outlook. Despite strong current

performance, the Armenian economy

remains constrained by structural

challenges including low productivity in

manufacturing and agriculture, narrow

export base and high dependence

on inflows from Russia (40.6% of

Armenian export proceeds and 65.9%

ofremittances were sourced from

Russiain 2023).

3. The sole instance of possible share issuance is previewed in Put and Call Option Agreement where BOGG has discretion to pay the Put and/or Call price either in cash or via

issuance of shares in the Company.

Strategic Report Governance Financial Statements Additional Information

Annual Report 2023 Bank of Georgia Group PLC

Mel Carvill

Board Chairman

Chairman’s Statement

2023 was a pivotal year in the Group’s

strategic development, as it laid the

groundwork for the acquisition of

Ameriabank in the first quarter of 2024,

a significant and immediately earnings

accretive transaction for the Group.

I spoke about the attractiveness of

Armenia and Ameriabank in my letter

to shareholders ahead of the General

Meeting and shareholder vote on the

acquisition, but I want to reiterate a

few points. Armenia and Georgia are

neighbouring countries with significant

cross-border links, and both are attractive

high-growth economies in the EMEA

region, pivoting towards the EU. Georgia

has already made significant progress. A

major leap forward was the achievement

of EU candidacy status at the end of

2023, and Armenia is voicing its intentions

to further deepen its relationship with

the EU. Ameriabank is a leading banking

franchise in the country, the largest

bank by loans, with 20% market share

as of year-end 2023, and the capacity to

double down on its customer franchise

growth, especially in the mass retail and

SME segments. We expect it to deliver

strong results and market share gains in

the years to come. We believe Bank of

Georgia’s experience and best practices

can be shared with Ameriabank to

support its growth and development.

The Board was very pleased to see

100.0% support for this transaction from

our shareholders, and the very positive

shareholder feedback.

In March 2024, in accordance with our

succession planning, we announced a

change to the composition of the Board.

Al Breach, a Non-executive Director of

the Company from 28 February 2018,

stepped down. We are very grateful

for his substantial contributions to the

Board during a significant period of

change throughout his tenure. A new

Non-executive Director, Andrew McIntyre,

has been appointed. I am confident that

Andrew’s rich experience and range of

skills will further strengthen the Board

and support the Group’s continued

progress. You can read more about

Andrew and the appointment process in

the Nomination Committee Report on

pages 206 to 213.

During 2023, the Board was focused

on understanding the impact of new

technologies and operating models in

financial services, as well as on exploring

potential new horizons for growth. The

Group has continued to deliver on its

strategic priorities, generating strong

top- and bottom-line growth, maintaining

high profitability levels, and rewarding

shareholders with a robust capital

distribution strategy. The Board has seen

significant improvements in the quality of

the organisation, with people-centricity

– be it customer-centricity or employee-

centricity –embedded throughout the

business in policies and processes, and

with relevant metrics meticulously

monitored by the management team,

which are regularly reported to, and

discussed at, the Board. The substantial

progress is visible in the figures, and you

can read significantly more about this

progress throughout this Report.

Throughout the year, the Board received

regular updates on how the management

continued to create opportunities for our

different stakeholders. Overall, Bank of

Georgia has taken great strides towards

a truly customer-centric culture, focused

on outcomes rather than processes,

with the right systems in place to

identify customer pain points, rectify any

mistakes along the way, and improve

the overall customer experience. The

Board continued to hear first-hand from

employees about their work experiences

in Employee Voice meetings. We saw

Employee NPS improve during 2023, and

employee engagement scores remained

at high levels during the year.

The Board also continued to be fully

engaged in the ESG practices across the

organisation, approving a number of new

policies, including a Responsible Supply

Chain and Environmental Policy, reflecting

our commitment to sustainability across

operations. The Group’s approach to

ESG has been informed by the views of

our key stakeholders through a formal

materiality assessment. In response to

stakeholder feedback during the second

formal ESG materiality assessment

in 2023, the Board approved a revised

ESG strategy, with Sustainable Finance

added as one of the main pillars and

green lending KPIs introduced for the

first time. Climate change is a global

challenge, and we understand that

leading financial institutions have a lot to

contribute to mitigate risks and support

sustainable economies alongside their

customers, communities, governments,

and regulators. The Group is making good

progress on understanding and managing

climate-related risks and opportunities

and improving data collection and

assessment capabilities. The Board

will focus closely on the progress the

Group is making in light of the external

environment, emerging regulatory

requirements, and, of course, the

expectations of our key stakeholders. We

remain committed to fostering diversity

and inclusion on the Board as well as

across the organisation and are pleased

to see that the Group has been ranked

#2 in the banking sector in the latest

FTSE Women Leaders Review on female

representation, with 49% of the Executive

Committee and their direct reports

being women. You can read more about

diversity and our sustainability practices

in the Sustainable Business section on

pages 120 to 122.

In conclusion, I’d like to thank fellow Board

members, the CEO and his team and

all employees across the Group for their

commitment and efforts throughout the

year. I’m confident about the Group’s

strengths and its ability to maintain

its strong track record of excellent

performance.

Mel Carvill

Chairman

24 April 2024

Section 172 Statement

In discharging its duty to act

in good faith and in a way that

is the 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 various

stakeholders. See pages 52-59

for our Section 172 statement

(which is incorporated to the

Strategic Report by reference),

and on how the Board has

engaged with our stakeholders.

Annual Report 2023 Bank of Georgia Group PLC

Archil Gachechiladze

Chief Executive Officer

Chief Executive Officer’s statement

As I write this letter, the Group looks

different to what it was at the end of

2023. With the acquisition of Ameriabank

going through successfully, we now operate

two leading, top-of-mind banks in two

high-growth neighbouring economies,

Georgia and Armenia. Both Georgia and

Armenia are attractive emerging markets,

of similar sizes and structures, delivering

and expected to continue to deliver one

of the highest, more than 5%, real GDP

growth rates in EMEA. Both Georgia

and Armenia are prudently managed,

with distinguished fiscal discipline and

effective monetary policy enabling them

to navigate through the uncertain and

volatile global environment. During the

past two years, Georgia’s role in the middle

corridor between Europe and Asia has

been amplified, and the entry of a number

of multinational companies reflects

increased investor interest which, I believe,

will be sustained and reinforced, especially

with the EU candidacy status granted to

Georgia in December last year. I am very

optimistic about Armenia as well, as we

see increasing engagement with the EU

and a strong focus on diversification, with

geopolitical risks substantially reduced.

From a banking sector perspective, lower

credit penetration and a fragmented

banking sector in Armenia present growth

opportunities that we intend to capture

in the coming years. You can read the

Georgian and Armenian macroeconomic

and banking sector highlights on pages 9

to 14.

Over the past few years, we have been

significantly focused on elevating the

1. Digital monthly active users – individuals who logged in to Bank of Georgia’s retail mobile applicable (BOG APP), internet banking platform (iBank) or mobile application for

school students (sCoolApp) at least once within the past month.

2. 2023 figures were adjusted for a one-off GEL 22.6 million other income related to the fair value revaluation of the receivable related to the settlement of a legacy claim.

quality of our Georgian banking franchise,

devoting significant resources to new

product development, digital channels,

and enhancing customer experience.

Our efforts, which are always ongoing,

contributed to Bank of Georgia’s

leadership in daily banking, and strong

results across our key performance

metrics. We ended 2023 with close to

1.4 million Digital MAU

among retail

customers, representing 75.0% of our

total monthly active retail customers,

compared to 68.7% a year ago. Our

customer Net Promoter Score of 59,

which was broadly stable during the year,

is an excellent score for a universal bank,

and, with customer-centricity embedded

in organisation’s DNA, we will remain

focused on our customers, anticipating

their wants and needs and delivering

an excellent customer experience. Our

payments business continues to grow,

with the volume of merchant acquiring

transactions in Georgia up 46.5% year-on-

year in 2023, achieving a 54.9% market

share in December 2023. In addition, more

than 1.2 million individuals used Bank of

Georgia’s cards to make a payment in-

store or online at least once in December

2023, a 20.1% increase over the same

period in 2022.

All of the above translated into strong

core revenue growth in 2023, with net

interest income up 36.6% year-on-year

and net fee and commission income up

36.8% year-on-year, translating into

full year profit (adjusted for one-off

items) of GEL 1,374.7 million

, up 21.4%

year-on-year, and an adjusted ROAE of

29.9%

. On the portfolio side, loan book

growth increased 19.6% year-on-year on

a constant currency basis in 2023, while

deposit growth was 12.2% year-on-year

on a constant currency basis, building on

the significant inflows during 2022. Going

forward, we expect our double-digit

balance sheet growth to more than offset

any margin impact of deposit re-pricing

and lower policy rates.

We acquired Ameriabank with our

surplus capital and cash resources,

with no significant effect on Bank of

Georgia’s capital ratios, no dilution for

existing shareholders and no change

to our dividend and capital distribution

policy and payout range of 30-50% of

earnings. Considering the Group’s strong

performance during 2023 and robust

capital and liquidity positions, the Board

intends to recommend, at the 2024

Annual General Meeting, a final dividend

for 2023 of GEL 4.94 per share, making

a total dividend for 2023 of GEL 8.00

per share. This is a 5% increase on the

dividend for 2022 – a year boosted by

significant one-offs and FX income which

broadly normalised in 2023. In addition,

the total buyback and cancellation

programme for 2023 totalled GEL 162

million, bringing the total dividend and

buyback payout ratio 2023 of 37%, the

same as in 2022.

Having acquired Ameriabank, the Group

has turned a new page. We are no longer

Georgia-focused only, as we used to say,

but we remain focused on delivering

strong growth and high profitability in

Georgia. In Armenia, we will work with

the local management team to build on

the existing strengths of Ameriabank

to drive strong customer franchise

growth. No matter where we are, we

aim to grow strongly and profitably. We

expect Ameriabank to deliver higher

lending growth, above 20%, over the

next few years as the market presents

opportunities for both strong systemic

growth and further market share gains

for the leading player. In light of this

expectation, we are revising our medium-

term lending growth target for the whole

Group from c.10% to 15%+.

Great customer experience starts with

engaged and empowered employees.

Our people are critical enablers of

the Group’s enduring success, and we

continue to listen to our employees to

improve the organisation together and

deliver better outcomes for all. Bank of

Georgia’s employee net promoter score

(eNPS) was 56 at year-end, higher than

throughout 2022-2023. The dynamics

of work continue to evolve globally,

with younger generations coming with

different expectations and needs. We

may not always get everything right,

but the whole organisation is committed

to being a great place to work for top

talent, creating equal opportunities that

help our employees achieve more of

their potential. I want to thank all of our

employees for constantly supporting our

customers and each other.

We have an interesting year ahead,

with new upsides and goals. I am

confident we have the necessary

capabilities to manage the challenges

we may face on our way and continue

creating opportunities and value for our

stakeholders.

Archil Gachechiladze

Chief Executive Officer

24 April 2024

This Strategic Report, as set out

on pages 5 to 183, was approved

by the Board of Directors on

24 April 2024 and signed on its

behalf by

Archil Gachechiladze

Chief Executive Officer

24 April 2024

Annual Report 2023 Bank of Georgia Group PLC

STRATEGY AND

PERFORMANCE

Annual Report 2023 Bank of Georgia Group PLC

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

Our strategic priorities

We are enabled by

We create positive impact

through our main focus areas

Key medium-term targets

Our purpose and strategy framework

c.15%

Loan book growth

20%+

ROAE

30-50%

Dividend and share

buyback payout ratio

CUSTOMER-

CENTRICITY

PEOPLE AND

CULTURE

BRAND

STRENGTH

EFFECTIVE RISK

MANAGEMENT

DATA AND AI

Employees

Financial inclusion

Sustainable finance

Employee empowerment

Communities

Customers Regulators

Investors

Being the main bank in

customers’ daily lives by

leveraging the digital and

payments ecosystems

Anticipating customer needs

and wants and providing

relevant products and services

Growing the balance sheet

profitably and tapping

segments with high growth

potential

The main bank

Excellent customer

experience

Profitable growth

1. We have revised the loan book growth target upwards following the Acquisition of Ameriabank.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Our key enablers

The success and resilience of our organisation rely on maintaining a positive

customer experience across all interactions with Bank of Georgia and driving

positive outcomes for our customers. Through the implementation of comprehensive

organisation-wide processes, including regular customer experience reviews at

management level and the use of key performance indicators (KPIs) to actively

respond to customer feedback, we have evolved into a truly customer-centric

company.

CUSTOMER-

CENTRICITY

NPS

58 (2022)

Unsecured

consumer loan

disbursement

enabled by AI

22%

N/A

eNPS

53 (2022)

Top-of-mind

50%

48% (2022)

Cost of credit

risk ratio

0.7%

0.8% (2022)

We aim to attract, retain and motivate skilled and talented individuals with

diverse outlooks, life experiences and career paths. Our goal is to establish a secure

and welcoming environment that fosters personal and professional growth and

teamwork, and contributes to our sustained success.

PEOPLE AND

CULTURE

We are the top-of-mind and the most trusted bank in Georgia. Our brand strength

enables us to acquire clients and maintain relationships with them. Robust brand

name fosters credibility, cultivates confidence and attracts customers, contributing

to the Bank’s overall success.

BRAND

STRENGTH

Identifying, assessing and mitigating risks not only safeguards the financial health

of the institution but also instils confidence among stakeholders. By navigating

potential pitfalls and uncertainties with a proactive approach, we build resilience,

sustain growth and ensure long-term stability.

EFFECTIVE RISK

MANAGEMENT

In 2023, we enhanced the Bank’s advanced analytics and artificial intelligence (AI)

capabilities for improved decision-making, efficiency and customer satisfaction.

Our machine learning models anticipate individual financial and lifestyle needs,

enabling us to provide personalised services for positive experiences across various

touchpoints. We have made good progress in these areas, but we see enormous

room for improvement, to become a truly data-driven organisation leveraging AI use

cases to their full potential.

DATA AND AI

1. Based on independent research conducted by IPM Georgia. ‘Top-of-mind’ refers to the first brand that comes to a person’s mind when they are asked an unprompted

question about a particular industry or category. The figure presented is as of 4Q23.

Annual Report 2023 Bank of Georgia Group PLC

Retail Banking

JSC Bank of Georgia business model

Mass Retail Banking

We provide a comprehensive range of daily banking, payments,

and related financial products and services to a broad spectrum

of mass segment customers through a digitally-led user

experience via our award-winning mobile application and one of

the largest distribution networks in Georgia.

Premium Banking

We provide exclusive premium banking products coupled with

a broad range of lifestyle offerings to mass affluent customers

through the SOLO brand and high-net-worth individuals through

the Wealth Management (WM) direction.

Net loans

GEL 4.5B

Deposits

GEL 5.1B

Corporate Banking

Market share – customer depositsMarket share – total gross loans

FY21 FY22 FY23FY21 FY22 FY23

35.7%

36.1%

36.8%

36.4%

38.9%

39.0%

Market share – loans to individuals Market share – deposits of individuals

FY21 FY22 FY23

39.0%

38.8%

39.5%

FY21 FY22 FY23

40.3%

44.4%

45.3%

Bank of Georgia has maintained strong competitive positions.*

Deposits Net loans

GEL 4.0B GEL 7.5B

SOLO is a unique banking

concept in one space,

combining privileged financial

and advisory services and

tailored and exclusive lifestyle

experiences.

Wealth Management serves

high-net-worth individuals. WM

services include a dedicated

private banker, a dedicated

personal concierge, exclusive

financial products and lifestyle

experiences on top of those

offered to SOLO customers.

* Market share data are based on standalone accounts as published by the National Bank of Georgia.

+8.9% y-o-y +10.3% y-o-y +26.1% y-o-y

Net loans Deposits

GEL 6.5B GEL 5.3B

We provide the expertise and tailored solutions needed by large

corporate organisations. Skilled relationship managers provide a

one-to-one dedicated support to our customers.

+31.2% y-o-y +8.9%y-o-y

We provide a broad range of banking and payment products and

value-added services to small- and medium-sized businesses,

including individual entrepreneurs.

SME Banking

Net loans

GEL 4.6B

Deposits

GEL 1.9B

+12.0% y-o-y +24.4% y-o-y

+19.1% y-o-y

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

2023

022

021

1,374.7

1,132.2

727.1

Profit (adjusted)

(GEL millions)

Definition

Profit is calculated in accordance with International

Financial Reporting Standards (IFRS) and represents

operating income and profit/(loss) from associates less

operating expenses, cost of risk, non-recurring items

and income tax expense. Profit is adjusted for one-off

items.

Why do we measure?

This measure reflects the Group‘s performance for the

period and is one of the KPIs for the Group’s businesses.

Performance

In 2023, the Group reported a 21.4% y-o-y increase in

adjusted profit, driven by strong top line growth.

We monitor and analyse a broad range

of financial and non-financial measures

(so-called strategic measures) that reflect

our strategic priorities to assess how well we

execute our strategy and ensure we remain

aligned with our medium-term targets.

Some of these performance measures

are also linked to the way we pay our

employees, including at Executive

Management level. The Board ensures

the most relevant KPIs are included in the

Executive Management’s remuneration to

better align their interests with those of

our different stakeholders.

Financial measures are presented for the

Group as a whole, while non-financial

measures (strategic and ESG KPIs)

are presented for JSC Bank of Georgia

standalone.

In 2023, we reviewed the KPIs against

our strategic priorities, including ESG

objectives. The changes were made to

reflect the ways in which both the Executive

Management analyses the Group’s

performance as well as how this is reflected

in the remuneration practices. The changes

are presented in the table below:

Added KPIs Removed KPIs

Financial KPIs N/A Profit (reported)

ROAE (reported)

Basic earnings per share

Cost:income ratio (reported)

Net loan book growth (nominal)

Deposit growth (nominal)

NPL ratio

CET1 capital adequacy ratio

Leverage (times)

Liquidity coverage ratio

Net stable funding ratio

Strategic and ESG KPIs sCoolApp MAU

Number of self-employed borrowers

Daily active users (DAU)

DAU/MAU

Share of products activated through digital channels

Share of transactions through mBank and iBank

Acquiring market share

Number of clients who exchanged loyalty points

Number of active business clients

Business MAU

Key performance indicators

Financial KPIs

2023

022

021

29.9%

32.4%

25.8%

ROAE (adjusted)

Definition

Profit (adjusted) attributable to shareholders, adjusted

for one-off items, 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, capital redemption reserve and other reserves.

Why do we measure?

20%+ ROAE is one of the key medium-term targets of

the Group communicated to investors. ROAE reflects

our ability to generate return on equity.

Performance

Adjusted ROAE stood at 29.9% in FY23

(32.4% in FY22), significantly higher than the 20%+

medium-term target.

1. 2023 figures have been adjusted for a one-off GEL 22.6 million of other income related to the settlement of a legacy claim. Reported profit for 2023 was GEL 1,397.3 million

and ROAE based on reported profit was 30.4%.

2022 figures have been adjusted for a one-off GEL 391.1 million other income due to the settlement of a legacy claim, and a one-off GEL 79.3 million tax expense due to an

amendment to the corporate taxation model applicable to financial institutions in Georgia. Reported profit for 2022 was GEL 1,444.0 million and ROAE based on reported

profit was 41.4%.

Annual Report 2023 Bank of Georgia Group PLC

2023

022

021

6.5%

5.4%

4.9%

Net interest margin (NIM)

Definition

Net interest income for the year divided by monthly

average interest-earning assets, excluding cash

and cash equivalents and corporate shares, for the

same year.

Why do we measure?

NIM reflects the profitability of our core banking

operations by taking the difference between the

interest income we earn on loans and other assets

and the interest expense we pay on deposits

and other liabilities. NIM is one of the key ratios

regularly monitored by Executive Management and

communicated to investors.

Performance

NIM stood at 6.5% in FY23 (up 110 bps y-o-y). The

increase in NIM versus the prior year was driven by a

combination of higher loan yield and lower cost of funds.

2023

022

021

19.6%

12.9%

19.8%

Net loan book growth

(constant currency basis)

Definition

Net loans to customers and finance lease receivables at

the end of the year divided by net loans to customers

and finance lease receivables at the end of the previous

year minus one. To calculate the change on a constant

currency basis, net loans to customers and finance lease

receivables in currencies other than GEL at the end of

the year are converted to GEL using the exchange rates

at the end of the previous year.

Why do we measure?

c.10% loan portfolio growth was one of the key

medium-term targets of the Group communicated

to investors. Following the Acquisition of Ameriabank,

we have revised this target up to c.15%.

Performance

Net loans and finance lease receivables amounted to

GEL 20,232.7 million at 31 December 2023, up 19.6%

y-o-y on a constant currency basis.

023

022

021

12.2%

43.2%

12.5%

Deposit growth

(constant currency basis)

Customer deposits at the end of the year divided by

customer deposits at the end of the previous year minus

one. To calculate the change on a constant currency

basis, customer deposits in currencies other than GEL

at the end of the year are converted to GEL using the

exchange rates at the end of the previous year.

Definition

Maintaining a strong deposit franchise reflects the

Group‘s ability to attract and maintain a loyal customer

base and underpins its ongoing resilience.

Why do we measure?

Performance

Client deposits and notes amounted to GEL 20,522.7

million as at 31 December 2023 (up 12.2% y-o-y on a

constant currency basis) driven by both current/demand

and time deposits.

023

022

021

0.7%

0.8%

0.0%

Definition

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.

Why do we measure?

Prudently managing credit risk is one of the critical

components of the Group’s enterprise risk management

(ERM) framework. Cost of credit risk ratio is one of

the key financial metrics regularly communicated to

investors with guidance of 1.0-1.2% as the Group’s

normalised range. This KPI has also been included in the

CEO’s KPIs.

Performance

The cost of credit risk ratio stood at 0.7% in FY23

versus 0.8% in FY22. The decrease was mainly driven

by improved performance of the Retail Banking loan

portfolio.

Cost of credit risk ratio

023

022

021

29.8%

32.0%

37.2%

Cost:income ratio (adjusted)

Definition

Operating expenses divided by operating income,

adjusted for one-off items.

Why do we measure?

This reflects our efficiency in managing operating

expenses relative to our income generation, providing

insight into our operational efficiency and financial

performance.

Performance

In 2023, the Group delivered positive operating leverage,

with the cost:income ratio at 29.8% versus 32.0% for

the full year of 2022.

1. 2023 figure has been adjusted for a one-off GEL 22.6 million of other income related to the settlement of a legacy claim. Reported cost:income ratio for 2023 was 29.5%.

2022 figure has been adjusted for a one-off GEL 391.1 million other income due to the settlement of a legacy claim, and a one-off GEL 79.3 million tax expense due to an

amendment to the corporate taxation model applicable to financial institutions in Georgia. Reported cost:income ratio for 2022 was 26.8%.

Financial KPIs

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

2023

022

021

1,357.2

1,121.4

852.7

Definition

An individual who logged into BOG APP, sCoolApp or

iBank at least once within the past month.

Why do we measure?

Increasing the use of Bank of Georgia’s digital channels

has been one of the top priorities during the past

few years. Digital MAU is one of the key strategic

metrics that we have communicated to the Company’s

investors and that is regularly monitored by Executive

Management.

Performance

In December 2023, Digital MAU was up 21.0% y-o-y to

c.1.4 million individuals.

Digital MAU

(thousands)

2023

022

021

14,965.2

10,212.8

6,858.7

Definition

GEL value of all payment transactions executed in

BOG’s physical POS and online acquiring network for

the period.

Why do we measure?

Growing the payments business is one of the

Group’s strategic priorities, and volume of payment

transactions is one of the key strategic metrics that we

have communicated to the Company’s investors and

that is regularly monitored by Executive Management.

Performance

The volume of payment transactions executed through

BOG’s physical and online POS terminals reached GEL

15.0 billion in 2023, a 46.5% increase versus 2022.

Volume of payment

transactions in BOG’s acquiring

(GEL millions)

023

022

021

1,248.7

1,039.8

781.9

Definition

An individual who used a BOG card for payments at

least once within the past month.

Why do we measure?

Our clients want a fast and frictionless payments

experience and we believe cashless payments benefit

people. Payments are also our daily touchpoint with

customers and we aim to be the main daily banking

relationship for our customers.

Performance

In December 2023, BOG’s cards were used for payments

at least once by more than 1.2 million individuals (up

20.1% y-o-y), an important progress towards a more

cashless economy in Georgia.

Payments MAU

(thousands)

Strategic and ESG KPIs

023

022

021

eNPS

Definition

To calculate eNPS, we ask employees “How likely are

you to recommend Bank of Georgia to others as a place

of work?” and answers are scored on a zero-to-ten

scale. eNPS is simply the percentage of employees who

are promoters (those who scored 9 or 10) minus the

percentage who are detractors (those who scored 0 to 6).

Why do we measure?

Engaged and committed employees are critical for

the success of the Group. eNPS, measured internally,

offers valuable insights into Company culture,

employee engagement and satisfaction and is one of

the main non-financial KPIs for the CEO and Executive

Management.

Performance

The Bank’s eNPS score increased to 56 by year-end

(from 53 at the end of 2022), and was within our target

range, reflecting our efforts to improve employee

experience throughout 2023.

2023

022

021

Definition

To calculate NPS, people are asked “How likely are you

to recommend Bank of Georgia to a friend or colleague?”

and answers are scored on a zero-to-ten scale. NPS is

simply the percentage of customers who are promoters

(those who scored 9 or 10) minus the percentage who are

detractors (those who scored 0 to 6).

Why do we measure?

Customer-centricity is one of the key enablers of the

Group‘s success in the longer term. Overall customer

satisfaction, measured by a third-party, is one of the

main non-financial KPIs for the CEO and Executive

Management.

Performance

NPS remained at a high level throughout 2023 and

stood at 59 at year-end, broadly stable versus prior

year.

NPS

1. Based on external research by IPM Georgia.

2. Based on internal survey.

Annual Report 2023 Bank of Georgia Group PLC

2023

022

021

89.6

33.2

N/A

Definition

An individual who logged into sCoolApp at least once

within the past month.

Why do we measure?

Developing sCoolApp, a special mobile application for

school children, reflects our commitment to onboarding

and engaging more 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. sCoolApp MAU is one

of the non-financial KPIs for the CEO and Executive

Management.

Performance

We surpassed the 2023 year-end target of sCoolApp

MAU of 70,000, having reached 89.6 thousand school

students by December 2023.

sCoolApp MAU

(thousands)

2023

022

021

54.7

47.6

N/A

Number of self-employed

borrowers

(thousands)

Definition

An individual, with a credit from Bank of Georgia, whose

share of income from self-employment exceeds 50%

and who does not own a business/is not registered as

an individual entrepreneur.

Why do we measure?

We are committed to removing barriers that prevent

people from accessing credit. One such barrier used to

be lack of formal income. Over the past two years we

have focused on supporting self-employed individuals

with a range of retail lending products, and this

metric has been one of the ESG KPIs for the CEO and

Executive Management.

Performance

We have simplified the lending process to support

self-employed borrowers, ending the year with 54.7

thousand individuals. The loan portfolio of self-

employed borrowers amounted to GEL 531.7 million

as at 31 December, 2023, up 45.9% y-o-y. The 2022

figure has been recalculated based on updated

business criteria.

In 2023, the number of self-employed borrowers was

slightly short of the target (57K), despite the fact that

the loan portfolio itself grew significantly. The Retail

Banking team continues to be focused on reaching this

segment, especially outside of the capital city, Tbilisi,

and simplifying the user experience to attract more

customers into the formal banking system.

1. Individuals whose share of income from self-employment exceeds 50% and who do not own a business/are not registered as individual entrepreneurs.

Strategic and ESG KPIs

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Addressing financial and lifestyle needs of

our customers

Our retail customer base is diverse,

encompassing individuals ranging from

school students to high-net-worth

individuals. To stay relevant to our clients,

we have developed distinct offerings

tailored to various needs.

In Mass Retail Banking, the majority of

our clients use subscription packages

called S, M, or L, with L being the

most comprehensive package with

higher available limits. In 2023, in

Premium Banking, we introduced a

new subscription option – SOLO X –

designed for customers who appreciate

the SOLO lifestyle and banking services

but do not require a personal banker.

This differentiation in packages has

successfully attracted more customers.

Through the BOG APP – Bank of

Georgia’s retail financial superapp, we

not only provide core banking products

to our clients, but also offer non-banking

products, including investment accounts,

public transport cards, and insurance

marketplace. This diverse product range

enhances the variety of our offerings,

fostering increased client engagement.

Despite offering different services

to various customer segments, our

commitment to delivering the best

customer experience and ensuring high

levels of customer satisfaction remains

consistent.

As of December 2023, the number of

monthly active retail clients reached 1.8

million, a y-o-y increase of 10.8%. Notably,

75% of active retail clients are monthly

active digital users. This reflects the

extensive adoption of Bank of Georgia’s

market-leading retail digital channels.

Credit

Savings

Payments

Daily banking

Lifestyle

Rewards

Investments

Insurance

1.8M monthly active individuals

+10.8% y-o-y

Mass Retail Banking: 1.7M

+9.2% y-o-y

Premium Banking: 127K

+38.6% y-o-y

SOLO

Club

SOLO

Premium

SOLO

Package

Annual Report 2023 Bank of Georgia Group PLC

Our digital ecosystem

The cornerstone of our digital ecosystem

is a global award-winning financial

superapp – BOG APP. We aim to use

other digital channels for client acquisition

and then migrate our customers to BOG

APP because we envision BOG APP as the

go-to channel for our increasingly digital

customer base.

We aim to transform the everyday

experiences of our customers by enabling

them to effortlessly discover and secure

daily banking services and relevant

products with a single touch, all within our

financial superapp.

BOG APP has evolved during the past

two years, often in response to customer

feedback that we continuously track,

analyse and share monthly with Executive

Management. For example, in 2023, we

added the possibility to cancel or prolong

deposits to the app. Previously, customers

whose deposits were about to expire

had to contact a banker or come to a

branch if they did not wish the deposit

to be prolonged. This issue came up in

customer surveys as a pain point, and now

customers can see in the app when their

deposit is about to expire shortly and they

can take action themselves directly from

the app. If they wish to prolong it, they can

prolong it on similar or different terms, or

they can cancel it so that the money saved

will be transferred to the current account

after expiry.

When Bank of Georgia was in the initial

stages of digital transformation, we

focused on making sure that more and

more transactional activity happens

outside of branches and moves to BOG

APP. Lately, more focus has been directed

towards moving product sales to digital

channels by designing straightforward

digital journeys for different products.

We have achieved good levels of

digitalisation in unsecured consumer

loans, and saw improvements in deposits

digitalisation during 2023. Digitising card

sales has been a challenge mainly because

we lacked a simple and efficient card

delivery process. We are in the process

of designing the card delivery process to

make it more efficient for the Bank as

well as for the customers.

Seamless and consistent user

experience (UX)

Personalisation, navigation, exploration Banking products, non-banking products

and more

Effortlessly discover

Relevant products and

services Single touch

Three pillars of the BOG APP

iBank

sCoolApp

BOGPAY.ge

BOG.GE & SOLO.GE

BOG APP

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Our financial superapp

What we did in 2023

We launched instant peer-to-peer (P2P) payments

to other banks in BOG APP – enabling users to

transfer and receive money instantly, 24/7, from

any Georgian bank.

24/7 P2P transfers to other Georgian banks

We introduced ‘Stories’, offering customers access

to both financial and non-financial content. In 2023

more than 1M customers engaged with the stories,

accumulating 738M views in total.

Stories

We revamped BOG APP’s navigation style to give

it more flair and functionality, broadening its focus

beyond banking offers and services. We reimagined

two pages: Hub and My Space.

Superapp navigation

We added gamification to BOG APP. 527K

customers played the game and 805K products

were sold during the gamification campaign,

boosting digital product sales to 70.3% of total

product sales in the fourth quarter of 2023. Many

customers also became acquainted with the services and

products that we offer in BOG APP. Gamification was the first

major product implemented on public cloud.

Gamification

We provide personalised financial and non-financial

offers to our clients, enabled by machine learning

and AI.

Next Best Offer (NBO) with reasonings

In December we introduced gift cards in BOG

APP that customers can purchase for themselves

or their friends. This feature not only enhances

the customer experience but also empowers our

merchants to boost sales.

Gift cards

Credit

Savings Daily banking

Investments

Insurance

marketplace

Personal finance

management

Gamification

• End-to-end unsecured

consumer lending

• Pre-approved credit limits

Loyalty and

lifestyle

• Dedicated space with offers

from partner merchants

• Gift cards

• Stories

• End-to-end online deposit

activation

• Activation of ‘piggy bank’

• Transactions

• Payments & BNPL

• Subscriptions

• Remittances

• Bill split & money request

• Chat and chat-bot support

• Automatic payments

and transfers

• Digital debit card and

physical debit card ordering

• Instant P2P payments

to other banks

• Opening investment account

• Managing investment

portfolio

• Motor Third Party Liability

insurance (MTPL)

• Travel insurance

• Daily spend view and

personal budget management

PLAY STORE 4.7/5

APP STORE 4.8/5

CSAT

92% in 4Q23

(89% in 4Q22)

Annual Report 2023 Bank of Georgia Group PLC

Best Consumer

Bill Payment and Presentment

Best in Consumer Lending AI – Natural Language

Understanding Tool for

Georgian Speech Technologies

Best Consumer Digital Bank Best Consumer Mobile

Banking App

Best Consumer Online

Product Offerings

Best Consumer Innovation and

Transformation

Best Consumer Bill Payment and

Presentment

Best in Consumer Lending

How we measure success

1,357K

+21.0% y-o-y

Digital MAU (Dec-23)

50.9%

+3.3 ppts y-o-y

Digital DAU/Digital MAU (Dec-23)

70.3%

+25.1 ppts y-o-y

Share of products sold digitally (4Q23)

75.0%

+6.3 ppts y-o-y

Share of Digital MAU in total active

retail customers (Dec-23)

2023 was a successful year for our

retail digital channels. The number of

digital MAU increased to 1,357K (up

21.0% y-o-y) and Digital DAU reached

691K (up 29.5% y-o-y) as at December

2023. It is noteworthy that our clients

are becoming more engaged with our

financial superapp, as reflected by the

increasing Digital DAU:Digital MAU

ratio – which stood at 50.9% (up 3.3 ppts

y-o-y) – and the share of Digital MAU

in total active retail customers, which

increased to 75.0% (up 6.3 ppts y-o-y)

as at December 2023.

In the fourth quarter the percentage

of products sold digitally rose to

70.3% (up 25.1 ppts y-o-y), partly

boosted by gamification in BOG APP.

To maximise their points in the game,

customers were assigned tasks such

as purchasing a product via the app

or completing a digital transaction,

which significantly boosted digital sales.

Several improvements were implemented

throughout the year, including

streamlining the deposit prolongation

flow – further contributing to the

increased share of products sold digitally.

Customer satisfaction with our digital

channels remained at a high level – the

CSAT score was 92% for BOG APP and

84% for iBank as at December 2023. In

response to customer feedback we also

launched dark mode in BOG APP.

In 2024, we will focus on digital acquisition

of new clients, including the transition of

adults from sCoolApp to BOG APP, as well

as boosting the engagement of current

clients by reimagining the offers page and

using AI-generated offers. In addition,

we plan to streamline the card delivery

process for clients who prefer physical

cards. We strive to execute all projects

with UX consistency and high quality.

Considering the increasing pace of

digitalisation as well as the growing

share of transactional activity happening

outside of branches, Bank of Georgia’s

Retail Banking strategy entails a gradual

transformation of transactional branches

into full-scale branches where customers

will be offered a full spectrum of banking

products together with advice. This

transformation will result in a gradual

reduction of transactional branches. The

number of total branches at 31 December

2023 was 189 (207 at 31 December 2022).

Out of 189 branches, 98 were so-called

transactional branches (down 17.6% y-o-y).

Global awards by Global Finance

Regional awards in Central and Eastern Europe by Global

Finance

1. In 2Q23, we changed the methodology of calculating the share of products sold digitally and currently include all types of products sold by Bank of Georgia. The previous

periods have been restated.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Payments – a daily touchpoint with our

retail customers

Payments are an integral part of retail customers’ daily experience – often so seamlessly embedded that they happen multiple times

a day without users giving too much thought to the process. Being relevant in customers’ daily lives for us means being the leader in

the payments business, with excellent customer experience and innovative payment methods listed below:

In-store BNPL process for customers who have BNPL limits

takes not more than a minute. Customers tap their payment

cards or digital wallets to Bank of Georgia’s POS terminals

and receive an SMS asking them to click on a link to see the

terms and conditions and confirm the purchase with BNPL.

Afterwards, customers can see the newly activated BNPL with

its repayment schedule in the BOG APP. If they wish, customers

can prepay the BNPL without any charge.

Our main competitor in the payments business is cash, which, despite increasing digitalisation, is still widely used for payments.

We believe cashless payments benefit people, not just because they are easier and safer, but also because they open up other

possibilities, including:

During the past few years, we have significantly increased the number of retail

customers who used Bank of Georgia’s cards to make at least one payment within

a month. We call this payment monthly active user or Payment MAU.

In 2023, Bank of Georgia launched BNPL

for in-store payments, on top of already

offering BNPL online. BNPL, available

at more than 500 merchants, allows

four equal payments spread across four

months to be paid back over time, with

no interest paid by the consumer. Our

customers can activate and see their

BNPL limits in our financial superapp.

A list of merchants where BNPL works

as a payment method is also displayed in

the app.

Buy Now, Pay Later (BNPL)

1,249K

+20.1% y-o-y

Payment MAU (Dec-23)

43.5%

Repeat rate

35K

Customers used BNPL

in 2023

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 that they can better manage personal finances. The Personal Finance Manager

is available in our financial superapp.

Contact and

contactless card

payments

Apple Pay/

Google Pay

Payment with

loyalty points

(PLUS and MR)

BNPL QR

1. Share of individuals who used BNPL more than once.

Annual Report 2023 Bank of Georgia Group PLC

Number of daily average payment

transactions: 677

We celebrate the PLUS birthday each

year. PLUS points that customers

accumulate throughout the year double

on this day, and, as a result, PLUS

birthday is recognised as a major sales

event in Georgia among both retail

customers as well as merchants. This

event highlights the benefits of Bank of

Georgia’s loyalty programme, translating

the accumulation of loyalty points into

more tangible rewards that help sustain

our retail customers’ interest in using

Bank of Georgia’s cards, and hence a high

growth in Payment MAU described on

page 29. We believe the PLUS birthday is

an extra driver for increased engagement

among customers. The strength of

Bank of Georgia’s loyalty feeds into the

strength of Bank of Georgia’s acquiring

business, with more active merchants

in the network and more payment

transactions going through Bank of

Georgia’s acquiring.

PLUS birthday

30K

Number of unique clients exchanging PLUS points on

PLUS birthday

52K

Number of PLUS payment

transactions on PLUS birthday

1,298

+75.9% y-o-y

Total offers

(excl. SOLO-specific offers)

695,367

+42.9% y-o-y

Unique customers who exchanged

PLUS points at least once

523

PLUS-card specific offers

GEL 47,856,812

+89.8% y-o-y

Value of PLUS points exchanged

Loyalty and lifestyle

Bank of Georgia’s loyalty programme is

a driving force behind increasing cashless

payments and customer loyalty. Our

different lifestyle offers are tailored to

the needs and preferences of specific

segments. Besides mass retail customers,

we have special offers for sCool Card

holders, Student Card holders and

Premium Banking (SOLO and WM) clients.

As clients make transactions within

BOG’s acquiring network (physical POS

and online), they accumulate either

PLUS points when using debit cards

or Membership Rewards (MR) points

when using American Express credit

cards. Mass Retail Banking clients attain

different status levels based on their

activity with the Bank, with higher levels

unlocking greater benefits. This approach

not only encourages cashless transactions

but also strengthens customer stickiness.

We changed the loyalty programme

mechanics in 2021, from product-based

upgrades to product- and payment-based

upgrades. We offer a variety of benefits

to our loyalty programme members,

including discounts, cashback and PLUS

points. One of the main aspects of the

value proposition is the personalisation of

lifestyle offers.

In 2023, we remained committed to

strengthening the Bank’s advanced

analytics and AI capabilities, aiming to

improve efficiency, customer satisfaction

and loyalty. We use machine learning

models to provide non-financial offers

tailored to each customer’s unique needs

across different physical and online

ecosystems.

In 2023, we introduced location-based

offers for all retail clients, delivered

through push notifications. Customers

are notified about relevant promotions

while being nearby partner merchants. By

clicking on the notification, the BOG APP

directs clients to Google Maps, allowing

them to see the precise location through

a pinned marker, ensuring a user-friendly

and interactive engagement. We elevated

our location-based offers by introducing

location-based bundled offers tailored

to specific areas with high merchant

concentrations. When clients find

themselves in these targeted locations,

they get push notifications with diverse

offers available within that area. This

approach ensures clients can access a

variety of offers grouped in one location,

enhancing their overall experience with

our services.

In 2021, we launched PLUS – the

first American Express debit card

project in EMEA and the second

globally. Our PLUS card enables our

customers to get more benefits,

especially in daily use categories, due

to lower transaction costs.

A snapshot of 2023 loyalty offers

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

In Premium Banking, we go beyond just

partnering with merchants for lifestyle

offers. We not only offer special deals,

but also create experiences in travel,

entertainment, education and wellbeing.

In 2023, in response to customer

feedback, we expanded our range of

SOLO offers to better reflect the diverse

preferences and requirements of our

customers. Additionally, we introduced

more specialised offers, tailored

specifically to individual tastes and

needs. Even though Offers Hub is already

integrated within our financial superapp,

we took additional steps to enhance

communication with our premium clients

in 2023. We increased the frequency of

informative text messages, ensuring

customers stay well informed about the

latest lifestyle offers. This commitment

reflects our dedication to making sure

our clients are aware of the advantages

and privileges available to them and can

maximise their benefits. As a result, 66K

unique customers used SOLO offers in

2023 (up 93.9% y-o-y).

During 2023, responding to high demand

from our customers, we significantly

expanded the number of SOLO events

and projects and we focused on

enhancing the quality of event content. As

a result, we achieved a remarkable 83.1%

y-o-y increase in attendance at these

events. We are committed to providing

enriching and engaging experiences for

our customers.

Lifestyle experiences for Premium Banking clients

920

+34.7% y-o-y

SOLO-specific offers FY23

66K

+93.9% y-o-y

Unique clients who used SOLO

offers FY23

SOLO Talks



Discussions and meetings

with various professionals

SOLO One to One



Individual meetings with

famous professionals

SOLO Events

Big art and culture events

financed by SOLO

SOLO Kids



Educational and entertaining

activities for our clients’ children

SOLO Hobby



Outdoor/indoor activities to

help our clients discover new

interests

SOLO Workshop



Interactive events for

collaborative learning



Organised by SOLO.

SOLO Tours



International/local tours with interesting travellers

SOLO X

In early 2023, we introduced SOLO X, in

response to the demand from customers

seeking to get the same value proposition

as SOLO, but without the necessity of

having a personal banker and at a lower

fee. SOLO X instantly gained popularity

due to its exclusive benefits, resulting in

26K monthly active customers and 11K

unique customers using SOLO X offers.

Annual Report 2023 Bank of Georgia Group PLC

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 not your usual banking brand

– it is a blend of tailored financial help,

exclusive lifestyle experiences and

luxury brands, all in one spot. At SOLO

lounges, our clients are attended by

personal bankers who not only deliver

banking solutions but also offer luxury

goods and exclusive lifestyle experiences,

encompassing everything from special

events and concerts to unique travel

tours and the latest product offerings

at the SOLO Boutique. Responding to

the evolving preferences of our clients in

2023, we expanded our SOLO Boutique

assortment by introducing ten new

brands and increasing the variety of

products. Moreover, recognising the

importance of accessibility and comfort,

four sales assistants were specifically

assigned to two SOLO lounges, ensuring

enhanced and personalised experience for

our SOLO customers.

This unique blend of banking and lifestyle

offerings sustains the strong interest

in the SOLO brand. As at 31 December

2023, SOLO served around 125,000 active

customers, up 39.1% y-o-y, reflecting

the ongoing popularity of this brand.

SOLO Club, the highest subscription level

within SOLO, launched in 2017, offers

additional exclusive financial products and

lifestyle experiences, at a higher fee. One

such exclusive product is the American

Express Platinum card, available only

to SOLO Club members. In 2023, SOLO

strengthened the customer experience

with its Personal Concierge Service. Club

members benefit from personalised

assistance through dedicated contact

persons, ensuring a tailored and

responsive lifestyle experience. This

premium service seamlessly assists with

travel arrangements, event planning,

dining reservations and more, providing

an unparalleled level of support and

convenience.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Lending journey

Bank of Georgia’s core business activity

is lending. We are committed to being

a responsible lender that supports

customers on every step of their lending

journey and enables them to fulfil their

needs. Lending is at the heart of Bank of

Georgia’s role in supporting the Georgian

economy. Responsible lending for us

means increasing access to finance whilst

ensuring that prudent risk management

practices as well as customer protection

principles are followed during the loan

underwriting process and throughout

the lifecycle of a loan. We aim to create

simpler end-to-end customer journeys for

loans, eliminating unnecessary barriers

and roadblocks.

Moving product sales to digital channels

is one of the ongoing focus areas for Bank

of Georgia’s digital agenda. Digitalisation

of the lending process is a big part

of the current efforts to design more

efficient processes with excellent user

experience. Lending processes vary for

different retail customer sub-segments

and different products. Bank of Georgia’s

digital lending gained speed in 2021

when we redesigned the unsecured

consumer lending flow in digital channels.

Currently, unsecured consumer lending

is almost fully automated and relatively

straightforward. Eligible customers who

give consent to the use of their data for

personalised offers can check and get

information on available credit limits

for unsecured loan types (including

instalments) as well as conditional

limits for secured loan types, including

mortgages, through the BOG APP. When

limits are available in BOG APP, activating

an unsecured consumer loan takes

seconds. The digitalisation of this process

resulted a high share of total number of

loans activated digitally.

76.5%

-0.8 ppts y-o-y

Share of total number of loans

activated digitally (4Q23)

During 2022-2023, we focused on

supporting self-employed retail

customers and making sure they have

access to the same products and services

as other retail customers. However, their

irregular income posed challenges for

income validation, requiring detailed

questionnaires to determine credit

eligibility. In 2023, we redesigned the

income validation process to eliminate

the need for long questionnaires and

instead relied on advanced models in the

back to fill out and analyse the necessary

financial data.

We also upgraded our analytical models

to be more independent of direct

client input. By making these fields

independent, we enhanced the accuracy

and reliability of our assessment process.

This allowed us to better understand

the financial dynamics of self-employed

individuals and offer more tailored

solutions to meet their needs. Ultimately,

these improvements streamlined the

validation process, making it more

efficient and less intrusive for the end-

user. Professional activity of clients is

being validated by a video call or/and, if

necessary, a site visit and a more detailed

study of the field of activity.

These changes allowed us to extend the

credit offerings to self-employed clients in

2023, and they are now able to access all

the available credit products.

Reaching more self-employed borrowers

has been one of the KPIs for Executive

Management (in 2023 and currently

in 2024). In 2023, the number of self-

employed borrowers was slightly short

of the target despite the fact that the

loan portfolio itself grew significantly.

The Retail Banking team continues to

be focused on reaching this segment,

especially outside of the capital city,

Tbilisi, and simplifying the user experience

to attract more customers into the

formal banking system.

Self-employed borrowers

In 2024, we aim to optimise and further

advance digitalisation of existing lending

processes to increase the share of

products sold digitally.

Several notable projects are currently

being developed: a fully digital lending

processes for secured consumer loans;

a feature allowing customers to sign

mortgage and secured agreements

digitally; E2E digital lending processes

for self-employed customers (including

income validation processes remotely).

Bank of Georgia will continue to work

on improving the user experience for

customers who are applying for any type

of lending product.

Annual Report 2023 Bank of Georgia Group PLC

54.7K GEL 531.7M

+14.9% y-o-y

Self-employed borrowers

(Dec-23)

+45.9% y-o-y

Loan portfolio of self-employed clients

(Dec-23)

Savings – encouraging a savings culture

As a leading organisation in Georgia,

fostering a robust savings culture within

our community is not just a financial

imperative, it is also a commitment to

empowering individuals and supporting

economic resilience as savings are a key

component of people’s financial health.

Bank of Georgia has the leading retail

franchise in the Georgian market, which

is reflected in its leading market share in

deposits of individuals, standing at 45.3%

as at 31 December 2023 (44.4% as at

31 December 2022). The deposit franchise

is a competitive strength of any bank,

and we believe our focus on leadership

in daily banking and excellent customer

experience has significantly contributed

to the retail deposit franchise.

We believe that by encouraging savings,

we help foster a sense of security and

empowerment among individuals.

By providing simple products and services

to promote savings and make savings

easier, we equip our retail customers

with the tools they need to face financial

uncertainties and achieve their small or

big goals.

During 2023, we made our savings

products more flexible and accessible

for our customers, with a focus on

encouraging the use of digital channels.

We provided employees at our branches

with an extra incentive to educate

customers on opening digital deposits

through BOG APP. We also continued to

offer higher rates on deposits opened

through BOG APP.

For Premium Banking (SOLO) customers,

we have an upgraded demand deposit,

‘Premium’. SOLO clients receive a higher

return on this deposit, with rates linked

to the monetary policy rate.

Throughout the year, more customers

used a digital piggy bank – accumulating

money by automatically transferring a

pre-defined amount after every purchase.

Towards the end of the year, an uptick

in customers with a digital piggy bank

was related to gamification in BOG APP,

however, even without gamification,

the trajectory of growth of customers

with a digital piggy bank was good, and

in December 2023, this figure stood at

304.2K. To read more about how Bank of

Georgia encourages young people to save

money, see page 37.

69.7% 313.7K 304.2K

+33.0 ppts y-o-y

The share of deposits

activated digitally

(4Q23)

+3.4% y-o-y

Retail customers with

an active saving deposit

(Dec-23)

+179.6% y-o-y

Retail customers with an

active piggy bank account

(Dec-23)

Savings highlights

1. Individuals whose share of income from self-employment exceeds 50% and who do not own a business/are not registered as individual entrepreneurs.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Investments – an alternative

savings method

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

financial superapp, giving Bank of

Georgia’s retail customers access to the

US stock market. BOG Investments offers

our retail customers low-cost trading and

fractional trading options.

Throughout 2023, we enhanced BOG

Investments by adding two new

functionalities:

• Account reactivation – users can now

reactivate their deactivated accounts,

eliminating the need for them to

create new accounts, which previously

used to be a time-consuming process.

• Instant cash-out – previously, users

needed two business days for

transferring funds to their bank

accounts, followed by additional

two days for cash-outs. In 2023, we

enhanced this process, making cash-outs

quicker and more efficient. Now, instead

of waiting for two additional business

days, users can enjoy immediate access

to their funds, up to $5,000, directly

from our investment platform as soon

as the funds become available in their

bank accounts.

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.

In 2023, we focused on increasing

awareness of our investment platform

through gamification within BOG APP.

Additionally, we published educational

content to give users the knowledge

of fundamental investing concepts.

Consequently, our efforts led to a

significant increase in active users, with the

number reaching c.45K in 2023 compared

with c.19K in 2022. Going forward, our

priority will be to enhance user activity and

engagement within the platform.

1.1K 487 30+

200+ TV c.3.0M

We see potential in retail brokerage in

Georgia over the medium-to-long term,

however this type of product is new to

the market and currently our efforts are

focused on making sure more people

understand what investing is, and what

kind of risks and benefits it entails.

To promote investing and general

financial literacy in 2023, we primarily

used three channels: media, our own

social networks, and events. Through

collaborations with prominent business

media in Georgia, we actively provided

educational content and comprehensive

insights into financial and economic

developments, including updates on

global financial markets. During 2023 we

also hosted events, including SOLO Talks,

aimed at meaningful discussions around

investment strategies and financial

planning. Expanding on our educational

initiatives, we introduced a course on

investments on our educational platform,

businesscourse.ge, in 2023. Additionally,

a subsidiary of the Group, G&T, publishes

analyses of investment opportunities,

including analyses of global commodities

and assessments of global equity and

fixed income markets.

Media Social network Events

Written pieces Posts

Business channel visits People reached

c.45K

c.19K in 2022

Active users of BOG Investments

Annual Report 2023 Bank of Georgia Group PLC

Empowering

young people

We surpassed our 2023 year-end target of

70K sCoolApp MAU, reaching up to 90K school

students as at December 2023

A sketch from sCoolApp gamification

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

We believe that financial education

should start early in childhood to help kids

develop financial literacy skills and money

management habits that will set them up for

financial security and wellbeing later in life.

Bank of Georgia is focused on seamlessly

onboarding children and young people into

the formal financial system, equipping

them with critical financial literacy skills and

offering support through accessible daily

banking solutions and tailored offers that

respond to their needs.

We offer a free account and a daily

banking card, sCool Card, to school

students, and a free and specially

designed mobile app – sCoolApp.

When launched at the end of 2022,

sCoolApp was the first financial

application for children in Georgia, with

an average user aged 14. Launched in

October 2022, it keeps young people safe

with our end-to-end security, spending

alerts, custom limits and in-app card

controls. With necessary features as well

as sounds, haptics and fun elements,

sCoolApp is becoming a daily app for

young people.

In 2023 we added new features to sCoolApp to further enhance children’s financial journey and daily engagement.

Stories

Gamification – the Other Universe

We launched ‘Stories’, a captivating

addition to sCoolApp that puts financial

education in the spotlight for young users,

on the home screen.

Each week sCoolApp’s main dashboard

is refreshed with engaging content

on effective money management

principles, including saving, budgeting

and thoughtful spending from an early

age, cultivating positive money habits for

future financial wellbeing.

In October 2023 we launched ‘Other

Universe’ in sCoolApp – a game where

students embark on a captivating journey

by answering simple yet thought-provoking

questions from history, general knowledge,

financial education and logic. Correct

answers rewarded school students with

a unique currency – ‘glitters’ – allowing

users to discover and explore diverse ways

to use their rewards while navigating and

conquering missions within the alternate

realm. The purpose of the game was to

engage more school students in the app

and raise awareness of the app’s features

and functionalities.

68K

Users who

started the game

Other Universe

In 2023, we built ChatGPT within sCoolApp, allowing users to get instant

information about any topic.

ChatGPT

In 2023, we added a Bill split feature to sCoolApp, empowering users to

effortlessly divide expenses.

Bill split

In 2023 we built PFM (Personal Financial Manager) within sCoolApp, allowing

users to manage their finances by providing a categorised breakdown of their

spending, revealing where they spend the most money.

PFM

We also added a digital

‘piggy bank’ to sCoolApp,

helping foster a savings

culture from an early age.

Piggy bank

sCoolApp

34K

+162.0% y-o-y

Active sCoolApp users with

an active piggy bank account

(Dec-23)

Annual Report 2023 Bank of Georgia Group PLC

77%

Tbilisi

63%

Rustavi

41%

Batumi

52%

Zugdidi

sCool Card benefits

Can be ordered on our website or through the app

Free card

Free SMS, mobile and internet banking

Free public transportation in Tbilisi and Batumi;

discounts in Zugdidi and Rustavi

No fee on BOG ATM withdrawal

Loyalty programme: accumulation of sCool points

Growing engagement among school students in Georgia

To read more about financial education initiatives, see page 89-90

142K

61.0% y-o-y

Active sCool Card holders (Dec-23)

116K

82.5% y-o-y

Payment MAU (Dec-23)

Share of total number of pupils having a sCool Card

We understand that being financially

literate is more than just understanding

numbers – it is a skill that influences day-

to-day decisions and long-term financial

stability. To enhance financial literacy

among young people, we offered diverse

resources, programmes, workshops and

tools to school students in 2023.

Together with USAID and Georgian

Economic Literacy initiative (GELi), we

provided students with basic knowledge

of financial education and encouraged

interest in economy and finance. We also

supported the first financial education

Olympiad in the country. Students in

grades 7-12 participated in this event.

The Olympiad was a one-round event,

held remotely, thus allowing students

living in Georgia’s regions to participate

and test their knowledge. A series of

lectures were given to interested students

to prepare for the Olympiad. In 2024,

we will expand our focus on financial

education.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Students

Can be ordered on our website or through the app

Free card

Free SMS, mobile and internet banking

Public transportation benefits

Loyalty programme: special offers and accumulation of

PLUS points

For years Bank of Georgia has focused on

onboarding and increasing engagement

with university students in Georgia.

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.

We believe everyone

in this age group is aware of Bank of

Georgia. Ten Georgian universities are

enrolled in Bank of Georgia’s payroll

programme.

Our partnerships with universities enable us to reach more students and involves different

activities, including:

1. Based on independent research conducted by IPM Georgia. ‘Top-of-Mind’ refers to the first brand that comes to a person’s mind when they are asked

an unprompted question about particular industry or category. Figure presented is as of 4Q23.

196K

15.9% y-o-y

Active Student Card

holders (Dec-23)

190K

18.1% y-o-y

Digital MAU (Dec-23)

153K

22.7% y-o-y

Payment MAU (Dec-23)

Distributing Student Cards directly from university buildings

Designing student spaces

Financial support in organising student graduations and anniversaries

Short-term internship programmes for students, along with ‘Leaderator’ – Bank of Georgia’s flagship

programme for motivated undergraduates

Annual Report 2023 Bank of Georgia Group PLC

Fulfilling business customer needs

Coverage of business clients

Daily business operations

Business growth and development

Sales

Process optimisation

We serve a broad spectrum of business

clients, including small and medium-sized

enterprises (SMEs) and large corporate

clients. We understand that each business

is a unique entity, influenced by its

own distinct characteristics – be it the

intricacies of its business model, the scale

of its operations, or the financial landscape

it navigates. Just like people, businesses

evolve and grow – and so do their needs.

Customer-centricity for us means listening

to different businesses and understanding

their needs to design financial solutions

that support our clients at different stages

of their business development journeys.

We strive to be more than just a provider

of banking products for our clients –

we want to be a trusted partner for

businesses, offering a comprehensive

suite of products and services including

value-added services such as personalised

advisory and access to business education

and insights. Deepening customer

relationships is one of our top priorities

and increasing engagement among

our business customers is a focus area

for both SME Banking and Corporate

Banking directions.

Our interaction with business clients

is multifaceted, including dedicated

relationship managers and dedicated

business branches, 4Bs. At the same time,

we pursue a digital strategy and continue

to develop separate digital channels for

businesses – Business mBank and iBank.

In 2023 we continued to improve

our processes and functionalities in

digital channels to enhance the overall

experience for our business clients. As

a result, the number of monthly active

business clients grew by 20.2% y-o-y as of

31 December 2023.

97.8K monthly active legal entities

+20.2% y-o-y

SME Banking: 93.9K

+20.2% y-o-y

Corporate and Investment Banking: 3.8K

+21.0% y-o-y

4B branch

We are committed to delivering excellent

customer service to our business

clients through various channels and

touchpoints, with a particular focus on

improving the digital experience.

Bank of Georgia has different coverage

models for SME and Corporate business

customers. SME clients can be served

in a variety of ways, including through

dedicated relationship managers who offer

personalised support and provide end-

to-end assistance, and remote bankers

who can handle client requests remotely.

Some customers are served fully through

digital channels. In 2020, Bank of Georgia

opened its first special business branch,

4B, in Tbilisi. In 2023, a second 4B branch

opened in Tbilisi – further strengthening

our commitment to the SME segment. 4B

serves as a hub for fostering networking

opportunities among businesses, and it

is a special place where business clients

can meet their relationship managers,

hold meetings, and participate in different

events that Bank of Georgia hosts

throughout the year.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Call centre

and chat

Retail

branches

Remote

bankers

Business

bankers

Relationship

managers

Digital

channels

MAIN TOUCHPOINTS

WITH BUSINESS

CLIENTS

Manufacturing

17.1%

Real estate

20.3%

Trade

10.2%

Agriculture,

hunting and

forestry

9.0%

Construction

1.5%

Electricity, gas

and water supply

10.1%

Hospitality

11.2%

Other

16.1%

Financial

intermediation

4.5%

Individual

entrepreneurs

54.7%

Other

9.0%

Trade

12.9%

Manufacturing

6.1%

Construction

6.0%

Real estate

3.9%

Agriculture, hunting

and forestry

2.5%

Hospitality

4.9%

Our customer coverage model for

Corporate clients is led by skilled

relationship managers equipped with

advanced financial tools and sector-

specific expertise. Strengthening industry

knowledge is our top priority, reflecting

our commitment to staying ahead of

market trends.

In 2023, we restructured our teams into

new sectors, enabling us to deliver

personalised financial solutions and

guidance tailored to the unique needs

of our Corporate clients. This approach

ensures our clients receive high-quality,

customised support.

We prioritise enhancing our digital

platforms to help our business clients

efficiently manage their daily tasks quickly

and independently – freeing up valuable

time for personalised guidance and

business support from the Bank.

Alongside in-person assistance, our big

Corporate clients can also benefit from

specialised advisory services offered by

the Group’s wholly-owned subsidiary G&T.

JSC Bank of Georgia has well-diversified

Corporate Banking and SME Banking

loan portfolios. As at 31 December 2023,

top 10 borrowers in Corporate Banking

accounted for 7.3% of the Group’s gross

loan portfolio (vs 5.9% as at 31 December

2022). The y-o-y increase in concentration

was driven by loans disbursed to a large

corporate client towards the end of the

year, however, the concentration risk

remains prudently managed by the Bank.

Corporate Banking continues to

focus on strengthening its position in

high-growth economic sectors and

deepening relationships with customers

in key sectors where Bank of Georgia

holds lower market shares. Further

improvement of customer coverage and

relationship management is one of the

main focus areas across both CB and

SME Banking directions.

Corporate Banking gross loans by sector: SME Banking gross loans by sector:

Annual Report 2023 Bank of Georgia Group PLC

Our business digital ecosystem

Business iBank

BOG.GE/Business

Business mBank

Business Manager

Central to our dedication to operational

excellence through digitalisation are

our award-winning digital channels for

business clients – a mobile app called

Business mBank and an internet banking

platform called Business iBank.

Since the launch of Business iBank and

mBank, we have continually refined and

improved these platforms to provide simple

and user-friendly digital experiences to our

business customers and support them in

managing daily operations as well as in

making more informed business decisions.

Our business mobile and internet bank

Credit

Savings

Daily

banking

For merchants

• Digital confirmation of loans (available

for some types)

• Pre-approved credit limits

activation

• Credit line management

• Credit leads

• Loan prepayment

• Tender guarantee

• Factoring

Business

support

• Collection of third-

party offers tailored

to business needs

• End-to-end deposit

activation

• Transactions

• Payments

• Business card: ordering

and management

• Digital business card:

ordering and

management

• Currency exchange

• Statements

• Templates

• Treasury transfers

• Money request

• Payroll management

• Packaged transfers

• User access

management

• SMS bank

• POS payments history

• E-commerce payments history

PLAY STORE 4.9/5

APP STORE 4.9/5

CSAT

90% in 4Q23

(85% in 4Q22)

1. Available only in Business iBank.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

While we consistently strive to enhance

digital channels and increase the range

of products available digitally, we see

more upside and room for further

improvement. While transactionally

business customers have become highly

digital, with more than 95% of daily

transactions happening outside of

physical branches, we still need to work

on designing end-to-end digital product

journeys. Unlike in retail, business lending

is still at an early stage of digitalisation,

and it will continue to be one of the main

focus areas going forward.

Our aspiration in SME Banking is to have

end-to-end digital lending, and some

of the ongoing consulting projects and

initiatives are directed at developing

appropriate models and redesigning

processes to enable the Bank to move to

a more digital business lending.

How we measure success

74K

+28.6% y-o-y

Digital MAU (Dec-23)

19.1M

+46.3% y-o-y

Number of transactions

in Business mBank and

iBank (2023)

Global awards by Global Finance 2023

Regional awards in Central and Eastern Europe by Global Finance 2023

Best Corporate Mobile

Banking App

Top Innovator in SME for

Api.bog.ge

Top Innovator in eCommerce

for Payment Manager

Best Corporate Mobile

Banking App

Best Corporate Innovation

and Transformation

Best Corporate Trade

Finance Services

What we did in 2023

Digitalisation of deposits

Digital activation of deposits was previously available only in

Business iBank, and in 2023 it was added to Business mBank

as well. In addition, we introduced a new deposit product

– collectable deposit, to promote a savings culture among

businesses. This deposit is currently available only in Business

iBank, but it is expected to be added to Business mBank during

the first half of 2024.

Digital tender guarantees

Customers can now activate a tender guarantee of up to GEL

15,000 in digital channels.

Digital signature

Once a loan is approved, borrowers can now digitally confirm

unsecured and secured loan contracts without visiting a branch,

thus activating a loan digitally. This process is currently available

for secured loans only if a borrower has already pledged

collateral to the Bank.

Fast loans

Fast loan is a pre-approved loan limit activation, available

instantly in digital channels.

Simplified onboarding and remote banking

A successful relationship with SMEs starts at the onboarding

stage, and a smooth and simple onboarding process is critical

for customer satisfaction. We simplified the onboarding process

to allow business account opening remotely, without a branch

visit. Customers can undergo this process independently or with

the help of a remote banker who can facilitate the onboarding

process via a call.

This process has contributed to more than 52% of customer

onboarding happening digitally in Dec-23 compared with just

around 13.0% in Dec-22.

Offers Hub for businesses

Our business customers can see different third-party service

offerings in digital channels. These offerings include accounting

services, business consulting, marketing, HR services, among

others. Our clients can see different third-party offers in one

space and leave a request for a follow-up.

Tailored business sets

Following extensive preparation in 2023, in January 2024

we rolled out business sets, a packaged offering including

products as well as transactional services differentiated for

SME customers of different sizes and needs. Previously, all

SME customers had to pay a fixed monthly fee irrespective of

their needs. By tailoring sets to suit different business sizes and

needs, we strive to provide a more tailored banking experience

and make fees more transparent for our customers. Recognising

the unique needs of early-stage businesses, we also added

‘Startup’ subscription set, which includes free accounting service

for the first three months from our partner accounting firms.

Enabling local businesses, especially smaller ones, to implement

proper accounting practices continues to be one of our priorities.

Annual Report 2023 Bank of Georgia Group PLC

Bank of Georgia is the leading payments

acquirer in Georgia. By prioritising user

experience and service quality, the Bank

has been focused on increasing digital

payments by encouraging more individuals

to use cashless payment methods and

expanding the network of merchant clients.

We also empower merchants to embrace

digitalisation, driving the growth of

e-commerce businesses in Georgia.

Merchant solutions

18.3K

+26.4% y-o-y

Active merchants

Highlights of 2023

596

+27.6% y-o-y

Active e-commerce merchants

GEL 15.0B

54.9%

+46.5% y-o-y

Volume of transactions in Bank

of Georgia’s acquiring (2023)

+3.7 ppts y-o-y

Market share by volume

(Dec-23)

We offer a variety of online and offline payment solutions:

In-store

Online

Diversity of payment methods

including Apple Pay, Google

Pay, all international payment

cards, BNPL and loyalty points

(PLUS/MR)

POS terminal

(standard,

Android-based)

All international

cards

Loyalty points

(PLUS and MR)

BNPL Instalments

Recurring

payments

E-invoicing Apple Pay Google Pay

Two-in-one solution – cash

POS terminal

POS terminal with

cash register

Fully certified application

for any Android phone, with

‘PIN on glass’ functionality

and no monthly fee (we use a

transaction-based fee model)

Soft POS terminal on

any Android NFC device

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Business Manager is still at an early stage of use and development, and 2024 will be a year of focus on its uptake and technical

development.

In 2023 we introduced Business Manager

– a digital platform equipped with

merchant solutions vital for supporting

business operations and development.

Running the daily operations effectively

and growing sales are two of the few

critical questions that business customers

grapple with and need answers to. Bank

of Georgia’s Business Manager is a digital

platform combining three merchant

solutions that are designed to help

businesses answer these questions.

Business Manager – responding to business needs

Being able to accept a variety

of payment methods is a top

priority for lots of businesses.

With a single integration,

businesses can take all the payment

methods that Bank of Georgia offers,

in-store and online, including Google Pay,

Apple Pay, loyalty points, BNPL, and loan

instalments, among others. Users can

manage payments on this platform and

see transaction analytics – a significant

perk that allows businesses to have a full

view of what kind of customers they have,

when most of the activity happens, which

products are more popular, among others.

They can use this data to make more

informed business decisions and increase

operational efficiency by targeting the

right customers at the right time with the

right products.

Ads Manager combines

customer analytics with a

campaign management tool

to help businesses plan and

executive special campaigns targeting

different customer segments. The

campaign management tool allows

businesses to reach their target audience

through Bank of Georgia’s retail digital

channels, used by c.1.4 million monthly

digital active users. Previously, the

campaign management process was a

fully manual process coordinated with the

Bank. With Ads Manager, businesses can

initiate campaigns, which will be reviewed

and assessed in the back by the Bank, and

in case of agreement, launched with pre-

set criteria.

Combines all available API

services provided by Bank of

Georgia, granting access to

critical functionalities such

as Business iBank, Open Banking, and

BOG ID API services, enabling a seamless

integration of banking features into

digital platforms or software.

Payment Manager Ads Manager API Manager

Payment Manager

Ads Manager

API Manager

• Payment aggregator with

one integration

• Card payment

• Online instalment

• BNPL

• Loyalty points

• Google Pay

• Apple Pay

• Fully digital onboarding

• Payment management

• Reports

• Transactional analytics

• Create offers and

distribute through BOG

digital channels

• Access to BOG’s c.1.4M

digital MAU

• User analytics based on:

• Demographic

• Interests

• Income

• Behaviour

• Detailed offer analytics

based on:

• Number of sales

• Expenses

• List of transactions

• BOG ID

• Open Banking

• Business Internet Bank

API

• Billing

Annual Report 2023 Bank of Georgia Group PLC

Business education and support

Supporting businesses is vital for

economic growth, job creation, and

community development. We believe

that successful businesses contribute to

innovation. To best assist our SME clients,

we have a comprehensive approach

that combines financial support with

a range of value-added services aimed

at fostering success. Bank of Georgia’s

initiatives encompass various supportive

measures.

These include targeted capacity-

building programmes, focused on

specific skills, such as marketing

and leadership. Additionally, our

clients benefit from expert advice to

navigate the market effectively, as

well as valuable introductions and

networkingopportunities.

We believe that education, information

sharing, and the development of

professional networks play pivotal roles

throughout the entire business lifecycle.

By combining financial assistance with

these multifaced support mechanisms,

we aim to empower our SME clients and

contribute significantly to their sustained

growth and prosperity.

A critical challenge confronting SMEs

in their pursuit of financial support

is the absence of robust accounting

practices. Bank of Georgia’s Accounting

Development Programme is designed

to empower SMEs by addressing

critical accounting challenges and

fostering financial inclusion. Through

collaborations with local accounting firms,

this programme promotes increased

transparency and proper financial

management.

The Accounting Development Programme

focuses on three areas: comprehensive

accounting services, digitalisation and

quick financial information sharing.

Through partnerships with global entities

like Visa and leading accounting firms,

SMEs receive discounted accounting

services. This enables them to fully

outsource their accounting practices,

gain access to digital tools and automate

accounting-related processes. After

having improved accounting practices,

our clients become able to integrate their

accounting softwares with the Bank,

which streamlines loan applications

and allows us to offer tailored solutions

for SMEs. As part of the programme,

we also conduct workshops for our

clients, emphasising the significance of

implementing sound accounting practices

for sustainable growth and development.

In 2023, we conducted three regional

business forums, focusing on effective

strategies for accessing finance, and

seven masterclass workshops, focusing on

raising financial awareness.

We understand that businesses require

more than just financial support to

succeed. That is why we facilitate

access to different advisory services and

networking opportunities for our SME

clients. Spanning from in-depth market

analysis to crafting expansion strategies,

we help businesses make informed

decisions and overcome challenges.

Through our events and platforms, we

connect SMEs with partners, suppliers,

and customers, fostering collaboration

and growth.

Improving accounting and

financial literacy

Supporting women entrepreneurs

Advisory and networking

support

Providing essential business insights

and relevant research reports

We support businesses through

The following projects were executed throughout 2023, unless otherwise stated.

Improving accounting and financial literacy

Advisory and networking support

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

300+

Women entrepreneurs reached

GEL 1.0BN

Gross loan portfolio of women-owned SMEs

(Dec-23)

1. Small and medium-sized enterprises wherein more than 50% ownership is held by

women.

Business offers

We have collated a list of 80 third-party business consulting firms who can provide

marketing, accounting services, tax assurance, HR and business consulting, to our SME

clients, often at a discount. The list of different offerings is accessible through our

Business mBank and iBank.

Trade mission to Uzbekistan

We organised trade mission to Uzbekistan and facilitated B2B meetings for ICT

companies and construction materials manufacturing companies with local public and

private sector organisations, building strong connections that can lead to potential

business opportunities. We believe supporting international business collaboration can

lead to increased investments, job creation and overall economic development.

Advisory

Networking

B2B Forum and Agro B2B Forum

In partnership with the USAID Economic Security Program, we organised a B2B

forum for SMEs, connecting entrepreneurs and customer companies across various

sectors. The forum enabled businesses to make new connections and explore

potential partnerships for the future. We also organised a B2B agro-forum with the

USAID Agriculture Program and EFSE Entrepreneurship Academy, to support export

opportunities and market access for Georgian entrepreneurs.

Supporting women entrepreneurs

We are committed to empowering

women entrepreneurs and have crafted

specialised programmes and initiatives

to empower them. Recognising the

crucial role women play in economic

development, innovation and societal

progress, we believe financing and

supporting women-led businesses is

a key towards a more inclusive and

vibrant business ecosystem. By providing

educational resources, development

opportunities and networking

platforms, we aim to encourage women

entrepreneurs to excel and become

impactful leaders in the modern business

landscape.

Workshops for women entrepreneurs

In collaboration with the EFSE Entrepreneurship Academy, we

conducted a series of workshops designed to empower women

entrepreneurs who manage relatively small businesses. These

sessions covered a range of essential topics including digital

marketing strategies, employment practices, e-commerce

approaches, and change management in dynamic and uncertain

business landscapes.

School of women entrepreneurs

In partnership with the United Nations Development

Programme (UNDP) we established the School of Women

Entrepreneurs. This initiative supports women’s leadership in

business and successfully trained 170 women entrepreneurs

in 2023. It offers a comprehensive curriculum encompassing

hard and soft skills. It also facilitates access to financing

opportunities and a strong partnership network.

200+

Businesses took advantage

ofthis opportunity

Companies participated

up to 180

Companies and entrepreneurs

participated

Annual Report 2023 Bank of Georgia Group PLC

Providing relevant business insights and research reports

Improving access to information and

knowledge is one of the many ways

in which we strive to support local

businesses on their development journeys.

Our commitment involves developing

and maintaining a comprehensive

knowledge base covering industry trends,

market analysis, and best practices. We

customise the delivery of this knowledge

to meet the unique needs and goals

of different business clients, ensuring

relevance to customers operating in

diverse industries.

Throughout 2023, we continued to develop our educational

platform, Businesscourse.ge. In 2023, we curated and developed

12 additional business courses covering a range of diverse topics.

Currently, we have a collection of 43 business courses. Our goal

is to offer content that would be relevant to businesses from

different industries.

Expanding Businesscourse.ge

7,500+

Business representatives completed business

courses in 2023

Webinars

Meetings

Webinars and business meetings

In addition to self-paced courses, we hold webinars and

meetings throughout the year on diverse subjects, including

changes in different regulations that local businesses should

be aware of. Ourgoal is to keep SMEs informed about

developments that may affect them, be it economic trends or

upcoming regulatory changes and compliance needs. We also

organise interactive business meetings to foster networking and

knowledge sharing among entrepreneurs and industry experts.

ESG INVESTMENTS DIGITAL

MARKETING

FINANCE EXPORTS HUMAN CAPITAL

DEVELOPMENT

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

100

Reports published on macro-

economic, capital markets,

and sector-specific topics

in 2023 (available at: www.gt.ge)

10,000+

Subscribers reached

in 2023

Conferences organised

in 2023

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. To

respond to the dynamic global and local

environment, G&T consistently refines

its products to meet market needs. In

2023, G&T added new research products

to the publication list, including monthly

analyses of global commodities and

assessments of the global equity and

fixed income markets. Additionally, G&T

has launched a series covering agricultural

products, driven by heightened interest

from the business community.

G&T expanded its custom research

client-base, undertaking projects

commissioned by international

development organisations. To engage

with our target audience, G&T uses social

media channels and maintains its TV

presence through regular macro updates

and sector-specific interviews on local

business media.

Galt & Taggart’s research products are

also available on leading proprietary

platforms, including Bloomberg,

ThomsonReuters, S&P Capital IQ,

FactSet, and Tellimer, bolstering our

international presence.

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. G&T’s DCM/ECM

services include support in accessing local,

regional and international debt and equity

capital markets. G&T has participated

in the majority of FX-denominated local

bond issuances and during the past ten

years it has assisted local businesses and

International Financial Institutions (IFIs)

in raising GEL 4.2 billion in public 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.

Throughout 2023, G&T acted as a

placement agent for 12 public corporate

bonds amounting to around GEL 787

million – six of these corporates were

Bank of Georgia’s Corporate Banking

clients – and an IFI bond of GEL 260

million. In 2023, G&T was also the only

Georgian investment bank that executed

a EUR-denominated issuance – the

transaction was the first of its kind

among non-financial corporates.

In 2022, G&T’s corporate advisory unit

was involved in the CMS Programme

funded by the EU and implemented by

the EBRD’s Capital & Financial Markets

Development team. Its aim was 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. The programme

concluded in August 2023, with 11 out

of 21 registered issuers successfully

placing securities, including six debut

issuers on the capital market. Introducing

innovation, the programme launched five

innovative securities, including the first

Green bond on the local market. The total

value of issued securities reached around

GEL 439 million.

The programme has also had a broad

positive impact through its educational

initiatives and public efforts.

In 2023, G&T became one of the

implementing partners of a five-year

programme to enhance the flow of

diversified investment resources and

innovative financial products to Georgia’s

private sector. Running until 2028 and

with a budget of US$ 18.9 million, the

programme aims to expand businesses,

create jobs and attract additional

privateinvestment.

Galt & Taggart research

Corporate advisory and DCM/ECM support through Galt & Taggart

Highlights of 2023

Capital Market Support (CMS) Programme

USAID Georgia Financial Innovation (FIP) Program

JSC Georgia Capital US$

150M sustainability-linked

bonds

The largest corporate bond

issuance on the Georgian

capitalmarket, with G&T

actingas a placement agent.

Tegeta Motors US$ 30M multi-

currency bond programme

As the exclusive arranger,

G&Tplayed a pivotal role in this

transaction, marking the first multi-

currency and Euro corporate bond

issuance inGeorgia.

GeoSteel US$ 30M

sustainability-linked bond

With exclusive support from

G&T, GeoSteel, the largest steel

producer in Georgia, successfully

issued and placed the first

sustainability-linked bonds on

the Georgian market.

Annual Report 2023 Bank of Georgia Group PLC

Digital Area snapshot

JSC Digital Area is a Group’s subsidiary

comprising several portfolio companies,

focused predominantly on e-commerce

and merchant solutions. Digital Area

actively manages portfolio companies

to maturity, setting the strategy and

business plan of each business and driving

its execution.

Digital Area’s strategy is to build

interconnected digital services to fulfil the

needs of its customers in an integrated

experience.

Extra: e-marketplace

800+

Merchants

120+

Products

GEL 16.0M

Gross merchandise value

+77.0% y-o-y

accelerating early-

stage startups

lightweight POS

and inventory

management SaaS

on-demand

everyday goods

delivery service

online ticketing

marketplace

leading e-commerce

marketplace

70.8K

+120.1% y-o-y

Orders

Extra maintains a leading position

in Georgia, offering a wide variety of

products to its customers. The platform

focuses on facilitating B2C transactions,

efficiently connecting merchants with

a broad consumer base and enriching

the digital shopping experience with

integrated payment options. Extra has

positioned itself as an e-commerce

marketplace with a wide selection of

products and competitive prices.

Beyond catering to individual consumers,

Extra also extends its services to the

corporate sector, offering a robust B2B

solution for comprehensive procurement

needs. The company’s commitment to

accessibility and convenience is evident in

its nationwide delivery coverage.

With a wide array of product offerings,

Extra’s top categories by GMV include

electronics, home and garden, express

grocery services, sports and travel,

pet care, and beauty products. Extra

continues to focus on building its

reputation as a leader in Georgia’s

e-marketplace, driving the industry

forward through its commitment to

customer satisfaction.

In 2023, Extra’s service offering was

enhanced with the integration of

moitane.ge, a leading quick-commerce

platform, into its website and mobile

application. This has led to the launch of

‘Extra Express’, guaranteeing fast delivery,

within an hour, for a wide selection of

products across six categories, including

groceries and personal care items. Initially

operational in Tbilisi and Batumi, ‘Extra

Express’ is focused on ensuring a fast and

convenient shopping convenience.

Extra is dedicated to curating a diverse

shopping experience that caters to

various customer needs and preferences,

ranging from the latest trends and daily

essentials to unique finds. This dedication

is mirrored in its high NPS of 77, as

of 4Q23, reflecting a strong focus on

customer satisfaction.

Extra collaborates with leading financial

institutions in Georgia, including Bank of

Georgia. The partnership with Bank of

Georgia has facilitated the integration

of a variety of payment solutions,

including the BNPL option, thus

accommodating the diverse financial

needs of its customer base.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Bank of Georgia Group PLC initiated the

500 Georgia acceleration programme

in 2020, in a strategic partnership with

500 Global and Georgia’s Innovation

and Technology Agency (GITA). This

collaboration was designed to fast-

track the development of both Georgian

and international early-stage startups

operating in the region. During 2020-2021,

28 companies from 11 business sectors

successfully completed the programme

and were integrated into the Digital Area

ecosystem.

Considering the traction of the first

rounds of acceleration, Bank of Georgia

Group PLC committed to a five-year

partnership with 500 Georgia and GITA.

In November 2022, Digital Area made a

substantial commitment of $5 million

to the $20 million 500 Georgia Fund.

An additional US$ 7 million has been

successfully secured, with the remaining

US$ 8 million slated for collection by the

end 2024. Over the course of our five-year

partnership, the fund aims to allocate

these resources towards fostering the

growth of up to 150 emerging startups.

In 2023, we celebrated a major

achievement: successfully graduating 30

regional startups from eight different

countries. We remain committed to

contributing to a vibrant, cross-border

startup ecosystem that empowers

businesses and fosters economic

development in Georgia.

Optimo is a digital inventory and

sales management software with an

integrated POS solution for traditional

retail and e-commerce businesses.

Optimo enables merchants to manage

inventory, accept online payments,

and access analytics on transactions,

inventory, revenues and profitability,

anytime and anywhere. Optimo covers

two main business lines: software as a

service (SaaS) and data monetisation.

In 2023, Optimo increased sales points

to 2,952, covering 39 cities in Georgia,

with an additional regional office opened

in Kutaisi. In addition to this, at the end

of 2023, Optimo increased value-added

services from different business verticals

up to 20 partners.

Furthermore, Optimo has started

partnerships with MasterCard, USAID

and EBRD. With these partnerships,

Optimo aims to support MSME

merchants by enabling digital

transformation.

In 2023, Optimo entered Uzbekistan and

opened an office in Tashkent. Optimo

product localisation has already been

completed and a growing Uzbekistan

team is focused on increasing sales

and customer acquisition. Optimo

strategically entered the Uzbekistan

market due to the latter’s size and

optimal growth conditions, leveraging

the first-mover advantage in a less

competitive environment. The Tashkent

office establishes a key operational hub

for localised products and targeted

marketing campaigns, aiming to build

brand awareness and trust. Optimo’s

commitment to innovation aligns with the

growing demand in Uzbekistan, marking

a significant milestone in its expansion

journey.

OPTIMO: lightweight POS and inventory management SaaS

In 2023, Digital Area acquired

Biletebi.ge, a major ticketing platform

in Georgia. Biletebi.ge, established in

2008, a major ticketing platform in

Georgia. Biletebi.ge, established in 2008,

is Georgia’s pioneering ticketing platform,

offering sales and distribution services

for various live events including concerts,

sports, theatre productions and more,

totalling around 800 events in 2023.

Biletebi.ge is currently in the process

of revamping its platform, with the

new version expected to be available in

June 2024.

Digital Area is committed to establishing

Biletebi.ge as the leading lifestyle

platform in Georgia, striving to elevate

the lifestyle experience of its users.

Biletebi.ge: online ticketing marketplace

500 Georgia

50.5M GEL 541.4M2,952

+301% y-o-y

GMV

+44.7% y-o-y

Merchants

+297.5%

Number of transactions

Startup participants

in 2023

Startup participants

since 2020

Non-Georgian startup

participants since 2020

22 63 37

Annual Report 2023 Bank of Georgia Group PLC

Section 172(1) statement

Stakeholder engagement is a key ingredient for long-term resilience and sustainability of the

Company and is central to how we set and execute our strategy. The needs and views of our

different stakeholders as well as the consequences of any decision in the long term are well

considered by the Board.

The Board is responsible for the long-term

success of the Company as a whole and

recognises that proactive and positive

engagement with stakeholders is a key

ingredient for long-term resilience and

sustainability of the Company.

By having a deep understanding of our

stakeholders, their concerns and priorities,

we are able to work closely alongside

them to achieve our mutual goals, create

value and, wherever possible, provide

proactive support.

Stakeholder engagement happens in a

variety of ways and through different

channels, both internal and external. The

Board welcomes and regularly reviews

feedback from stakeholders to shape

strategic decisions.

The Board considers any current risks

or emerging risks with regard to each

stakeholder group as part of the overall

principal risk assessment which is

described on pages 150 to 169.

Sometimes, different stakeholders have

competing priorities and the Board

has to make decisions balancing these

differences. Our stakeholder engagement

processes enable the Board to understand

what matters most to stakeholders and

consider the relevant factors to be able to

choose the course of action that ensures

the resilience and success of the Group in

the long term. You can read more about

stakeholder engagement on pages 54 to

57.

In performing their duties during 2023,

the Directors have had regard to the

matters set out in S172 of the Companies

Act 2006. You can read more on how the

Board had regard to each matter, during

the year, on pages 58 to 59.

This section of the Strategic Report

comprises the Company’s section 172(1)

statement. In this section, we describe

various considerations surrounding

our key stakeholders including their

importance to the business, engagement

methods, monitoring and decision

making, as well as how the Company

acted on stakeholder feedback

throughout the year.

The Board’s understanding of the needs

and views of different stakeholders

is at the heart of its responsibilities.

Stakeholder engagement takes place in

a variety of ways and through various

channels. The Board reviews stakeholder

feedback and uses this feedback when

defining strategic objectives and making

decisions. On the following pages, we

describe typical engagement methods,

the main topics that came up during

these engagements, including through

our regular customer and employee

surveys, as well as how we engaged

and acted on the feedback received

throughout the year.

How the Board fulfils its section 172 duties

Stakeholder engagement

S172 factor

The likely

consequences

of any long term

decision

The interests of

the Company’s

employees

The need to foster

the Company’s

business

relationships

with suppliers,

customers and

others

The impact of

the Company’s

operations on the

community and

the environment

The desirability

of the Company

maintaining a

reputation for

high standards of

business conduct

The need to act

fairly between

members of

the Company

Relevant disclosures

Strategic focus

pages 188,216 and 223

(Ameriabank)

Succession planning

pages

pages 195, 207-209

Financial

governance

changes

page 215

Culture

pages 191-193

Diversity and

inclusion

pages 207, 210-212

Workforce

engagement

page 210

Workforce

remuneration

pages 230-231

Engagement with

stakeholders

page 189

Meetings with the

auditors page

page 218

External Auditor

effectiveness

pages 220-221

FRC

correspondence

page 223

Engagement with

stakeholders

pages 189 and 220

Culture

pages 191-193

Whistleblowing

pages 222

Risk Report

pages 225-228

Conflicts of

interest

page 251

Code of conduct

and ethics

page 253

Significant

agreements

page 252

External

effectiveness

evaluation

page 196 and 212

Statement of Code

compliance

page 189

Strategic focus

page 188

Share capital and

rights attaching to

the shares

pages 250-251

Results and

dividends

page 251

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

EMPLOYEES

INVESTORS

CUSTOMERS

COMMUNITIES

GOVERNMENTS

AND REGULATORS

OUR KEY

STAKEHOLDERS

EMPLOYEES

INVESTORS

CUSTOMERS

COMMUNITIES

Who are our stakeholders?

Why are our stakeholders important to our business model?

Engagement performance key highlights of 2023

EMPLOYEES CUSTOMERS

Customer-centricity

begins with

employee-centricity.

We will not be able to

serve our customers

and communities

and deliver business

success without the

commitment, passion

and skills of our

employees. We strive

to be an employer

of choice that

attracts, develops

and retains top

talent and ensures

equal opportunities

and best employee

experience for all.

We are a customer-

centric organisation –

This means that we

design our products

and services with

customers in mind,

continuously review

and respond to

feedback, and

always strive to

anticipate customers’

wants and needs.

Our goal is to

maintain the trust

of our customers,

be relevant in their

daily lives with our

financial products

and serve as a

trusted partner

throughout their

financial journeys.

Attracting long-term

investment is key

to the Company’s

success and

sustainability. We

aim to maintain the

trust and support

of our investors by

ensuring we are

transparent, do

business ethically

and in line with the

highest standards

of corporate

governance, and

deliver strong

performance and

shareholder returns.

We are committed

to making a positive

impact in the

communities where

we live and work

and maintaining

our reputation as

a responsible and

sustainable business

that empowers

people to drive

positive change.

We operate in a

highly regulated

environment, and

we are committed

to acting as

governments

and regulators

expect and require,

following the

highest standards

of corporate

governance and

acting ethically in

everything we do.

INVESTORS COMMUNITIES GOVERNMENTS

AND REGULATORS

85% say “I have trust and

confidence in the Company’s

senior leadership.”

eNPS stood at 56 at year-end

2023, an increase from 53 at

year-end 2022.

We ended the year with a

high NPS of 59 – up from 58

in 2022 and 55 in 2021. NPS

is measured quarterly and it

was broadly stable during the

whole year.

Interim dividend of GEL 3.06

per share paid in October

2023. The Board intends to

recommend a final dividend

of GEL 4.94 per share at the

AGM. GEL 162 million buyback

and cancellation programme

for 2023.

120K+ students reached with

Bank of Georgia’s educational

initiatives.

Strong employee engagement Maintaining high NPS levels Delivering high profitability

and returns

Focusing efforts on education

Annual Report 2023 Bank of Georgia Group PLC

Engagement

• eNPS surveys, engagement surveys, and employee working groups.

• Culture and values assessment surveys.

• Town hall meetings and quarterly product milestone reviews.

• CEO live updates with Q&A sessions, open to all through Workplace, our internal networking tool.

• A dedicated Non-Executive Director facilitating regular Employee Voice meetings with the Board (Mel Carvill,

Hanna Loikkanen and Mariam Megvinetukhutsesi undertook a series of Employee Voice meetings during 2023,

engaging with 61 employees; you can read more about this on page 210.

• Personal interviews with employees, including exit interviews with departing employees 360° performance and

competencies review (bi-annual).

• Independent whistleblowing system.

• Group-wide communications through our networking tool, Workplace, and intranet for sharing news and

achievements.

Performance

information

provided to

Directors

• Bank of Georgia eNPS survey (bi-annually).

• Bank of Georgia Korn Ferry Employee Engagement and Enablement survey (annual).

• Whistleblowing and grievance mechanism review.

• Gender pay gap reporting.

• Diversity monitoring and reporting.

• Monitoring and reporting of compensation trends on the market.

Who

engages?

• The townhalls and quarterly product milestone reviews provide updates on business performance and employee

initiatives and are led by the CEO and other Executive Management members.

• The Senior Independent Director and other Non-executive Directors attend the Employee Voice meetings which

take place twice a year.

• The Human Capital Management (HCM) department is responsible for the overall employee experience and

feedback gathering.

Employees

What they tell us matters to them

• Professional development

opportunities.

• Recognition and appreciation.

• Career advancement.

• Compensation.

• Work-life balance.

• Teamwork, support and

positiveculture.

• Being part of a successful

organisation.

How we acted on their feedback this year

• In our 2022 Annual Report, we

mentioned that 29% of employees

would like to receive clear and regular

feedback on how well they do their

work. In 2023, we launched an updated

360° assessment in 2023 to strengthen

the feedback culture and make sure

employees have performance and

development-oriented conversations

with their managers. We made the

comment section of the assessment

mandatory for managers to complete. In

2023, the percentage of employees who

did not agree with the statement that

they receive clear and regular feedback

decreased by 5 ppts.

• Compensation tends to be one of

the main areas detractors (those

considered dissatisfied) mention in

eNPS surveys. The Board reviews

annual reports on Bank of Georgia’s

compensation practices and how those

compare with the market, including

average compensation earned at

different levels. The Bank continues

to monitor the market and adjusts its

pay practices if and where necessary

to remain a competitive employer. In

2023, in response to this feedback, the

Bank implemented a salary increase

for certain mass positions to ensure

alignment with the market.

• Lack of appreciation and recognition

are one of the leading reasons for

dissatisfaction that employees

mentioned in eNPS surveys. The

Human Capital Development function

is currently designing a framework for

team engagement. In addition, the Bank

delivers trainings on team development

to help managers increase motivation

and teamwork. The Bank also awards the

Best Employee and the Best Team of the

Year to highlight our people’s contribution

to the success of the organisation.

These awards are performance-based,

primarily for front-office positions where

performance against targets can be more

easily compared.

Customers

Engagement

• Internal NPS and CSAT surveys.

• Telephone calls and interviews.

• Informal client feedback communicated by bankers and relationship managers.

• Third-party NPS survey, brand research and focus groups.

• Complaints management.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Investors

Engagement

• Quarterly results announcements, the full and half-year results and the Annual Report.

• Regular announcements via RNS.

• Quarterly results conference calls with investors and analysts.

• Investor roadshows (1 roadshow in London in 2023, with the Chair of the Board attending some of the

meetings with major institutional shareholders).

• Investor conferences.

Engagement

• Individual investor meetings, virtual and face-to-face, including site visits in Tbilisi, Georgia.

• Engagement calls with proxy agencies.

• AGM (1 in 2023, attended by the Board).

Performance

information

provided to

Directors

• Investor Relations updates including roadshow feedback.

• Proxy ratings and reports (ISS, Glass Lewis, IVIS and PIRC).

• Reports on Remuneration Policy Review meetings and engagement.

• Share price dynamics updates provided quarterly.

Performance

information

provided to

Directors

• Net Promoter Scores (‘NPS’), both internal by segment and external, Bank-wide.

• Internal satisfaction scores for branches, call center and digital channels.

• Service-level Agreement (SLA) monitoring.

• Quarterly Board reports on information security and data protection.

• Quarterly Whistleblowing reports to the Audit Committee.

Who

engages?

• Engagement takes place at various levels including with the Executive Directors and senior management.

• Non-Executive Directors review customer satisfaction measures and how they compare against main

competitors quarterly. In February 2023, at the Board’s Strategy Sessions, the Board engaged with Bank of

Georgia’s Corporate Banking and SME Banking clients via a zoom call, asking questions and receiving feedback

on the Bank’s value proposition for business clients and service quality.

• Data and information security is a key responsibility of the Group, and, therefore, key metrics regarding

performance are discussed quarterly at the Joint Audit and Risk Committee.

What they tell us matters to them

• Clear and transparent product & service

descriptions and fees.

• Uninterrupted access to digital and

payments services.

• Suitable product fees and rates.

• Timely and professional responses to

their queries as well as timely resolution

of issues.

How we acted on their feedback this year

• Queues in branches were one of the top

reasons of dissatisfaction among retail

customers during 2023. To solve this

problem, we change queue management

logic and changed the incentive

system so that employees in branches

focused on teaching digital skills to our

customers. As a result, the maximum

branch SLA of 89% was recorded in

December 2023.

• We launched P2P transfers in BOG APP

for instant interbank transfers within

Georgia. Previously, customers could

do instant P2P transfers only within

Bank of Georgia, and considering that

the speed of transactions is one of the

key elements of customer experience in

banking, we focused on making sure we

could offer instant P2P transfers to any

other Georgia bank.

• Lacking an efficient card delivery service

continues to be one of our pain points,

reflected in relatively lower share of

cards being sold digitally and customer

dissatisfaction when opting for card

delivery. Bank of Georgia has initiated

a partnership with new vendors to

improve its card delivery service in

Tbilisi and Georgia’s regions (the existing

service is not available outside of Tbilisi).

The project is ongoing and expected to

be implemented during the first half of

2024.

• Bank of Georgia cards can now be

used to pay in public transport in more

regions across Georgia. Previously, this

was possible only in Tbilisi and three

other cities.

• Dark mode in the financial superapp

was launched in 2023, after numerous

requests by customers.

Annual Report 2023 Bank of Georgia Group PLC

Communities

Engagement

• Involvement in various community activities such as voluntary work and the development of social impact

programmes with charity partners.

• Our employees participate as volunteers in various community projects.

• Attendance and participation at key sustainability events.

Performance

information

provided to

Directors

• Corporate responsibility, community activities and volunteering programmes are discussed at Board

meetings.

• ESG topics are regularly discussed at Board meetings.

• Sustainability sections of the Annual Report are reviewed and approved by the Board.

Who

engages?

• Engagement, on the whole, is delegated to the CEO and Executive Management.

What they tell us matters to them

• Local employment opportunities.

• Business support.

• Education.

• Financial contribution.

• Protection of the environment.

Who

engages?

• This continues to be a shared responsibility for all Directors of the Board. The engagement is predominantly led

by the CEO who is supported by the Investor Relations team. The Chairman attends the AGM as well as some

of the meetings during the roadshows, and the Chairs of the Committees make themselves available to meet

investors upon request or if needed.

• The Chair of the Remuneration Committee offers meetings on Remuneration Policy matters and proposed

changes to the Group’s Policy.

What they tell us matters to them

• Strategy and business model,

particularly with regard to our

digitalisation programme, and customer

franchise development.

• Financial performance and returns.

• Strength of corporate governance.

• Macroeconomic and geopolitical risks.

• ESG performance and impact

measurement.

• Financial risk management.

How we delivered on their feedback this year

• The strength of the Group’s business

performance during 2023 has been

well received by investors, where we

have strong alignment on our strategic

direction and this has been evidenced

by the Group’s strong share price

performance over the last 12 months.

• Many shareholders have been specific

that they want us to combine further

investment in our business to deliver

sustainable high returns, with a strong

capital distribution policy. Over the last

few years, we have specifically engaged

our shareholders on how we should

return excess capital to them, and this

has led to our combination of regular

dividend coupled with a share buyback

and cancellation programme. At the

same time, we have also continued our

investments in developing our financial

SuperApp, our payments business

and increasing product sales in digital

channels – which remains important to

our shareholders.

• Many shareholders tell us they want

to see the ongoing strong growth of

our balance sheet which we continue

to deliver in a prudent manner while

ensuring strong levels of profitability.

This has enabled us to maintain a

robust capital distribution policy whilst,

at the same time, investing in organic

business growth, and understanding

shareholder views on potential

expansion outside Georgia – which has

specifically informed the Board in their

consideration of where they should focus

their prioritisation of various strategic

priorities.

• Our ESG strategy continues to have

increasing importance for us and our

investors and, in 2023, we conducted a

further ESG materiality assessment,

leading to the specific changes to

our ESG priorities and disclosures,

the details of which you can read on

pages 62 to 64. Specifically, given the

growing investor focus on climate and

sustainable finance, we have revised

the ESG strategy to include Sustainable

Finance as one of the four main

pillars and introduced green lending

KPIs for the CEO and the Executive

Management for 2024. We also regularly

liaise with shareholders on remuneration

policy issues and often adapt issues

in our remuneration disclosures and

policy – specifically in 2023 we adapted

share vesting timelines in our senior

management rewards policy vesting

schedules following investor feedback.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

How we acted on their feedback this year?

• STEM (science, technology, engineering

and mathematics) education has

emerged as a critical component

of education, with STEM skills in

high demand and important for the

economic development of communities.

Georgia’s mean score in science is one

of the lowest among PISA-participating

countries and economies (383 PISA

Score, rank 70/75, 2018). During 2023,

Bank of Georgia prioritised STEM

in its community impact activities

and increased investments in STEM-

related projects, including, among

other projects, adding STEM corners

to libraries in Georgia’s regional public

schools and launching STEM Olympiad

in partnership Komarovi School, a

leading math- and physics-focused

school in Georgia.

• Financial literacy skills are not

specifically taught in Georgian schools

and the mean score in financial

literacy is one of the lowest among the

countries/economies participating in

the PISA financial literacy assessment.

(403 PISA Score, rank 18/19, 2018).

Focusing on financial education and

health is an extension of Bank of

Georgia’s core business activities as

financially literate customers increase

the resilience of the communities where

we operate as well as the resilience

of the financial system itself. During

2023, we prioritised financial education

and used sCoolApp, Bank of Georgia’s

financial mobile app for school children,

as one of the channels for spreading

educational content via weekly Stories

in the app. Given that sCoolApp had

90,000 MAUs in December 2023, we

will focus on using it as one of the key

tools for raising financial literacy among

Georgia’s youth.

• Lack of access to educational

opportunities in Georgia’s regions

(outside of big cities) has come out

as one of the key concerns of local

communities in the surveys Bank of

Georgia has conducted. In response,

Bank of Georgia has partnered with

Komarovi school to launch STEM School,

a year-long online programme in STEM

for school students in grades 7-11. Bank

of Georgia provided scholarships to

up to 100 school kids from Georgia’s

regions.

• Lack of financial support is another

roadblock in accessing quality education

in Georgia. For years Bank of Georgia

has financed several prestigious

international scholarships, giving

selected young people opportunities to

study abroad at the graduate level. In

2023 Bank of Georgia launched local

scholarships to increase the scale of

its financing efforts and make sure

more young people in Georgia have

access to undergraduate education

irrespective of their socioeconomic

status. Bank of Georgia Scholarship was

launched in 15 partner universities in

Georgia. Currently, the goal is to provide

scholarships to over 100 students

annually.

Governments & Regulators

Engagement

• To deepen Board-level understanding of our regulators, our Chair and Non-executive Directors formally meet

with the NBG during the year.

• Regular meetings with the NBG happen at the Executive Management level, with the CEO engaging directly on

key matters.

• The CEO participated in the policy dialogue in Georgia through different avenues, including the Banking

Association of Georgia and the Business Association of Georgia. In these matters, the CEO is often assisted by

other Executive Management members.

Performance

information

provided to

Directors

• Regulatory matters are regularly discussed by the Board. Regulatory updates are presented quarterly to the

Risk Committee and major changes or issues are reviewed and discussed at the Board level.

• Directors are informed of all material litigation and/or significant regulatory engagement via reporting from

the General Counsel UK and the Company Secretary, as well as Bank of Georgia’s Chief Legal Officer.

Who

engages?

• Engagement, on the whole, is delegated to the CEO and Executive Management. The Board usually engages

with the NBG if and when needed, and during their visits to Georgia.

Actions and outcomes during the year

• The Audit Committee took part in

the FRC’s consultation on changes to

the UK Corporate Governance Code

(‘Code’). The Audit Committee discussed

the proposed changes to the Code in

meetings, commissioned on ongoing

assessment of the Group’s preparedness

in respect of possible enhanced focus

on internal controls and discussed the

outcomes of this assessment.

• The Audit Committee received and

responded to a letter from the FRC

which raised no questions or queries

regarding the Company’s 2022 Annual

Report. The 2023 Annual Report has

been enhanced following suggestions

made by the FRC in the letter.

Further information regarding this

correspondence is available on page 223

of the Audit Committee Report.

• The Audit Committee and Risk

Committee received regular updates

on sanctions compliance and AML

and oversaw enhancements in

theseareas.

• The Risk Committee considered the

General Risk Assessment Programme

(GRAPE) assessment from the NBG and

discussed progress against the matters

raised by the NBG.

• The Nomination Committee and

Board remained cognisant of the NBG

independence requirements and the

impact of this on succession planning.

• The Directors received updates and

oversaw continued adherence to legal

and regulatory requirements.

Annual Report 2023 Bank of Georgia Group PLC

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 2023.

Expansion to a new market

What was the decision?

During 2023, the Board considered

a potential opportunity in Armenia

presented by the management.

The Board agreed that value could be

derived from exploring this opportunity

in an adjacent high-growth economy and

agreed that the management engaged

with the potential target to gauge

detailed information and evaluate the

upside through a thorough due diligence

process.

How were stakeholders engaged and their interests considered?

In addition to discussions at regular Board

meetings, the Board held a two-day in-

person strategy meeting to review the

Company’s strategy and performance

and consider customer and investor

perspectives regarding the strategic

direction of the Company. Discussions

with key investors through roadshows

and meetings with the Board throughout

the year highlighted that there was

appetite and support for the Group’s

excess capital to be carefully deployed

in growth opportunities. In addition, our

CEO met with a significant proportion of

our institutional shareholders ahead of

the Shareholder General Meeting, which

resulted in a 100.00% vote in favour of

the Ameriabank acquisition in March

2024.

Actions and outcomes

Following analysis, discussions with

advisors and other key parties, a potential

opportunity to acquire Ameriabank, a

leading universal bank in Armenia, one

of the fastest-growing economies in

the region, was identified as a leading

opportunity for international growth for

the Group.

Following extensive due diligence

and Board discussions with the

management and external advisors, the

Board unanimously recommended the

conditional acquisition of 100% of shares

of Ameriabank to the shareholders of the

Company in February 2023.

On 14 March 2024, at a General Meeting

of the Company, 83.60% of issued share

capital voted, with 100.00% votes

in favour of the acquisition. Further

information regarding this transaction

can be found on pages 13 to 14.

Approving capital distributions

What was the decision?

The Board recommended a final dividend

for the financial year 2022 and approved

an interim dividend in respect of the

period ended 30 June 2023. In February

2023, the Board approved an increase of

up to GEL 148 million in its share buyback

and cancellation programme.

In August 2023, the Board approved the

launch of a GEL 62 million share buyback

and cancellation programme.

The Board’s decisions were informed

by the Group’s dividend and capital

distribution policy, which was announced

in September 2021, as well as regular

updates on the Group’s financial and

capital positions.

A key focus of Board-level discussions

throughout the year was the

management of excess capital whilst

balancing shareholder returns and

deployment for growth.

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 from

shareholders regarding the importance of

dividends and share buyback, combined

with the importance of maintaining

strong capital ratios to ensure the Bank

is always adequately capitalised in

uncertain times.

The Board remained supportive of

keeping the dividend and buyback

payout ratio the same as in 2022 – a

year boosted by significant one-off gains

and FX inflows, and, going forward, the

Board plans to maintain both a regular

progressive dividend policy and a share

buyback and cancellation programme, as

and when appropriate, targeting a 30-

50% total capital distribution ratio. This

policy is expected to continue, following

the proposed acquisition of Ameriabank.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Actions and outcomes

On 27 October 2023, the Company paid

an interim dividend of GEL 3.06 per

ordinary share in respect of the period

ended 30 June 2023.

In June 2023, the Company completed

its GEL 260.7 million buyback and

cancellation programme, having

repurchased and cancelled 3,254,705

ordinary shares, representing 6.6% of the

Company’s issued share capital.

At the 2024 AGM, the Board intends to

recommend for shareholder approval a

final dividend for 2023 of GEL 4.94 per

share payable in Pounds Sterling at the

prevailing rate. This would make a total

dividend paid in respect of the Group’s

2023 earnings of GEL 8.00 per share. In

addition, the Board has also approved

an extension of the share buyback and

cancellation programme by an additional

GEL 100 million.

The Board will continue to review

the Company’s dividend and capital

distribution policy and revise it if, and as,

required.

ESG strategy

What was the decision?

During 2023, the Group continued to

enhance its Climate Action Strategy

and ESG practices and related policies.

The Board approved the adoption

of two further ESG policies: the

Responsible Supply Chain Policy and

the Environmental Policy.

The Board also received an update on

the second formal ESG materiality

assessment conducted in 2023, building

on the first materiality assessment in

2021. Following a review of feedback

received from key stakeholders during

the materiality assessment, the Board

approved a revised

ESG strategy, which included Sustainable

Finance as one of the key pillars,

substituting Education in Communities

as the latter was considered to be less

relevant to the Group’s core business.

How were stakeholders engaged and their interests considered?

The Board recognises that sound ESG

policies and practices help generate

sustainable shareholder value and

contribute to the success of the whole

Group in the longer term.

The Responsible Supply Chain Policy

and the Environmental Policy were

developed following engagement, and

requests, from proxy voting agencies and

shareholders. These policies also comply

with legal and regulatory requirements

and are based on global best practice.

We recognise that our business activities

and daily operations may have a

significant impact on the environment,

the economy and the communities

where we operate. We seek to minimise

the negative environmental and social

impacts we may have, and we believe

sustainability is a journey and there is

always more we can do to promote

responsible business practices throughout

our organisation and beyond it, among

our communities and in our supply chain.

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.

Annual Report 2023 Bank of Georgia Group PLC

SUSTAINABLE

BUSINESS

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

KPI

Target Result

eNPS Min. 54

sCoolApp MAU 70K

Number of self-employed borrowers 57K

Seedetails on page 33

Empowering people by creating

sustainable opportunities

ESG governance

We believe in shared success.

Sustainability for us means acting in

ways that empower our customers, our

employees and our communities, and

doing 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 1.8 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. Information in

this chapter is provided mainly for JSC

Bank of Georgia standalone, unless

otherwise stated.

Oversight of the majority of material

ESG topics and related impacts on the

economy, people, and the environment

is allocated to specific Board

Committees: 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,

and oversees the Group’s overall

communications strategy around ESG

topics and impacts. The full Board also

retains the 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.

The management of ESG topics is

delegated to the Bank’s Executive

Management team. Discrete ESG

matters are managed by individual

members of Executive Management.

Management-level Environmental and

Social Impact (ESI) Committee reviews

and discuss the Bank’s ESG-related

(including climate) matters and impacts.

Key developments in 2023

We updated and developed a number of ESG-related policies, which were approved by the Board of Directors

We conducted the second formal ESG Materiality Assessment and updated our ESG strategy

We created ESG and Sustainability function, which is responsible for Bank of Georgia’s sustainability practices

We updated internal sector classification system to NACE2, the European classification system used by the

NBG’s Sustainable Finance Taxonomy for identifying sectors and activities that are or could potentially be

green. We operationalised selected taxonomy criteria so bankers could determine whether our customers fit

the criteria under the taxonomy

2023 KPIs & results

Annual Report 2023 Bank of Georgia Group PLC

2024 KPIs

Digital transactional MAU

1,291,000

2023 – 1,182,399

Self-employed borrower clients

60,000

2023 – 55K

Green portfolio (gross)

GEL 875M

2023 – GEL 752M

Cash withdrawals in total transactions

(byvolume)

25%

2023 – 28%

sCoolApp MAU

150,000

2023 – 90K

ESG materiality assessment

To formalise our ESG strategy, we

undertook our first formal ESG

materiality assessment in 2021. As a

result, we identified material issues

and defined commitments for each of

them. Building upon this groundwork,

we decided to undergo a reassessment

in2023.

The primary motivation for the 2023

materiality reassessment was to align

with best practices, considering the

recommended timeframe of 2-3 years for

updates. Furthermore, we aim to adhere

to the latest Global Reporting Initiative

(GRI) Standards.

The materiality reassessment conducted in 2023 allowed us to clearly identify our most significant

impacts on the economy, the environment and people, including on their human rights, and to

prioritise key material topics for our ESG Strategy. We considered the views of internal and external

stakeholders in this process.

Given that the relevant GRI Sector Standards were not available at the time of this assessment, the identification of impacts on

the economy, the environment and people, including on their human rights, was mainly done by drawing on our own and third-party

assessments:

Impact scoping – identifying actual and potential impacts

An analysis of material topics identified in previous reports and the 2022-2023 ESG Strategy,

outlining actual and potential, positive and negative impacts

A gap assessment of the current material topics against the topics deemed relevant for the industry,

using SASB materiality finder

An analysis of the main issues outlined in the latest ESG rating reports (gap assessment)

An assessment of the Bank’s main activities, markets, products, stakeholders and business

relationships as described in previous annual reports and validated by the Bank’s ESG project working

team and discussed with Executive Management

An assessment, mapping and expansion of Bank of Georgia’s contribution to the Sustainable

Development Goals (SDGs), referring to the SDGs previously identified by the Bank in the previous

two annual reports

A review of currently available policies and grievance mechanisms at the Group level

The impact identification process, as required by GRI, was discussed with Executive Management during an in-person workshop.

Relevant definitions and updates to the GRI materiality assessment process were discussed. Executive Management contributed

with their views on the Bank’s actual, potential, negative and positive impacts. All identified positive and negative impacts were

summarised in a long list of impacts.

1. Number of users who made at least one transaction through digital channels within the past month.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

The long list of impacts was classified

according to each impact’s significance

following the guidance presented in GRI 3

and consulting the OECD’s Due Diligence

Guidance for Responsible Business

Conduct. A consolidated list of impacts

was provided by the consultants and

approved by the Bank.

Assessing the significance of the impacts

ESG materiality assessment results

The least significant impacts were

eliminated from the consolidated list

and the remaining were clustered

into ‘preliminary material topics.’ The

preliminary list of material topics

was presented to various stakeholder

groups. Stakeholders were asked to rate

the topics according to their relevant

significance. The engagement happened

in the form of surveys and structured

interviews.

The ranked material topics were

presented to and validated by Bank of

Georgia’s Executive Management and the

Board of Directors.

Prioritising the most significant impacts for reporting

Combined ranking

Stakeholder groups

Business ethics

Customer protection and product

responsibility

Data security and privacy

Local economic development

Sustainable finance

Gender equality

Engagement with communities and

theenvironment

Fair working conditions and

employee well-being

Human capital development

Diversity, equity, and inclusion

Responsible supply chain

Internal environmental management

Product and service innovation

Sustainable financial inclusion and

empowerment

Structured interviews

Online questionnaire

Online questionnaire Online questionnaire Online questionnaire Online questionnaire

Investors IFIs Employees

Customers

SME

Customers

Corporate

The primary goal in presenting the preliminary list of material topics, and their respective definitions, to stakeholders was

to gather their perspectives on the relative importance of the topics identified during the impact scoping exercise.

This step aimed to validate the level of significance identified in the process.

Annual Report 2023 Bank of Georgia Group PLC

ESG strategy

The aim of the materiality assessment

was to determine the relative priority of

relevant ESG topics and to define the

material topics to base our ESG strategy

on. Based on the materiality assessment

process described above, we updated our

ESG strategy. Our ESG priorities continue

to evolve, and we are committed to being

transparent about our practices and

progress.

Contributing to the United Nations Sustainable Development Goals

Focus areas

Governance & Integrity Financial Inclusion

Sustainable Finance

(Integrated Risk

Management) Employee Empowerment

Objectives

To do business in line with

the highest standards of

corporate governance, highest

ethical principles and ensure

accountability, transparency,

fairness and responsibility in

every decision we make

To use the power of

technology and product

innovation to drive digital

financial inclusion and deliver

innovative financial services

To manage financial risks

stemming from climate

change and other E&S risks,

while fostering greater

transparency and long-term

focus

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

Material topics

• Business ethics

• Customer protection and

product responsibility

• Data security and privacy

• Engagement with

communities and the

environment

• Internal environmental

management

• Responsible supply chain

• Customer protection

andproduct responsibility

• Data security and privacy

• Local economic

development

• Product and service

innovation

• Sustainable financial

inclusion and

empowerment

• Diversity, equity

andinclusion

• Gender equality

• Business ethics

• Sustainable finance

• Environmental and

social management of

loan portfolio;

• Mitigating E&S risks

associated with client

financing

• Local economic

development

• Product and service

innovation

• Local economic

development

• Fair working conditions

andemployee well-being

• Human capital

development

• Diversity, equity and

inclusion

• Gender equality

We remain committed to contributing to the five United Nations Sustainable Development Goals (UN SDGs) (highlighted below) we

linked to our strategy in 2020.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

MSCI

Bank of Georgia falls into the highest scoring range relative

to global peers.

LAGGARD AVERAGE LEADER

CCC B BB BBB A AA AAA

ESG ratings

Memberships and external recognition

ISS

Environment 3

Social 2

Governance 6

As of April 2024, Bank of Georgia Group PLC received an ESG Risk Rating of 17.6 from Morningstar Sustainalytics and was assessed

to be at low risk of experiencing material financial impacts from ESG factors. In no event the Annual Report shall be construed as

investment advice or expert opinion as defined by the applicable legislation.

The Bank is a member of the UN Global Compact

The Bank became a signatory of the UN Women’s Empowerment

Principles in 2022

information and data are proprietary of Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational purposes only. They do not

constitute an endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose.

Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers.

2. 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 – 19 March 2024; Last E&S data profile update – 13 March 2024.

3. As of 27 March 2023.

FTSE Russell (the trading name of FTSE International Limited and

Frank Russell Company) confirms that Bank of Georgia Group PLC

has been independently assessed according to the FTSE4Good

criteria, and has satisfied the requirements to become a constituent

of the FTSE4Good Index Series. Created by the global index provider

FTSE Russell, the FTSE4Good Index Series is designed to measure

the performance of companies demonstrating strong Environmental,

Social and Governance (ESG) practices. The FTSE4Good indices are

used by a wide variety of market participants to create and assess

responsible investment funds and other products.

Annual Report 2023 Bank of Georgia Group PLC

GOVERNANCE

AND INTEGRITY

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Financial crime

Money laundering is one of the major threats to the international financial

services community and therefore to us. Our policies and procedures are designed

to ensure that we have robust systems and controls in place to mitigate the risk

of us being used to facilitate money laundering.

We ensure compliance with local

and relevant foreign legislation in all

jurisdictions where financial institutions

belonging to the Group conduct

operations and integrate international

standards and recommendations

developed by Financial Action Task Force,

the Office of Foreign Assets Control

(OFAC) of the U.S. Treasury Department,

the European Union, the UN Security

Council and HM Treasury within our

ventures.

To that end, we do business only with

clients who meet our strictest criteria

and are within our risk appetite.

During 2023, customer engagements

and transactional flows remained

steady, without significant disruptions or

turbulence.

Anti-money laundering and international sanctions

In 2023, we enhanced our cooperation with the NBG, other relevant Government authorities, the embassies of the United

States, United Kingdom, and European Union, as well as partner financial institutions to monitor and mitigate sanctions-related

risks at the sectorial and country levels.

ENHANCED COOPERATIONS

We adhere to the international sanctions regimes and ensure that all our activities are in line with applicable sanctions

requirements.

The Bank has been audited by one of the big four firms, whose report provided a favourable assessment of the Bank’s AML/

Sanctions control environment.

We follow regulatory measures and guidelines prescribed by the National Bank of Georgia targeting financial institutions with

respect to adherence to international sanctions regimes.

All Group subsidiaries comply with the requirements and obligations set out in Group policies.

ALIGNMENT WITH INTERNATIONAL SANCTIONS REGIMES

To address current challenges, we have updated our International Sanctions Compliance Policy and related procedures to align

the Group with the latest economic and financial measures implemented by the US (Office of Foreign Assets Control), EU, UK,

(HM Treasury) and United Nations Security Council.

The Bank has designated the Russian Federation and the Republic of Belarus as high-risk countries and all transactions and

clients from those countries are subject to enhanced due diligence.

UPDATED POLICIES AND PROCEDURES

We have invested significant resources to improve our money laundering (ML)/terrorism financing (TF) risk management

capabilities, including implementing advanced analytics and transaction monitoring solutions to conduct ongoing monitoring of

transactions and detect unusual and suspicious activity, and strengthening offline reporting tools. Additional offline monitoring

scenarios were implemented, which are tailored to the current risk and transaction typologies.

Enhancements have been applied to intensify the offline monitoring mechanisms.

The internal reporting for AML/Sanctions was significantly improved, resulting in the creation of multiple new dashboards and

metrics, which are used to continuously monitor existing trends and risk changes.

ML/FT RISK MANAGEMENT

We have a risk-based AML/CFT and international sanctions compliance programme, operating based on the three lines of

defence model.

Online and offline monitoring are ensured by the relevant teams serving as additional control mechanisms. The operational

processes are supported by the specifically dedicated teams dealing with high-risk countries.

Additionally, to enhance process control, as a secondary control tool, an assurance unit has been established, which focuses on

the regular assessment of the efficiency and compliance of the control system deployed within the Group.

AML/COMBATING THE FINANCING OF TERRORISM (CFT) AND INTERNATIONAL SANCTIONS

COMPLIANCE PROGRAMME

First line

Business direction

Second line

AML/Sanctions Compliance department

Third line

Internal Audit

Annual Report 2023 Bank of Georgia Group PLC

To strengthen due diligence in response to prevailing sanctions regimes, we have revised and refined the transaction screening

and onboarding processes.

Customer and payment online screening is undertaken to identify sanctioned customers or goods and transactions prohibited

under applicable sanctions regimes.

TRANSACTION SCREENING AND ONBOARDING PROCESS

We possess an online solution that enables a fully automated screening of all transactions against sanctions lists (OFAC, the

EU, the UK, the United Nations and other similar bodies, including global news databases).

AUTOMATED SCREENING OF TRANSACTIONS

We invested resources in implementing additional tools for machine screening of respective documents accompanying

transactions. This has improved our capabilities for detecting possible sanctions violation scenarios.

Along with online screening, the Bank uses an offline monitoring tool and various offline scenarios, tailored for different products

and types of clients. Specifically, for trade restrictions, the Bank has developed several scenarios, which help AML/Sanctions

officers identify a pattern of transactions, when a company may be engaged in trading with the Russian Federation or other

high-risk countries. A special team has been established for managing and analysing offline monitoring scenarios.

TOOL FOR MACHINE SCREENING

We have a zero tolerance policy towards sanctioned persons, transactions, and funds related to sanctioned persons, as well as

towards international sanctions evasion and circumvention.

We have a zero-risk appetite for engaging in international operations involving crypto businesses.

We have restricted all transactions/onboarding of a client/provision of any service involving Russia’s military-industrial base.

We have tightened onboarding and transaction screening processes. In addition, the Bank continues to strengthen compliance

processes, with a particular focus on introducing additional control mechanisms on transactions coming from CIS countries.

ZERO TOLERANCE POLICY

To effectively address future external challenges posed by numerous and dynamically evolving sanctions regimes, the AML/

Sanctions Compliance department was redesigned and a more robust structure was established.

To comprehensively execute International Sanctions Compliance Programme, a dedicated unit has been created with the

responsibilities of analysing existing international sanctions regulations, elaborating and implementing the Bank’s international

sanctions compliance policy and internal control mechanisms, and providing informational updates and trainings to the relevant

staff of the Bank on a permanent basis.

STRENGTHENING AML/SANCTIONS COMPLIANCE DEPARTMENT

The Executive Management of the Bank promotes a culture of compliance and regularly emphasises the importance of AML/

sanctions compliance at all levels.

We conduct regular employee training and awareness-raising sessions regarding international sanctions compliance.

REGULAR TRAINING AND AWARENESS RAISING CAMPAIGNS

97% of our employees completed the mandatory training. We have intensified the focus on the mandatory training

programmes for our employees and target 100% training completion rates.

MANDATORY TRAINING

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Customer Risk Assessment is a fully

automated process and customer

risks are managed 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 relevant policies, procedures and risk appetite to ensure compliance with applicable

domestic AML laws and regulations, as well as international sanctions frameworks implemented by

the US (Office of Foreign Assets Control), EU, UK (HM Treasury) and United Nations Security Council.

They are subject to regular reviews to ensure compliance with applicable sanctions regimes.

The Bank has strong Know Your Client and customer due diligence procedures:

The Bank has a strict Customer Acceptance Policy.

AML, CFT and sanctions topics are on the quarterly agenda of the Joint Audit and Risk Committee.

The Committee receives information on existing controls and implemented measures.

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.

Our policies

Our AML/CTF and International Sanctions Compliance programme comprises written policies, procedures, internal controls and

automated system monitoring tools.

Annual Report 2023 Bank of Georgia Group PLC

Anti-bribery and anti-corruption

The Group has zero tolerance towards bribery and corruption. We have in place

written policies, procedures and internal controls to comply with anti-bribery and

anti-corruption laws.

Our comprehensive programme, with a suite of measures to ensure compliance with relevant ethical standards, includes:

Our risk management processes encompass regular risk assessments according to key risk

indicators and pre-approval processes. These involve identification, assessment and mitigation of

potential threats to our organisation’s integrity. This comprehensive approach is an integral part

of our commitment to maintaining a culture of integrity, transparency and zero tolerance towards

bribery and corruption.

RISK MANAGEMENT PROCESSES

Prior to establishing any commercial relationship, we conduct a thorough due diligence on

potential business partners or third parties. This ensures alignment with our commitment to

ethical business practices, in compliance with anti-bribery and anti-corruption laws. The scope and

intensity of due diligence and monitoring vary based on the nature of the relationship, whether

with a legal entity or an individual. Additionally, customer due diligence is conducted in accordance

with anti-money laundering regulations.

THIRD-PARTY DUE DILIGENCE

Investigation protocol is a structured framework outlined in our policies that guides employees

on reporting and investigating potential policy breaches. Concerns can be reported through the

whistleblowing platform confidentially or anonymously.

INVESTIGATION PROTOCOL

We make and keep books, records and accounts that accurately, fairly and in reasonable detail

reflect all payments, expenses, transactions and disposition of the Bank’s assets.

RECORD-KEEPING

Communication efforts include using internal channels like memos or letters, while a structured

training programme ensures employees at all levels understand and adhere to the Anti-bribery and

Anti-corruption Policy. Awareness campaigns and refresher courses reinforce the key concepts.

ADOPTION, COMMUNICATION AND TRAINING

Combating bribery – policies, transparency and accountability

The Code of Conduct and Ethics, the

Conflict of Interest Policy, the Anti-bribery

and Anti-corruption Policy and Know

Your Employee procedures safeguard the

integrity of the Bank. The Anti-bribery

and Anti-corruption 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. Transparency

is further ensured by implementing a

reporting requirement that encourages

the disclosure of any unethical behaviour.

We have established a systematic

recording system for documenting gifts

and other advantages. This structured

approach ensures thorough tracking and

accountability within our organisation.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

How we govern

Enhancing controls and monitoring

The Bank’s Executive Management Team

and the Supervisory Board establish

a strong culture of ethics throughout

the organisation by setting the tone at

the top. Every anti-corruption initiative

is actively supported by the Executive

Management. This endorsement from the

highest levels provides a solid foundation

for our anti-corruption programme.

Employees in managerial positions

are critical for identifying corruption

risks. Their positions bear a special

responsibility for upholding ethical

standards and actively preventing

instances of corruption.

Internal Control and Compliance

departments serve as a second line

of defence in managing bribery and

corruption risks. Those departments

scrutinise red flag situations, known

for their elevated risk profile, such as

sponsorship, gifts, hospitality, political

and charitable donations. These high-risk

scenarios undergo a rigorous examination,

reflecting our commitment to proactive

risk mitigation and the establishment of

strong control mechanisms.

The Compliance department regularly

reviews the Anti-bribery and Anti-

corruption Policy and initiates changes

to reflect international best practice and

improve control design. An enhancement

programme to further improve our

bribery and corruption risk assessment,

controls and reporting is in progress.

We continue to further structurally

strengthen our response to bribery and

corruption risks in key areas. We have

developed online training modules on

bribery and corruption risks, including

on the Gift Acceptance Policy and the

whistleblowing platform. Annual training

is mandatory for all employees. 89% of

our employees completed the mandatory

training programme. We have intensified

the focus on the mandatory training

programmes for our employees and

target 100% completion rates going

forward.

First line

Business directions

Second line

• Internal Control department

• Compliance department

Third line

Internal Audit

Our training programme empowers every employee with the essential knowledge, skills, and expertise required to

uphold the integrity of the Bank. This comprehensive framework guarantees that our team operates with the highest

level of diligence, adhering to guidelines that enforce a zero tolerance policy towards bribery and corruption.

Employee monitoring Declaration process

Background check

In 2023, no bribery or corruption incidents were registered in the Bank, nor were any bribery or corruption

fines imposed on the Bank.

The Bank has in place the Know Your Employee procedure that includes:

The Bank’s Compliance Committee reviews any complaint related to bribery and corruption incidents.

The Audit Committee receives information on any reported incidents.

Annual Report 2023 Bank of Georgia Group PLC

Information security

Information security is a priority for the Group. As we develop new digital

products and services, we implement complementary measures to ensure the

robustness of our information security systems.

Information security risks represent one

of the global threats that organisations

worldwide face. The external threat

profile is dynamic, and these threats

continue to increase. The financial sector

remains a primary 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.

Our focus on information security risks

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.

The Bank’s commitment and 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

landscapes.

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,

Data and Information Technology.

The CISO presents regular updates to

the Joint Audit and Risk Committee.

As aresult, the Bank’s Executive

Management Team and the Supervisory

Board remain up-to-date on information

security risks.

The Bank follows a three lines of defence

model.

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.

Information security management system

First line

• Business directions

• IT department

• Information Security department

Second line

Operational risks

Third line

Internal Audit

We 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 on 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 take

measures to mitigate the risks of a supply

chain attack (for more information please

see page 162 of this report). Despite the

increasing frequency of DDoS attacks on

the Bank, there have been no instances

of service disruption resulting from these

attacks since March 2023, following the

implementation of a new solution.

Customer engagement and risk mitigation

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Although the Bank was not involved in any

significant negative impact in 2023, 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:

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

or optimisation purposes.

Incident response and control measures

Penetration testing Breach and attack

simulation

Self-assessments Internal and external

audits

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 through which the Bank has

access to a threat intelligence platform,

resilience resources and a trusted peer-

to-peer network of experts to anticipate,

mitigate, and respond to information

security threats specifically targeting

financial institutions.

Mandiant (now part of Google Cloud)

conducted an assessment of Bank of

Georgia’s cybersecurity programme in

November 2023. The purpose was to

validate existing capabilities, identify

areas for improvement, and offer

recommendations to enhance the

programme’s maturity.

Mandiant noted that the Bank generally

showcased higher maturity levels across

multiple facets compared to prevailing

industry standards in both European and

global financial sectors.

These strengths collectively contribute to the Bank’s robust cybersecurity posture, indicating a proactive and well-prepared

approach to handling potential threats and vulnerabilities.

Contributions to information security development

Cybersecurity programme assessment overview

The executive summary from the report highlighted several key strengths:

INFORMATION SECURITY TEAM

PROACTIVE CAPABILITIES

IMMUTABLE BACKUPS

DOCUMENTATION

TRAINING AND AWARENESS

Highly certified and skilled, with a strong focus on

continuous improvement.

Embracing proactive measures such as red teaming,

purple teaming, and honeypots to pre-emptively

address vulnerabilities.

Leveraging immutable storage solutions for secure

and resilient backups.

Comprehensive suite of documentation guiding the

organisation’s information security practices.

Implementing a robust awareness programme and

regular training to foster a culture of preparedness

among employees.

Annual Report 2023 Bank of Georgia Group PLC

Information security metrics

Cross-functional team of employees Active professional certifications

2023 2023

2022 2022

28 50

25 40

Internal phishing campaigns conducted

Employees not deceived by

a phishing campaign (%)

2023 2023

2022 2022

98%

4 97%

Independent internal audit engagements

Third-party penetration testing

(external assurance)

2023 2023

2022 2022

Third-party cybersecurity programme

assessment (external assurance)

2023

2022

GEL loss

data breaches

security breaches

due to a cybersecurity incident or a regulatory fine

external intrusion into the Bank’s network or systems

personal or financial data leaked to the public

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Employee training and awareness programme

We take pride in our team members who

hold industry-recognised certifications,

including three individuals with CISSP,

two with OSEP, and one with CRTO.

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). 97% of our employees

completed the training successfully.

The Information Security department

monitors the completion of mandatory

information security training and targets

100% completion rates going forward.

On a quarterly basis, the Information

Security department conducts a

comprehensive phishing campaign,

assessing all employees’ ability to detect

and respond effectively to phishing

attempts. In addition to the general

test, we executed two more targeted

phishing campaigns tailored to specific

groups. The department closely monitors

performance and provides additional

training to individuals who may have

fallen victim to phishing emails or were

unable to respond promptly.

Data privacy

As data collection and digital footprints continue to expand worldwide, it is

essential for us to be proactive in protecting clients’ most valuable asset –

personal information. We are committed to protecting and respecting the data

we hold and process, in accordance with the laws and regulations of the markets

in which we operate.

Information is one of our most valuable

assets, and data privacy is a top 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

information security standards.

Our approach rests on having the technology, systems, controls, policies and processes to ensure proper data governance, the

appropriate management of privacy risk and the fulfilment of our obligations.

Data governance and responsibility

We have appointed the Georgian banking industry’s first Data Protection Officer who advises the

Bank and helps monitor compliance with the applicable data protection rules. The Data Protection

Officer 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 Team and the Supervisory Board

remain up-to-date on privacy matters.

PRIVACY GOVERNANCE

In our commitment to safeguarding privacy, we make sure all data subjects’ rights are strictly

observed. In 2023, the frequency of data subject access requests remained robust. Each request

is diligently fulfilled, ensuring comprehensive protection and empowerment for data subjects.

Importantly, none of the complaints regarding Data Subject’s Access Rights were communicated

to the personal data protection service of Georgia, further emphasising our commitment to

ensuring the proper protection of the rights of the data subjects.

INDIVIDUAL RIGHTS AND TRANSPARENCY

We prioritise robust security measures when engaging with third-party vendors. This involves

a thorough assessment of their security infrastructure. We conduct a comprehensive review

of regulatory compliance to ensure adherence to data protection. Prior to collaboration, clear

and detailed contractual agreements are established, outlining data protection responsibilities.

These practices ensure we maintain the highest standards of data protection and security in our

partnerships.

THIRD-PARTY DATA PROCESSING

Annual Report 2023 Bank of Georgia Group PLC

Further developments and the implementation of a new framework

In June 2023, the legal framework

governing data protection in Georgia was

amended. The new law is more closely

aligned with the General Data Protection

Regulation (GDPR) and introduces

obligations similar to those outlined in the

GDPR.

As GDPR applies to certain data

processing by the Bank, the amendments

introduced by the new law have already

been implemented. However, considering

that the majority of our clients are

Georgian citizens, we anticipate an

increase in complaints as citizens become

more aware of their rights and the

responsibilities of data controllers due to

awareness-raising campaigns carried out

by the Government. In response, we have

proactively initiated a comprehensive

review of our practices to ensure full

compliance with the requirements

stipulated by the new law and to enhance

our privacy standards.

Despite the current legislative changes

in Georgia, the Bank constantly tries to

improve data processing practices. This

enables us to properly identify, address

and mitigate the risks in advance,

significantly limiting the likelihood of a

negative impact on individuals as a result

of data processing.

The orders and instructions given by the regulatory body have already been fulfilled. The regulator deemed the measures taken by

the Bank to be sufficient and closed the supervision of the execution of these cases.

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. We have a thorough incident response policy which is aligned with the emerging threat

landscape as well as current business and regulatory requirements.

INCIDENT RESPONSE AND BREACH NOTIFICATION

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. 97% of our employees

completed mandatory training successfully. We have intensified the focus on the mandatory

training programmes for our employees and target 100% completion rates going forward.

In 2024, the Bank will enhance data privacy and security through targeted face-to-face training

for employees who have direct communication with clients and access to significant volumes of

personal, including sensitive, data. The training will be customised for each department’s activities

and practices. This proactive approach aims to prevent potential breaches and emphasises the

importance of keeping our employees informed about their obligations under data protection

legislation, contributing to a culture of awareness and responsibility throughout the Bank.

EMPLOYEE TRAINING AND AWARENESS RAISING

In 2023, we received four individual complaints regarding breaches of customer privacy from the Personal Data Protection Service, a

regulatory body in Georgia. All four have been identified as substantiated complaints. None of them constitutes a systemic issue within

the Bank.

Regulatory cases overview

Substantiated complaints concerning

breaches of data privacy

Identified leaks, thefts or losses of data

In 2023, the regulatory body conducted a planned inspection on the legality of data processing through audio

recording. Within the inquiry, the regulator examined the lawfulness of obtaining, recording and holding data by the

Bank, as well as security measures applied to the data, including access, and physical security measures.

The regulatory body considered that the Bank complied with all the rules in the processing and storage of personal data

and did not find any violations.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

The following measures have been carried out after the adoption of the new law:

UNDERSTANDING

THE LAW

INSPECTING THE

INFORMATION

WE HOLD

REVIEWING LEGAL

GROUNDS

UPDATING

PRIVACY POLICIES

To ensure transparency and

regulatory alignment, we

have engaged in ongoing

consultations with the

relevant supervisory

authority. Furthermore,

all stakeholders have been

informed to navigate the

compliance requirements

of the new law, and they

are actively engaged in the

process, contributing to both

compliance and successful

implementation.

We have conducted an

information audit, including

where it came from, who

it is shared with, where it

is kept. Additionally, the

retention period has been

reviewed to ensure that we

retain personal data for

the necessary and lawful

duration.

We have conducted a

thorough review of the legal

basis for data processing

within the Bank and the

way we seek, obtain and

determine consent. We have

reviewed all web forms, online

consents, and landing pages

to align them with legal

requirements.

We have reviewed and

updated our data protection

policies to reflect the latest

legal developments. These

revisions guarantee that

our policies fully comply

with data protection

legislation and reflect best

practices, ensuring they are

comprehensive and up-to-

date.

Customer protection

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 touchpoints, and engaging with them regularly to

learn from their feedback.

We aim to maintain customer trust by

adhering to the highest ethical standards

in doing business. Customer protection

is not just a commitment. It is also a

fundamental aspect of our business ethos

that motivates us to continuously improve

our practices and set the bar high to

have excellence in customer care and

protection.

Fairness, transparency and integrity

are the main principles that underpin

customer-centricity across the entirety of

the customer relationship lifecycle. These

principles are reflected in our Code of

Conduct and Ethics and in the Customer

Protection Standard, which reflects local

regulatory requirements, international

best practices and control mechanisms

for effective execution.

We view each employee as our

ambassador, and, therefore, we

continuously refine our approach to

employee training and testing. 96% of our

employees completed mandatory training

successfully. We have intensified the focus

on the mandatory training programmes

for our employees and target 100%

completion rates going forward.

The training programme equips all employees involved in selling our products and services with the necessary

knowledge, skills and expertise to prioritise and safeguard customers’ interests. This framework ensures that our

team operates with the utmost diligence and integrity in all customer interactions.

We must ensure that our customers are

able to make well-informed decisions

on how to use our products and services

and understand the protection available

to them if something goes wrong. Our

principles aiming to ensure customer-

centricity are reflected in all product

development and sales activities. The

principles apply to all business lines and

customer types and are integrated in the

product approval processes.

The new product approval process

and related risks are managed based

on three lines of defence. The Bank’s

internal procedures define the scope and

responsibilities of all involved structural

units to ensure:

How we design and sell our products and services

Suitable product offering

We create and offer products and services tailored to our customers’ needs and

preferences.

Clear communications

We communicate information, including terms and conditions, on products and

services in a clear and non-misleading manner.

Annual Report 2023 Bank of Georgia Group PLC

Customer complaints are another source

of feedback that we aim to handle

effectively and use lessons learned for

continual improvement of our customer

service. We aim to be open and consistent

in how we track, record and manage

complaints. We measure the volume of

complaints and review root causes to

inform the changes we should make to

our products and services to improve

them for our customers. By doing this,

we hope to see improved customer

satisfaction and reputation, and reduced

costs.

We understand that it is important for

our customers to be able to address their

complaints through several channels or to

clarify the details of any issue.

As a result of claims processing, constant

changes are made to adapt services

and banking products to customers’

requests and needs as much as possible,

which makes the Bank more flexible in

the market, attractive and special for

customers.

The variety of recourse channels clearly

shows that it is possible for our customers

to file a complaint using any preferred

and available means. Submitted

complaints are then reviewed by the

Customer Complaints Management and

Support Centre.

How we listen – customer complaints

First line

Customer Complaints Management

and Support Centre

Second line

Customer Protection unit

Third line

Internal Audit

The Customer Complaints Management process and related risks are also managed based on three lines of defence.

Internal Audit as the third line of defence, is an independent assurance provider, and

performs audit engagements using a risk-based approach. The scope of work of Internal

Audit related to customer protection is to determine whether our risk management,

internal control, and governance processes, as designed and represented by management,

are adequate and functioning in a manner that reasonably ensures material regulatory

and compliance risks are appropriately identified, measured, assessed and managed

across the organisation.

WEBSITE

CONTACT

CENTRE

SOCIAL MEDIA

E-MAIL

WHISTLEBLOWING

CHANNEL

CHANCELLERY

BRANCHES

E-BANK AND

M-BANK

NATIONAL BANK

OF GEORGIA

Customers can leave complaints via various channels, including:

Robust control mechanism when

developing and/or reviewing a product

New products and services as well as changes to existing products are reviewed and

assessed by key control functions including the Legal department.

Responsible marketing

All mass communications in public channels as well as all personalised

communications are reviewed by the Legal department to make sure they are

compliant with applicable laws and regulations.

Advisory

We provide services and trusted advice through professionals with the necessary

knowledge and expertise.

Fair offering

We offer products and services at a fair price considering the market, costs and risks.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Customer claims management

We have a consistent set of principles

that enable us to remain customer-

focused throughout the complaints

process. Our Customer Claims

Management procedure 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 centre is obliged to escalate

the matter to the Bank’s Compliance

Committee.

A Customer Protection unit in the

Compliance function 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 monthly to identify root

causes and systemic issues, any violation

of our Code of Conduct and Ethics 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 Joint Audit and Risk

Committee in its quarterly compliance

reports.

The Customer Complaint Management

and Support Centre reflects complaints

recorded with the Bank on a monthly

basis in its reports submitted to the NBG.

Step 1

Step 2 Step 5

Registered

complaint/request

Processing the

complaint/request

Appealed cases are

reported to the NBG

Step 3

Direct communication

with the customer

Step 4

Decision making/communicating

with the customer

PROCESS

How we handle complaints

Our principles Our actions

Making it easy for our customers

to complain

The Bank has a Customer Claims Management procedure that defines how to handle

customer complaints and concerns in a timely and effective manner. Customers can

complain via the channel that best suits them. We provide clear information about

our customer complaint mechanisms.

Keeping the customer up to date

We set clear expectations and keep customers informed throughout the complaint

resolution process via their preferred channel.

Ensuring fair resolution

The Customer Claims Management and Support Centre reviews and manages all

incoming claims. We thoroughly investigate all complaints to address concerns and

ensure the right outcome for our customers.

Providing available rights

We provide customers with information on their rights and the appeal process if they

are not satisfied with the outcome of the complaint.

Undertaking root cause analysis

Complaint causes are analysed on a regular basis to identify and address any

systemic issues and to inform process improvements.

Annual Report 2023 Bank of Georgia Group PLC

Registered complaints by category Resolution outcomes

13%

26%

34%

51%

19%

23%

11%

Plastic cards

In favour of customerLoans

Accounts, deposits

Digital channel and service

Other

Payment problem Consultation

Transactions

Breach of the process

Whistleblowing

We want to continue to foster a culture where our colleagues feel safe to speak up.

Our whistleblowing channel, WhistleB, is

one of our speak-up channels, which allows

our employees and other stakeholders

to raise concerns confidentially

and, if preferred, anonymously. The

correspondence process is managed

by WhistleB, an external, advanced,

independent whistleblowing reporting

channel and case management tool.

We promote a speak-up culture and aim

to ensure our employees and stakeholders

are aware of our whistleblowing

mechanism, and have full comfort

reporting potentially unethical practices

without fear of reprisal.

The Whistleblowing Policy is one of the

primary documents governing culture and

ethics, and therefore, responsibility for

the Whistleblowing Policy resides with the

Board who, together with the Joint Audit

and Risk Committee, receive reports on

its operation quarterly.

Over the past year, in response to the

challenge that the platform, in some

cases, was not used for its intended

purposes, the whistleblowing channel

has been redesigned and updated to

enhance its effectiveness, efficiency

and awareness. As a result, statistics

have improved, and irrelevant reports

decreased over the past months.

In the reporting year, we received

22 relevant reports on the WhistleB

platform. 19 reports dealt with the

same issue – organisational changes

(dissatisfaction caused by manager

rotation). 2 out of these 19 reports

included additional concerns about

unfavourable work environment. The

issue was investigated and violation was

not confirmed. Out of the remaining 3

reports, 2 hinted at favouritism/nepotism

whereas 1 was about communication

challenges. Violation was not observed

in any of the cases, nonetheless we

addressed the issue with all managers

underscoring their pivotal role in

cultivating a bias-free environment,

emphasising preventive measures for the

future. Furthermore, selection/promotion

criteria were standardised, and an action

plan, including an ongoing monitoring

mechanism, was drawn up to ensure

continuous attention to these matters.

Communication challenges were resolved

by establishing a streamlined process,

enabling open discussions with managers.

Reports received

Organisational change

Breach of Code of Conduct and

Ethics

TOTAL

Money retained in

the ATM

In favour of the Bank

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Working with our suppliers

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 committed to involving local suppliers in our supply chain and contributing to local business development. The majority of our

suppliers were local in 2023.

Total spend on suppliers

87%

13%

Local suppliers Others

Largest categories of suppliers by spend

28%

15%

22%

24%

Professional service

Renovation

Office supplies

Rents

The Bank continues its commitment to strategic sourcing, emphasising the importance of selecting suppliers not only based on cost

but also based on factors such as quality, reliability and innovation. This approach ensures that procurement decisions align with the

Bank’s overall business strategy, fostering long-term partnerships and mitigating risks associated with the supply chain.

Meanwhile, cost efficiency still remains one of the main KPIs for the Procurement team.

Investing in advanced technologies

To enhance efficiency, reduce manual errors and provide valuable insights for better decision making, we are investing in advanced

technologies to streamline and automate various aspects of the procurement process. This includes the implementation of:

The Procurement department has

transitioned to electronic signatures,

implementing a paperless strategy that

enhances efficiency and sustainability.

This move not only aligns with our

commitment to innovation but also

underscores our dedication to reducing

environmental impact. Moving to

e-signature process and going paperless

means a significant reduction of paper

usage and a decrease of our operational

carbon footprint.

PROCUREMENT

SOFTWARE

AI TASK AND PROJECT

MANAGEMENT TOOLS

DATA

ANALYTICS

Banking products

Annual Report 2023 Bank of Georgia Group PLC

Sustainable procurement

Supplier screening

We are committed to conducting

business responsibly and to integrating

ESG criteria into our decision-making

processes. We want to promote

sustainability and responsible business

practices throughout our supply chain.

As one of the biggest groups in Georgia,

we recognise that our business activities,

operations and supply chain have a

significant impact on the environment,

the economy and society at large,

and we seek to minimise the negative

environmental impact of our operations

and supply chain by reducing our carbon

footprint, conserving natural resources,

and promoting circular economy

principles. We aim to uphold human

rights, promote fair labour practices

and support diversity and inclusion

throughout our supply chain. We believe

that sustainability is a journey and there

is always more we can do to promote

responsible business practices throughout

our supply chain.

To ensure that our supply chain aligns

with our values, commitments and the

expectations we have for our suppliers,

we have established the Supplier Code

of Conduct, which sets the principles

and guidelines for Group’s supply chain

practices.

In 2023, we implemented supplier E&S

due diligence process. All of our suppliers

with turnover more than GEL 500K

must fill out an E&S questionnaire. This

evaluation involves examining suppliers’

E&S conduct, including but not limited

to labour conditions and environmental

impact. If there is a need, we also perform

an on-site assessment of supplier

premises to ensure that the provided

information is accurate.

Adherence to legal and ethical standards

remains a priority in the procurement

process. We have rigorous compliance

checks to avoid dealing with suppliers

who are not aligned with local laws and

regulations.

We have supplier screening processes and

policies, and all suppliers with more than

GEL 10K turnover with the Bank should

pass a qualification process (background

check).

Suppliers with access to the Bank’s IT

infrastructure or personal data are liable

to fulfil due diligence questionnaires. More

specifically:

• Information security questionnaires.

• Privacy due diligence questionnaires.

• Operational risk due diligence

questionnaires.

• General questions to all suppliers

regarding: child labour, illegal

immigrants, discrimination, minimum

salary, and modern slavery statement.

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

and strive to adopt a ‘reduce, reuse,

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.

The 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.

For information on GHG emissions, please

see pages 115 to 116.

Energy consumption

2021 2022 2023

Electricity (kWh) 17,489,358 19,623,529 22,050,710

Gas (m

) 448,718 349,205 389,485

Gas (kWh, assuming that 1 m³ gas = 9.7 kWh) 4,352,565 3,387,285 3,778,003

Total energy consumption (kWh) 21,841,923 23,010,813 25,828,713

Total energy consumption (kWh)

per square metre of office space

243 238 267

Energy consumption data

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

59,316

67,649

107,415

2021

2022 2023

Water consumption (m

)

The increase in electricity and water

consumption versus prior year was mainly

driven by the increased office space to

accommodate the growing workforce

(the number of our employees increased

by 12.7% y-o-y). In addition, 2023 was the

first year after the COVID-19 pandemic

when employees moved into full-load

office space, which in turn led to an

increase in energy consumption.

Water consumption by the Bank is limited

to ‘domestic-type use’ and cleaning purposes.

Despite the increasing demand for resources, the organisation’s environmental vision and policy is to properly manage the resources

used, which involves waste prevention and recycling of waste generated.

Since 2023, the Bank has taken a number of positive steps to reduce its environmental footprint, namely:

Environmental management

An environmental manager position was created, responsible for minimising harmful environmental impacts and

overseeing processes in accordance with national and international environmental standards

Improved waste management practices have been implemented

The organisation’s waste management plan was updated

Clarification of the definition of waste within the organisation contributed to the improvement of the waste management system.

As a result, during the reporting period, we conducted an inventory of waste and separated two types of waste:

Waste management

Recyclable waste plastic, glass, cardboard, metal and electronic waste, which will be transferred to companies that have

the appropriate license for recycling

Non-recyclable waste will be transferred to those enterprises that ensure the destruction of waste by physical and

chemical methods, so that it does not harm the environment and human health

In the reporting period, generated waste was recycled in full compliance with

local environmental regulations.

Glass 60 tonnes

Mixed stationery and office supplies 250 m

Lead-acid batteries 6 tonnes

Recycled paper from the archive 70 tonnes

Recycled paper from offices 2 tonnes

Type of waste Amount (2023)

Annual Report 2023 Bank of Georgia Group PLC

Starting in 2023, we have maintained an inventory of equipment containing

ozone-depleting substances, which includes accounting for heating and cooling

systems throughout the Bank, monitoring each system to prevent the release of

ozone-depleting substances into the environment.

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

2023 30

2022 39

2021 35

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 2023, c.1.8 tonnes of paper were 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.

A responsible approach to tax

Our approach to responsible business conduct extends to our approach to

taxation. We understand that responsible tax practices are not just a legal

requirement but a vital aspect of our commitment to ethical business conduct

and sustainable development.

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. The table below shows taxes

paid during 2023.

Taxes paid in 2023, GEL million (BOGG PLC)

49%

51%

Corporate income tax

Other tax

GEL

327

Types of taxes paid in 2023, GEL million (BOG)

152.7

37.6

11.7

6.3

94.4

Corporate income tax

Property tax

Withholding tax

VAT

GEL

303

Payroll tax

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Company

Corporate income tax

(GEL)

Other tax (GEL) Total tax (GEL)

Georgia

BGEO Group 19,993 151,453 171,446

Bank of Georgia 152,446,136 150,312,817 302,758,953

Prime Leasing – 975 975

Solo 32,660 1,218,479 1,251,139

Tree of Life Foundation – 52,635 52,635

Georgian Leasing Company 1,529 4,481,876 4,483,405

Galt & Taggart 3,765 1,809,809 1,813,574

United Securities Registrar of Georgia – 44,627 44,627

Express Technologies – 92,500 92,500

Didi Digomi Research Center 12,021 16,266 28,287

Georgian Card 1,529 2,223,428 2,224,957

Direct Debit Georgia 469 1,688,406 1,688,875

Metro Service + – 1,234,529 1,234,529

Digital Area 1,000,367 842,778 1,843,145

Area Extra 7,018 10,588 17,605

Easy Box LLC 104 290,199 290,302

Optimo Global 23,303 47 23,350

Deliveri 1,762 110,360 112,122

Total 153,550,656 164,581,772 318,132,428

Belarus

Belarusky Narodny Bank 4,268,726 7,861 4,276,587

BNB Leasing 44,891 570,524 615,415

Total 4,313,617 578,385 4,892,002

Hungary

Bank of Georgia Representative Office

Hungary

– 50,035 50,035

Israel

Georgia Financial Investments 14,519 93,810 108,329

Turkey

Representative Office of JSC Bank of

Georgia in Turkey

– 5,251 5,251

Bank of Georgia Group PLC 2,056,004 2,126,021 4,182,025

Cyprus

Benderlock Investments Limited 106,468 – 106,468

Total 160,041,264 167,435,273 327,476,537

Annual Report 2023 Bank of Georgia Group PLC

FINANCIAL

INCLUSION

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

We believe that improving access to

financial services is crucial for enhancing

people’s quality of life and fostering

economic growth. Lack of access to

financial services and finance poses a

significant barrier to sustainable and

inclusive socioeconomic development. In

2021, we identified financial inclusion as

one of our primary impact focus areas,

which is intertwined with our overall

business objectives.

We aim to foster financial inclusion by

offering people relevant, accessible, and

affordable services tailored to the diverse

needs of different customer segments

– spanning various socioeconomic

backgrounds and geographic locations,

from rural to urban communities.

In addition to our core business, we

actively engage in corporate social

responsibility (CSR) initiatives in the

communities where we live and operate,

providing educational resources,

workshops and tools to empower

individuals and businesses – equipping

them with the knowledge and skills they

need to effectively manage their finances.

We believe financial inclusion starts

with the use of digital channels for daily

banking and cashless payments. Through

our digital platforms, we provide easy

access to a formal financial system

to anyone across Georgia. Financial

technologies, be it mobile app or secure

online payments, empower people to

safely handle their money, carry out

transactions, and get necessary services

without relying on cash or visiting

traditional bank branches. We measure

the uptake of our mobile app and internet

banking platform through Digital MAU

and the use of cards for payments in-

store and online through Payment MAU.

Both metrics are key business metrics, but

we believe by focusing on these metrics

and reaching more people monthly

through our digital and payments

technologies, we contribute to stronger

communities.

Financial inclusion

To enhance financial inclusion, we focus on:

Financial inclusion focus

area

Where we are now

(December 2023)

Why we think it is

important

Use of digital

channels

Use of cashless

payments

• 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

• 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

1.4 million

+21.0% y-o-y

Digital MAU

1.2 million

+20.1% y-o-y

Payment MAU

Increasing the use

of digital financial

products and services

Building financial

literacy among

young people

Building capabilities

of local businesses

with relevant tools

and information

Annual Report 2023 Bank of Georgia Group PLC

How we ensure the accessibility of our products and services

Access to finance – removing barriers for self-employed and underserved people

Self-employed individuals

Underserved individuals

In Georgia, most of the economic activity

happens in big cities, leaving rural areas

feeling left out when it comes to financial

opportunities. Therefore, creating an

inclusive environment where everyone

regardless of their location or occupation,

feels empowered to access financial

tools requires addressing the disparity in

access to financial products and services

between urban and rural areas. Bank

of Georgia’s goal is to be accessible to

people living in locations beyond major

urban centres, in rural areas, and to those

of different socioeconomic backgrounds,

through a variety of financial services and

products.

For instance, we have strategically placed

ATMs and self-service terminals (BOG

Pay) in regions for individuals to gain

access to basic banking services without

needing to travel to urban centres. We

also have a number of branches in rural

communities providing residents with

access to a wider range of financial

services and personalised assistance.

The Mass Retail Banking strategy is

focused on encouraging people living

in Georgia’s regions to adopt digital

channels, particularly our financial

superapp for a fast, easy and seamless

daily banking experience. In 2023, we

focused on making sure our customer-

facing employees in regional branches

were equipped with the knowledge of

various digital tools and incentivised to

raise awareness of the benefits of using

digital channels among their customers.

Since 2022, we have been focused on

closing the gap between self-employed

individuals and the financial services

sector. We understand the challenges

faced by those with income from self-

employment or unofficial sources when

trying to access credit. That is why we

have worked on refining our lending

processes, removing the artificial barriers

that have long hindered their financial

inclusion.

In 2023, we improved the income

validation procedures for

self-employed clients and extended

the full spectrum of credit products,

previously unavailable to them. As a

result, we achieved a 14.9% y-o-y growth

in the number of self-employed borrowers

as of 31 December 2023.

54.7K

+14.9% y-o-y

Self-employed borrowers

(Dec-23)

479K

+9.1% y-o-y

Active customers

in Georgia’s regions

GEL 531.7M

+45.9% y-o-y

Loan portfolio of

self-employed clients (Dec-23)

You can read more about

self-employed clients on

pages 33 to 34 of this

report.

Customers can access BOG

APP’s full functionalities

without WiFi 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

sCoolApp for school students

and Student Card and BOG

APP for university 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.

1. Number of monthly active customers in Georgia excluding the top four large cities: Tbilisi, Batumi, Kutaisi and Rustavi.

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

You can read more about how we empower young people with

our products on pages 37 to 39 of this report.

Through our CSR initiatives, we aim

to provide resources, workshops and

tools that teach and explain financial

concepts and empower young people to

manage their money more effectively,

make informed decisions, and understand

the implications of economic policies on

their lives. We want to provide the tools

and skills so that more young people in

Georgia can be in control of their financial

futures because that will ultimately

benefit the whole communities around us.

Key financial education activities during 2023

TSU Envoy

The TSU Envoy project has been making a

significant impact in schools throughout

Georgia. University students, serving as

ambassadors, return to their schools to

share their experiences with over 10,000

school students annually – providing

invaluable insights into university life. In

2023, the project was supported by Bank

of Georgia for the first time. Through

this collaboration, ambassadors not only

talk about and give tips on university

life, but they also educate students

about the functions of sCoolApp and the

importance of banking products, focusing

on the products relevant for them. In

this way, the TSU Envoy project supports

financial literacy activities and awareness

raising across the whole country.

200+

Envoys participated

250+

Schools visited

In 2022, we launched sCoolApp – the first

financial mobile app for school students

in Georgia. The average age of sCoolApp

user is 14.

Our objective is to expand our reach to

school students and use sCoolApp as

one of the main avenues for teaching

essential financial literacy skills to children

from a young age.

In 2023, we developed sCoolApp with

innovative features aimed at promoting

financial inclusion and education among

school students.

Empowering school and university students in Georgia with daily banking solutions

Bill split

Educational

stories

Personal financial

manager (PFM)

Piggy bank

Financial literacy content and tools embedded in sCoolApp

90K

+170.3% y-o-y

sCoolApp MAU

Annual Report 2023 Bank of Georgia Group PLC

Teachers’ competition for integrating financial education in schools

Partnering with the NBG and the financial education platform

FinEdu, Bank of Georgia engaged in the teachers’ competition

for integrating financial education in schools. The primary

objective of the competition was to develop supplementary

financial educational materials aligned with the national

curriculum and enhance the effective teaching of financial

literacy concepts. We believe providing financial education to

children during their school years is essential for fostering their

future success.

Financial education exhibition

In 2023, for the first time, a space for financial education

was organised at the international education exhibition in

partnership with the NBG. Major banking sector organisations

were represented. We hosted students who participated in

entertaining financial education games while learning about

the resources offered by Bank of Georgia to promote financial

literacy.

Invite FinEdu to Class

In 2023, Bank of Georgia supported the ‘Invite FinEdu to Class’

programme, a collaborative effort of the NBG and the financial

education platform FinEdu. The initiative aimed to enhance

financial and economic awareness among young people, with

representatives from partner financial institutions taking on

the role of ambassadors and visiting schools across Georgia.

Ambassadors from Bank of Georgia provided students with

insights into sCoolApp, which facilitates everyday transactions

for young people. Through these interactions, students gained

practical knowledge about the significance of prudent money

management and saving principles.

Improving the financial literacy of our

business clients is also an important

aspect of supporting local business

development. We aim to empower

business owners and managers with

the knowledge and skills necessary for

successful business operations, including

understanding fundamental concepts

such as budgeting, investing, and planning

for the future.

We believe that with this knowledge our

clients can navigate their businesses

more effectively, mitigating risks, seizing

opportunities, and ultimately achieving

their financial goals. Moreover, we believe

that by promoting financial education

and investing in our clients’ financial

literacy, we can not only contribute to

their prosperity but also strengthen the

overall resilience and stability of the

business ecosystem.

Building capabilities of local businesses with relevant tools and information

30+

Schools visited

900+

School students participated

Georgia’s regions

3,000+

Entrants

Accounting Development programme

500 Georgia

Workshops for female entrepreneurs

Businesscourse.ge

Bank of Georgia’s Accounting Development programme helps

SMEs overcome the hurdle of accessing finance by promoting

effective accounting practices. Through its partnerships with

local accounting firms, Bank of Georgia facilitates access to

affordable accounting software packages to help SMEs run their

businesses more effectively.

In collaboration with 500 startups and GITA, we launched the

country’s first international accelerator programme, fostering

entrepreneurship, nurturing the tech ecosystem, facilitating global

networking, and helping participating companies in fundraising.

Bank of Georgia regularly holds peer-to-peer trainings and

workshops specially developed for women entrepreneurs.

Through this online platform we provide educational content

and timely insights tailored to the needs of local SMEs.

Digitalisation

of accounting

Full accounting

services

Identifying

tax risk

Digital

marketing

E-commerce

Employment

practices

Quick sharing of financial information with the Bank Change management

Change Management

Read more on page 48

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Annual Report 2023 Bank of Georgia Group PLC

SUSTAINABLE

FINANCE

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Sustainable finance

Sustainable finance for us means

integrating ESG criteria into core

operations and decision-making

processes. This involves aligning

investment decisions, risk assessments

and lending practices with a commitment

to long-term sustainability.

As a leading lender and a reliable

partner for businesses of any size in

Georgia, Bank of Georgia is committed

to mobilising and prudently channelling

financing to support customers and

drive economic growth while reasonably

mitigating climate, environmental and

social (CE&S) risks in our financing. The

CE&S management of the Bank’s loan

portfolio is based on the Environmental

and Social Risk Management System

(ESMS) and Climate Risk Management

(CliRM) framework and encompasses a

systematic identification, assessment,

mitigation and monitoring of CE&S risks

associated with the projects that are

financed by the Bank’s Corporate Banking

and SME Banking segments.

We understand, that businesses can

no longer operate in isolation from the

impact they have on the planet and the

people, and, therefore, we are planning

to develop green products and create

green finance opportunities for the

businesses. This will help us identify

opportunities for sustainable growth

and, mitigate potential adverse impacts

and reduce risk of financial losses, and

foster the development of a resilient

and sustainable financial system and

businesses around us.

Environmental and social risk management

At Bank of Georgia, we are committed to prudently managing the risks

associated with our lending activities. Through our ESMS, we proactively identify

potential risks and promote mitigating actions by motivating our customers to

effectively manage these risks.

Environmental and social risks are risks of

negative materialisation of E&S factors

that affect our clients, borrowers, other

counterparties and the Bank itself.

The most common are environmental

risks – financial risks stemming from an

institution’s exposure to activities that

may be affected by or contribute to

the negative impacts of environmental

factors. Social risks are financial risks

arising from an institution’s exposure

to activities that may be affected by or

contribute to the negative impacts of

social factors.

E&S risk definition and management approach to the E&S risk appraisal

Risk level Definition E&S due diligence requirements E&S monitoring requirements

Low

Transactions with minimal or no

adverse E&S impact.

No in-depth assessment required. Monitoring visits not required.

Medium

Transactions with specific E&S

impacts that are few in number,

generally site-specific, largely

reversible, clearly evident at the

time of the assessment, and readily

addressed through mitigation

measures and international best

practice.

Gaps are identified and where appropriate

an E&S action plan is developed to minimise

the gap. When the total project exposure

is more than US$ 5 million, clients have

to comply with applicable International

Finance Corporation (IFC) Performance

Standards 1-8.

In case of non-compliance, monitoring visits

should be performed at least every two

years until major E&S issues are resolved

accordingly and properly monitored by the

customer.

High

Transactions with significant

adverse E&S impacts that are

sensitive, diverse or unprecedented.

In-depth assessment required. Gaps are

identified and, where appropriate, an E&S

action plan is developed to minimise the

gap.

If E&S issues are complex or outside the

in-house team’s competence, a qualified

external consultant(s) should be hired

to undertake an E&S assessment. When

the total project exposure is more than

US$ 5 million, clients have to comply with

applicable IFC Performance Standards 1-8.

Monitoring visits to poor E&S performance

clients on an annual basis. Monitoring visits

to all other clients should be performed

at least every two years until major E&S

issues are resolved accordingly and properly

monitored by the customer.

Category A

Developments on ‘greenfield’ land or

major extension or transformation-

conversion projects which may give

rise to significant or long-term E&S

risks and impacts.

In-depth assessment required. Gaps are

identified and where appropriate an E&S

action plan is developed to minimise the

gap. If E&S issues are complex or outside

the in-house team’s competence, a qualified

external consultant(s) should be hired

to undertake an E&S assessment. These

projects have to comply with applicable IFC

Performance Standards 1-8.

Customers should provide the Bank with

an annual E&S performance report and

monitoring visits should be performed every

year until major E&S issues are resolved

accordingly and properly monitored by the

customer.

The Bank focuses on higher-risk sectors and transactions. All cases that are identified as higher-risk and where specific or material

E&S risks or concerns are identified are subject to further review.

Annual Report 2023 Bank of Georgia Group PLC

Medium

High

Category A

Low

20%

60%

17%

294

511

TOTAL

GEL 1,040M

387

176

123

111

400

TOTAL

GEL 1,251M

In 2023, our E&S risk management team conducted due

diligence of all new clients that may pose potential E&S risks

and/or high and very high climate-related transition and/or

physical risks. Out of GEL 1,040 million new loans screened, GEL

561 million was assessed against IFC Performance Standards,

while the rest was assessed against local legislation. The data

below shows the breakdown of the screened loans by sector as

at 31 December 2023.

In 2023, our E&S Risk Management team carried out E&S

monitoring of all Category A and High risk clients. Out of

GEL 1,251 million, GEL 918 million was assessed against IFC

Performance Standards, while the rest was assessed against

local legislation. The data below shows the breakdown of the

monitored loans by sector as at 31 December 2023.

E&S risk categorisation

(31 December 2023)

Category A projects constituted 3.1% of the Bank’s gross

SME Banking and Corporate and Investment Banking

loan portfolio, and 1.7% of the Bank’s total gross loan

portfolio as at 31 December 2023.

E&S due diligence data E&S monitoring data

*In ‘other’ we consider the following sectors: wholesale and retail trade; human health and social activities; education; transportation and storage; mining and quarrying;

production of trade of clothes, shoes and textiles; and other activities.

Construction/

development

Manufacturing,

except for food

products

Manufacture of food

products

Agriculture, forestry

and fishing

Energy

Other*

Agriculture, forestry

and fishing

Manufacture of food

products

Accommodation

and food service

activities

Accommodation

and food service

activities

Manufacturing,

except for food

products

Construction/

development

Sector

Exposure

GEL

million

Exposure

GEL

million

Share in

business

portfolio

Share in

business

portfolio

2022 2023 2022 2023

Industry 269.3 257.9 2.9% 2.3%

Construction

Materials

97.1 54.0 1.0% 0.5%

Consumer

Foods & Goods

33.5 31.7 0.4% 0.3%

Total 400.0 343.6 4.2% 3.1%

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Mitigating E&S risks in Bank of Georgia’s loan portfolio

E&S risk framework

E&S risk management is integrated

into the underwriting process related to

business clients. There are procedures,

application forms and actions that

have been integrated into the Bank’s

credit procedures since 2013. E&S

risk management is based on IFC

Performance Standards and the EBRD

Performance Requirements – the

benchmarks for E&S risk assessments

in lending. A dedicated E&S team has

been in place since 2013, within the

Enterprise Risk Management function.

The ESMS and the associated E&S

procedures are periodically updated

and approved by the Environmental and

Social Impact (ESI) Committee and

the Supervisory Board of the Bank to

ensure they remain fit for purpose and

reflect the Bank’s strategic objectives

and current performance, expectations

of stakeholders, and changes in the

legal and regulatory environment. Our

ESMS aligns with our risk management

framework and provides additional clarity

and transparency regarding our approach

to E&S risks, including climate risk.

The Bank bases its E&S risk management on the following standards, regulations and policies:

The Group’s Environmental Policy

The Bank’s CliRM framework

Georgia’s environmental, climate, social, health

and safety, and labour laws and regulations

International Labour Organization’s core

labour standards

Applicable international environmental, health

and safety (EHS) conventions that Georgia is

signatory to

IFC’s Performance Standards

The EBRD’s Performance Requirements

Mitigating

AssessingIdentifying

Managing

E&S risk management of our loan portfolio involves systematically:

E&S and climate-related risks associated with projects financed by the

Bank’s Corporate Banking and SME Banking business directions.

Annual Report 2023 Bank of Georgia Group PLC

The Bank’s ESI Committee and the Supervisory Board received updates on the implementation of

ESMS and approved the updated version of ESMS.

We started to assess climate-related risks for the Bank’s clients, based on a standardised E&S due

diligence process.

We provided Environmental Awareness trainings to SME Banking and Corporate and Investment

Banking clients and bankers.

We assessed E&S risks of more than 100 beneficiary companies, with exposure GEL 175 million as at

31 December 2023, delivering financing and guarantees via BOG within the framework of the World

Bank-supported Relief and Recovery (referred to as ‘Credit Guarantee Scheme’) for MSME Project

implemented by the economic development agency ‘Enterprise Georgia’, the governmental body

under the Ministry of Economy and Sustainable Development.

Activities in 2023:

The Supervisory Board will review E&S risk assessment reports for all large credit requests. These

reports provide information on current regulatory requirements and details on the client’s E&S

performance, potential risks and mitigation measures.

We are taking measures to fully comply with the NBG’s new ESG Guidelines, which are expected to

come into force from January 2025.

We will develop specific guidance for clients operating in oil and gas, agriculture, mining, forest and

biodiversity, recycling and heavy industry. These sectors are identified as those with potentially high

adverse E&S impacts.

Activities planned for 2024:

Employee and customer engagement

Employees are critical to our ability

to mitigate our indirect negative

impacts and effectively manage CE&S

risks and opportunities. To increase

the understanding of CE&S-related

issues and build internal capacity,

we hold training sessions for key risk

and banking personnel involved in

CE&S riskmanagement processes.

Thetrainingscover different topics,

including climate and sustainable finance,

ESG standards and the United Nations

Sustainable Development Goals, health

and safety, green taxonomy, renewable

energy investments, energy efficiency, and

green and affordable housing.

We engage with customers and

provide information on relevant laws

and regulations and the Bank’s ESMS

during our E&S due diligence processes.

By ensuring comprehensive E&S risk

assessment and action plans, the Bank

encourages customers to fulfil their

E&S obligations andachieve good E&S

standards.

During the E&S risk assessment, we work with our customers to:

Raise their awareness on EHS and climate

issues and regulations

Encourage companies to adopt best EHS

practices and challenge them on EHS risks

Make recommendations and measure

customers’ progress

Establish a framework for clients to

achieve good CE&S standards

Meet companies to better understand

sectorial EHS and climate risks, impacts

and opportunities

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Together with local sustainability third-party consultants, we provided Environmental Management

Awareness Trainings to SMEs and Corporate Banking clients on local environmental regulations and

requirements, as well as on mechanisms for ensuring compliance with these requirements, on legal

sanctions, 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 246 representatives of local companies from various sectors. Trainings were

supported by the GGF.

Together with external consultants, we prepared an electronic training module covering the same

topics that were offered to the training participants (mentioned above). The training module

is available on Bank of Georgia’s educational platform, businesscourse.ge, free of charge. The

development of this online module was supported by GGF.

An information leaflet on Bank of Georgia’s approach to managing customers’ E&S risks is available

on the Bank’s website.

2022-2023 customer engagement highlights:

Our impact through funding activities

In partnership with the European Investment Bank (EIB), we are

financing investment projects that support SMEs and MidCaps

in Georgia. We direct at least 30% of the funding to green loans

with better terms, thus giving Georgian businesses access to

better opportunities.

we direct at least 30%

of the funding to green

loans with better terms

offering our clients more

access to consulting

services and encouraging

businesses to invest in

energy efficiency

addressing environmental

challenges by reducing

global energy

consumption and CO₂

emissions through

promoting renewable

energy and energy

efficiency

In cooperation with GGF, Southeast Europe S.A., SICAV-SIF,

we have an opportunity to stimulate green financing of both

retail and business sectors in Georgia. A portfolio of combined

sub-loans is required to achieve at least 20% primary energy

and/or CO

savings. The Bank is expected to expand financing

for energy-efficient construction and green mortgages, while

encouraging businesses to invest in energy efficiency. Within

the framework of technical assistance, we can offer our clients

access to consulting services to make their businesses greener

and more focused on long-term sustainability.

With financing from the Global Climate Partnership Fund S.A

(GCPF), SICAV-SIF, the Bank has an opportunity to address

environmental challenges by reducing global energy consumption

and CO

emissions. The Bank, together with GCPF, is actively

involved in the promotion and support of renewable energy and

energy efficiency projects in the economies, which is expressed

by the fact that at least 75% of the amount of each sub-loan

reported by Bank of Georgia is directed to energy efficiency

renewable energy measures.

financial support, in

the form of cashbacks,

to help local SMEs

strengthen their

competitiveness and

compliance with

European standards

As part of an active cooperation with the EBRD, we use the

Deep and Comprehensive Free Trade Area programme under

the EU4Business-EBRD credit line. Financial support, in the

form of a cashback, and technical assistance from international

advisors, allow us to help local MSMEs in strengthen their

competitiveness and compliance with European standards, and

especially to increase investments in green technologies and

promote green transformation.

Annual Report 2023 Bank of Georgia Group PLC

The Group’s wholly-owned subsidiary, an

investment bank G&T has been heavily

involved in advancing ESG objectives

through the local capital markets.

Having been the sole arranger of the first

sustainability-linked and social bonds

on the local market, as well as the co-

arranger of the first local green bonds,

G&T has pioneered ESG thematic bonds

in Georgia. The recent growth in local ESG

issuances has been incentivised by the

CMS Program in Georgia, supported by

the EU and the EBRD, and implemented

by G&T.

Supporting sustainability in the Georgian capital market

...with the help of a

technical assistance

component, we have

the ability to pay more

attention to business

sustainability and green

transformation...

...strengthening women-

owned businesses...

In partnership with the EBRD and Swedfund, we received a

Additional Tier 1 Capital Perpetual Subordinated Syndicated

Facility. Within the framework of the project, we should invest

an amount equal to the AT1 loan in green projects. This process

becomes even more effective with the grant received from the

EBRD, which provides technical assistance in the process of

identifying green loans. The Bank has the ability to pay more

attention to business sustainability and contribute to green

transformation.

In partnership with the European Fund for Southeast Europe

(EFSE), we have an opportunity to increase lending to MSMEs,

especially those engaged in sustainable activities. The funding

also aims to strengthen women-owned businesses to promote

gender equality and advance sustainable development.

Issuer Bond type Amount

Interest/

maturity

Subscribed

Second Party

Opinion issued by

Comment

Green US$ 80,000,000 7.00%;

5-year

EBRD, ADB,

IFC and FMO

First and largest

green bond locally

Sustainability-

linked

US$ 15,000,000 9.00%;

2-year

Mostly retail

subscribed

First ever

sustainability-

linked bond locally

Sustainability-

linked

US$ 5,000,000 8.50%;

2-year

Mostly retail

subscribed

First ever

sustainability-

linked bond locally

Sustainability-

linked

US$ 150,000,000 8.50%;

5-year

EBRD, ADB,

IFC and AIIB;

Pension Fund

and retail

investors;

Largest

sustainability-

linked bond locally

Social GEL 25,000,000 3m TIBR +

475 bps;

2-year

ADB

anchored

transaction

First social bond in

Georgia

Annual Report 2023 Bank of Georgia Group PLC

TCFD

100

Annual Report 2023 Bank of Georgia Group PLC

Managing our transition to

a climate resilient future

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

transition journey in 2021. We have considered our reporting obligations under

both the UK Financial Conduct Authority’s Listing Rules and Sections 414CA

and 414 CB of the UK Companies Act 2006, and confirm that we have made

disclosures consistent with the TCFD Recommendations and Recommended

disclosures. On the following pages we explain our current position, state our

expectations for the future, and identify where additional work is required for us

to disclose fully against all TCFD recommendations. This report focuses on the

Group’s main operating entity, JSC Bank of Georgia, which constituted 95.3% of

the Group’s total assets as at 31 December 2023.

Pillar Recommended disclosures Actions Page

GOVERNANCE

Disclose the organisation’s

governance around

climate-related risks and

opportunities

a) Describe the Board’s oversight of

climate-related risks and opportunities

Ensure governance structure is maintained 102-104

b) Describe management’s role in assessing

and managing climate-related risks and

opportunities

Executive KPIs to be aligned with green

loan portfolio target

114

STRATEGY

Disclose the actual and

potential impacts of

climate-related risks

and opportunities on the

organisation’s businesses,

strategy, and financial

planning where such

information is material

a) Describe the climate-related risks

and opportunities the organisation has

identified over the short, medium, and long

term

Annual review and further incorporation

into business strategy

105

b) Describe the impact of climate-

related risks and opportunities on the

organisation’s businesses, strategy, and

financial planning

Commitment to quantify the impacts on

our financial planning

105-107;

109

c) Describe the resilience of the

organisation’s strategy, taking into

consideration different climate-related

scenarios, including a 2°C or lower scenario

Develop robust scenario analyses to test

the resilience of the business

105-106

RISK MANAGEMENT

Disclose how the organisation

identifies, assesses, and

manages climate-related

risks

a) Describe the organisation’s processes

for identifying and assessing climate-

related risks

Review processes for identifying and

managing climate-related risks

111-113

b) Describe the organisation’s processes

for managing climate-related risks

Review processes for managing climate-

related risks

111-113

c) Describe how processes for identifying,

assessing, and managing climate-related

risks are integrated into the organisation’s

overall risk management

Review processes for integrating climate-

related risks

111

METRICS AND TARGETS

Disclose the metrics and

targets used to assess

and manage relevant

climate-related risks and

opportunities where such

information is material

a) Disclose the metrics used by the

organisation to assess climate-related risks

and opportunities in line with its strategy

and risk management process

Set, review and monitor targets 114

b) Disclose Scope 1, Scope 2, and, if

appropriate, Scope 3 greenhouse gas

(GHG) emissions, and the related risks

Disclose and monitor our GHG emissions 115-118

c) Describe the targets used by the

organisation to manage climate-related

risks and opportunities and performance

against targets

Set, review and monitor targets 114

101

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

In adherence to our responsibility outlined

in the Listing Rules of the UK’s Financial

Conduct Authority, we confirm that

our disclosures in this Annual Report

align with the recommendations and

recommended disclosures of the TCFD.

Our climate action and reporting are

in line with the four pillars defined by

the TCFD: Governance, Strategy, Risk

Management, and Metrics and Targets.

However, we note an exception: complete

disclosure of Scope 3 GHG emissions is

pending, as we are currently engaged

in a thorough analysis of our portfolio,

prioritising sectors with the highest

carbon intensity due to a lack of reliable

data and the absence of relevant

regulations to compel counterparties to

disclose emissions data in the country.

During 2023, we did not have any climate-

related targets. However, for 2024, green

loan portfolio targets will be included in

Executive Management KPIs and linked

to remuneration. Going forward, we may

consider developing additional sector-

specific targets.

Key messages

Climate-related taxonomy

Climate change

Long-term shifts in temperatures and weather patterns accelerated by the release

of GHGs into the atmosphere due to human activity such as burning of fossil fuels,

deforestation and agriculture

Climate risk

Risks that can impact financial institutions in different ways, from direct impacts on

the Bank’s buildings and operations to indirect impacts on client default rates and

portfolio riskiness.

Risk types:

Physical risk: Risks result from climate change. Acute physical risks arise from extreme

weather events such as floods, wildfires and droughts. Chronic physical risks arise

from gradual climate shifts such as rising sea levels, rising average temperatures and

loss of biodiversity.

Transition risk: Risks result from global efforts to prevent climate change. Risk drivers

can include climate-related policy or regulatory changes, such as the implementation

of a carbon tax or of country-wide climate targets, technology disruptions, such as

the development of a clean fuel source, and changes in consumer preferences.

Climate opportunity

Efforts to mitigate the impacts of climate change, adapt to changing conditions, and

transition towards a more sustainable and resilient future.

In 2015, 197 nations, including Georgia,

committed to the goals of the Paris

Agreement to limit global warming to 2°C

above preindustrial levels, while pursuing

the means to limit the increase to 1.5°C.

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. In 2017, Georgia’s GHG emissions

amounted to 17,766 Gg CO

e, 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:

Climate change in Georgia at a glance

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

In 2023, the Georgian Government

published the consulting document ‘Green

Book’ on Climate Change Law of Georgia.

The aim of the Green Book was to open

consultations and public discussions

on the implementation of the law on

climate change. Based on the public

consultations and analysis of the Green

Book, the ‘White Book’ was developed. A

public consultation on the White Book of

the Climate Change Law was held at the

end of 2023. The White Book includes the

main principles that should be reflected in

the Climate Change Law of Georgia.

As noted by the Prime Minister of Georgia

at COP28, Georgia has adopted the

long-term low emissions development

strategy, declaring ‘carbon neutrality’

as an important goal by 2050. Georgia

has also committed to presenting a new

Nationally Determined Contribution

(NDC) in 2025.

102

Annual Report 2023 Bank of Georgia Group PLC

Governance

Board of Directors

The Board 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:

• In 2022, the Board reviewed and approved the Bank’s Climate Action Strategy and CliRM framework (internal).

• In 2023, the Board approved the Environmental Policy. The new policy sets the general principles and the key management and

control objectives to be followed by the Group in terms of environmental protection with a focus on climate change, E&S risk

management and sustainable finance.

• The Board considers performance against the objectives defined in the Bank’s strategies.

The Board is responsible for reviewing the Group’s strategies, policies and budgets:

• In 2023, the Board reviewed Bank of Georgia Group PLC’s 2022 Annual Report and provided feedback and guidance for enhancing

the Bank’s sustainability management, including climate risk and opportunity management.

• In September 2023, the Board was also informed on the Bank’s progress on climate action during one of its quarterly Board

meetings.

• From 2024, the Bank’s new climate-related due diligence, which was launched in 2023, will generate more detailed information on

climate risks and opportunities in the portfolio, the results of which will be reviewed by the Board. The Board receives quarterly

risk reporting that provides updates on the green portfolio.

• In 2023, the Bank started preparing climate risk assessment reports for all large credit requests and presented to the Supervisory

Board for their review. These reports provide information on current regulatory requirements, including the country’s climate-

related strategy and action plan towards the specific sectors and details on clients’ climate transition plans.

The Board regularly examines opportunities and risks as well as the measures taken as a result:

• 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 ESG 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 Supervisory Board bears the overall responsibility for the Bank’s ESG strategy

Mandate/scope Membership Frequency

Bank of Georgia

Group PLC Board

Responsible for the long-term success of the Group as

a whole and the delivery of sustainable value to

shareholders. It oversees the Group’s operations

and ensures it is being managed in accordance with

its strategies and targets. Approval of the Company’s

climate-related financial disclosures.

Full Board At least quarterly.

Risk Committee

Primary responsibility for risk management at the

Board level, including overseeing climate change as an

emerging risk in the Bank’s loan portfolio.

At least three Independent Non-executive Directors.

CRO attends all the meetings. Other members

of Executive Management attend as and when

required. For more information about the Committee,

please see pages 224 to 228.

At least four times

a year.

Audit Committee

Assesses the quality of the Company’s 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.

At least three Independent Non-executive Directors.

Attended by Internal Audit and External Audit. May also

be attended by Executive Management members and

senior managers as and when required. For more

information about the Committee, please see pages 214

to 223.

At least four times

a year.

Remuneration

Committee

May set climate-related targets for the CEO and

considers how the Bank’s management performs

against climate-related objectives and targets.

At least three Independent Non-executive Directors.

For more information about the Committee, please

see pages 229 to 247.

At least twice a

year.

ESI Committee

Reviews progress in the implementation of the

Bank’s Climate Action Strategy and the CLiRM

framework and stipulates appropriate measures.

CEO, CRO, COO, CFO, CLO, Head of HR, CMO,

Head of Investor Relations and Head of Funding.

Quarterly

Governance and accountability structure

103

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Board of Directors and senior management

At the instruction of the Supervisory

Board, to anchor climate change and

other sustainability-related topics, a

management-level ESI Committee

was established and held for the first

time in 2022, comprising the Executive

Management Team and senior managers,

including the Bank’s CEO, CRO, Head of

Operations, CFO, CLO, Head of HR, CMO,

Head of Investor Relations, and Head of

Funding. The Committee is appointed by

the Board and shall consist of a minimum

of three members. The Committee

Chairman is the CEO.

The Committee is responsible for

managing the Bank’s CE&S impacts,

focusing on those arising from its lending

and operational activities. It holds overall

responsibility for designing, implementing

and enhancing CE&S strategies and

policies, and for setting and monitoring

targets. The Committee intends to

further embed E&S risk management

into the Bank’s daily operations. The

Committee Chairman reports to the

Board on its proceedings and decisions

within its duties and responsibilities. The

final responsibility for the decisions made

by the ESI Committee rests with the

Supervisory Board.

ESI Committee meets quarterly. In 2023,

one meeting was focused on the revised

Environmental Policy which sets general

principles with a focus on climate change,

E&S risk management and sustainable

finance, and with one meeting focusing

on climate-related matters. In 2023, the

ESI Committee played an active role in

promoting the strategy and monitoring

the integration of sustainability into the

Bank’s business processes and activities.

Its work has been supported by a cross-

functional Climate Working Group

established in 2021, which continued to

work through 2022-2023 to develop Bank

of Georgia’s Climate Action Strategy,

design new climate and green finance

related processes and methodologies,

integrate climate-related risks into overall

risk management process, and contribute

to preparing climate-related disclosures.

In 2023, key people from the Bank’s

Corporate Banking and SME Banking

segments and Risk, Legal, ECRM, IT,

Operational Support and Funding

departments participated in meetings

to support critical processes related

to climate-related opportunities and

risks and related to the integration of

sustainability into day-to-day activity.

They report to the CEO and the Board of

Directors through the ESI Committee.

To achieve the best performance of its

functions in this area, the Board believes

it is necessary to have suitable knowledge

and experience in sustainability matters.

To this end, the Board continues to

receive the training on matters related to

sustainability.

The Group’s sustainability governance

model allows the Board and its

Committees to have the necessary

information to make suitable decisions

and perform their supervisory and

control functions.

Our Senior Non-executive Director, Hanna Loikkanen, who serves as a member of the Audit Committee and the Nomination

Committee, has extensive experience in climate-related matters and has completed courses at the London Business School on

Sustainable Leadership and Corporate Responsibility and at GRI on Sustainability Reporting and GRI Standards. Currently, she

serves as the Chief Investment Officer of Finnfund, a Finnish state-owned development financier and impact investor that has

a focus on sectors that are critical to sustainable development, including renewable energy, sustainable forestry, sustainable

agriculture, financial institutions, and digital infrastructure and solutions, and where every investment decision is reviewed against a

detailed climate impact analysis and the board are given regular training on climate-related regulations. She has also been a board

member of Caucasus Nature Fund since 2020, a nature conservation trust that provides funding and management assistance to

protected areas in Armenia, Azerbaijan and Georgia. Additionally, Board members will receive climate-related training as part of

their ongoing development in 2024 and seek out further opportunities to build their skills and experience in this area.

Skills and competencies at the Board level

104

Annual Report 2023 Bank of Georgia Group PLC

Our climate-related governance

Board of Directors / Supervisory Board

Environmental and Social Impact Committee

Enterprise-wide risk Environmental & Climate Risk Lending, Credit Risk

ESG & Sustainability Investor Relations Operations Legal

Climate Working Group

Topic Responsibilities Overall

responsibility

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.

CRO

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 Corporate Banking department, calculates financed emissions.

• Supports other departments in conducting climate-related tasks.

• Prepares climate-related disclosures.

CRO

Corporate and

Investment Banking

and SME Banking

departments

• Collects data from clients for climate-related risk assessment and GHG calculation. CEO

Corporate and

Investment Banking

and SME Banking

departments Credit

Risk Management

departments

• 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).

CEO

Operational support

Department

• Collects relevant data and calculates GHG emissions from the Bank’s own operations, including

Scope 1, 2 and 3 (except financed emissions).

• Sets the Bank’s supply chain ESG policies and supplier ESG due diligence.

COO

Investor Relations

department

• Notifies the ECRM department of climate-related requirements and/or expectations of investors

and stakeholders that could lead to reputational risks for the Group.

CEO

ESG and

Sustainability

direction

• Is responsible for the Bank’s overall ESG strategy and sustainability agenda.

• Leads and supports development of green lending products.

• Is responsible for ESG policies.

CLO

Legal department

• Conducts research on new climate-related regulation that could lead to legal risks for the Group. CLO

HR department

• Ensures the relevant people have required skill sets to address sustainability and climate issues.

• Ensures employee awareness and engagement actions on climate and sustainability.

Head of HR

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Strategic Report Governance Financial Statements Additional Information

Strategy

Risks and opportunities for Bank of Georgia under different scenarios

Strengthening scenario analysis across multiple time horizons

Assessing the climate resilience of our business model and strategy

Climate-related risks may adversely impact

the Bank both directly and indirectly. Such

risks arise from the physical or transition

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.

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.

To assess climate-related risks and

opportunities in the short, medium and

long term, we use scenario analysis to

consider how risks and opportunities may

evolve under different situations and

impact our business model and strategic

planning. 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

on 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.

Our scenario analysis capabilities are

evolving. Over the past two years, the

modelling of climate risk impact over

the short-, medium- and long-term time

spans have been hamstrung across

multiple dimensions, including scenario

data and pathways, availability of client-

specific data, missing national legislation

on climate change. We are constantly

revising our data strategy to bridge data

gaps. This is a multi-year endeavour

involving periodically working with external

consultants, use of proxies and engaging

clients to gather more information.

From 2023, the ‘top-down’ analysis of

our business portfolio is accompanied

by ‘bottom-up’ client-level assessments

through an updated due diligence process.

In-depth data collection helps us better

understand and model impacts which is

prerequisite for the scenario analysis and

stress-testing.

In 2024, we plan to progressively

strengthen our scenario analysis

capabilities with support from EIB

within the framework of Greening

Financial Systems Technical Assistance

Programme. Improving the Bank’s CliRM

framework requires identifying potential

gaps, conducting materiality assessment

of both climate risks and opportunities

against selected climate change

scenarios, and climate risk stress testing

and impacts on the Bank’s financial

position, financial performance and cash

flows. Our intention is to focus on how

climate risk management can inform

portfolio management and support

opportunity identification with clients on

their transition and adaptation pathways.

Short

<2 years

Medium

2-5 years

Long

5-7 years

Very long

>7 years

Transition risks, 2023-2030. ‘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). The Georgian Government supports efforts to

reduce the country’s GHG emissions, especially by fostering renewable energy and low(er) carbon transportation.

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 introductory part of this section. Global

ambitions to protect the climate drastically rise after 2030. Due to external and internal pressure, the Government of

Georgia also introduces more ambitious climate policy. 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: The world continues ‘Business as usual’ and no new

climate protection measures are introduced besides what is in place today. 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.

Georgia’s NDC anchor the scenarios applied by the Bank for materiality analysis. Country NDCs are aligned with the Paris

Agreement which has a stated objective to keep global warming well below 2°C. As such, our scenario framework implicitly assumes

a 2°C scenario. We have, however, not modelled potential impacts across these scenarios on our financial position and capital

planning across multiple time horizons. We will continue to work on this in 2024.

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Annual Report 2023 Bank of Georgia Group PLC

Type of risk Definition Drivers

(physical and transition risks)

Risk score

<2030 >2030 >2040

NDC 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. Risks are more pronounced in certain

sectors and geographies. At the same time, we

expect positive credit enhancements from clients

already aligned to a low carbon-transition (see

our NBG Taxonomy-aligned portfolio) or resilient

to physical risks.

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 can manifest

through transition risk channels

through market value loss,

asset and liability management

impact due to societal, legal and

technological response to climate

change, particularly affecting

loans and equities. Physical

risk channels can also results

in market value loss and asset

liability management impact due

to weather impacts, particularly

affecting property and real

estate.

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. Both climate change and

ambitious climate policies can weaken growth

prospects and cause greater uncertainty over

economic development. However, effective

climate policy – involving, for example, public

investment in new technology – could also spur

growth. Both effects could have an influence on

markets, FX rates and interest rates. Climate

change is currently rather low on the Georgian

government’s agenda and does not have

significant effects on the economy yet. In the

middle-term perspective temporary economic

challenges caused by ambitious climate policy

could affect interest rates and currency value. In

the long-term perspective, Economic downturn

due to climate change could affect the Georgian

currency, especially compared to countries which

are less affected by climate change. In case of

fluctuation of the Georgian Lari or increased

volatility in local and global market interest rates

due to climate-related risks, the Bank’s financial

position may be adversely affected, proportional

to its open currency position and interest rate

gap. In addition, traditional methodologies of

market risk management and measurement,

such as Value at Risk, are limited to capture

climate-related shocks due to limited availability

of historical data.

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

We have identified Bank-wide climate-related risks over the short, medium, long and very long term

Notes on methodology: In 2023, 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?

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.

Theoretically, an important driver of the

likelihood of climate-related risks is the

likelihood of the scenario that is being

used. Yet, providers of climate-related

scenarios do not usually determine

the probability of individual scenarios

– they are simply considered plausible.

The likelihood of certain scenarios to

materialise of course changes over time,

as decisions are made and assumptions

become true or false. 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 seven years we

do not view significant movement in

the policy nor technology trends as risks

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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 SME portfolios

– making up 54.4% of the Bank’s (consolidated) total gross loan portfolio at 31 December 2023 –

has helped us understand hypothetical risks for different sectors.

nor do we view current assessment of

physical risk impacts as diverging from

business as usual which is why results are

presented together under ‘<2030’.

We will continue refining our approach

to Bank-wide climate-related risk

assessment going forward.

In BOG’s 2023 scenario analysis, an

‘orderly transition’ scenario was not used

given that there is currently not much

evidence of ‘immediate and smooth’

implementation of ambitious climate

policies, which is the key assumption of

such a scenario. For now, BOG could thus

assume that the three scenarios used so

far (Delayed Transition, NDCs, Current

Policies) are equally likely. This could be

reassessed when trends are becoming

clearer – at the latest in 2030, when many

NDCs end and when ambitious climate

policy should be initiated according to the

Delayed Transition scenario.

1 2 3 4 5

Our heat map for assessing inherent sector-based climate risks

<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 MEDIUM

<2030:

TRANSITION

RISK SMALL

Potential risks in the 2023

business portfolio

1.3%

0.2%

63.1%

57.0%

52.8%

45.9%

36.8%

42.8%

Low

Medium

High

Very high

Unknown

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Annual Report 2023 Bank of Georgia Group PLC

Notes on methodology: Figures are as at

31 December 2023. 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

Sector1, 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 2023 due to lack of data as

we started 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.

17.9%

1.9%

% exposure to carbon-related

assets in the Bank’s gross

loan portfolio

% exposure to fossil fuel and

coal-related assets in the

Bank’s gross loan portfolio

No exposure to fossil fuel and

coal exploration and mining

assets in the Bank’s gross

loan portfolio

Exposure to carbon-related sectors

As at 31 December 2023 this equals GEL 3,670 million (GEL 3,018 million in 2022). 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.

As at 31 December 2023 this equals GEL 395 million. (GEL 197 million in 2022). 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.

As at 31 December this equals to GEL 0. We have no exposure to prospection,

exploration and mining of fossil fuels or electric utilities using coal.

2022: 18.2%

2022: 1.2%

The uncertainties surrounding the timing

and impact of physical and transition

risks make it challenging for any tool

or methodology to accurately estimate

climate change risks, both currently and

in the future. Nevertheless, recognising

the urgency, we are actively developing

methodologies, collaborating with

clients, and integrating climate risk into

our core risk management practices

and assessments. We want to remain

adaptable, adjusting our approach as

the clarity on the impact of climate risk

increases and reliable data-gathering

tools and methodologies mature.

The data we started to gather in 2023

played a pivotal role in formulating client

specific climate-risk assessments for

both our existing and new clients. It also

contributed to enhancing our internal

climate capabilities and fortifying the

measurement and monitoring of portfolio

risks. These enhancements are expected

to be a gradual process. The scarcity of

data and the absence of historical data

related to transition or physical risks is

one of the main challenges for emerging

markets.

In 2024, we will advance our capabilities by enhancing the methodology on credit and

investments portfolio screening for climate-related transition and physical risks in line with IFRS

S2. Our ongoing engagement with high and very high risk SME Banking and Corporate Banking

clients remains a priority.

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Total outstanding green finance as at 31 December 2023 (GEL million)

Bank of Georgia works with its lenders

such as GGF, GCPF, EBRD, Swedfund,

and EIB to provide green finance. Through

our ‘Energy Credit’ initiative, we offer

companies credit to buy solar panels.

Other green finance is directed mostly

towards large-scale renewable energy

(hydropower plants) and green transport.

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.

Bank of Georgia also sees the opportunities in the transition

to a low-carbon economy

Energy efficiency

Bio/Eco

Climate smart agriculture

Waste

Green transport

Renewable energy

Green buildings

Total outstanding green portfolio is

3.7% (3.0% in 2022) of the Bank’s

gross loan portfolio. This includes

the portfolio identified based on the

NBG’s Green Taxonomy criteria.

Compliance with Sustainable Finance Taxonomy

462138

30 6 5

GEL 752

TOTAL

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 EU), making it difficult or impossible to

check compliance during a standard loan

appraisal process.

In 2023, external consultants supported

us in operationalising technical screening

criteria of the NBG Green Taxonomy

for ease of use by the bankers within

the framework of Green Loan Quick

Opportunities Type Description Term Action

Need for

real sector

to adapt

to climate

change

Transition

& physical

Climate change is expected to cause a wider spread

of hazards and with higher intensities. It is therefore

necessary to continue raising awareness of clients and

support capacity building to manage climate risks.

Medium,

Long Term

Bank of Georgia will continue to use tools such

as our CliRM, financed emission calculator, and

heatmaps to pinpoint clients most exposed to

inherent risks and advise on adaptive capacities.

Technological

change

Transition More ambitious climate policies and favourable policy

environment for the uptake of low carbon technologies

have been developing. Technologies are also developing

accordingly. Additional investments will be needed across

the real economy to remain competitive and align with

the global transition to low carbon economic growth.

This shall create new lending opportunities for BOG.

Short,

Medium,

Long Term

Bank of Georgia monitors the market status,

needs and opportunities to develop products

and connect IFI credit lines for technological

development and investment in low carbon

technologies.

Opportunities from combating climate change

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Annual Report 2023 Bank of Georgia Group PLC

We acknowledge the fact that the financial sector is a crucial player in supporting the decarbonisation of economies, therefore the Bank

is committed to taking an active role in supporting Georgia’s climate-related goals. The Bank’s Climate Action Strategy is outlined below.

How climate change affects our strategy

We plan to meet our outlined ambition through the following commitments:

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

Monitoring and managing climate and environmental risks in the client base: 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 began 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 associate 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.

Assessment programme funded by DEG

Impulse gGmbH (DEG). Additionally, the

NBG Taxonomy criteria were compared to

taxonomy criteria from DEG, EBRD and

GGF. As a result, we found that different

taxonomies were not fully aligned with

each other. In 2023 we strengthened our

capabilities across the Bank to identify,

capture and manage opportunities

regarding climate and green finance. We

will continue to address barriers in 2024

and beyond. In 2024, we plan to scrutinise

the Bank’s loan portfolio and screen market

opportunities for green investments. We

will review the Bank‘s loan portfolio and

lending practices, competitive landscape,

existing financing schemes and market

demand/investment opportunities for

green loans. We will define the key sector(s)

out of the ones identified in the materiality

assessment process and meaningful areas

of intervention with the greatest potential

to deploy dedicated green products. Based

on this assessment we will develop a Green

Finance Framework and Guidelines based

on national, EU and global standards.

External consultants will review and

suggest revisions to internal operations,

including credit policies and procedures

to integrate green lending considerations

into business processes. We will prioritise

sustainable finance products to clients in

high-carbon sectors to decarbonise their

business models.

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Bank of Georgia has developed a

complete training course and delivered ad

hoc trainings to ensure that its employees

can acquire the basic knowledge to be

able to address climate-related matters.

In 2023, we focused on educating

colleagues on climate and green finance.

A workshop on ESG impact scoping was

conducted for the Board of Directors and

senior management in July 2023. This

included discussions, among other topics,

on the actual and potential impacts

that the Bank has or could have on the

environment and climate. More than

200 colleagues across Corporate and

Investment Banking, SME Banking, Risk,

Legal and Trade Finance participated in

trainings on climate finance, the NBG’s

Green Taxonomy and climate change.

In 2024, we intend to embed climate

change and climate-related risk

management training material into the

Bank’s online learning platform.

Education and training

Number of

employees

Climate Finance and Green

Taxonomy

129

Green Finance Training

Green Trade Finance –

General concept

RENAC Academy Green Finance

Expert Course

UN Global Compact Climate

Ambition Accelerator

Training data

Risk management

Bank of Georgia is committed to addressing climate risks by integrating their identification,

evaluation and management within standard risk management procedures.

Beyond risk identification and assessment, Bank of Georgia has undertaken the following steps to manage climate-related risks

and opportunities:

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 will continue to engage with third-party consultants in 2024.

Integrated risk management

Risk identification and evaluation

In 2023, we conducted the following exercises:

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 ESI 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.

Development of a CliRM 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-related risks in our ERM framework:

In 2023, we continued to develop our climate-related due diligence process, to assess and address climate-related risks as part of our

loan appraisal and E&S monitoring. The process comprises four steps, as illustrated below. We started to implement steps one to

three in 2023, with step four to be introduced once we have gathered sufficient information on our existing client base and their risks

and when national regulation on climate change will be in place.

Integration of climate considerations in our due diligence process:

Based on the results of the 2022 Bank-wide climate risk analysis (see Annual Report 2022), 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). Overall, our assessment of the magnifying effects of climate

change and climate-related transformations on Bank-wide risks remains similar to 2022 (please see more in the Strategy section).

Qualitative analysis of the effect of climate change on enterprise-wide risks:

Capacity building is crucial to ensure climate-related risks and opportunities are considered in every credit decision. For climate

risk specifically, in 2023, we developed a mandatory course on climate change and climate-related risk management, which will be

undertaken by the relevant staff across Corporate and Investment Banking, SME Banking, Risk, Trade Finance and Legal starting in

the first quarter of 2024.

Building climate-related risk management capacities

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Annual Report 2023 Bank of Georgia Group PLC

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.

Bottom-up climate risk assessment at client level

The first step of this process is to identify

expected transition risks based on the

sector in which a clients generate their

income, and expected physical risks

based on the sector and location of

income generation. While we draw on the

heat map to assess risks per sector, the

analysis of risks for different locations

is 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.

In 2023, we conducted an exposure

analysis of our portfolio against various

hazards across the country. Hazards we

have assessed include urban flood, river

flood, extreme heat, and wildfires. Our

team of experts qualitatively assessed

the level of risk from these hazards using

various sources including Thinkhazard.org.

For example, areas designated as high

river flood are ‘determined as potentially

damaging and life-threatening river

floods expected to occur at least once in

the next 10 years.’ The assessment has led

to low, medium, and high risk categories

following Thinkhazard methodologies.

Our portfolio demonstrated minimal exposure (1.6% of total loans as at 31 December 2023) to

areas designated as ‘high’ physical risk.

‘High’ physical risk hazards are found

in Batumi and Tbilisi mostly under real

estate and hotel activities. In Batumi

there is a ‘high’ risk of flooding according

to our hazard map. However, we deem

these exposures to have low residual risk

as they conform to national regulations

and laws on construction. We have

also begun incorporating historical

flood analysis in our due diligence. In

Tbilisi the ‘high’ risk hazard is extreme

temperatures. Hotels and real estate

activities are deemed to have low residual

risk given the compliance with national

laws and regulations on construction and

connectivity to electricity grid.

We are strengthening our assessment

of client adaptive capacities in material

sectors in 2024.

Approximately 30% of our portfolio is

exposed to ‘medium’ risk category. We are

actively assessing our clients’ vulnerability

to this medium risk category which is

dominated by hotels and real estate

activities as well as the agriculture sector.

Unsurprisingly, most exposure to various

hazards across risks are found in the

Tbilisi municipality – where most of our

financing activity is concentrated. Tbilisi

alone is 9.6% of our outstanding portfolio

under the medium risk category. Tbilisi

municipality is not exposed to many

hazards we deem ‘high’.

From 2023, the ‘top-down’ analysis of our business portfolio is accompanied by ‘bottom-up’ client-level assessments through an

updated due diligence process.

Based on the 2022 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 640 activities conducted by our clients and aggregated risks for 25 sectors. The overall results

are very similar to those of 2022 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 (please see more in the Strategy section).

Qualitative analysis of climate-related risks in our portfolio:

Bottom-up climate risk assessment at client level:

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Strategic Report Governance Financial Statements Additional Information

We continue to revise our transition risk methodology. We have similarly carried

out an exposure analysis across sub-sectors and by very high, high, medium and

low emission profile categories. High emission-intensive activities in our portfolio

are dominated by buildings – (leased real estate and hotels). Very high activities

are dominated by few counterparties engaged in natural gas trade as well as

dairy farming. We have determined that despite the high emission profiles of

these clients we do not see material risk over our time horizons.

The second step of the process is

awareness raising. The booklet on climate

change and low-carbon, climate-resilient

development is sent to targeted business

clients. Moreover, the Environmental

and Social Covenant was updated. The

Covenant must be signed by all business

clients. They are also required to read the

climate booklet.

The fourth step of the process ensures in

depth engagement of ECRM department

to support clients in addressing risks. This

step will become more relevant in the

years to come, as the level of transition

and physical risks in Georgia rises. It will

thus be developed in more detail once

climate regulatory framework in Georgia

develops.

The third step of our climate-related due

diligence consists 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. We started this

in-depth data collection in 2023 which

helps us assess clients’ awareness of

potential risks and preparedness for

addressing them. Analysis is done once

a year, per identified client, as part of

our regular E&S 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 the fourth step.

For STEP one we updated our credit

information software to enable

information collection on clients’ business

activities and locations, and evaluating

expected climate risk.

For STEP two a booklet on climate

change and low-carbon, climate-resilient

development is sent to high and very

high risk business clients. Moreover,

the updated Environmental and Social

Covenant with information on our climate

risk assessment process is signed by all

business clients and requires that they

read the climate booklet.

STEP three of our climate-related due

diligence is implemented alongside

our E&S 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.

Our climate-related due diligence is integrated as much as possible into standard procedures.

We made the following changes in 2023:

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, in 2023, we piloted

a methodology for assessing financed

emissions from larger parts of our

portfolio using a methodology developed

by IFIs. Please see the ‘Metrics and

targets’ section for further detail on the

results of the 2023 assessment and on

the methodologies for borrower-specific

and portfolio-level GHG assessment.

Measuring financed emissions

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Annual Report 2023 Bank of Georgia Group PLC

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

are discussing low-carbon development

and Paris Agreement alignment with

clients affected by transition risk as

part of our updated climate-related due

diligence process (step three and four, see

previous page). We will assess the results

to determine an approach to measuring

portfolio alignment in a standardised

manner.

Estimating alignment of selected clients with the goals of the Paris Agreement

Metrics and targets

Metric/KPI Rationale Target

GHG emissions: Absolute Scope 1, 2

and 3; emissions intensity

Measuring our GHG emissions helps us

understand our direct and indirect impact

on the climate.

In 2024 we aim to expand our coverage

of financed emissions calculation

across 40-45% of the Corporate and

Investment Banking portfolio. In 2024

we will analyse potential development

of sector-based targets per Science

Based Targets initiative methodology.

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. In 2023 we

have categorised our existing portfolio

across inherent climate related risks (see

table on page 107).

In 2024 we will be examining potential

upper limits to sectors considered

vulnerable to transition risks and

physical risks.

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.

We are targeting green assets and

developing decarbonisation targets in

2024. These will have implications on the

carbon-related assets to total assets

ratio.

Amount of lending aligned with

climate-related opportunities, relative

to total assets

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 monitor and report

the share of financing in line with Georgia’s

new Sustainable Finance Taxonomies and

explore the opportunities to expand such

climate-related lending. We have adhered

to strict criteria to categorise our green

allocations per various taxonomies.

We have set the initial climate-related

opportunity KPI to expand our green

portfolio and reach a minimum GEL

875 million outstanding in 2024 with

aspiration to reach GEL 1 billion.

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.

In 2023, we completed our baseline

analysis that will underpin revision to

targets in 2024 and beyond. These

include total financed emissions,

sector emission intensities, screening

of existing and new clients for

opportunities, green alignment ratios,

and decarbonisation targets.

Bank of Georgia uses metrics recommended by the TCFD to measure our

impact on climate, and the effects of climate change on our business model

and operations.

For all the metrics presented, there are challenges with availability and reliability

of data. As methodologies and learnings emerge, we intend to progressively

refine our approaches and measurements, covering a bigger portion of our client

and portfolio base.

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Strategic Report Governance Financial Statements Additional Information

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 second time, our 2023

reporting also includes emissions for

three Bank subsidiaries (BNB Bank,

Georgian Leasing Company, Bank of

Georgia Representative Office UK Ltd)

and two Group subsidiaries (G&T, Digital

Area). Two of BOGG PLC’s subsidiaries

as at 31 December 2023 are UK-based:

(1) BGEO Group Limited and (2) Bank

of Georgia Representative Office UK

Limited. According to their financial

statements, both BGEO Group Limited

and Bank of Georgia Representative

Office UK Limited remain below the

thresholds stipulated in para 20B Part

7A Sch 7 LMCGAR 2008 (considering

employees/turnover/balance sheet total),

meaning that neither of them would be

required themselves to report (on SECR

emissions) under LMCGAR 2008. We

use a small shared office space in the UK

(total annual electricity consumption is

less than 5 MWh, at 3.3 MWh for 2023

and 3.5 MWh for 2022).

Our emissions data follows the guidelines

of the World Resources Institute/

World Business Council for Sustainable

Development 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.

GHG emissions: our operational footprint

Scope 1

• 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.

Scope 2

• Purchased electricity at owned and controlled sites.

Scope 3

• Fuel-and energy-related activities; waste generated in operations; and purchased goods.

• Air business travel; hotel accommodation; and land transportation by rental cars.

• Employee commuting (for the second time in 2023).

Bank of Georgia GHG emissions 2021-2023 2021 2022 2023

Category Emission source category tCO

e tCO

GHG Protocol standards: Corporate Scope 1 and 2,

Value Chain Scope 3

Scope 1

Direct emissions from owned or

controlled stationary sources

Fuels 907.6 957.3 1,026.2

Direct emissions from owned or

controlled mobile sources

Passenger vehicles 1,089.5 1,110.1 1,104.5

Scope 2

Location-based emissions from the

generation of purchased electricity,

heat, steam or cooling

Electricity 1,661.5 1,864.2 2,094.8

Scope 3

Fuel- and energy-related activities

All other fuel- and energy-related

activities

545.6 593.3 603.7

Transmission and distribution losses 350.7 347.1 414.5

Waste generated in operations

Waste water 42.0 18.4 29.2

Waste 0.1 0.1 0.5

Purchased goods

Water supplied 20.4 10.1 16.0

Material use 224.8 281.1 395.5

Business travel

All transportation by air 19.9 80.9 36.7

Hotel accommodation 2.1 6.8 13.6

Land transportation by outsourced

vehicles

615.0 565.2 566.1

Employees commuting – 3,822.3 4,550.1

Scope 1 1,997.1 2,067.4 2,130.7

Scope 2 1,661.5 1,864.2 2,094.8

Scope 1 and 2 3,658.6 3,931.6 4,225.5

Scope 3 1,820.5 5,828.4 6,625.9

Total emissions 5,479.1 9,760.1 10,851.5

tCO

e/employee 0.9 1.5 1.5

BOG employees (year-end) 6,207 6,597 7,435

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Annual Report 2023 Bank of Georgia Group PLC

Notes on methodology: We used the most

recent Georgia electricity conversion

factor provided by JRC. 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 Tool,

version 2.

Further conversion factors were taken

from the 2023 UK Government GHG

reporting: conversion factors – 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 2021 and

2022 were not remodelled using the

updated emission factors.

Compared to 2021 and previous years, our

gas consumption significantly decreased

in 2022/23 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.

In 2023, we assessed Scope 3 emissions

from ‘Employee commuting’ for the

second time. This was based on a survey

of employees’ mode of transportation,

distance travelled and – where known

fuel used. 22% 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, the results

are 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 2021

due to a lack of data and irregularities

in commuting patterns throughout the

COVID-19 pandemic.

Bank of Georgia and Group subsidiaries’ GHG emissions 2023 Bank subsidiaries Group subsidiaries

2022 2023 2022 2023

Category Emission source category tCO

e tCO

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 39.0 79.8 141.9

Scope 2

Location-based emissions from

the generation of purchased

electricity, heat, steam or cooling

Electricity 235.0 153.3 18.5 21.2

District heat 118.5 60.5 – –

Scope 3

Fuel- and energy-related

activities

All other fuel- and energy-related

activities

24.6 10.0 19.8 34.8

Transmission and distribution losses 10.2 6.9 3.4 4.0

Waste generated in operations Waste water 1.1 0.2 1.0 1.0

Purchased goods Water supplied 0.6 0.1 0.5 0.5

Scope 1 95.5 39.0 79.8 141.9

Scope 2 353.4 213.8 18.5 21.2

Scope 1 and 2 448.9 252.8 98.3 163.1

Scope 3 36.6 17.2 24.7 40.2

Total emissions 485.5 270.0 123.0 203.3

tCO

e/employee 0.6 0.3 0.6 0.7

Total employees 833 830 210 295

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 2023 UK

Government GHG reporting: conversion

factors.

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Strategic Report Governance Financial Statements Additional Information

Scope 3: Financed emissions

In 2023, Bank of Georgia analysed the GHG emissions of 35.7% of corporate portfolio across eight sectors:

Outstanding

loan amount

at 31 December

2022 (GEL) Scope 1 and 2 (tCO

Scope 3

(tCO

Emissions

intensity (tCO

GEL million)

Cement, steel and other energy-

intensive manufacturing

849,631,652

Emissions from use of

electricity and fuels; emissions from

chemical processes not calculated

153,301 / 180

Hotels (running) 79,897,946 Emissions from use of electricity and fuels 588 / 7

Real estate management 252,431,198

Emissions from tenants’ building use,

calculated based on measured energy

consumption

1,286 / 5

Healthcare

84,890,734 Emissions from use of electricity and fuels 1,371 / 16

Mining (gold, copper)

98,316,423 Emissions from use of electricity and fuels 7,024 / 71

Transport 84,894,481 Emissions from use of fuels and electricity 18,618 / 219

Electricity generation

(from gas)

57,048,703

Emissions from electricity generation,

calculated based on gas consumed

78,199 / 1,371

Oil and gas (distribution, retail

sale)

263,353,300 Not calculated / 998,851 3,793

Total 1,770,464,438 260,387 998,851 711

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.

This is the first year that we are

computing financed emissions for our oil

and gas exposure of which are entirely

comprised of downstream operators

(distributors of oil and gas products). We

have included in our calculation Scope 3

emissions from this exposure – eventual

combustion of oil and gas products by

their customers. The inclusion of these

figures significantly raises our portfolio

carbon footprint (i.e. financed emissions).

Methodology: The clients covered

by the assessment are considered

carbon-related through their Scope

1, 2 or 3 emissions, and account for

35.7% of our corporate portfolio (as at

31 December 2022). The analysis was

done for emissions generated in 2022,

given the required data to calculate

2023 emissions was not available at

the time of calculation. Particularly,

local companies are not obligated by

any national regulation to disclose

information regarding their annual energy

consumption, GHG emissions or related

data. As the World Bank Group’s report

on Greening Firms in Georgia explores,

nearly half the firms they surveyed

through the World Bank Enterprise

Surveys reported monitoring energy

consumption.

To calculate financed emissions, we

applied the ‘Global GHG Accounting and

Reporting Standard for the Financial

Industry’ developed by the PCAF.

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 three.

Description of the data quality score

– Primary physical activity data for

the company’s energy consumption by

energy source (e.g., megawatt-hours of

electricity) plus any process emissions.

Emission factors specific to that primary

data.

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.

Challenges and outlook: We experience

difficulties in obtaining sufficiently

reliable data. 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 2024 we aim to assess emissions for

approximately 40-45% of our Corporate

Banking portfolio using the PCAF

Standard.

Given the large number of clients in our

SME and Retail portfolios, we cannot

apply the PCAF Standard to these

segments.

/ = not calculated yet.

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Annual Report 2023 Bank of Georgia Group PLC

* BOG’s operational emissions were 9,760 tonnes of CO

e in 2022 (including commuting). That is 2.9% of client Scope 1 and 2 emissions, or 1% of client Scope 1, 2 and 3 emissions.

Results of JIM: 2022 financed emissions (tCO

Non-CO

Scope 1 and 2

Scope 3 Total Operational

total*

TOTAL

244,900

475,400

720,300

988,000

91,838

165,800

257,600

10,000

During 2023, Bank of Georgia

implemented the Joint Impact Model

(JIM) as a new tool for modelling Bank

of Georgia’s financed GHG emissions in

the SME and CB portfolios. We piloted

the JIM 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. The JIM calculated the

Bank of Georgia funded GHG emissions

at about 1 million tCO

e for the 2022

financial year.

We are disclosing climate-related actions for the third time in 2023. 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.

The way forward

Pillar Plans for 2024

Governance

• 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. New e-learning materials will be developed.

• KPIs will include green lending targets.

Strategy

• We will continue to conduct climate-related risk and opportunity analysis and disclose relevant results.

• We will conduct a materiality assessment of climate risks on the Bank’s portfolio against selected climate change scenarios.

• We will strengthen our scenario analysis capabilities and develop our infrastructure and capabilities to incorporate climate risk into

data and analysis.

• We will develop climate risk stress testing framework.

• We will assess the financial impacts of climate-related risks on the Bank’s financial position, financial performance, and cash-

flows over short, medium and long term.

• We will continue implementing our Climate Action Strategy.

Risk

management

• To enhance credit risk assessment and manage risks, we will continue to collect data from business clients in a standardised

manner through an updated due diligence process. Moreover, we will continue to engage with our (very) high risk clients to

understand their transition and physical risks, as well as their plans to prepare for climate change.

• 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 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

• The focus for 2024 will be to increase the coverage of existing metrics.

• We will assess emissions generated by 40-45% of our Corporate Banking portfolio (up from 35.7 % in Annual Report 2023).

• We will enhance the measurement approach, inputs and assumptions used for Scope 1, 2 and 3 calculation.

• As we start to better understand emissions from our portfolio and enhance the screening of our portfolio against the NBG’s Green

Taxonomy, we will take into consideration whether – and how – to specify additional climate-related targets.

Bank of Georgia’s portfolio scope 1 and 2 GHG emissions intensity is 98 tonnes per million US dollars under management

(tCO

e/$mAUM). For context, the mean emissions intensity for five similar-sized commercial banks using the same PCAF-aligned

Joint Impact Model methodology is 156 tCO

e/$mAUM. This means Bank of Georgia’s portfolio is relatively less carbon intensive

than some other banks in emerging economies.

EMPOWERING

EMPLOYEES

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Annual Report 2023 Bank of Georgia Group PLC

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Annual Report 2023 Bank of Georgia Group PLC

Empowering employees

The resilience and success of the Group depends on the continued commitment

of our talented people. We strive to be the employer of choice, providing equal

opportunities for development and ensuring a positive employee experience.

Our employees at a glance

Female

29%

Female

27%

Male

71%

Male

73%

Executive management by gender

JSC Bank of Georgia

Executive management by gender

Group

TOTAL

Female

40%

Female

51%

Male

60%

Male

49%

Senior Management by gender

JSC Bank of Georgia

Senior Management by gender

Group

TOTAL

104

TOTAL

191

Female

70%

Male

30%

Female

69%

Male

31%

All employees by gender*

JSC Bank of Georgia

All employees by gender

Group

TOTAL

7,435

TOTAL

9,398

* 99.9% of our employees are with permanent contracts.

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Strategic Report Governance Financial Statements Additional Information

We deliver on our strategic objectives and

can make a difference in our customers’

lives through the actions of our people

and their commitment to shared success.

We continue to focus on empowering

our employees by fostering a high-

trust, diverse environment and a strong

feedback culture, equipping employees

with the skills and capabilities for the

future.

Bank of Georgia’s HCM function plays

a critical role in helping us onboard and

retain the right talent, while maintaining

employee engagement and wellbeing.

HCM combines HR expertise with

business knowledge to design and

implement policies and practices in line

with the Group’s purpose, values, business

principles and strategic objectives. HCM

reports to the Head of Human Capital

Management, 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:

• diversity overview provided to the

Nomination Committee;

• remuneration and related policies

overview provided to the Remuneration

Committee;

• overview of employee grievances

related to ethical issues (if any)

provided to Joint Audit and Risk

Committee; and

• key people risk metrics reported

quarterly to the Risk Committee.

Our human capital strategy is focused on

the following key areas:

Tbilisi

71%

Regions

29%

All employees by location*

JSC Bank of Georgia

All employees by age

JSC Bank of Georgia

All employees by age

Group

TOTAL

7,435

* Five employees worked outside of Georgia.

50%

35%

3% 3%

TOTAL

7,435

21-30 years old

31-40 years old

41-50 years old

>50 years old

<21 years old

21-30 years old

31-40 years old

41-50 years old

>50 years old

<21 years old

TOTAL

9,398

10%

48%

35%

4% 3%

Promoting diversity

and equal

opportunities

Attracting,

developing and

retaining top talent

Providing positive

employee experiences

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Annual Report 2023 Bank of Georgia Group PLC

Promoting diversity and equal opportunities

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 but not limited to:

Our Employee Corporate Handbook,

which defines employee behaviour

standards and procedures. The Handbook

is available to all employees in Georgian

and English, via our intranet.

The Code of Conduct and Ethics – an

integral part of the Handbook which acts

as a employment agreement between

the Bank and its employees. 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 continue to work on

strengthening internal communications to

clearly explain our policies and procedures

through online, interactive, self-paced

courses.

We maintain an open-door policy where

our people are encouraged to share

their questions, concerns, suggestions or

complaints with their managers, HCM, or

anonymously if they wish. We prohibit any

form of retaliation against an employee

raising a concern or participating in an

investigation.

Whistleblowing and grievance mechanisms

Grievances can be submitted via email,

anonymous hotline call or electronic form.

We are currently reviewing and updating

the Grievance Policy based on global

best practices for handling employee

complaints. In 2023, we had eight cases

reported under the Grievance Policy.

Two of these grievances were provided

anonymously, via WhistleB, and one of

them represented collective concern of

employees. All cases were investigated

and resolved.

GRIEVANCE

WhistleB is an external, independent

whistleblowing reporting channel and

case management tool that allows

employees to report any concern

anonymously or confidentially.

WHISTLEBLOWING

Anti-discrimination and

anti-harassment

We are committed to ensuring inclusion and equal opportunities in our organisation.

We do not tolerate discrimination on any grounds, including gender, marital status,

sexual orientation, race, ethnic origin, nationality, age, disability, political or religious

beliefs. Universal human rights are incorporated into our Handbook, along with our

Anti-discrimination and Anti-harassment, Diversity and Inclusion, and Human Rights

Policies. Bank of Georgia’s Anti-nepotism Policy also underpins fair and transparent

decision making in all employee-related matters.

Diversity, equity and inclusion (DEI)

DEI is about the respect for, and appreciation of, differences in personalities,

professional and educational backgrounds, and identity. We 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. In 2023, we worked on

improving employee data related to diversity, including ethnic and religious groups,

mother tongue and the knowledge of state language. Such analysis will allow us to

offer benefits better tailored to employee needs and more supportive of work-life

balance, contributing to a more family-friendly workplace. Given that ethnic origin

and religious beliefs are special categories of data, according to the Law of Georgia

on Personal Data Protection, we consulted with Personal Data Protection Service, a

state authority of Georgia. At the time of writing, we received the approval of such

data collection from the regulator together with recommendations regarding its

management in compliance with state regulations. We will start collecting data

in 2024.

Gender equality

Since 2022, Bank of Georgia has been a signatory of the UN Women’s Empowerment

Principles to further strengthen its initiatives aimed at supporting women in the

workforce. The Bank has also retained 2XChallenge status since 2020, awarded in

recognition of its efforts to address barriers to the employment of women.

We provide an annual update on diversity matters to the Nomination and

Remuneration Committees.

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We aim 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.

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 provide a wide

range of development opportunities to

our employees, including development

reviews, personal coaching, and leadership

programmes.

Our engagement strategy extends beyond

our immediate organisational boundaries

to include:

In developing and implementing our talent strategy, we focus on:

Attracting, developing and retaining top talent

Actively engaging with Georgian talents

abroad.

3. Ensuring alignment of our talent

strategy with business objectives by

analysing and anticipating business

needs and gaps in required skills and

competencies.

Active participation in job festivals

and fairs.

1. Attracting, developing and retaining

highly qualified professionals with a

strong work ethic.

Networking with professionals at

events organised by various educational

and professional companies, including

ourselves.

2. Putting the right people in the right

roles.

49% of our employees are 30 or under years old, and our approach has evolved

alongside changing attitudes towards work among younger generations.

When recruiting, we highlight that hybrid work is the new normal, that we are

committed to ensuring DEI, and that work-life balance matters.

Attracting talents

Bank of Georgia is an equal-opportunity

workplace where people from different

backgrounds and experiences come

together, support each other, and

create value for our stakeholders. The

Bank’s Recruitment Policy and practices,

including panel interviews, relevant

control procedures and an online

applicant tracking system, ensures 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, to make sure no

candidate or employee is discriminated

against on any grounds. We continuously

develop our acquisition channels, tailoring

them to target segments of diverse

talent while tracking and systematically

improving the candidate experience.

We enrich our employee base in different ways:

One priority is to develop talent internally, and current employees have priority when filling vacancies, especially for

managerial positions.

Our Talent Acquisition team actively monitors the labour market and regularly engages with potential candidates in

Georgia and abroad.

Collaborative initiatives with educational institutions and industry partners. In 2023, Kutaisi International University and

the International School of Economics at Tbilisi State University joined our network of partners.

The use of alumni networks not only enhances our outreach and engagement initiatives but also establishes a valuable

avenue for connecting with experienced professionals, helping us access a pool of talent and expertise.

We have implemented an internal and external IT referral programme, actively fostering the identification and

recruitment of highly qualified professionals. This multifaceted strategy cultivates a culture of ongoing learning,

collaboration and inclusivity.

We continue to strengthen our Talent Acquisition team members with the skills required to successfully achieve our

recruitment goals. In 2023, we advanced our tech recruiters’ team and ensured their presence at top tech events in

Georgia.

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Female

69%

Male

31%

Female

65%

Male

35%

New hires by gender

JSC Bank of Georgia

New hires by gender

Group

TOTAL

2,213

TOTAL

2,945

Female

57%

Male

43%

Female

59%

Male

41%

Employees promoted

to managerial positions by gender

Group

Employees promoted to

managerial positions by gender

JSC Bank of Georgia

TOTAL

154

TOTAL

130

Female

70%

Male

30%

Promotions by gender

JSC Bank of Georgia

TOTAL

1,498

New hires by age

JSC Bank of Georgia

15%

17%

64%

3% 1%

TOTAL

2,213

21-30 years old

31-40 years old

41-50 years old

>50 years old

<21 years old

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44.1%

87.0% 19.6%

58.0%

40.2%

84.3% 20.4%

60.2%

29.9%

85.2%

18.5%

54.2%

Internal mobility rate

Employee retention rate Employee turnover rate

Vacancies filled internally

We closely monitor the turnover and retention indicators, validating the impact of various human capital and employee experience

initiatives, and the respective trends confirm the positive dynamics: increase in retention and reduction in turnover versus 2022.

2023

2023 2023

2023

2022

2022 2022

2022

2021

2021 2021

2021

Leaderator: nurturing young talent for future success

BOG Boot Camp: empowering young tech enthusiasts

Summer Internship Programme: bridging academia and industry

Since 2017, Bank of Georgia’s Leaderator

internship programme has been a dynamic

career accelerator for young talent. We

recruit promising undergraduates and

engage them in professional training,

job rotations across departments, and

hands-on experience in ongoing projects.

Leaderator participants are mentored by

Bank of Georgia’s professionals.

Every year, we tailor the programme to

organisational needs and add new tracks

or update existing ones. We have seen a

consistent increase in the representation

of female participants in technology-

related tracks over the past three years.

In 2023, we expanded our offerings to

young talent in the tech industry and

launched the BOG Boot Camp in IT

software development. This nine-month

programme welcomed 12 individuals,

providing intensive training, mentorship

and hands-on experience in database

development.

In 2023, our dedication to offering

practical experience to Georgian students

studying abroad continued through the

Summer Internship Programme. This

initiative connects us with talented

individuals studying outside of Georgia.

In 2023, we attracted 59 potential

candidates (19 in 2022) and selected 12

summer interns (8 in 2022) from leading

universities in different countries.

Total participants

since launch

Hired after programme

completion

376 79%

We regularly monitor the effectiveness of our programmes for young talents. As of 4Q23, Bank of

Georgia was the top-of-mind employer among our target student segments in Georgia, according to a

targeted survey by a third-party research company.

Figures given for JSC Bank of Georgia standalone

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Annual Report 2023 Bank of Georgia Group PLC

Some of the training programmes

are required for employees in specific

positions. For example, based on

feedback from customer satisfaction

surveys, one of our key objectives in

2023 was to improve the qualifications

of our customer-facing employees.

We introduced an annual mandatory

knowledge testing for front-office

positions. Testing results, together with

performance results, serve as criteria

for career advancement and promotion.

Testing results also provide insights into

the topics that should be prioritised for

upcoming training sessions.

A Risks and Compliance programme is

also required for employees in front-

and back-office positions. We aim to

have a strong risk culture, ensuring our

employees understand some of the

principal risks our organisation faces and

their role in managing and mitigating

those risks. The programme includes

mandatory training for all new hires and

mandatory periodic (usually annual)

retraining for existing employees. Training

is online and self-paced, to 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.

When we onboard employees, we shift

the focus to their development. Talent

development is an ongoing process that is

critical no matter the tenure. We aspire to

have a learning culture where employees

can access opportunities for lifelong

learning and personal development.

Our learning and development ecosystem

is divided into the following areas:

Developing talent

Professional programmes Management programmes Executive programmes

• Onboarding

• Risks and compliance programme

• Banking products and services

• Software-related programmes

• Communication skills programmes

• High-potential Employee (HiPos)

programme

• Tailored training sessions and

educational content provided

• Management skills programme

• Feedback skills programme

• Leadership development: Executive

coaching programme (individual and

team coaching)

• Financing masters’ programmes and

other professional certifications

• Leadership development: Executive

coaching programme (individual and

team coaching, mentoring sessions)

• Individual business coaching

programme

• Financing masters’ programmes and

other professional certifications

91%

of our employees completed

Risks and Compliance

programme

(86% in 2022)

We strive to achieve 100% completion rate for required trainings. The

completion rate of required trainings was on the agenda of the Joint Audit

and Risk Committee during 2023 as the Board noted that the Bank needed

to improve in this area. In December 2023, the HCM department presented a

report to the Joint Audit and Risk Committee on this issue. The report noted

that HCM was implementing several initiatives to increase the effectiveness

of this training programme, including increasing monitoring and introducing

measures to target employees who do not complete the courses, improving

the user experience of the courses and content, and reviewing the courses to

change the frequency of required retaking where necessary.

Besides required training, we have a comprehensive catalogue of self-paced courses focused on hard and soft skills. On top

of this catalogue, Bank of Georgia runs different leadership and professional development programmes, some of which are

described below.

Leadership training

for new managers:

We support newly appointed managers by offering leadership training, individual coaching, and

personalised training aligned with their personal and professional development needs. In 2023, we

extended participation in this programme to 70 individuals – 73% of them were internally promoted

talents and 66% were women.

Individual coaching for

managers:

Throughout 2023, 242 employees actively participated in individual coaching sessions. 62% were women.

To enhance the coaching experience for senior leadership, we also partnered with a business coaching

platform. Following a successful six-month pilot, we continued this collaborative effort, with plans to

extend coaching opportunities to 32 senior leaders through 2023/24.

In 2023, we expanded the coaching initiative to encompass other targeted groups, including

participants in the HiPos programme and Product Owners.

HiPos programme:

Building on the successful tracking of high-potential and high-performing individuals since 2021, Bank

of Georgia introduced its second programme for HiPos in 2023. This one-year programme involved 22

senior-level individual contributors from 15 departments in the back office, focusing on comprehensive

development activities to support personal and professional growth. 55% of the participants

were women, with an average tenure of 3.2 years with the Bank. Importantly, following the 2021

programme, 83% of the participants experienced position changes, with 46% continuing their career in

managerial or team leader positions at the Bank.

In 2023, we also introduced the programme to front-line senior employees, and aim to select 17

individuals who will undergo mini-MBA certification from a top-tier university in Georgia.

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36 hours

25 hours

53 hours

38 hours

41 hours

23 hours

Per employee

28 hours in 2022

Per male employee

21 hours in 2022

Per new hire

43 hours in 2022

Per senior manager

28 hours in 2022

Per female employee

32 hours in 2022

Per CEO and Deputy CEO

20 hours in 2022

Training data for 2023

Average hours per employee

Training data for 2023 (Group)

Average hours per employee

Total hours of training per employee 30

Total hours of training per new hire 42

Total hours of training per female employee 34

Total hours of training per male employee 21

Total hours of training per senior manager 35

Total hours of training per CEO and Deputy CEO 13

Feedback culture

In our ongoing efforts to foster a feedback culture, we have implemented an integrated performance management approach.

This combines:

The KPI management system, embedded in our human resources management software, includes

managers as well as individual contributors. Within a unified framework, we ensure the system’s

effectiveness and transparency in goal setting and evaluation. This holistic approach not only

facilitates the setting, tracking, and evaluation of annual KPIs and key business objectives (KBOs),

but also enables the seamless translation of individual performance into the annual bonus scheme.

Building on existing performance management, the addition of a 360° development tool in 2023

further strengthened our efforts to support employee development. This tool, aligned with the

Bank’s core values and business principles, includes a comprehensive feedback mechanism from

managers and peers alike.

The KPI management

system

Our 360° development tool

In 2023, we optimised our 360° evaluation system, eliminating manual steps in the evaluation process.

This effort resulted in 98% of eligible employees receiving personalised feedback reports that they

can use for professional development going forward.

Front2IT retraining

programme:

With its second intake in 2023, the Front2IT retraining programme demonstrates our commitment

to employee development and our adaptability to emerging trends in technology. From a pool of 78

applicants, we selected eight employees to transition to three distinct positions within IT operations.

Front2IT is a paid reskilling programme encompassing intensive training and individual mentoring.

Participants engage in real work processes, deepening their practical knowledge in addition to

taking professional courses. Across the past two programme intakes, 183 employees applied and

18 participants were chosen for corresponding job openings in the IT department. Notably, 72%

of successful applicants were women, with an average age of 27 years. The average tenure of

participants was 4.4 years with the Bank.

The programme’s emphasis on career growth has proven highly effective. Within just one year

since launch, six out of nine employees who successfully completed the retraining programme were

promoted.

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Annual Report 2023 Bank of Georgia Group PLC

For our raw gender pay gap (GPG), the

improvement is observed due to salary

revisions in mass positions where the

majority of employees are women. On

the other hand, we still have positions

with relatively higher salaries where men

represent the majority, e.g. IT, Digital

Banking and credit-related front-office

positions. Another reason for this raw

pay gap is a higher proportion of women

among new hires at entry level and

in lower ranges on managerial levels.

We are committed to ensuring equal

opportunities and developing various

talent development activities to support

professional and career progression of

employees in lower positions.

Our Job Architecture, named as Levelling,

also ensures equal grades for equal work

and contributes to ‘equal remuneration

of female and male employees for equal

work performed’. Levelling was introduced

in 2021, and currently includes each

position and incumbent employed by the

Bank. In 2023, based on position levels’

specifications, we updated employee

promotion criteria. Currently, we are

updating levelling factors, to make them

more specific and more easily applicable

to positions and/or incumbents’

evaluation.

2021 2022 2023

GEPG

5% 4% 2%

GPG

45% 44% 43%

1. The gender equal pay gap (GEPG) is the difference between the compensation of male and female employees in the same position.

2. Gender pay gap (GPG) measures the difference in the average earnings of male and female employees regardless of the nature of their work (mean pay – female versus male).

Our benefits for supporting employee wellbeing

Along with competitive remuneration, Bank of Georgia’s employee value proposition includes benefits supporting work-life balance

and family-friendly arrangements as well as opportunities for personal and professional development.

Corporate health insurance and night-shift

employees’ medical check-up.

Workplace ergonomics for pregnant women.

HEALTH

Special rates for banking services and financial aid for various life events including marriage, the birth of a

child, or the illness of a family member.

FINANCIAL

WELLBEING

Back-to-work adaptation trainings for those

returning to front-office positions after parental

leave.

Time off in lieu (TOIL) and paid time offs (PTOs)

for special needs in accordance with Georgian

regulations: medical check-ups related to pregnancy,

breastfeeding hour during the first year, monthly

day-off for a legal representative/supporter of a

person with a disability.

Fair remuneration practices and competitive packages

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.

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Educational vacation: short-term educational vacation opportunity to employees attending certain MBA

programmes. The Bank also provides the possibility of co-financing the cost of academic or certification

programmes at foreign universities for professional development in the relevant field (e.g. MBA and CFA

programme).

TIME-AWAY

Maternity leave, newborn adoption leave and

parental leave with salary compensation in addition

to state allowance.

Additional paid time-off: five sick-leave days and five

days-off.

1. Regular live Q&A sessions led by the CEO to discuss strategy, performance and current developments. Five sessions were held in 2023.

2. Held since 2018, these meetings have promoted transparency and a feedback culture. Employees meet with the Chairman and the Senior Independent member as well as

other members every year. Three meetings with the participation of 61 employees were held in 2023.

3. To promote idea sharing and ensure employees are aware of each other’s work, we discuss new products and future plans with our agile teams and the Bank’s Executive

Management Team.

Employees on maternity/

parental leave

by gender

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

314 women

1 man

89.5% 83.9%

Parental leave at Bank of Georgia

Providing positive employee experiences

We have a systematic approach for identifying employee needs and concerns, delivering solutions and interventions that help create

more positive experiences at every step of the employee journey. Our Employee Experience Management (EXM) team is responsible

for gathering regular feedback from employees and providing insights on issues and solutions:

In 2023, improving the employee onboarding experience was one of the main priorities of our EXM team. Previously, the onboarding

experience was not structured uniformly across the Bank and employees were often dissatisfied with the ease and pace of

onboarding.

We ensure all our employees can directly and openly communicate with senior leadership and the Supervisory Board of the Bank. We

regularly engage with and listen to our employees through a number of channels:

Analysing responses from regular

surveys to identify pain points for further

research and interviews.

Getting in touch with new hires to ensure

smooth onboarding.

Collecting and analysing employee

sentiment data through focus groups and

individual interviews.

Ongoing deep interviews with

individual employees

Employee satisfaction surveys

Team reviews

CEO vlog on Workplace

Entry interviews

Meetings with the Board

Exit interviews

Agile quarterly business

reviews

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Annual Report 2023 Bank of Georgia Group PLC

I have trust and confidence

in the Company’s senior

leadership

My manager supports me in

learning and development

I believe the Company is

socially responsible

85% 88% 92%

2022: 86% 2022: 73% 2022: 92%

I would recommend our

Company as a good place

to work

The Company values and

promotes employee diversity

I receive clear and regular

feedback on how well

I do my work

79% 82% 75%

2022: 78% 2022: 81% 2022: 71%

Voice of the employee

To measure the effectiveness of employee empowerment initiatives, we closely track employee engagement and corporate culture

using internal and external surveys:

Employee Engagement survey eNPS

Korn Ferry Engaged Performance

™

Core indices – 2023

Engagement (Korn Ferry) Enablement (Korn Ferry)

70% 75%

2022: 70% 2022: 73%

2022: 53 (eop)

eNPS (eop)

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The increases in eNPS (BOG internal

survey) and Employee Enablement

(Korn Ferry survey) are attributed to key

initiatives that reflect our commitment

to employee growth and wellbeing.

The refinement of promotion criteria

at the Bank level created transparent

and personalised guidelines for every

position, simplifying career paths and

empowering employees with a clear

view of their professional trajectory.

Our business areas actively cultivated a

culture of mutual feedback, enhancing

collaboration and engagement through

improved interpersonal communication.

Furthermore, the comprehensive annual

review of employee pay demonstrates

our dedication to recognising the intrinsic

value of each role and responding to

market dynamics. These concerted

efforts collectively foster a positive and

motivating work environment, aligning

with our corporate ethos of prioritising

employee satisfaction and professional

development.

New employees receive the

training they need to do their

jobs well

I have opportunities

to achieve my career goals

at the Company

79% 73%

2022: 77% 2022: 71%

Measuring culture

In 2023, we also performed Barrett’s value

study, which back in 2019 contributed

to outlining organisational values and

business principles of the Group. The aim

of the study was to calibrate our current

culture and its dynamics in new business

environment following the pandemic and

other recent global developments. The

research was performed by a UK-based

international consulting company in

cooperation with Barrett Value Centre.

The results of the study confirmed our

strong and healthy corporate culture. The

positive dynamic since 2019 was reflected

in increased scores, which are higher

than current benchmarks compared

to industry peers. Deeper analysis of

overall results is expected in 2024, and

respective initiatives will be defined and

implemented to maintain and further

develop our culture of helping people

achieve more of their potential.

Occupational health and safety

Providing a healthy and safe working environment remains a key priority and

an integral part of our culture. We develop a number of preventative actions to

safeguard the Bank every day.

The Bank’s Health and Safety team, reporting to the Deputy COO, is responsible for developing and implementing health and safety

practices across the Bank and covers:

FIRE AND

EMERGENCY

MEDICAL

EMERGENCY

HEALTH AND

SAFETY ISSUES

HEALTH AND SAFETY

PRACTICES

Occupational health and safety management system

The Bank’s Occupational Health and Safety Management System (OHS), which covers all employees and third-parties in our

workspaces, improves our ability to identify and remove hazards and decrease risk at the workplace.

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OHS Risk management

The OHS Risk Assessment Standard defines principles, rules, and responsibilities. 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.

Health and safety training and instructions

A mandatory online course on labour safety, and practical training events are held annually for all employees of the Bank. In 2023,

we’ve updated the training and added a new module – ‘Manual Lifting Recommendations’.

• Occupational Health and Safety Policy

• Occupational Safety and Health (OSH) Risk Assessment Standard

• Emergency Evacuation Standard

• Fire Safety Standard

• Occupational Accidents and Occupational Diseases Investigation/Reporting Standard

• Standard for Prevention and Mitigation of Viral Diseases at the Workplace

• Manual Handling Procedure

• Personal Protective Equipment Procedure

FIRE SAFETY EMERGENCY PREVENTION

AND RESPONSE

WORKPLACE

SAFETY

The online course includes modules on:

Incident response:

We carry out different preventive measures, including:

• Securing service centers with armed security police personnel.

• Equipping service centers with state-of-the-art security systems.

• Equipping cash operating units with bulletproof glass and alarm buttons. Upon activation of

these buttons, operational security police groups respond to the alarm promptly.

In 2023, there were no incidents.

In 2023, the occupational health and safety specialists completed the ‘Managing Safely Course’ and were

awarded with certificates from the Institution of Occupational Safety and Health (IOSH).

The Bank regularly carries out fire and emergency drills and relevant practical training.

In 2023, 120 fire drills were conducted.

Selected employees in major branches of the Bank are trained in First Aid.

The OHS system is based on the following policies and standards:

EMPOWERING

COMMUNITIES

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Within our educational initiatives, we have identified three main objectives and

you can read more about each in this chapter.

Promoting STEM

education

Improving educational

infrastructure

Increasing access to

quality education

Promoting STEM education

Empowering communities

We are committed to being a significant

contributor to the local communities

where we operate, by not only creating

innovative products and services, but also

by driving positive impact through various

community projects and initiatives beyond

our core business. A significant focus

of our community outreach efforts is

education as access to quality education

is one of the main challenges that people

name in various surveys. We believe

that access to high-quality education

opens doors to limitless opportunities,

shaping brighter futures for individuals

and contributing to the prosperity

of countries. By actively engaging in

educational initiatives, we aim to make a

meaningful difference in the lives of those

around us.

Everest Code IT NASA Space Apps

In 2023, Bank of Georgia became

the general sponsor of Everest – the

mathematics Olympiad that has been

famous among Georgian teachers and

students for the past two decades. The

competition, aimed at fostering passion

for mathematics, welcomes participants

from the second to sixth grades.

In cooperation with GITA, school students

in eight techno-parks in Georgia learned

how to code and developed the skills

of the future. The project followed a

P2P model of learning, creating an

environment where students could also

hone their communication skills.

Every year a 48-hour hackathon takes

place in 300 cities worldwide, where

teams come together to brainstorm

and create innovative solutions to global

challenges inspired by NASA’s research.

The hackathon in Georgia is organised

by Startup Bureau, with Bank of Georgia

as the main partner. The project’s main

objective is to spark curiosity, encourage

creativity and help develop problem-

solving skills. Participants get to apply

their knowledge and skills to address

global issues, bridging the gap between

theory and application. The ideas of

the winning projects are sent to an

international competition.

20K+

Participants

c.350

Participants

c.100

Participants selected

15K+

From Georgia’s regions

c.300

From Georgia’s regions

Winners

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Strategic Report Governance Financial Statements Additional Information

We believe STEM education is the key

to unlocking the potential of the next

generation as scientists and innovators.

By promoting STEM education, we

want to inspire and prepare young

people in Georgia for the challenges

and opportunities ahead. This is why in

2023 we deepened our partnership with

Komarovi School, one of the few top

schools in Georgia focused on physics and

mathematics, in the following projects:

STEM School is an online, one-year

comprehensive educational programme

for students in the seventh to 10th

grades across Georgia, designed to foster

creativity and learning and encourage

ideas and discovery. Students have a

unique opportunity to work with Komarovi

teachers on different STEM projects and

delve into the professions of the future.

Each year, we cover the programme fees

for 60 students, providing them with

essential equipment and devices required

for the course.

STEM School

c.1,100

Students registered

68%

from Georgia’s regions

65%

from Georgia’s regions

c.100

BOG scholarship holders

100%

from Georgia’s regions

With the same goal of popularising

technical disciplines and natural sciences

in Georgia, STEM Olympiad is an

innovative competition, not only giving

seventh to 11th graders opportunities

to represent their schools, but also

facilitating the practical application of

the knowledge acquired in traditional

subjects such as physics, mathematics,

informatics and engineering.

The competition unfolds in different

stages, offering a comprehensive

evaluation of participants’ skills and

understanding. At the final stage, the ten

top-performing teams compete to solve

practical tasks.

STEM Olympiad

Bank of Georgia X Komarovi School

Up to 400

Participants

136

Annual Report 2023 Bank of Georgia Group PLC

BLACK

SEA

Educational infrastructure – buildings,

classrooms, laboratories and equipment

– matter for learning. Spaces in schools

where children spend most of their time

are critical components of the overall

educational experience – and, when

designed with students in mind, they

have the power to support learning and

wellbeing.

We recognise the importance of a

conducive learning environment, and are

committed to enhancing educational

infrastructure. This includes supporting

the development and improvement

of schools and educational facilities,

ensuring students have access to safe

and supportive spaces for learning.

Since 2020, Bank of Georgia has been

designing Ideathecas. These colourful,

multifunctional libraries in Georgia’s

public schools provide access to books

and technology to students living in

Georgia’s regions, supporting teamwork

and collaboration in bright, open spaces

full of educational resources. In 2023

we also added a STEM corner to our

Ideathecas, highlighting the importance

of mathematics, science and technology,

and encouraging a more hands-on

approach to learning STEM.

Most of our Ideathecas are located in

rural regions that have high poverty rates

and/or are home to ethnic minorities.

Ideathecas

Since 2019

10,000+

Students reached

Improving educational infrastructure

Regions

2020

Khurvaleti

Ditsi

Tbilisi

Poti

2021

Pankisi

Nikozi

Akhalkalaki

Ozurgeti

Ambrolauri

2022

Jvari town

Chokhatauri

Nabeglavi Village

Erisimedi

Lambalo

Udabno

Sabatlo

2023

Zugdidi

Shindisi

Mukhrani

Bolnisi

Daba Qeda

Akhaltsikhe

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Strategic Report Governance Financial Statements Additional Information

Increasing access to quality education

We aim to contribute to a more inclusive and empowered society by improving access to quality education. This includes initiatives to

support underprivileged communities and create opportunities for those who may face educational challenges.

other post-graduate levels.

We believe in boundless potential of young

individuals and recognise that the student

phase of life holds immense significance,

shaping one’s future professional success.

In line with our commitment to support

and empower young people, in 2023

we launched two new scholarships for

local experience – the Bank of Georgia

Scholarship in Partner Universities and

the Giorgi Chakhava Scholarship, both

focusing on undergraduate students within

the country.

Within the framework of the Bank of

Georgia Scholarship, the Bank cooperates

with 15 Georgian universities, through

which students have unique opportunities

to join our partner universities and receive

either full or partial funding for the entire

year. Whether it is in business, science

or the arts, this scholarship is designed

to help students in any field they are

passionate about.

The Giorgi Chakhava Scholarship

supports students interested in

architecture only. Named after the

brilliant architect behind some of the

most iconic buildings, including Bank of

Georgia’s headquarters, this scholarship

supports future architects who have the

passion and leadership to make a real

difference.

For both scholarships, students are

selected based on their academic

performance and leadership potential,

however the final winners are individually

selected by our partner universities.

We firmly believe that investing in the

education of young minds today will

shape a brighter and more promising

future for all.

International scholarships

Local scholarships

Bank of Georgia Scholarship

Giorgi Chakhava Scholarship

138

Annual Report 2023 Bank of Georgia Group PLC

Other activities to motivate students

291

Schools

c.1,300

Participants

from

120

Participants

In 2023

400

Participants

In 2023

c.140K

Participants

Since 2021

Economics Olympiad

With the support of Bank of Georgia and in collaboration

with non-governmental organisation GELi, the Economics

Olympiad was organised and held for the first time in Georgia

in 2023. Following the competition, five talented individuals

were selected to participate in the finals of the International

Economics Olympiad held in Slovakia.

Public Speaking Competition

For more than ten years and as part of a partnership between

Bank of Georgia and the English Speaking Union (ESU),

the Public Speaking Competition has promoted the English

language and critical and logical thinking among young people

in Georgia. The event stands as one of the largest international

gatherings in Georgia dedicated to educational empowerment,

effective communication and thoughtful analysis. More than

800 young people between the ages of 16 and 20 have taken

part in the competition, and the selected student has gone on to

the international Public Speaking Competition held in London.

Harvard Business Case Competition

The Harvard Business Case Competition – one of Georgia’s

largest business faculty events – was held in 2023 as a

partnership between TBSC Consulting and Bank of Georgia. This

unique challenge provided students with hands-on experiences

as decision-makers in managerial positions, enhancing their

quick thinking, teamwork and analytical skills. Participants

gained practical insights that have positively impacted their

studies, employment and work processes.

Kings Olympiad

Kings Olympiad is the largest school Olympiad in Georgia in

mathematics, English and Georgian languages. Bank of Georgia

has been its sponsor since 2021 to increase the level of general

education and motivation among students.

Olympiads and competitions

139

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Strategic Report Governance Financial Statements Additional Information

Bank of Georgia teamed up with the

Georgian Football Federation in 2022

for the following four years. Under

this partnership, Georgia hosted the

UEFA U21 Euro 2023 in Tbilisi, Kutaisi

and Batumi in June 2023. In 2024,

the Georgian National Football team

qualified for Euro 2024 for the first time

in history.

The Bank actively continues to support

Georgian Football, a sport cherished by

many Georgian citizens. This commitment

not only fosters the growth of existing

athletes but also sparks enthusiasm

for a healthy lifestyle among future

generations.

Since 2021 Bank of Georgia has been

the partner of the Georgian Basketball

Federation, with numerous projects

executed during this period. In 2022 Tbilisi

successfully hosted the group stage of

Eurobasket, and we assisted in enhancing

the brand of the Georgian Basketball

Federation and the national team by

introducing a new logo and visual identity.

2023 marked a historic moment for

Georgian basketball, as the national team

qualified for the FIBA World Cup for the

first time in the history.

Bank of Georgia has been a partner and the general sponsor of the Georgian National Olympic and Paralympic Committees since

2016. In 2023, Bank of Georgia helped open the Georgian Olympic Committee Museum. The Museum showcases the impressive

achievements of Georgian Olympians, the history of the Olympic Committee, various Olympics and more.

We believe that sport-related

infrastructure projects are essential for

the development of Georgian sport,

inspiring young people to take up sport

and hone their skills. It is therefore crucial

for young athletes to have access to

suitable facilities. As a result, Bank of

Georgia inaugurated a multifunctional,

high-quality sports facility in Tbilisi in

2023, where amateur athletes can play

football, basketball and tennis, and gain

top-notch experience – all free of charge.

Georgian Football

Federation

Georgian Basketball

Federation

Olympic Committee

New street arena

Sports partnerships

Culture

The Georgian National Ballet –

Sukhishvilebi – has been a global

household name for Georgian dance

since 1945. In 2022, the Bank of Georgia

and Sukhishvilebi established a two-

year partnership. As a key component

of this collaboration, we undertook

a comprehensive renovation of their

primary outdoor venue, ‘Takara’. This

venue served as the main location for

the majority of their shows during the

summer of 2023. Almost every day during

this period, a concert was held, drawing in

more than 10,000 attendees.

The protection and promotion of cultural

heritage rank among our priorities, and

therefore, Bank of Georgia proudly serves

as the general partner of Sukhishvilebi.

With the aim of bringing people together

and making literature accessible, we

organised Tbilisi Book Festival in 2023.

Festival brought more than 16,000

visitors together in the centre of Tbilisi

and across more than 60 bookstores.

Visitors discovered new reads, enjoyed

discounts and publishers gain visibility on

their titles. Through exciting speakers and

special offers, we aimed to make reading

even more enjoyable while supporting

literature and encouraging cultural and

educational activities throughout the

country.

Sukhishvilebi

Tbilisi Book Festival

140

Annual Report 2023 Bank of Georgia Group PLC

Other initiatives

Bank of Georgia has continued its long-

running partnership with the Caucasus

Nature Fund and the Agency of Protected

Areas, contributing up to US$ 50,000

in 2023 to support the country’s 12

protected areas: Borjomi-Kharagauli,

Lagodekhi, Tusheti (Tusheti National Park

and the protected landscape), Vashlovani,

Mtirala, Javakheti, Kazbegi, Algeti,

Kintrishi, Machakhela, Batsara-Babaneuri

and Pshav-Khevsureti.

Together with the Caucasus Nature Fund

and the Agency of Protected Areas, we

contribute to the protection of unique

species, the preservation of ecological

diversity, and the promotion of protected

areas and tourism. The total protected

area is nearly 520,000 hectares and

includes 11 administrative and visitor

centres, employing around 350 people.

In 2023, we also continued educational

campaigns to promote the unique

biodiversity of these protected areas.

Supporting Georgia’s protected areas since 2010

141

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Strategic Report Governance Financial Statements Additional Information

Non-financial and sustainability

information statement

The statements below reflect our

commitment to, and management

of, employees, communities, the

environment, human rights, anti-bribery

and anti-corruption in the last 12 months

as required by sections 414CA and 414CB

of the Companies Act 2006.

We are actively monitoring developments

including in relation to ESG matters.

In 2023, our focus included the Global

Reporting Initiative (GRI) standards

and the Task Force on Climate-related

Financial Disclosures (TCFD).

Business model

Climate and environment

Our commitment Further detail

Page reference in

this report

Relevant policy or document

available at

bankofgeorgiagroup.com

We continue to deliver relevant banking

products and services in a seamless

digital experience. We aim to be the

main bank in customers’ daily lives by

leveraging the digital and payments

ecosystems, anticipate customers’ needs

and wants and provide best-in-class

customer care and service.

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.

• Sustainable finance

• TCFD report

• Climate-related financial

disclosures

(a) The Group’s governance

around climate-related risks

and opportunities

(b) how climate-related risks

are identified, assessed and

managed

identifying, assessing and

managing climate-related

risks are integrated within

the Group’s overall risk

management framework

(d) impact of climate-related

risks and opportunities on the

Group’s business, strategy and

financial planning

(e) Targets used by the Group

to assess climate-related risks

and opportunities

• Our operational footprint

• Environmental Policy

• Our purpose and strategy

framework

• JSC Bank of Georgia business

model

• Empowering individuals

• Empowering businesses

• Financial overview

25 – 39

40 – 49

172 – 183

93 – 98

99 – 118

291

102 – 104

111 – 113

111

105 – 107

and 109

114

115 – 116

142

Annual Report 2023 Bank of Georgia Group PLC

Our employees

Respect for human rights

Anti-bribery and anti-corruption

Risk management

Strategic and ESG KPIs

We focus on empowering our employees

by fostering a high-trust, diverse

environment and a strong feedback

culture, equipping employees with the

skills and capabilities for the future. We

are committed to providing our colleagues

with a safe and healthy working

environment and an organisational

culture which promotes inclusivity,

diversity, equal opportunities, personal

development and mutual respect.

We want people to enjoy coming to

work and for the workplace to be free

from discrimination, harassment and

victimisation.

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. We believe that we are

well-positioned to contribute to building

communities where human rights are

valued and respected.

We are committed to zero tolerance

towards bribery and corruption. We have

in place written policies, procedures and

internal controls to comply with anti-

bribery and anti-corruption laws.

• Key enablers

• S172 statement

• Empowering our employees

• Working with our suppliers

• Sustainable finance

• Empowering our employees

• Financial inclusion

• Anti-bribery and anti-corruption

• Risk management

• Principal risks and uncertainties

• Key performance indicators

• Code of Ethics and Conduct

• Human Rights Policy

• Diversity and Inclusion

Policy

• Anti-discrimination and

Anti-harassment Policy

• Whistleblowing Policy

• Environmental and Social

Policy

• Human Rights Policy

• Diversity and Inclusion

Policy

• Anti-discrimination and

Anti-harassment Policy

• Code of Conduct and Ethics

• Anti-bribery and

Anti-corruption Policy

• Whistleblowing Policy

120 – 132

54 – 57

87 – 91

134 – 140

81 – 82

93 – 98

120 – 132

87 – 91

70 – 71

144 – 148

150 – 169

23 – 24

Social matters

We are committed to being a significant

contributor to the local communities

where we operate, by not only creating

innovative products and services, but also

by driving positive impact through various

community projects and initiatives beyond

our core business.

• Key enablers

• S172 statement

• Financial inclusion

• Empowering our

communities

• Environmental and Social

Policy

• Human Rights Policy

• Diversity and Inclusion Policy

• Anti-discrimination and

Anti-harassment Policy

143

Annual Report 2023 Bank of Georgia Group PLC

RISK

MANAGEMENT

144

Annual Report 2023 Bank of Georgia Group PLC

The effective management of risk

is key for achieving the Group’s

strategic objectives. Material risks and

uncertainties are key focus areas for

Executive Management and the Board

of Directors. The Board has ultimate

responsibility for risk governance and

management. Our ERM framework

embeds day-to-day accountability

throughout the organisation to ensure we

operate within acceptable risk tolerances,

as set by the Board’s risk appetite, with

our governance structure and three lines

of defence providing a foundation for

continuous oversight.

Risk management

Key components of our ERM framework

Risk governance

Non-executive risk governance

The risk appetite limits are reviewed and approved annually by

the Board of Directors. The Board sets the tone ‘from the top’

and is advised by the Risk Committee.

Executive risk governance

Executive Management assesses the effectiveness of the

implementation of the risk management and internal control

policies and procedures.

Roles and

responsibilities

‘Three lines of defence’ model

The Group’s ERM framework is based on the industry-

standard ‘three lines of defence’ model for risk management.

Processes and tools

Risk appetite

The Group has processes in place to identify, assess, measure,

manage and report risks to ensure we remain within risk

appetite.

Active risk management:

identification, measurement,

mitigation and reporting

Internal controls

Policies and procedures

The Group continuously develops the control environment in

business processes, including through segregation of duties,

preventive tools integrated in the systems, restrictions of user

rights.

Control activities

Risk management process

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 or mitigate the 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 regularly discusses and

debates key risks and management’s approach

to managing those risks.

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,

aligning identified exposures with the Group’s

risk tolerances.

The Group monitors if appropriate actions are

taken in a timely, consistent and systematic

manner. 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 – or 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-mitigating activities are developed and

implemented to reduce the potential negative

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 regularly reviewed.

When a control is not working effectively,

root causes are analysed and action plans are

developed and implemented to improve the

control design.

Identify

Monitor and report

Assess and measure

Mitigate

145

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Strategic Report Governance Financial Statements Additional Information

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

framework is reviewed and approved

annually by the Board of Directors. A risk

appetite dashboard is presented monthly

to Executive Management and quarterly

to the Risk Committee which reports to

the Board. This process ensures timely

escalation of a breach and remediation

action plan development.

Risk appetite framework

Risk culture is at the heart of the Group’s

ERM 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 their 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 ERM framework;

and (v) report and communicate risks

transparently.

To develop risk culture, we focus on giving

employees the awareness and capabilities

to manage risk. We provide a wide range

of training programmes across the risk

disciplines – some mandatory for all

employees, others role-specific or part of

individual development plans. Mandatory

training programmes are accessible

online and ensure we keep our customers,

employees and the whole organisation

safe. Topics covered include operational

risks, business continuity, information

security and data protection, health and

safety, corporate security, business ethics,

and financial crime risks and sanctions

risks. The system allows monitoring at all

levels to ensure completion of mandatory

training programmes. The completion

rate of the risks and compliance training

programme at the end of 2023 was

91%, an increase on 2022. Our goal is

to achieve c.100% completion rate and

we are focused on ensuring a strong risk

awareness among our employees.

Risk culture

The Code of Conduct and Ethics and the

Whistleblowing Policy are the primary

documents governing culture and ethics.

The Code of Conduct and Ethics clearly

sets the expectation that all employees

act legally, ethically and transparently in

all their dealings.

The whistleblowing tool allows employees

to report any concern, anonymously

if they wish so. Responsibility for the

Whistleblowing Policy resides with the

Board who, together with the Audit and

Risk Committees, 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 – without the

risk of retaliation.

Our Code and Whistleblowing Policy

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 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 Executive

Management.

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 Executive Management. .

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 Executive Management. 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

Executive Management.

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

Executive Management. Each quarter

the CFO 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 auditor and Internal Audit

attend each Audit Committee meeting,

and the Audit Committee meets them

regularly both with and without the

presence of Executive Management.

Our Audit and Risk Committees monitor

internal controls over operational and

compliance risks. The Bank’s CRO and

CFO, Head of Internal Audit and other

Executive Management Team members

report to the Audit and Risk Committees

on a quarterly basis.

Internal controls

146

Annual Report 2023 Bank of Georgia Group PLC

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 2023 and obtained

assurance from Executive Management,

Internal and External Audit.

The Board concludes with reasonable

assurance that the appropriate internal

controls and risk management systems

were maintained and operated effectively

during 2023, 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’s (FRC)

guidance on Risk Management, Internal

Control and Related Financial and

Business Reporting.

Effectiveness review

The Audit and Risk Committees play

key roles in assessing the strength and

effectiveness of the risk management and

internal control systems. Each Committee

has described its work in its Committee

Report, which can be found on pages 214

to 223 for the Audit Committee and 224

to 228 for the Risk Committee.

Committee reports

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 170.

Viability statement

All roles below the CEO fall within one of the three lines, and all employees are responsible for understanding and managing risks

within their individual roles and responsibilities.

Revenue-generating, customer-

facing and support functions that are

responsible for identifying, assessing,

managing, monitoring and reporting risks

of products, activities, processes and

systems under their management.

Risk function (under the CRO) responsible

for: developing policies, methods and

procedures; developing and implementing

the risk appetite framework, including

setting the limits; supporting and

challenging first-line risk management;

and providing assurance on regulatory

compliance and effectiveness of key

controls.

Internal Audit responsible for: providing

independent assurance; assessing the

consistency and effectiveness of the

Group’s internal control systems; and

reviewing the overall ERM framework

to ensure alignment to regulatory

expectations and industry standards.

Risk management structure

Three Lines

First Line Second Line Third Line

Any key issues identified are escalated to

the Board. The Board also receives regular

reports directly from the head of each

risk function, in which principal risks and

internal control issues are addressed.

In line with the revised UK Code of

Corporate Governance issued in January

2024, specifically Provision 29, the Bank

has established a dedicated working

group led by a steering committee, under

the CFO. The Internal Controls over

Financial Reporting (ICFR) team has

been entrusted with the responsibility

of ensuring compliance with the

requirements by 2026.

As part of our governance framework, the

Board receives quarterly updates from

the ICFR team on the progress of the

project, focusing on our journey towards

compliance with the code. These updates

include comprehensive information on

the project’s advancements in identifying,

assessing, and documenting key risks

andcontrols.

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Audit Committee

Credit Committees

Asset and Liability

Management Committee

Environmental and Social

Impact Committee

Risk Committee

Management Board

Supervisory Board of

Bank of Georgia

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 Committees, Asset and Liability

Management Committee (ALCO), and

ESI Committee. The Supervisory Board,

Audit Committee and Risk Committee

mirror the Group Board, the Group

Audit Committee and the Group Risk

Committee.

Executive Management has overall

responsibility for the Bank’s asset, liability

and risk management activities, policies

and procedures.

The Group Internal Audit function is an

internal, independent, objective assurance

and consulting provider. As the third line

of defence, it adds value and improves

the Group’s operations through the

assessment of the effectiveness and

adequacy of Group-wide processes,

controls, governance and risk

management. 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. Furthermore, the Chief

Auditor meets with the Chair of the Audit

Committee on a monthly basis to discuss

resource allocation, performance results,

and address any additional concerns.

Risk management bodies of Bank of Georgia

The Bank has five Credit Committees,

each responsible for managing the Bank’s

risk across loan portfolios in all business

segments.

The Credit Committee comprises three

tiers of subcommittees for retail loans;

one tier for micro loans; three tiers for

SME loans; three tiers for corporate loans;

and one tier for corporate recovery.

Lower-tier subcommittees meet daily,

while higher-tier subcommittees meet as

needed – typically once or twice a week.

Each subcommittee makes its decisions

by a majority vote of its members.

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 and

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 pre-set risk limits and approves

treasury deals.

Responsible for the development and

implementation of the Bank’s ESG

strategy, including its climate risk and

opportunity management strategy. The

Committee manages the Bank’s CE&S

impacts, focusing primarily on those

associated with its lending activities.

Stress testing and scenario analysis

are important risk management tools

providing input for strategic decision

making and planning as they enable

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 to adverse macroeconomic

factors, financial market stresses and

geo(political) developments. Portfolio

sensitivities are fed into the impact

assessment of profit and loss, liquidity

and capital.

Stress testing

• Viability: Scenario assumptions for

all relevant macroeconomic and

financial market variables are set,

and potential impacts are assessed

against the viability of the Group. This

includes 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 the Board of

Directors.

• Risk-specific: Depending on the

tendencies of the market, specific

portfolios are tested for various

market-wide scenarios. The impact

of various shocks is assessed against

portfolio quality, profitability, liquidity

and capital.

• Idiosyncratic: Conducted on an ad hoc

basis, based on certain idiosyncratic

factors that may arise in the business

over time.

We perform different types of stress tests:

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Annual Report 2023 Bank of Georgia Group PLC

Each business line identifies key risks

that are inherent to their 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 150 to 169.

Information compiled from all our

businesses is examined and processed to

identify, assess and manage emerging

risks. This information is presented and

discussed with 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 transitional and

physical, for our client base and determine

potential impacts on the Group. We are

describing and managing climate-related

risks in line with recommendations from

the TCFD, and more details on the Group’s

planned actions can be found on pages 100

to 118.

Principal and emerging risks

• Regulatory: Mandated by the NBG,

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.

We consolidated our Risk and Compliance

functions under the CRO to enhance

collaboration and efficiency among

teams.

We continued to improve our capital

and liquidity risk management by

updating the Internal Capital Adequacy

Assessment Process (ICAAP) and Internal

Liquidity Adequacy Assessment Process

(ILAAP) to reflect changes in the financial

landscape, regulatory requirements and

the Bank’s risk profile.

We improved our enterprise risk reporting

processes, increasing focus on key risk

indicators, promoting proactive risk

management and ensuring a more

comprehensive assessment of potential

vulnerabilities.

We revised the Bank’s Model Risk

Management Policy with the help of

a global management consultancy,

McKinsey & Company.

We continued to strengthen climate risk

management capabilities across the

Bank. This involved broadening the scope

of climate-related training, deepening our

knowledge of climate change and climate

policy in Georgia, and reassessing climate

scenarios.

In 2023 we implemented several changes and initiatives to further strengthen our risk management:

Key development in 2023

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Annual Report 2023 Bank of Georgia Group PLC

PRINCIPAL

RISKS AND

UNCERTAINTIES

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Annual Report 2023 Bank of Georgia Group PLC

Principal risks and uncertainties

In this section we disclose 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 impacts as well as the 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 in turn result in a decline

in the value of the Group’s securities. We

disclose the risks we believe are likely to

have the greatest impact on our business,

and which have been discussed in depth

at the Group’s recent Board, Audit or Risk

Committee meetings.

Macro and Geopolitical risks

Macro and geopolitical risks are the risks that would lead to the Group being unable to execute its strategy – and therefore result in a

deterioration in its financial position – due to macroeconomic and geopolitical instability affecting the Georgian economy.

Key drivers and

developments

The Group’s operations are primarily located in, and most of its revenue is sourced from, Georgia. One of the

Group’s subsidiaries – JSC Belarusky Narodny Bank (BNB) – is located in Belarus, but it only accounted for 3.0%

ofthe Group’s total equity as at 31 December 2023.

Key sources of macro risk related to Georgia are changes in GDP, inflation, interest rates and exchange rates,

and political events. These factors may have a material impact on our business by affecting the Group’s financial

performance and position.

The Georgian economy is expected to grow at 6.0% in 2024 according to Galt & Taggart, while IMF forecasts

Georgia’s real GDP growth at 5.7%. However, the growth outlook is accompanied by downside risks related to

geopolitical instability and tightening of global financial conditions.

Inflation has decreased sharply in Georgia since the beginning of 2023. However, upside inflation risk remains

elevated. In case of a sudden halt of external inflows and the Georgian Lari (GEL) depreciation, inflation may

resurge and require a tight monetary policy response. Tensions in the Middle East following the Hamas attacks

on Israel in 2023 have also contributed to upside inflation risks. If the situation in the Middle East escalates

further, global commodity markets may be affected adversely with harsh inflationary impact on commodity

importers such as Georgia. The unresolved war in Ukraine and related supply disruptions have exacerbated

global commodity price pressures. As a response, the Western central banks continued to hike interest rates in

2023. Emerging markets and developing economies, including Georgia, are particularly vulnerable to tight global

financial conditions as a considerable share of their debt is denominated in foreign currencies. Furthermore,

suchconditions may induce capital outflows and result in depreciation pressures on local currencies.

International sanctions on Russia have been evolving, increasing sanctions compliance risks for the financial

sector. The 2023 Investment Climate Statements of the Department of State of the United States noted that

the NBG and Georgian financial institutions act fully in compliance with the financial sanctions imposed on the

Russian Federation

. The NBG thoroughly monitors financial institutions’ compliance with international financial

sanctions during on-site inspections. As at 31 December 2023, the Bank did not have any exposure to the Russian

banks impacted by the US, UK or EU sanctions.

The sanctions on Belarus have also been expanding. In November 2022, the Government of Canada sanctioned

additional individuals and entities, including BNB. BNB did not have exposure to Canada, therefore neither its

operations nor its financial position was significantly affected. The Group 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.

Overall, business and investment conditions are sound in Georgia, with low inflation, reduced public debt and

ample foreign exchange buffers. 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 that granted Georgia EU candidate

status on the understanding that the relevant steps set out in the Commission recommendation are taken.

Theoutstanding conditions include Georgia pushing back against political polarisation, as well as ensuring a

free and fair 2024 elections. If ongoing tensions escalate, market sentiment and the growth outlook may be

negatively affected.

In 2024, the Group expanded into Armenia through the acquisition of a leading universal bank, Ameriabank.

Despite a robust performance and prudent management of the Armenian economy, it remains exposed to

geopolitical risks and structural challenges. The Armenian economy remains constrained by structural challenges

including low productivity in manufacturing and agriculture, narrow export base and financial dollarisation.

However, strong focus on the IT sector as well as ongoing reforms in the education system can help Armenia

transform into a service-based and export-led economy. Similar to Georgia, the Armenian banking sector is

distinguished by relatively high, albeit decreasing dollarisation, which amplifies external shocks and weakens the

transmission of monetary policy. In Armenia, bank loan and deposit dollarisation stood at 35.6% and 50.5% at

end-2023, respectively (vs. 36.3% and 55.1% at end-2022).

1. https://www.state.gov/reports/2023-investment-climate-statements/georgia/

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Mitigation Governance: The Board of Directors receive a regular, quarterly update on global, regional, and local economic

developments and risks from the Bank’s economist. The Board is also regularly updated, sometimes by external

consultants, on major political and geopolitical developments that affect the broader region. Economic analysis

is also regularly presented to the ALCO, with a specific focus on interest rates, exchange rates, inflation and

economic growth outlook.

Monitoring and reporting: The Group continuously monitors macroeconomic conditions and performs stress

and scenario analyses to test its position under adverse economic and geopolitical conditions including adverse

currency movements. We assess the sensitivities of certain portfolios to different macroeconomic factors and

geopolitical scenarios, enabling us to take portfolio-related actions if necessary, including increasing monitoring

and changing our credit risk appetite.

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 well-diversified economy, prudent monetary

and fiscal policies, a business-friendly environment, and a healthy banking sector. The Belarus market is more

vulnerable to the impact of the Russia-Ukraine war, and we continue to closely monitor the situation.

Mitigation: In accordance with the Georgian legislation, in 2023 loans up to GEL 200,000 were issued only in

Lari. Effective from 1 January 2024, this threshold was increased to GEL 300,000, while borrowers with hedged

currency risk were exempted from this regulation. The threshold was further increased to GEL 400,000 effective

from 1 May 2024. Additionally, the NBG has 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 loans to individuals, the NBG’s payment-to-

income (PTI) and loan-to-value (LTV) requirements are more conservative for foreign currency loans to mitigate

borrower-level credit risk: PTI requirements for foreign currency loans are 5 ppts higher for income below GEL

1,500 and 20 ppts higher for income above GEL 1,500; the LTV requirement for foreign currency mortgage loans

is 15 ppts tighter.

At 31 December 2023, 22.7% of Bank of Georgia’s Retail Banking (RB) gross loans, 43.5% of SME Banking gross

loans, and 73.5% of CB gross loans were denominated in foreign currency. Meanwhile, 4.9% of Retail Banking

gross loans, 1.7% of SME Banking and 37.7% of CB loans were issued in foreign currency, with minimal exposure

to foreign currency risk.

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

and monitored by the Capital Adequacy and Financial Risk Management (CFRM) unit.

Despite the ongoing war and the sanctions directly or indirectly imposed on BNB, it has demonstrated resilience

and continues to operate with solid liquidity and capital positions. At 31 December 2023, BNB’s Tier 1 and Total

capital adequacy ratios stood at 9.9% and 13.8% respectively, above the National Bank of the Republic of Belarus

(NBRB)’s minimum requirements of 7.0% and 12.5% respectively. In line with the Group’s zero-tolerance policies

with respect to sanctions risk, BNB is operating in compliance with local and international sanctions laws, and

we do not expect further sanction extensions.

Credit risk

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 drivers and

developments

Expected credit loss (ECL) and, in turn, the Group’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.

The Group’s cost of credit risk ratio was 0.7% in 2023 (0.8% in 2022). The ECL on loans and finance lease

receivables posted during the year amounted to GEL 127.1, mainly driven by Retail Banking exposures. As at

31 December 2023 the Stage 3 ratio stood at 2.5%, versus 3.4% as at 31 December 2022.

Mitigation Governance: The Bank has three independent Credit Risk Management departments: Retail Credit Risk

direction; Corporate Credit Risk department; and MSME Credit Risk department. The Credit Risk Management

departments oversee and challenge frontline credit risk management activities. Each department is supported

by the following teams:

• Credit Risk Analysis team: responsible for analysing customers’ creditworthiness based on financial

information/credit ratings, sharing analyses with the risk owners and providing recommendations at

underwriting or monitoring stages. It controls compliance with credit limits through regular reporting and

systemic alerts, and ensures compliance with credit risk management procedures.

• Portfolio Risk Analysis team: responsible for analysing and monitoring the credit risk position of the Bank

while establishing and maintaining the credit risk framework and policies. It assesses credit risk, reporting to

management and business lines.

The Enterprise Risk Management (ERM) department oversees the Bank-wide credit risk assessment process,

manages quality monitoring policies, continuously monitors the Bank’s credit portfolio quality parameters

using various tools and techniques, and manages risk budgeting, stress testing and scenario analysis. The ERM

department provides regular reports to Executive Management and the Supervisory Board on the Bank’s credit

risk profile and the effectiveness of risk management strategies.

Macro and Geopolitical risks continued

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Annual Report 2023 Bank of Georgia Group PLC

Mitigation

continued

Risk appetite: The credit risk appetite consists of quantitative limits and is specifically designed to mitigate

theoccurrence of excessive credit risk and credit concentrations at various levels within the Bank’s portfolio.

The credit risk profile relative to risk appetite is monitored and reported monthly to Executive Management

andquarterly to the Supervisory Board.

Credit risk identification and assessment: The process of identifying credit risks primarily relies on effective

relationship management and the prudent oversight of customer and portfolio credit. The credit assessment

process is distinct across segments and is further differentiated across various product types to reflect the

specifics of different asset classes. The assessment process depends on transaction complexity: Corporate,

SME and larger Retail loans are assessed individually; unsecured Retail loan decisions are largely automated.

The performance of all models used in credit risk management is monitored in line with the Bank’s model risk

management framework. Please see Model Risk on pages 166 to 167 for more details.

To ensure a robust credit-granting process, the Bank has implemented several measures and frameworks:

• Well-defined lending standards: The Bank has established clear standards for granting credit, outlining the

requirements and standards that borrowers must meet. These standards serve as a benchmark for evaluating

the creditworthiness of customers, enabling the identification and assessment of potential risks associated

with extending credit.

• Segregation of duties: The credit analysis and approval process involves a clear segregation of duties among

the parties involved. In the case of Corporate, SME clients, the analytics team is involved in credit risk analysis,

while for Retail loans only loan officers and credit risk officers are involved. Credit analysts and loan officers

prepare presentations with key borrower information which are then reviewed by a business credit risk officer,

ensuring all risks and mitigating factors are identified and addressed, and that loans are properly structured.

• Multi-tiered loan approval committees: The loan is reviewed and approved by multi-tiered credit committees,

with different loan approval limits to consider a customer’s overall risk profile. Different committees are

responsible for reviewing credit applications and approving exposures based on the size and risk of a loan.

Loan portfolio quality monitoring and reporting: 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 Credit Risk Management departments review the credit quality of the portfolio monthly.

Retail and SME loans are subject to periodic reviews, and the Bank monitors exposures to identify customers

with signs of potential financial difficulty. 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 7.3% of the Group’s gross

loans to customers and finance lease receivables at 31 December 2023 (5.9% at 31 December 2022).

The Group provides updates monthly to Executive Management and quarterly to the Board of Directors on the

Group’s exposures and loan portfolio quality, and detailed information on the largest CB borrowers. In addition

to these recurring updates, some point-in-time analyses are occasionally performed upon request of the

Supervisory Board’s Risk Committee to monitor exposures in specific sectors and/or single-name exposures.

Collateral valuation: Property and other security arrangements are used to mitigate credit risk across portfolios.

The main forms of collateral in CB and SME Banking 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. At 31 December 2023,

83.2% of the Group’s gross loans to customers 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 a reputable third-party asset appraisal company and submitted to the appropriate

Credit Committee alongside a loan application and a credit risk officer’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 by the Collections teams, and

the circumstances of each customer are considered separately. When a customer surpasses an agreed-upon

limit or fails to make a regular monthly payment, the Bank contacts the customer and asks her to remedy the

position. If the issue is not resolved, the Collections teams may initiate a loan restructuring process, modifying

the contractual payment terms to support customers and transfer loans back to the performing category.

For unsecured retail loans overdue for more than 30 days, restructuring alternatives are automatically offered

through digital channels. Helping a 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.

Credit risk continued

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Mitigation

continued

Recovery process is 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 a collateral sale or repossession. If the Bank and

the borrower cannot agree on acceptable terms, the collateral repossession process is initiated, which may

include court, arbitration or notary procedures.

ECL measurement: The Bank uses the ECL model of IFRS 9 to determine loss allowances, acknowledging its

forward-looking nature. The model follows a conventional approach that involves dividing the estimation of

credit losses into its components: probability of default (PD), loss given default (LGD), and exposure at default

(EAD).

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:

• Stage 1: If, at the reporting date, exposure is not credit impaired and credit risk has not increased significantly

since initial recognition. The Group recognises a credit loss allowance in an amount equal to a 12-month ECL.

• Stage 2: If, at the reporting date, exposure is not credit impaired but credit risk has increased significantly

since initial recognition. The Group recognises a credit loss allowance in an amount equal to lifetime ECL.

• Stage 3: If, at the reporting date, exposure is credit impaired. The Group recognises a loss allowance in

an amount equal to lifetime ECL, reflecting a PD of 100% for those financial instruments that are 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 individually significant and non-significant loans. The Credit Risk Management departments assess

all defaulted significant loans individually. Non-defaulted significant loans are given a collective assessment rate.

For the purpose of collective provisioning, all loans are categorised into homogenous groups (such as mortgage,

consumer and micro loans).

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 the 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 risk. Counterparty credit risk exposures are monitored daily and any breaches are escalated

in line with escalation policies to the Bank’s Executive Management. As at 31 December 2023, 95.4% 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. The risks related to these products are managed and mitigated with the same policies and controls as

loan-related risks.

Credit risk continued

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Liquidity and funding risks

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 sources at an acceptable cost.

Key drivers and

developments

The availability of funding in emerging markets is significantly influenced by the level of investor confidence. Any

factors affecting this – 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 a severe economic downturn or a period of

political, social or economic instability, a major deterioration in consumer confidence, or an erosion of trust in

financial institutions. Furthermore, following the Russian invasion of Ukraine, there was a substantial rise in the

foreign currency deposits of Russian residents in Georgia, which has created a concentration risk.

Mitigation Governance: The governance of funding and liquidity risk management at the Group level is overseen by the

ALCO, which approves the liquidity risk management framework and liquidity risk appetite, and ensures its

implementation throughout the organisation. The Group’s funding and liquidity risk governance follows a

three-lines-of-defence structure to set a clear division of responsibilities as well as an independent risk control

challenge process. The Treasury department and the Asset and Liability Management (ALM) unit are the first

line of defence, responsible for managing the Group’s liquidity and funding positions, maintaining access to

funding markets, and managing the liquidity buffer. The CFRM unit serves as the second line of defence and

is responsible for developing and maintaining policies, standards, and guidelines for funding and liquidity risk

management, and developing the risk appetite. Furthermore, the CFRM is responsible for conducting risk profile

reviews and communicating results to the ALCO.

Risk appetite: The Bank has developed a set of risk appetite statements outlining its risk tolerance and defining

its risk appetite in alignment with the principles of liquidity adequacy. The liquidity risk appetite statements are

translated into a range of metrics approved by the Bank’s Supervisory Board and reviewed at least annually,

enabling the identification of potential deviations from the desired risk profile and triggering proactive risk

management actions if these boundaries are breached.

Funding and liquidity management: 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 a set of limits on various liquidity indicators, closely

monitored by the ALCO. 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 Group conducts a comprehensive assessment of funding risk associated with the balance sheet,

encompassing both quantitative and qualitative analyses of the behavioural characteristics of its assets and

liabilities, along with an examination of funding concentration. 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 stress testing: The Bank’s ILAAP includes liquidity stress-test/scenario analysis framework to assess

the sufficiency of the Bank’s liquidity buffers to withstand potential liquidity shocks. The framework includes

idiosyncratic, systemic and combined scenarios to test the sensitivity of the Bank’s liquidity position to each of

them. Shocks are designed to include all key liquidity-related items and factors.

Monitoring and reporting: The Bank monitors a range of market and internal early warning indicators on a daily

basis for early signs of liquidity risk in the market or specific to the Bank. Furthermore, the Bank delivers bi-

weekly forecasts and monthly updates on liquidity risk to Executive Management. The liquidity risk is integrated

into the risk profile dashboard, subject to review by the Risk Committee, and is also a topic of discussion

during joint sessions of the Risk and Audit Committees. The reports included EY’s view of the judgments

made by management, compliance with international financial reporting standards and the external auditor’s

observations and assessment of the effectiveness of internal controls over financial reporting.

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Liquidity and funding risks continued

Mitigation

continued

Funding and liquidity developments: The Group maintains a diverse funding base comprising short-term sources

of funding (including Retail Banking and CB customer deposits, inter-bank borrowings and borrowings from the

NBG) and longer-term sources (including Retail Banking and CB term deposits, borrowings from international

credit institutions and long-term debt securities). At 31 December 2023 42.2%, 48.0% and 9.8% of the Group’s

long-term funding sources were deposits, amounts owned to credit institutions, and debt securities respectively.

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 a stable

funding source 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

implemented by the NBG are already more conservative than the minimum levels required under the Basel III

framework. At 31 December 2023 the Bank’s IFRS-based LCR ratio stood at 125.2% (132.4% at 31 December

2022)

and its IFRS-based NSFR ratio was 130.4% (131.9% at 31 December 2022)

Client deposits and notes are key sources of funding and the majority (61.4% as at 31 December 2023) of our

deposits come from a stable retail customer base linked to our strong retail franchise. The Bank uses LCR as a

liquidity risk management tool in accordance with the international standard, implying run-off rates based on

deposit type and concentration to properly account for potential deposit run scenario. The LCR outflow rates

imposed by the NBG are more stringent than those in international standards, corresponding to the severe

stress. At 31 December 2023, 92.0% of the Group’s client deposits and notes respectively had contractual

maturities of one year or less (90.3% at 31 December 2022), of which 64.6% and were payable on demand

(66.8% at 31 December 2022).

As of the same dates, the ratio of net loans to client deposits and notes was 98.6% and 92.3% respectively, and

the ratio of net loans to client deposits and notes and DFIs was 89.3% and 83.8% respectively.

The Bank has strong support from the international financial institutions (IFIs) and private asset/fund

managers. The Bank signed a number of new local and foreign currency long-term borrowings 2023 –

approximately US$ 115.1 million in total, part of which was drawn down during 2023. At 31 December 2023 the

Bank had EUR 50 million undrawn long-term facilities from DFIs with maturity of up to 7 years, as well as a

strong pipeline to secure resources needed for the next 12 months.

Capital risk

Capital risk is the risk of failure to deliver on business objectives, or to 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, 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, General Risk Assessment

Programme (GRAPE), CICR, and stress-test buffers). In January 2023, the NBG transitioned to IFRS-based

accounting and introduced a new Pillar 2 buffer, Credit Risk Adjustment (CRA), to account for the difference

between the NBG- and IFRS-based provision levels (higher in the former case). Fully loaded capital adequacy

requirements were introduced in March 2023. In the same month, the FSC at the NBG set the cycle-neutral

countercyclical capital buffer (base rate) at 1%. Banks are required to accumulate neutral countercyclical capital

buffer according to the following schedule: 0.25% by March 15, 2024; 0.5% by March 15, 2025; 0.75% by March 15,

2026; 1% by March 15, 2027.

The Bank maintains capital adequacy ratios, well above the minimum regulatory requirements.

Ratios

31 December

2023

Buffer

above min

requirement

Minimum

Requirement

Common Equity Tier 1 18.2% 3.7% 14.5%

Tier 1 20.0% 3.3% 16.7%

Total capital adequacy 22.1% 2.5% 19.6%

Mitigation Governance: 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 Supervisory Board to ensure prudent management and

timely actions when necessary.

1. In January 2023 the NBG transitioned to IFRS-based accounting. The methodology of calculation of LCR and NSFR ratios was changed. Ratios given for 31 December 2022

are not IFRS-based.

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Mitigation

continued

Risk appetite: The Bank has capital risk appetite presented as different types of Bank-level limits and approved

by the ALCO and the Supervisory Board. In the process of limit setting the following aspects are considered:

• expectations regarding regulatory requirements for capital adequacy;

• existing capital levels and medium-term strategic plans that might potentially impact capital adequacy;

• capital distribution policy;

• Internal Capital Adequacy Assessment Process (ICAAP) results;

• enterprise-wide risk appetite and business strategy; and

• recovery plan.

The risk profile relative to risk appetite is monitored and reported monthly to the Bank’s Executive Management

(ALCO) and quarterly to the Supervisory Board.

Capital management: The Bank maintains an actively managed, robust capital base to cover the risks inherent to

its business. 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 Bank’s ICAAP is approved by the Supervisory Board. Its main aim is to ensure the Bank maintains sufficient

capital levels to cover material risks to capital from both a normative (supervisory) and economic (internal)

perspective. The Bank conducts an internal assessment of material risks annually to evaluate the amount, type,

and distribution of capital necessary to cover these risks.

The Bank actively monitors early-warning indicators as part of the regulatory recovery plan, 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 ALCO and Supervisory Board

levels.

Capital stress testing: Capital stress testing plays a vital role in the Bank’s risk management processes by

allowing the examination of severe but plausible stress scenarios and their impact on the capital position. The

results of capital stress test analyses are used to inform various aspects of the Bank’s risk management and

capital planning processes. Specifically, these outcomes are considered in the following areas:

• Capital planning: The findings from stress testing help determine the appropriate level of capital that needs

to be maintained to withstand adverse events and meet regulatory requirements.

• Risk appetite statements: By incorporating the results of stress tests, the risk appetite statements ensure the

Bank sets appropriate boundaries and limits for managing capital-related risks.

• Capital management buffer: Capital stress test analyses assist in defining the capital management buffer.

Planning and forecasting: The Bank updates capital forecasts twice a month, based on updated business

expectations, portfolio quality forecasts, market conditions, the latest trends and anticipated changes in the

Bank’s medium-term strategy. The Group’s capital distribution plans are discussed with and approved by the

ALCO and are continuously monitored and approved by the Board of Directors. The ALM unit is responsible for

initiating and coordinating capital distribution plans and operations on capital elements, such as attraction

of capital instruments. It prepares various scenarios, assesses impact on planned capital and presents to the

ALCO/Board of Directors.

Market risk

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.

It arises from mismatches of maturity, currency or interest rates between assets and liabilities, all of which are exposed to market

fluctuations.

Key drivers and

developments

The volatility of GEL may adversely affect the Bank’s financial position. The Bank’s currency risk is calculated as

an aggregate of open positions and 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.

Capital risk continued

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Mitigation Governance: The governance of market risk management at the Bank is overseen by the ALCO and the

Supervisory Board, which approves the Bank-level market risk appetite and ensures its implementation

throughout the organisation. The Bank’s market risk governance follows a three-lines-of-defence structure to

set a clear division of responsibilities and an independent risk control process. The responsibility for identifying,

measuring, monitoring and controlling market risk lies with the Bank’s respective business units. The CFRM unit

serves as the second line of defence and is responsible for developing and maintaining policies, standards and

guidelines for market risk management, and setting the risk appetite. Furthermore, the CFRM is responsible for

conducting risk profile reviews and communicating results to the ALCO.

Risk appetite: The Bank has currency exchange and interest rate risk appetite presented as different types of

limits approved by the ALCO and the Supervisory Board. In the process of limit setting, the following aspects are

considered:

• exchange rate volatility dynamics;

• availability of currency instruments on the market;

• existing and expected levels of capital;

• historical volatility of interest rates;

• current interest rate risk profile and medium-term strategic plans that may affect the risk profile; and

• business strategy and enterprise-wide risk appetite.

The risk profile relative to risk appetite is monitored and reported monthly to the Bank’s Executive Management

and quarterly to the Supervisory Board.

Market risk management: The 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.

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.

To minimise interest rate risk, the Bank monitors its interest rate (re-pricing) gap and maintains an interest

rate margin (net interest income (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, the 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 2023, the Bank’s EVE ratio stood at 7.6%, 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. NIM sensitivity is also

analysed by currency and is limited by the Supervisory Board and ALCO levels. The Bank’s interest rate risk

measurement practices were reviewed by an independent consultant as part of the NBG initiated assessment of

the banking sector and were rated as in line with international standards.

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.

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.

Market risk continued

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Regulatory and legal risk

Regulatory and legal risk is the risk of financial loss, regulatory censure, criminal or civil enforcement action or damage to the Group’s

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 increasingly subject to 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’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 the 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 Governance: The Compliance department serves as a second line of defence and reports directly to the CRO. It is

responsible for establishing the compliance policy, methodologies and minimum standards for the entire Group,

and plays a critical role in instructing, advising, and challenging the first line of defence in managing compliance

risks. It coordinates identification, assessment, documentation, reporting and mitigation of compliance

risks associated with the Bank’s processes and products. The department is focused on promoting a strong

compliance risk culture through trainings and internal communication.

The Legal department reports directly to the Chief Legal Officer. Its principal aim is to ensure the Group’s

activities conform to applicable legislation and that possible losses from the materialisation of legal risks

are minimised. The Legal department is responsible for the application and development of mechanisms for

identifying legal risks in the Group’s activities in a timely manner, planning and implementing all necessary

actions to mitigate identified legal risks.

Compliance risk management framework: The Group maintains compliance policies and procedures enabling the

integration of compliance risk management principles across operations in line with relevant regulations. These

policies set the principles and standards for managing compliance risk 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 Internal Audit function. Adherence to the policies is mandatory for all employees and,

to increase awareness, the Bank runs a mandatory compliance training programme. Training is 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 team’s compliance training status. Reminders

are sent regularly to employees who do not complete training in a timely manner. Additionally, relevant process

owners receive quarterly Bank-wide reports and, when needed, escalate issues accordingly.

Monitoring and reporting: The Group places significant importance on measuring and managing compliance and

legal risk. This is achieved through ongoing assessment and reporting to the Audit and Risk Committees and the

Board, enabling consistent monitoring and measurement of adherence to laws and regulations. Furthermore,

compliance and legal risk management are integrated into the Group’s strategic planning cycle, ensuring a

comprehensive approach to managing these risks across the organisation.

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 Joint Audit and Risk Committee.

Related party transactions monitoring: The Group ensures related party transactions are identified, assessed

and monitored in line with the requirements of the NBG. The Board receives reports on transactions annually,

while results are communicated to the CRO on a monthly basis.

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Conduct risk

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, damaging 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 Governance: The Bank assigns various departments and divisions the responsibility for managing, mitigating and

eliminating conduct risk throughout the Bank’s interactions with clients and stakeholders. Collaboration between

the Compliance, Human Capital Management, and Legal functions is essential in establishing a cohesive

conduct risk management framework. These departments work together to support business lines and other

departments in the following ways:

• Developing policies and procedures that promote responsible conduct and compliance with applicable laws

and regulations.

• Fostering a strong culture of ethics and integrity within the organisation by conducting employee training and

promoting a values-based culture that prioritises responsible behaviour towards clients and stakeholders.

• Establishing controls and processes to monitor and manage conduct-related risks, ensuring adequate

measures are in place to prevent misconduct and enhance operational resilience.

Treating customers fairly: Our Code of Conduct and Ethics and the Customer Protection Standard cover all

stages of the product and services lifecycle. They include 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 quarterly to the

Joint Audit and Risk Committee.

Financial crime risk

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 to manage these risks. Failure to comply 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.

• 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, and

crypto-currencies – and the Group will need to implement more advanced technological solutions and

comprehensive policies to prevent and detect money laundering.

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Financial crime risk continued

Key drivers and

developments

continued

• 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.

• Recent events around the Russia-Ukraine war have raised sanctions compliance risks.

Mitigation Governance: Financial crime risk governance follows a three-lines-of-defence structure to set a clear division of

responsibilities and an independent risk control challenge process. The responsibility for identifying, measuring,

monitoring, and controlling financial crime risk lies with the respective business units within the Group that may

be exposed to the risk of financial crime, sanctions evasion, money laundering and financing of terrorism in the

course of their business activities. The AML and Sanction Compliance department, under the CRO, serves as

the second line of defence and is responsible for developing and maintaining policies, standards, guidelines and

internal compliance systems – monitoring the risks of sanctions evasion, money laundering and financing of

terrorism within the Group and overseeing the processes of risk identification, assessment, and management.

Additionally, an AML/Sanction Compliance Committee has been created for continuous control and oversight of

money laundering, terrorism financing and sanction evasion risks.

The Tax Reporting and Tax Risks Management unit, under the CFO, focuses on effective assessment and

management of tax risks and the Bank’s relationship with the tax authorities, provides practical advice and

ensures tax compliance across the Group.

Monitoring and reporting: 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.

Continuous risk management and regular reporting to the Risk Committee and the Board facilitate the

recognition and communication of potential financial crime risks. The review and assessment of both

quantitative and qualitative dashboards are conducted to gauge whether the level of financial crime risk is

managed effectively. Financial crime risks are on the regular agenda of the Risk and Audit Committees joint

sessions.

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 local

legislation, international standards (Financial Action Task Force recommendations) and international financial

sanctions programmes.

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 best practice 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: Bribery and corruption risks are integral components of our financial crime framework

and are encompassed within the client and third-party due diligence processes as well as the monitoring

measures. 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

Sanctions compliance: The Group has a robust sanctions compliance policy. It 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 by the Group as high-risk jurisdictions, meaning 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 subjected to enhanced sanctions screening and transaction monitoring. 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 at both sector 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 Know Your Customer (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 from 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 enhanced

due diligence. To manage risks associated with crypto-currency we have restricted international transactions

related to virtual assets or involving virtual asset service providers. The Group has zero tolerance towards

Russian and Belarusian clients who are involved in crypto-currency-related activities.

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Mitigation

continued

Fraud risk: To mitigate fraud risk we have implemented the following measures:

• Know Your Employee procedures including screening requirements at recruitment, employment and departure

stages of employment, providing 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.

• Communication channels to inform our customers about fraud risk.

Information security and data protection risks

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 for organisations globally – and especially those in financial services.

The Bank remains subject to attempts to compromise its information security. The external threat profile is

continuously changing, and we expect threats to increase, including potential state-sponsored cyber attacks.

Malicious actors focus on the following events:

• 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 the uninterrupted operation of its 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 Governance: Information security risk governance follows a three-lines-of-defence structure to set a clear

division of responsibilities as well as an independent risk control challenge process. The Information Security

department represents the first line of defence, following internal policies and procedures regarding information

security, and performing routine risk assessments, vulnerability scans and penetration tests to identify potential

vulnerabilities within our systems and infrastructure. In this manner, the Information Security department

prevents unauthorised access attempts and maintains real-time monitoring to promptly detect and respond to

any potential security incidents.

The Information Security Compliance and Risk Management unit serves as a second line of defence under CRO.

It conducts regular risk assessments associated with third parties and conducts regular monitoring and reporting

of identified risks to the relevant parties. The unit provides oversight, guidance, and support to the Group’s

business units, ensuring information security risks are identified, assessed and managed effectively, and monitors

compliance with internal policies and external regulations.

Risk appetite: Information security risk is measured against predefined risk appetite metrics and thresholds.

By establishing risk appetite, we aim to minimise our exposure to data and security breaches to achieve our

main strategic objectives: (i) delivering excellent customer experience; and (ii) maintaining the Group’s financial

strength.

The risk profile relative to risk appetite is monitored and reported monthly to Executive Management and

quarterly to the Supervisory Board.

Monitoring and reporting: We use key risk indicators and metrics to track the effectiveness of our information

security programme. Regular analysis of these metrics allows us to identify trends, areas for improvement and

potential risks requiring additional attention.

We provide monthly reports on information security risks and incidents to Executive Management and quarterly

to the Board of Directors. These reports offer a comprehensive overview of the Bank’s security, significant

incidents, risk mitigation efforts and the effectiveness of controls.

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.

Financial crime risk continued

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Information security and data protection risks continued

Mitigation

continued

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 imposing 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 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 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.

• 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 incidents.

Annual training is mandatory for all 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 such attacks 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.

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. 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, contributing to the automation of employee

onboarding and existing employee rotation processes and enabling the restriction of network access based on

the roles of individual users – 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, allowing us to see our network through the eyes of malicious

actors, verify our defences and security configuration, and continuously monitor and improve our defences. 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.

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.

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.

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Governance: Effective implementation of the privacy strategy requires a strong organisational structure. We

have the 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, which ensure our projects

comply with data protection legislation when they go live.

Transparency: Transparency is a core element of our privacy programme. 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.

Reporting: 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 the Supervisory Board remain up to

date on privacy matters at all times

Operational risk

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 the accurate and timely visibility of the Group’s risk profile

for our key stakeholders. The trends driving the need to transform risk management, as well as the risks arising

from the above-mentioned events, stem from multiple sources:

• Customer expectations of banking products and services will change with the emergence of new technologies

and service models, forcing 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.

Mitigation Governance: Responsibility for the management of operational risks is determined by the ‘three-lines-of-defence’

model. The first line of defence is represented by business units responsible for identification and assessment

of operational risks and establishing appropriate controls to mitigate them. The Operational Risk department

is a second line of defence responsible for oversight and risk guidance within the Group. Third line of defence is

internal audit, independently assessing operational risk and events in business processes throughout the Group.

The Operational Risk Committee is the decision-making body overseeing operational risk profile and monitoring

operational risk management programme activities. The Committee reviews key items for risk taking decisions

and monitors the follow-ups of mitigation action plans.

Risk appetite: The Bank has established an operational risk appetite to effectively manage all operational risks.

It defines the level and categories of operational risk the Bank is willing to accept in order to achieve its strategic

objectives.

The risk profile relative to risk appetite is monitored and reported monthly to Executive Management and

quarterly to the Supervisory Board.

Information security and data protection risks continued

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Mitigation

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Operational risk framework: 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 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 made available to all relevant employees through internal

channels. The operational risk framework includes: the risk and control self-assessment (RCSA) programme; key

risk indicators; operational risk event analysis; the scenario analysis programme; risk monitoring and reporting;

business continuity management programme; risk awareness; and training programmes.

Risk and control self-assessment: The RCSA aims to identify and assess operational risks in relation to business

processes and products. Analysis of business processes identifies the impact of operational risk factors,

vulnerabilities and weaknesses in existing processes, and potential threats that might have materialised in the

form of financial or reputational impact for the Bank.

For the assessment of operational risks the Group applies an approach involving a detailed study and analysis

of existing business models, procedures and guidelines regulating business processes, including controls built in

at the system levels. The inherent and residual operational risks are assessed using the following parameters:

likelihood of events; quantitative impacts; and qualitative impacts.

Identified operational risks are classified, aggregated by business lines and business processes, and registered in

the operational risk management system. Identified control functions and existing risk mitigation tools are also

classified and registered in the operational risk management system.

Scenario analysis: The Group maintains a scenario analysis programme as a separate tool to identify, analyse

and measure a range of scenarios, including low probability and high severity events – some of which could result

in severe operational losses.

Scenario analysis involves workshop meetings attended by subject matter experts including senior management,

business management and senior operational risk staff, to develop and analyse the drivers and range of

consequences of potential events. Inputs to the scenario analysis include relevant internal and external loss data,

information from self-assessments, control monitoring framework, forward-looking metrics and root-cause

analyses.

RCSA and Scenario analysis assessment techniques are based on a Loss Distribution Approach (LDA), which

aims to evaluate the potential range of financial loss impact and the likelihood of loss distribution. LDA

calculates the expected loss amount and VAR using the ‘Monte Carlo simulation’ method.

Monitoring and reporting: The Operational Risk department regularly reviews and monitors the assessments

of operational risks. Reviews of risks affecting key business processes are conducted annually and findings are

submitted in the form of reports.

The Management Board and the Operational Risk Committee regularly review and monitor the actual

operational risk profile against the agreed levels of risk tolerance and risk appetite. The Operational Risk

Management Committee monitors the risk profile to ensure appropriate actions are taken regarding breaches of

risk appetite limits.

The department reports quarterly to the Risk Committee. The risk report includes information about the current

risk profile, risk appetite limits and breaches, together with risk-taking activities and mitigation plans.

We have designed internal controls that ensure the Group has efficient and effective operations, safeguards

its assets, produces reliable financial reports and complies with applicable laws and regulations. The Group

continuously develops the control environment in business processes – including through segregation of duties,

preventive tools integrated in the systems, system of limitation and powers, restriction of user’s rights, risk

insurance, among many others.

Business resilience and continuity: The Group has established a business continuity programme appropriate for

the nature, size and complexity of our operations. The programme considers different scenarios to which the

Group may be susceptible, including system and technology failures.

• The Group performs business impact analyses and risk assessment, identifying business processes that are

critically important for the banking activity, identification of threats to business activities and risk assessment

of potential financial and reputational impacts related to significant threats.

• The Group 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 continuity and recovery plans.

The Group has established business continuity and disaster recovery plans for each critical business process,

which is a combination of procedures and arrangements aimed at ensuring retention or prompt resumption of

continuation of the Bank’s critical business processes.

The Group continuously performs impact analyses and testing of business continuity plans, training and

awareness programmes, and communication and crisis management programmes.

Operational risk continued

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Operational risk analysis: The Group has an operational risk event and loss data management process to identify

and record the operational risk of financial and non-financial events. Internal operational loss data provides

significant information for assessing the Bank’s exposure to operational risk and the effectiveness of internal

controls. Analysis of loss events can provide insight into the causes of large losses and whether control failures

are isolated or systematic.

The Bank applies the method of operational risk events and loss database analysis. The Bank maintains

comprehensive operational risk event data on all material events experienced by the Bank.

Awareness programmes: We conduct awareness campaigns and mandatory training to help 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.

Human capital risk

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 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 increased the need to adapt approaches and employee experiences to be

an attractive employer for young talent.

Given our strategic focus on digital capabilities and data/AI-based decision-making, the recruitment and

retention of qualified IT and data science professionals is one of our priorities. It remains challenging to recruit

top talent in these areas due to the scarcity of highly qualified candidates on the local market and the availability

of jobs both locally and globally. Georgia has a relatively limited talent pool which, while developing, may not keep

up with the skills required in a digital and fast-moving organisation.

Mitigation Governance: Human capital risk is identified, assessed, and managed by the Bank’s Human Capital Management

function. It establishes policies, procedures, and frameworks to guide risk management efforts and ensures

compliance with relevant laws and regulations. It also monitors and reports on human capital risks to Executive

Management and the Board.

Risk appetite: We have defined Bank-level human capital risk appetite, which is presented in a form of different

types of limits and is approved by the Supervisory Board. Our human capital risk appetite considers various

factors, including business goals, culture, and workforce dynamics. The risk profile relative to risk appetite is

monitored and reported monthly to Executive Management and quarterly to the Supervisory Board.

Monitoring and reporting: We monitor human capital risk through a series of quantitative and qualitative

indicators, including ongoing deep interviews with individual employees, Bank and team/division level eNPS,

engagement scores, internal mobility, retention, employee turnover measures. We discuss and design action

plans based on the results of different surveys and measures.

Key people risk metrics are reported quarterly to the Risk Committee and monthly to Executive Management.

Also, 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 Audit Committee.

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, which gives

talented undergraduates an 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 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. Our Job Architecture,

named as Levelling, provides a clear map of positions within the company and aligns employees accordingly.

It is the basis of internal mobility of our employees – promotions and lateral moves are guided by levelling

factors ensuring recruitment of correct candidates in accordance with required roles and competencies.

Operational risk continued

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Mitigation

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• We develop our leadership pool through various programmes and activities, including through Leadership

Coaching for senior managers in individual and group format, New Managers’ programme – a special

introductory course for employees recently appointed to managerial positions and team leads. We also ensure

professional and personal development of existing managers, conducting regular needs analysis and offering

designed leadership development programmes. Our development programmes are aligned with Performance

Management Process – setting and monitoring KPIs/KBOs, contributing to developing a feedback culture. In

2023, employees from non-managerial pool participated in this process as well. We leverage our leadership

development to mitigate risks associated with the departure or absence of well-qualified and experienced

individuals. Our succession planning process ensures necessary support of our talent pipeline for now and in

the future for key positions, including at the senior manager and executive levels.

• 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. Introducing yearly performance management system

via KPIs/KBOs at all levels, including non-managerial ones, enabled further transparency of performance-

based employee annual bonus schemes, and setting and managing clearer and properly aligned expectations.

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 plan their career moves and progression. We have forums and communication channels

enabling employee voices to be heard across the organisation, including a 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. We offer hybrid working arrangements, giving the majority of

back-office employees the flexibility to combine working from home with working from the office.

Model risk

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.

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 artificial intelligence (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.

The NBG’s regulation – Managing Risks for Data-based Statistical, Artificial Intelligence and Machine Learning

Models – sets 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 regulatory 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 (MRM) Policy defines:

• The segregation of roles and responsibilities of those involved in the model development lifecycle, including

ownership of model development, independent oversight and approval.

• Key controls with respect to data integrity, model development, validation, implementation, backtesting and

monitoring.

In 2023, as part of the Bank’s engagement with global management consulting company McKinsey & Company,

the MRM framework was revised and refined to align with best practices.

Governance: 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.

Monitoring and reporting: The Bank maintains a structured model development lifecycle including recalibration.

All significant new models or material changes to existing significant models are validated by an independent

risk function and authorised by the Chief Risk Officer. Significant model-related issues are reported to the Bank’s

Supervisory Board, and the Bank’s Executive Management is aware of major model risks.

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 and ad hoc). Model

performance monitoring is carried out by model owners and supervised by model validators, enabling prompt

action to be taken in addressing any issues related to inadequate model performance and identifying and

rectifying control deficiencies or vulnerabilities.

Human capital risk continued

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Model risk mitigation: To manage this risk, the Bank employs the following strategies:

• Refining or redeveloping models: When necessary, models are refined or redeveloped to account for changes in

market conditions, business assumptions, or processes. This ensures the models remain accurate and aligned

with the evolving landscape.

• Adjustments to model outputs: Quantitative adjustments or those based on expert opinion may be applied

to the outputs generated by the models. These help address any known limitations or biases and improve the

accuracy of the results.

• Process enhancements: The Bank may introduce enhancements to the processes in which model outputs are

used. By implementing additional controls, validation measures or complementary methodologies, the risk

levels associated with model outputs can be further limited.

By employing these mitigation measures the Bank aims to minimise the impact of model risk and ensure the

models used in its business activities provide reliable and accurate assessments and decisions.

Strategic risk

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 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 increased economic uncertainty, the emergence of global fintechs and competition in financial

services have changed stakeholder expectations, heightening the need for strategic and forward-looking risk

management.

Mitigation Strategic planning: 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.

The Group conducts an annual strategic planning process to review its performance against targets, discuss the

internal and external environment, and develop short- and medium-term strategic plans considering potential

financial and non-financial risks. This process is supported by risk appetite statements, a capital plan and a

recovery plan.

In 2024, the Group extended its investments into Armenia through the acquisition of Ameriabank. As we expand

our geographic footprint, we recognise that this introduces new emerging risks that require proactive monitoring

and mitigation. This investment remains exposed to various risks, encompassing political and economic

uncertainties, sanctions implications, foreign currency fluctuations, and regulatory challenges. These factors will

hold particular significance as we provide further disclosures in 2024, especially regarding our collaboration with

Ameriabank.

Monitoring: We conduct annual strategic review sessions involving executive and senior management.

Throughout the year, the performance against key strategic objectives as measured by KPIs is monitored and

assessed by the Executive Management quarterly. The Group takes corrective measures to mitigate risks arising

from significant variance. In addition, Executive Management holds monthly meetings to discuss the competitive

landscape and the Group’s competitive positions, including any changes versus prior periods, and any actions if

required. Key strategic areas and/or projects are periodically discussed in working groups comprising executive,

senior and middle management.

Periodic strategic challenge reviews: Our strategic objectives and/or decisions are regularly discussed with and

challenged by the Board of Directors, including during the Board’s annual strategy sessions.

Reputational risk

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 of

internal execution; failure to manage cyber and phishing cases; and a difference between the Group’s values and

public perceptions and/or opinion.

Mitigation Risk appetite: We acknowledge that reputational risk is an inherent aspect of our operating environment, with

public trust being a crucial consideration when determining the level of reputational risk the organisation is

willing to accept. We have defined Bank-level reputational risk appetite through a quantitative measure.

The risk profile relative to risk appetite is monitored and reported monthly to Executive Management and

quarterly to the Supervisory Board.

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.

Model risk continued

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continued

To protect and maintain the strength of our brand the Bank’s marketing team monitors media coverage daily.

The Bank’s legal team ensures 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 Bank

regularly tracks and measures customer satisfaction using both internal and independent 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.

To prevent inaccurate or misleading reporting that could damage the Group’s reputation by losing trust of our

stakeholders, we have a well-documented reporting process with strong controls for fairness and transparency.

Oversight from internal and external audits, as well as the Board of Directors ensures our reporting is

trustworthy.

Climate-related risk

Climate-related risk is the risk of financial loss and/or damage to the Group’s reputation as a result of the accelerating transition to a

lower-carbon economy and/or 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 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 Task Force on

Climate-Related Financial Disclosures (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 to work on a climate change law that will regulate climate-related issues and distribute

responsibilities. These strategies and regulations and their implementation may drive changes across the

Georgian economy and increase the importance of climate change mitigation and adaptation measures for

different sectors.

We recognise climate change as an emerging risk and have integrated climate-related risks, both physical and

transitional, into the overall risk management framework and decision-making processes across the Bank.

Mitigation Governance: The Bank implements climate risk governance through the Environmental and Social Impact

Committee comprising executive and senior management. 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.

The Environmental and Climate Risk Management department is a risk function that is part of the Bank’s second

line of defence. It reports progress and performance in the area of environmental, social, and climate-related risk

management to the Environmental and Social Impact Committee, and is responsible for:

• developing policies and procedures and ensuring implementation of the Bank’s environmental, social and

climate risk management policies;

• monitoring the Bank’s environmental, social, and climate risk profile and performance in relation to the Bank’s

lending activities;

• ensuring data consolidation with respect to environmental, social, and climate-related risks associated with

the Bank’s loan book;

• spreading ESG awareness throughout the Bank; and

• handling environmental, social, and climate-related communications.

Human capital risk continued

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Climate-related risks mitigation: We have integrated 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;

• identifying and addressing sector- and location-specific climate risks for our business clients, as part of loan

appraisal and origination process, as well as the 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;

• calculating Scope 3 financed emissions through the Joint Impact Model in 2023 as a potential solution;

• 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;

• identifying and reporting on transactions aligned with the NBG’s Green Taxonomy (from January 2023),

including in climate-relevant sectors;

• raising climate finance awareness across the Bank by implementing training for bankers and risk managers

from CB and MSME departments; and

facilitating climate-related disclosure. We are actively working to enhance our climate change risk management

and plan to implementing the following actions in 2024:

• assessing the materiality of climate risks on the Bank’s portfolios against selected climate change scenarios;

• enhancing the methodology on credit portfolio screening for climate-related physical and transition risks;

• enhancing the measurement approach, inputs and assumptions used for Scope 1-3 calculation;

• developing a climate risk stress-testing framework; and

• assessing the financial impacts of climate-related risks on the Bank’s financial position, financial performance

and cash-flows over the medium and long term.

Climate-related risk continued

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Going Concern statement

Viability 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 18 to 20, 150 to

169 and 22 to 24. 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 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.

Provision 31 of the 2018 UK Corporate

Governance Code requires the Board to

make a statement in the Annual Report

and Accounts regarding the viability of

the Group, including an explanation of

how they assessed the prospects of the

Group, the period of time for which they

have made the assessment and why they

consider that period to be appropriate.

In assessing the Group’s viability, the

Board considers a three-year period to

be appropriate as this period is covered

in the Group’s strategic planning and

budgeting process and carries a high

level of confidence in assessing viability.

The Board has considered the Group’s

current and forecast capital and liquidity

positions over a three-year period which

aligns to management’s 2024-2026

business plan and has evaluated the

results of stress testing and reverse stress

testing as described in this section.

In making its assessment, the Board

has considered the potential impact

of a severe but plausible scenario over

this period, each of which contained a

combination of principal risks. In addition,

the Board reviewed the results of reverse

stress testing, which involved examining

the level of disruption that may cause the

Group to fail.

The Board examined, among others, the

impact of the following risks over the

assessment period:

• Severe contraction of the economy.

• Significant 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,

and the need for capital injection in

Ameriabank.

Applying the stress testing scenarios

to the Group’s capital and liquidity did

not result in a breach of any regulatory

requirements.

The reverse stress testing scenario is

currently deemed to be implausible.

The stress 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

a temporary halt in capital 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 after

2025. 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 from 1 January 2024 to

31 December 2026.

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Annual Report 2023 Bank of Georgia Group PLC

OVERVIEW

OF FINANCIAL

RESULTS

172

Annual Report 2023 Bank of Georgia Group PLC

Overview of financial results

Income statement highlights

GEL thousands FY23 FY22 Change y-o-y

Net interest income 1,615,446 1,182,335 36.6%

Net fee and commission income 434,482 317,491 36.8%

Net foreign currency gain 365,711 466,094 -21.5%

Net other income (adjusted for one-off items) 114,735 36,092 217.9%

Operating income (adjusted for one-off items) 2,530,374 2,002,012 26.4%

Operating expenses (754,053) (641,186) 17.6%

Profit from associates 1,456 754 93.1%

Operating income before cost of risk (adjusted for one-off items) 1,777,777 1,361,580 30.6%

Cost of risk (144,064) (119,068) 21.0%

Net operating income before non-recurring items (adjusted for one-off items) 1,633,713 1,242,512 31.5%

Net non-recurring items – 1,038 -100.0%

Profit before income tax expense and one-off items 1,633,713 1,243,550 31.4%

Income tax expense (adjusted for one-off items) (258,971) (111,376) 132.5%

Profit (adjusted for one-off items) 1,374,742 1,132,174 21.4%

One-off items 22,585 311,825 -92.8%

Profit 1,397,327 1,443,999 -3.2%

Basic earnings per share 31.30 30.99 1.0%

Diluted earnings per share 30.43 30.33 0.3%

Balance sheet highlights

GEL thousands Dec-23 Dec-22 Change y-o-y

Liquid assets 9,984,238 10,367,600 -3.7%

Cash and cash equivalents

3,101,824 3,584,843 -13.5%

Amounts due from credit institutions

1,752,657 2,433,028 -28.0%

Investment securities

5,129,757 4,349,729 17.9%

Loans to customers and finance lease receivables 20,232,721 16,861,706 20.0%

Property and equipment 436,955 398,855 9.6%

All remaining assets 1,103,644 1,273,739 -13.4%

Total assets 31,757,558 28,901,900 9.9%

Client deposits and notes 20,522,739 18,261,397 12.4%

Amounts owed to credit institutions 5,156,009 5,266,653 -2.1%

Borrowings from DFIs

2,124,264 1,867,454 13.8%

Short-term loans from central banks

2,101,653 1,715,257 22.5%

Loans and deposits from commercial banks

930,092 1,683,942 -44.8%

Debt securities issued 421,359 645,968 -34.8%

All remaining liabilities 637,615 479,060 33.1%

Total liabilities 26,737,722 24,653,078 8.5%

Total equity 5,019,836 4,248,822 18.1%

Book value per share 114.62 94.07 21.8%

1. Due to the settlement of a legacy claim, the fair value revaluation of the receivable resulted in a one-off other income of GEL 22.6 for FY23. Due to the settlement of the

same legacy claim, FY22 net other income was adjusted for a one-off GEL 391.1 million. The entire legacy claim amount has already been settled. FY22 income tax expense

was adjusted for a one-off GEL 79.3 income tax expense due to an amendment to the corporate taxation model in Georgia. As a result, ROAA and ROAE were adjusted for

both one-off other income and one-off income tax expense where applicable and Cost:income ratios were adjusted for one-off other income where applicable. Comparisons

given in text are with adjusted figures of respective periods.

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Strategic Report Governance Financial Statements Additional Information

Key ratios

FY23 FY22

ROAA (adjusted for one-off items) 4.7% 4.4%

ROAE (adjusted for one-off items) 29.9% 32.4%

Reported ROAE 30.4% 41.4%

Net interest margin 6.5% 5.4%

Loan yield 12.5% 11.5%

Liquid assets yield 4.7% 4.3%

Cost of funds 4.7% 4.9%

Cost of client deposits and notes 4.0% 3.6%

Cost of amounts owed to credit Institutions 8.0% 8.9%

Cost of debt securities issued 8.2% 7.1%

Cost:income ratio (adjusted for one-off items) 29.8% 32.0%

Reported cost:income ratio 29.5% 26.8%

NPLs to gross loans 2.3% 2.7%

NPL coverage ratio 69.2% 66.4%

NPL coverage ratio adjusted for the discounted value of collateral 117.6% 128.9%

Cost of credit risk ratio 0.7% 0.8%

NBG (Basel III) CET1 capital adequacy ratio N/A 14.7%

Minimum regulatory requirement

N/A 11.6%

NBG (Basel III) Tier 1 capital adequacy ratio N/A 16.7%

Minimum regulatory requirement

N/A 13.8%

NBG (Basel III) Total capital adequacy ratio N/A 19.8%

Minimum regulatory requirement

N/A 17.2%

IFRS-based NBG (Basel III) CET1 capital adequacy ratio 18.2% N/A

Minimum regulatory requirement

14.5% N/A

IFRS-based NBG (Basel III) Tier 1 capital adequacy ratio 20.0% N/A

Minimum regulatory requirement

16.7% N/A

IFRS-based NBG (Basel III) Total capital adequacy ratio 22.1% N/A

Minimum regulatory requirement

19.6% N/A

174

Annual Report 2023 Bank of Georgia Group PLC

Overview of financial results continued

Financial Review

Operating income

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Interest income 2,748,261 2,256,881 21.8%

Interest expense (1,132,815) (1,074,546) 5.4%

Net interest income 1,615,446 1,182,335 36.6%

Fee and commission income 707,765 559,465 26.5%

Fee and commission expense (273,283) (241,974) 12.9%

Net fee and commission income 434,482 317,491 36.8%

Net foreign currency gain 365,711 466,094 -21.5%

Net other income (adjusted for one-off items) 114,735 36,092 217.9%

Operating income (adjusted for one-off items) 2,530,374 2,002,012 26.4%

Net interest margin 6.5% 5.4%

Average interest-earning assets 24,967,791 21,765,305 14.7%

Average interest-bearing liabilities 24,008,840 21,865,374 9.8%

Average net loans and finance lease receivables 18,193,535 16,213,098 12.2%

Average net loans and finance lease receivables, GEL 9,698,415 8,009,664 21.1%

Average net loans and finance lease receivables, FC 8,495,120 8,203,434 3.6%

Average client deposits and notes 19,813,930 15,876,171 24.8%

Average client deposits and notes, GEL 8,554,724 6,172,866 38.6%

Average client deposits and notes, FC 11,259,206 9,703,305 16.0%

Average liquid assets 9,474,612 8,178,417 15.8%

Average liquid assets, GEL 3,419,120 3,305,624 3.4%

Average liquid assets, FC 6,055,492 4,872,793 24.3%

Liquid assets yield

4.7% 4.3%

Liquid assets yield, GEL

8.4% 8.9%

Liquid assets yield, FC

2.6% 1.0%

Loan yield

12.5% 11.5%

Loan yield, GEL

15.6% 15.9%

Loan yield, FC

8.9% 7.2%

Cost of funds

4.7% 4.9%

Cost of funds, GEL

8.8% 9.4%

Cost of funds, FC

1.7% 1.8%

Cost of client deposits and notes

4.0% 3.6%

Cost of client deposits and notes, GEL

8.4% 8.3%

Cost of client deposits and notes, FC

0.7% 0.6%

Cost: income ratio (adjusted for one-off items) 29.8% 32.0%

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Net interest income

• Interest income amounted to GEL 2,748.3 million, up 21.8% y-o-y. The y-o-y increase in interest income was mostly attributable

to increased loan portfolio coupled with higher loan yield (up 100 bps y-o-y in FY23, on the back of increasing rates in foreign

currency).

• Interest expense amounted to GEL 1,132.8 million, up 5.4% y-o-y. The main driver of increased interest expense was a significant

increase in deposit portfolio coupled with a 40 bps increase in cost of deposits, partly offset by reduced interest expense on

amounts owed to credit institutions.

• Net interest margin stood at 6.5% (up 110 bps y-o-y).

Net non-interest income

• Net fee and commission income amounted to GEL 434.5 million, up 36.8% y-o-y, mainly due to settlement operations and

advisory services.

• Net foreign currency (FX) gain has broadly normalised, following last year’s higher activity levels, and amounted to GEL 365.7

million (down 21.5% y-o-y).

• Net other income (adjusted for a one-off GEL 22.6 million other income) was GEL 114.7 million, up 3.2x y-o-y, driven by the

significant net gains on the sale of repossessed assets booked in the second and the fourth quarters of 2023.

Overall, the Group generated operating income (adjusted for one-off other income) of GEL 2,530.4 million, up 26.4% y-o-y, driven by

strong income generation across core revenue lines, partly offset by lower net foreign currency gains reflecting a normalising trend.

Operating expenses, cost of risk, profit

GEL thousands FY23 FY22 Change y-o-y

Salaries and other employee benefits (419,454) (362,019) 15.9%

Administrative expenses (205,368) (164,450) 24.9%

Depreciation, amortisation and impairment (124,723) (111,089) 12.3%

Other operating expenses (4,508) (3,628) 24.3%

Operating expenses (754,053) (641,186) 17.6%

Profit from associates 1,456 754 93.1%

Operating income before cost of risk (adjusted for one-off items) 1,777,777 1,361,580 30.6%

Expected credit loss on loans to customers (124,298) (128,678) -3.4%

Expected credit loss on finance lease receivables (2,762) (3,208) -13.9%

Other expected credit loss and impairment charge on other assets and provisions (17,004) 12,818 NMF

Cost of risk (144,064) (119,068) 21.0%

Net operating income before non-recurring items (adjusted for one-off items) 1,633,713 1,242,512 31.5%

Net non-recurring items – 1,038 -100.0%

Profit before income tax expense and one-off items 1,633,713 1,243,550 31.4%

Income tax expense (adjusted for one-off items) (258,971) (111,376) 132.5%

Profit (adjusted for one-off items) 1,374,742 1,132,174 21.4%

One-off other income 22,585 391,100 -94.2%

One-off income tax expense – (79,275) -100.0%

Profit 1,397,327 1,443,999 -3.2%

Operating expenses and efficiency

• Operating expenses amounted to GEL 754.1 million (up 17.6% y-o-y). The rise in operating expenses was primarily related to

overall business growth and ongoing investments in strategic areas. Additionally, in the fourth quarter of 2023, the Group

incurred expenses related to the acquisition of Ameriabank as well as the consulting projects in IT and several other business

areas (totalling GEL 10.5 million).

• For the full year of 2023, the Group delivered positive operating leverage, with the cost:income ratio at 29.8% versus 32.0% for

the full year of 2022.

Cost of risk

• The Group maintained a healthy loan portfolio, with the cost of credit risk ratio of 0.7% in FY23 (0.8% in FY22).

Profitability

• The Group’s profit (adjusted for a one-off) was GEL 1,374.7 million (up 21.4% y-o-y).

• ROAE (adjusted for a one-off) was 29.9% (32.4% in FY22).

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Overview of financial results continued

Balance sheet highlights

GEL thousands Dec-23 Dec-22 Change y-o-y

Liquid assets 9,984,238 10,367,600 -3.7%

Liquid assets, GEL 4,113,597 3,461,218 18.8%

Liquid assets, FC 5,870,641 6,906,382 -15.0%

Net loans and finance lease receivables 20,232,721 16,861,706 20.0%

Net loans and finance lease receivables, GEL 10,838,243 8,854,286 22.4%

Net loans and finance lease receivables, FC 9,394,478 8,007,420 17.3%

Client deposits and notes 20,522,739 18,261,397 12.4%

Client deposits and notes, GEL 8,829,820 6,692,834 31.9%

Client deposits and notes, FC 11,692,919 11,568,563 1.1%

Amounts owed to credit institutions 5,156,009 5,266,653 -2.1%

Borrowings from DFIs 2,124,264 1,867,454 13.8%

Short-term loans from central banks 2,101,653 1,715,257 22.5%

Loans and deposits from commercial banks 930,092 1,683,942 -44.8%

Debt securities issued 421,359 645,968 -34.8%

Risk-weighted assets (JSC Bank of Georgia standalone) 23,061,905 20,279,424 13.7%

Loan book

• Net loans and finance lease receivables amounted to GEL 20,232.7 million at 31 December 2023, up 20.0% y-o-y in nominal terms.

Growth on a constant-currency basis was 19.6% y-o-y. On a constant currency basis, each segment recorded a strong growth of

loan book: Retail Banking up 16.2% y-o-y, SME Banking up 11.4%, and Corporate and Investment Banking up 30.5% y-o-y.

• The NPLs to gross loans ratio reduced to 2.3% as at 31 December 2023 (down 40 bps y-o-y).

• The positive asset quality trend is reflected in improved Stage 3 loans to gross loans ratio to 2.5% as at 31 December 2023

compared with 3.4% as at 31 December 2022.

Non-performing loans

GEL thousands, unless otherwise noted Dec-23 Dec-22 Change y-o-y

NPLs 467,656 471,577 -0.8%

NPLs to gross loans 2.3% 2.7%

NPLs to gross loans, Retail Banking 1.9% 2.1%

NPLs to gross loans, SME Banking 3.6% 3.2%

NPLs to gross loans, Corporate and Investment Banking 1.7% 3.4%

NPL coverage ratio 69.2% 66.4%

NPL coverage ratio adjusted for the discounted value of collateral 117.6% 128.9%

Stage 3 ratio 2.5% 3.4%

Deposits

• Client deposits and notes amounted to GEL 20,522.7 million as at 31 December 2023 (up 12.4% y-o-y). On a constant currency

basis, deposits increased by 12.2% y-o-y. The y-o-y growth was driven by both current/demand and time deposits.

Liquidity position

• Bank of Georgia continues to operate with comfortable levels of liquidity. At 31 December 2023, the Bank’s IFRS-based liquidity

coverage ratio (LCR) stood at 125.2% (132.4% at 31 December 2022), above the minimum requirement of 100%

. The net stable

funding ratio (NSFR) also stood at a high level of 130.4% at 31 December 2023 (131.9% at 31 December 2022). The loan-to-deposit

ratio increased to 98.6% at 31 December 2023 versus 92.3% at 31 December 2022.

Capital position

• The Bank continues to operate with robust capital adequacy levels. At 31 December 2023, the Bank’s Basel III CET1, Tier 1 and

Total capital ratios stood at 18.2%, 20.0%, and 22.1%, respectively, all comfortably above the minimum requirements of 14.5%,

16.7% and 19.6%, respectively.

1. In January 2023, the NBG transitioned to IFRS-based accounting. The LCR and NSFR figures for 31 December 2022 are not IFRS-based.

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Segment results

In the first quarter of 2023 we split the SME Banking segment from Retail Banking and transferred the majority of the Micro

portfolio, where customers had business-related needs, to SME Banking. The remaining Micro portfolio has been transferred to Mass

Retail. The SME segment has grown significantly over the past few years. In addition, the value proposition for business clients has

been different from the value proposition for retail customers, leading to our decision to change the segmentation. The comparative

figures have been restated accordingly to reflect this change.

Retail Banking

Income statement highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Interest income 1,323,069 1,166,265 13.4%

Interest expense (532,439) (601,090) -11.4%

Net interest income 790,630 565,175 39.9%

Net fee and commission income 302,555 221,495 36.6%

Net foreign currency gain 197,379 234,425 -15.8%

Net other income 18,471 18,898 -2.3%

Operating income 1,309,035 1,039,993 25.9%

Salaries and other employee benefits (235,601) (193,730) 21.6%

Administrative expenses (133,419) (104,789) 27.3%

Depreciation, amortisation and impairment (97,938) (86,546) 13.2%

Other operating expenses (2,897) (2,082) 39.1%

Operating expenses (469,855) (387,147) 21.4%

Profit from associates 1,391 700 98.7%

Operating income before cost of risk 840,571 653,546 28.6%

Cost of risk (83,847) (164,099) -48.9%

Profit before non-recurring items and income tax 756,724 489,447 54.6%

Net non-recurring items – 1,241 -100.0%

Profit before income tax expense and one-off items 756,724 490,688 54.2%

Income tax expense (adjusted for one-off items) (121,126) (43,342) 179.5%

Profit (adjusted for one-off items) 635,598 447,346 42.1%

One-off income tax expense – (33,147) -100.0%

Profit 635,598 414,199 53.5%

Balance sheet highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Net loans and finance lease receivables 8,502,529 7,304,874 16.4%

Net loans and finance lease receivables, GEL 6,547,120 5,307,288 23.4%

Net loans and finance lease receivables, FC 1,955,409 1,997,586 -2.1%

Client deposits and notes 12,597,938 10,923,787 15.3%

Client deposits and notes, GEL 4,115,260 2,863,880 43.7%

Client deposits and notes, FC 8,482,678 8,059,907 5.2%

of which:

Time deposits 6,528,765 5,329,886 22.5%

Time deposits, GEL 2,562,840 1,801,029 42.3%

Time deposits, FC 3,965,925 3,528,857 12.4%

Current accounts and demand deposits 6,069,173 5,593,901 8.5%

Current accounts and demand deposits, GEL 1,552,420 1,062,851 46.1%

Current accounts and demand deposits, FC 4,516,753 4,531,050 -0.3%

Assets under management 2,486,547 1,953,970 27.3%

1. In ‘Segment results’, loan and deposit portfolios are given for JSC Bank of Georgia standalone.

2. FY22 income tax expense was adjusted for a one-off GEL 33.1 income tax expense due to an amendment to the corporate taxation model in Georgia. As a result, ROAE was

adjusted for this one-off item. Comparisons given in text are with adjusted figures of respective periods. You can see the unadjusted ROAE at the bottom of ‘Key Ratios’

table.

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Overview of financial results continued

Key ratios

GEL thousands, unless otherwise noted FY23 FY22

ROAE (adjusted for one-off items) 39.6% 31.7%

Net interest margin 6.0% 5.0%

Loan yield 14.1% 13.7%

Loan yield, GEL 16.6% 17.0%

Loan yield, FC 6.4% 5.9%

Cost of funds 4.8% 5.9%

Cost of client deposits and notes 3.0% 2.7%

Cost of client deposits and notes, GEL 8.2% 8.5%

Cost of client deposits and notes, FC 0.8% 0.6%

Cost of time deposits 5.1% 4.3%

Cost of time deposits, GEL 11.2% 11.2%

Cost of time deposits, FC 1.5% 1.0%

Cost of current accounts and demand deposits 0.8% 0.6%

Cost of current accounts and demand deposits, GEL 2.8% 2.8%

Cost of current accounts and demand deposits, FC 0.2% 0.1%

Cost: income ratio 35.9% 37.2%

Cost of credit risk ratio 1.0% 2.2%

ROAE (reported) 39.6% 29.3%

Performance highlights

• Operating income amounted to GEL 1,309.0 million (up 25.9% y-o-y). The y-o-y increase was driven by growth in both net interest

income and net fee and commission income, partly offset by the normalisation of net foreign currency gains and lower net other

income.

• Operating expenses amounted to GEL 469.9 million (up 21.4% y-o-y). The y-o-y increase in operating expenses was driven by

business growth and continuing investments in strategic areas. In addition, the growth in operating expenses was partly due to

the allocated costs with respect to the acquisition of Ameriabank and ongoing business consulting projects.

• The cost of credit risk ratio improved significantly to 1.0% (2.2% in FY22).

• Overall, Retail Banking generated a profit of GEL 635.6 million (up 42.1% y-o-y).

• Retail Banking’s net loans and finance lease receivables stood at GEL 8,502.5 million (up 16.4% y-o-y) as at 31 December 2023.

On a constant currency basis, the loan book increased by 16.2% y-o-y. Both the y-o-y and the q-o-q growth was mainly driven by

consumer loans, followed by mortgage loans.

• 77.0% of the loan book was denominated in GEL at 31 December 2023 versus 72.7% at 31 December 2022.

• Client deposits and notes stood at GEL 12,597.9 million at 31 December 2023 (up 15.3% y-o-y). On a constant currency basis,

deposits increased by 15.1% y-o-y. The strong y-o-y increase in deposits was mainly driven by time deposits, followed by current

accounts and demand deposits.

• The share of GEL-denominated client deposits increased to 32.7% as at 31 December 2023 versus 26.2% at 31 December 2022.

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SME Banking

Income statement highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Interest income 553,281 467,707 18.3%

Interest expense (297,268) (264,914) 12.2%

Net interest income 256,013 202,793 26.2%

Net fee and commission income 40,574 34,792 16.6%

Net foreign currency gain 38,357 43,183 -11.2%

Net other income 6,049 2,503 141.7%

Operating income 340,993 283,271 20.4%

Salaries and other employee benefits (61,641) (57,800) 6.6%

Administrative expenses (25,523) (22,022) 15.9%

Depreciation, amortisation and impairment (12,206) (13,193) -7.5%

Other operating expenses (410) (492) -16.7%

Operating expenses (99,780) (93,507) 6.7%

Profit from associates 65 54 20.4%

Operating income before cost of risk 241,278 189,818 27.1%

Cost of risk (32,316) (8,603) NMF

Profit before income tax expense and one-off items 208,962 181,215 15.3%

Income tax expense (adjusted for one-off items) (34,094) (16,310)

109.0%

Profit adjusted for one-off items 174,868 164,905 6.0%

One-off income tax expense – (12,475) -100.0%

Profit 174,868 152,430 14.7%

Balance sheet highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Net loans and finance lease receivables 4,550,840 4,064,034 12.0%

Net loans and finance lease receivables, GEL 2,570,051 2,208,103 16.4%

Net loans and finance lease receivables, FC 1,980,789 1,855,931 6.7%

Client deposits and notes 1,876,967 1,508,932 24.4%

Client deposits and notes, GEL 1,197,070 852,922 40.3%

Client deposits and notes, FC 679,897 656,010 3.6%

of which:

Time deposits 84,245 65,626 28.4%

Time deposits, GEL 61,408 41,930 46.5%

Time deposits, FC 22,837 23,696 -3.6%

Current accounts and demand deposits 1,792,722 1,443,306 24.2%

Current accounts and demand deposits, GEL 1,135,662 810,992 40.0%

Current accounts and demand deposits, FC 657,060 632,314 3.9%

1. FY22 income tax expense was adjusted for a one-off GEL 12.5 income tax expense due to an amendment to the corporate taxation model in Georgia. As a result, ROAE was

adjusted for this one-off item. Comparisons given in text are with adjusted figures of respective periods. You can see the unadjusted ROAE at the bottom of ‘Key ratios’

table.

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Overview of financial results continued

Key ratios

GEL thousands, unless otherwise noted FY23 FY22

ROAE (adjusted for one-off items) 22.6% 24.0%

Net interest margin 4.9% 4.3%

Loan yield 11.2% 10.0%

Loan yield, GEL 13.8% 13.5%

Loan yield, FC 7.9% 6.4%

Cost of funds 6.4% 6.1%

Cost of client deposits and notes 1.7% 1.0%

Cost of client deposits and notes, GEL 3.1% 2.4%

Cost of client deposits and notes, FC -0.4% -0.7%

Cost of time deposits 7.7% 6.4%

Cost of time deposits, GEL 10.8% 10.8%

Cost of time deposits, FC 1.2% 0.8%

Cost of current accounts and demand deposits 1.4% 0.7%

Cost of current accounts and demand deposits, GEL 2.7% 1.9%

Cost of current accounts and demand deposits, FC -0.5% -0.7%

Cost:income ratio 29.3% 33.0%

Cost of credit risk ratio 0.7% 0.1%

ROAE (reported) 22.6% 22.2%

Performance highlights

• Operating income amounted to GEL 341.0 million (up 20.4% y-o-y). The y-o-y increase was mainly driven by strong net interest

income generation, partly offset by the reduced net foreign currency gain.

• Operating expenses were GEL 99.8 million, up 6.7% y-o-y.

• The cost of credit risk ratio stood at 0.7% (0.1% in FY22).

• Overall, SME Banking generated a profit of GEL 174.9 million (up 6.0% y-o-y).

• Net loans and finance receivables stood at GEL 4,550.8 million at 31 December 2023, up 12.0% y-o-y. On a constant currency

basis, the loan book increased by 11.4% y-o-y.

• GEL-denominated loans remained broadly stable at 56.5% of total SME Banking loans at 31 December 2023, compared with

54.3% at 31 December 2022.

• Client deposits and notes amounted to GEL 1,877.0 million at 31 December 2023, up 24.4% y-o-y. On a constant currency basis,

deposits increased by 24.1% y-o-y.

• GEL-denominated deposits represented 63.8% of total SME Banking deposits at 31 December 2023, compared with 56.5% at

31 December 2022.

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Strategic Report Governance Financial Statements Additional Information

Corporate and Investment Banking (CIB)

Income statement highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Interest income 803,408 554,135 45.0%

Interest expense (283,171) (177,364) 59.7%

Net interest income 520,237 376,771 38.1%

Net fee and commission income 83,718 49,543 69.0%

Net foreign currency gain 88,369 123,993 -28.7%

Net other income (adjusted for one-off items) 89,035 14,299 522.7%

Operating income (adjusted for one-off items) 781,359 564,606 38.4%

Salaries and other employee benefits (86,237) (80,978) 6.5%

Administrative expenses (27,217) (18,079) 50.5%

Depreciation, amortisation and impairment (5,319) (5,292) 0.5%

Other operating expenses (624) (1,283) -51.4%

Operating expenses (119,397) (105,632) 13.0%

Profit from associates – – –

Operating income before cost of risk (adjusted for one-off items) 661,962 458,974 44.2%

Cost of risk (30,549) 79,461 NMF

Profit before non-recurring items and income tax (adjusted for one-off items) 631,413 538,435 17.3%

Net non-recurring items – – –

Profit before income tax expense and one-off items 631,413 538,435 17.3%

Income tax expense (adjusted for one-off items) (95,274) (44,040) 116.3%

Profit adjusted for one-off items 536,139 494,395 8.4%

One-off other income

22,585 391,100 -94.2%

One-off income tax expense – (33,653) -100.0%

Profit 558,724 851,842 -34.4%

Balance sheet highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Net loans and finance lease receivables 6,463,690 4,926,264 31.2%

Net loans and finance lease receivables, GEL 1,714,253 1,321,797 29.7%

Net loans and finance lease receivables, FC 4,749,437 3,604,467 31.8%

Client deposits and notes 5,256,172 4,824,646 8.9%

Client deposits and notes, GEL 3,734,682 3,021,179 23.6%

Client deposits and notes, FC 1,521,490 1,803,467 -15.6%

of which:

Time deposits 1,416,400 1,520,701 -6.9%

Time deposits, GEL 1,295,713 1,412,130 -8.2%

Time deposits, FC 120,687 108,571 11.2%

Current accounts and demand deposits 3,839,772 3,303,945 16.2%

Current accounts and demand deposits, GEL 2,438,969 1,609,049 51.6%

Current accounts and demand deposits, FC 1,400,803 1,694,896 -17.4%

Letters of credit and guarantees (off-balance sheet exposures) 1,973,156 1,812,231 8.9%

Assets under management 2,193,090 1,480,894 48.1%

1. Due to the settlement of a legacy claim, the fair value revaluation of the receivable resulted in a one-off other income of GEL 22.6 million posted in FY23. Net other income

was adjusted for these one-offs. Due to the settlement of the same legacy claim, FY22 net other income was adjusted for a one-off GEL 391.1 million. FY22 income tax

expense was adjusted for a one-off GEL 33.7 income tax expense due to an amendment to the corporate taxation model in Georgia. As a result, ROAE was adjusted for

one-off other income and one-off tax expense where applicable and Cost:income ratios were adjusted for one-off other income where applicable. Comparisons given in text

are with adjusted figures of respective periods. You can see the unadjusted ROAE and unadjusted cost: income ratio at the bottom of the ‘Key ratios’ table. You can see the

unadjusted ROAE and unadjusted cost:income ratio at the bottom of the ‘Key ratios’ table.

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Annual Report 2023 Bank of Georgia Group PLC

Overview of financial results continued

Key ratios

GEL thousands, unless otherwise noted FY23 FY22

ROAE (adjusted for one-off items) 26.0% 39.1%

Net interest margin 6.2% 5.6%

Loan yield 11.5% 9.3%

Loan yield, GEL 14.7% 14.7%

Loan yield, FC 10.3% 7.7%

Cost of funds 4.1% 2.6%

Cost of client deposits and notes 7.2% 6.2%

Cost of client deposits and notes, GEL 9.8% 9.4%

Cost of client deposits and notes, FC 0.3% -0.1%

Cost of time deposits 10.3% 10.4%

Cost of time deposits, GEL 10.7% 11.1%

Cost of time deposits, FC 2.2% 1.1%

Cost of current accounts and demand deposits 5.5% 3.9%

Cost of current accounts and demand deposits, GEL 9.0% 7.7%

Cost of current accounts and demand deposits, FC 0.1% -0.2%

Cost:income ratio (adjusted for one-off items) 15.3% 18.7%

Cost of credit risk ratio 0.4% -1.0%

Concentration of top ten clients 7.3% 5.9%

ROAE (reported) 27.1% 67.4%

Cost:income (reported) 14.9% 11.1%

Performance highlights

• Operating income (adjusted for a one-off GEL 22.6 million other income) amounted to GEL 781.4 million, up 38.4%, driven by

significant growth in every core revenue line, except for the net foreign currency gain that broadly normalised in 2023.

• Operating expenses were up 13.0% y-o-y to GEL 119.4 million.

• The cost of credit risk ratio was 0.4% in FY23 versus -1.0% in FY22.

• Overall, Corporate and Investment Banking posted a profit (adjusted for a one-off GEL 1.5 million net other income) of GEL 536.1

million, up 8.4% y-o-y.

• Net loans and finance receivables stood at GEL 6,463.7 million at 31 December 2023 (up 31.2% y-o-y). On a constant currency

basis, the loan book increased by 30.5% y-o-y.

• GEL-denominated loans represented 26.5% of total Corporate and Investment Banking loans at 31 December 2023, compared

with 26.8% at 31 December 2022.

• The concentration of top ten Corporate and Investment Banking clients was 7.3% of total gross loans at 31 December 2023 (5.9%

at 31 December 2022).

• Client deposits and notes amounted to GEL 5,256.2 million at 31 December 2023 (up 8.9% y-o-y). On a constant currency basis,

deposits increased by 9.0% y-o-y.

• GEL-denominated deposits stood at 71.1% of total Corporate and Investment Banking deposits at 31 December 2023, compared

with 62.6% at 31 December 2022.

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Strategic Report Governance Financial Statements Additional Information

Belarusky Narodny Bank (BNB)

Income statement highlights

GEL thousands, unless otherwise noted FY23 FY22 Change y-o-y

Net interest income 48,486 37,511 29.3%

Net fee and commission income 7,379 11,500 -35.8%

Net foreign currency gain 41,606 64,493 -35.5%

Net other income 2,009 1,170 71.7%

Operating income 99,480 114,674 -13.2%

Operating expenses (65,514) (55,432) 18.2%

Operating income before cost of risk 33,966 59,242 -42.7%

Cost of risk 2,648 (25,827) NMF

Net non-recurring items – (203) -100.0%

Profit before income tax expense 36,614 33,212 10.2%

Income tax expense (8,477) (7,684) 10.3%

Profit 28,137 25,528 10.2%

Balance sheet highlights

GEL thousands, unless otherwise noted Dec-23 Dec-22 Change y-o-y

Cash and cash equivalents 407,456 640,018 -36.3%

Amounts due from credit institutions 18,759 74,778 -74.9%

Investment securities 70,411 60,361 16.6%

Loans to customers and finance lease receivables 716,905 538,166 33.2%

Other assets 66,636 68,043 -2.1%

Total assets 1,280,167 1,381,366 -7.3%

Client deposits and notes 1,048,512 1,034,124 1.4%

Amounts owed to credit institutions 50,852 172,389 -70.5%

Debt securities issued 6,810 2,745 148.1%

Other liabilities 25,268 20,670 22.2%

Total liabilities 1,131,442 1,229,928 -8.0%

Total equity 148,725 151,438 -1.8%

Total liabilities and equity 1,280,167 1,381,366 -7.3%

During 2023 BNB continued to be focused on its core domestic retail and small business customers.

During a few months of 2023, as a result of the ongoing Russia-Ukraine war, the NBG’s official exchange rate of GEL versus the

Belarusian Ruble (BYN) was not updated due to inactivity on the source platform. On 3 October 2023, the NBG’s official exchange

rate of GEL versus the BYN was reinstated, resulting in a 23.3% depreciation of BYN against GEL. BNB’s performance was adversely

affected by this change in exchange rate.

BNB’s capital ratios, calculated in accordance with the National Bank of the Republic of Belarus’ standards, were above the

minimum requirements at 31 December 2023 – Tier 1 capital adequacy ratio at 9.9% (minimum requirement of 7.0%) and Total

capital adequacy ratio at 13.8% (minimum requirement of 12.5%).

184

Annual Report 2023 Bank of Georgia Group PLC

GOVERNANCE

185

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Governance at a glance

2023 key highlights:

Evaluated Board effectiveness

An externally facilitated Board effectiveness and performance

evaluation was carried out during the year, in accordance with

the requirements of the 2018 UK Corporate Governance Code.

Clare Chalmers Ltd, a specialist consultancy firm, was engaged

to undertake the effectiveness evaluation of the Board, its

Committees, individual Directors and the Chair of the Board.

Further details of the process and its outcome can be found on

page 196.

Progressed succession planning

During the year, succession planning has been a key topic

of discussion. Cecil Quillen was appointed as Chair of the

Remuneration Committee with effect from 1 January 2023. We

also engaged Korn Ferry, an external recruitment consultant,

to assist with the appointment of Andrew McIntyre as a new

Non-executive Director and aid with the future succession of

the succession of the Audit Chair.

Further information on our work on succession planning can be

found on pages 195 and 207 to 209.

Enhanced ESG policies

We remain committed to ensuring a robust ESG strategy and

during the year approved two additional ESG policies: the

Responsible Supply Chain Policy and the Environmental Policy.

Further information on our work on ESG can be found on

pages 60 to 142.

Listened to stakeholders

Board members have undertaken numerous engagement

opportunities with our employees and stakeholders, including:

• AGM held on 19 May 2023

• Multiple investor roadshows

• Three Employee Voice meetings

• Meetings with the National Bank of Georgia (‘NBG’) and

other local stakeholders.

Further details can be found on pages 52 to 59, 189, 252 and

210.

Reviewed diversity

We remain committed to ensuring the Company is an inclusive

organisation reflecting all aspects of diversity. During the year

we reviewed and confirmed the diversity within the Board

membership, including gender and ethnicity as well as broader

characteristics.

Further details on our commitment can be found on pages 186

to 187, 194 and 210 to 212.

186

Annual Report 2023 Bank of Georgia Group PLC

67%

33%

27% 67%

11%

67%

73% 33%

11%

45-4940-44 50-54 55-59 60 -64

Governance at a glance continued

2023 in numbers:

We recognise that a Board consisting of individuals with a wide range of

backgrounds and experiences will contribute to the Company’s long-term success.

Board diversity

Composition of the Board

As at 31 December 2023

Gender diversity of the Board

Gender diversity of the Executive

Management Team

Age diversity of the Board

Ethnic diversity of the Board

Chairman (independent upon appointment) - 1

Senior Independent Non-executive Director – 1

Independent Non-executive Directors – 6

Executive Directors – 1

Male – 6

Female – 3

Male – 11

Female – 4

Other – 3

White – 6

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Strategic Report Governance Financial Statements Additional Information

Board independence

Board meeting attendance

Board skills and experience

Details of Board attendance in 2023 are as follows:

Members No. of meetings attended

Mel Carvill* 8/8 scheduled and 4/4 ad hoc

Alasdair Breach* 8/8 scheduled and 4/4 ad hoc

Tamaz Georgadze* 8/8 scheduled and 4/4 ad hoc

Archil Gachechiladze 8/8 scheduled and 4/4 ad hoc

Hanna Loikkanen* 8/8 scheduled and 4/4 ad hoc

Mariam Megvinetukhutsesi* 8/8 scheduled and 4/4 ad hoc

Véronique McCarroll* 8/8 scheduled and 4/4 ad hoc

Jonathan Muir* 8/8 scheduled and 4/4 ad hoc

Cecil Quillen* 8/8 scheduled and 4/4 ad hoc

* Denotes Independent Director.

Director tenure as at 31 December 2023Board independence as at 31 December 2023

Non-independent – 1

Independent – 8

< 1 year – 0

1 year – 1

2 years – 1

3 years – 0

4 years – 1

5 years+ – 6

The Board continues to have a strong mix of experienced individuals able to provide an external perspective on the business and

constructive challenge. The below skills matrix sets out the expertise of the Non-executive Directors:

UK corporate governance/listed plc

Corporate memory

Banking sector knowledge

Regulatory experience

Sustainability/ESG

Digital technology

Financial and accounting

Risk management

Information technology and cybersecurity

Strategy, capital markets, investor management

Other stakeholder management

HR, talent management, culture management

UK executive remuneration

188

Annual Report 2023 Bank of Georgia Group PLC

“Strategic leadership and

stakeholder engagement have

been key areas of focus to further

support the long-term sustainable

growth of the Group.”

Chairman’s introduction

Dear Shareholders,

On behalf of the Board, I am pleased

to present the Company’s Governance

report for the year ended 31 December

2023.

Corporate governance

We remain committed to upholding high

standards of corporate governance.

We believe maintaining compliance

with the Principles of the UK Corporate

Governance Code 2018 (the ‘Code’), along

with our openness to evolve and improve

our governance framework, contributes

to the long-term success of the Group. In

addition, the Bank complies with the NBG

Corporate Governance Code to ensure

that the highest standards are applied.

Our robust framework of governance, risk

and internal controls supported by the

knowledge, skills and experience of the

Directors and the Executive Management

Team provides us with confidence in the

decisions we make and the strategic

direction we are taking.

This governance statement details how

the Company has complied with the Code

and outlines our governance framework

and the activities of the Board and its

Committees during the year.

Strategic focus

With our purpose – Helping people

achieve more of their potential – at the

heart of everything we do and aligned

with our culture, we continue to be a

leader in the Georgian banking sector,

committed to achieving strong employee

and customer satisfaction, profitability

and shareholder returns.

During the year under review we have

been focused on the Company’s strategic

agenda. We welcomed a number of

external speakers to Board meetings and

our two-day in-person strategy meeting

to provide further insight into wider

geopolitical and macroeconomic factors,

and consider customer and investor

perspectives regarding the strategic

direction of the Group.

The strategy days were a great success,

enabling the Board to delve deeper

into stakeholder views and strategic

discussion. They provide us with the

time to focus on the long-term strategic

direction of the Company required to

optimise sustainability and shareholder

value.

During 2023, the Board considered

a potential opportunity in Armenia

presented by the Executive management

team. We agreed that value could be

derived from exploring this opportunity

in an adjacent high-growth economy

and agreed for management to engage

with the potential target to gauge

detailed information and evaluate the

upside through a thorough due diligence

process. Discussions with key investors

through roadshows and Board meetings

throughout the year highlighted that

there was appetite and support for the

Group’s excess capital to be carefully

deployed for international growth.

Following analysis, discussions with

advisers and other key parties, a potential

opportunity to acquire Ameriabank CJSC

(‘Ameriabank’), a leading universal bank

in Armenia, one of the fastest-growing

economies in the region, was identified

as a leading opportunity for international

growth for the Group. Following extensive

due diligence and Board discussions

with the management and external

advisors during 2023 and into 2024,

we unanimously recommended the

conditional acquisition of 100% of shares

of Ameriabank to the shareholders of the

Company. Since year end, at a General

Meeting of the Company on 14 March

2024, 83.60% of issued share capital

voted, with 100.0% votes in favour of the

acquisition. Further information regarding

this transaction can be found on pages 13

to 14.

Board effectiveness

We were pleased to appoint Clare

Chalmers Ltd (the ‘Evaluator’) to

undertake our effectiveness evaluation

for 2023 and welcomed the opportunity

to receive external feedback on our

governance arrangements and Board

dynamics. We found the process was a

useful experience that provided positive

feedback on the Board’s effectiveness as

well as useful suggestions on how we can

optimise performance. The evaluation

process is detailed on page 196 of this

report and further information regarding

the outcomes and action plan can be

found in the Nomination Committee

Report on page 212.

We have already begun to consider and

implement suggestions provided by the

Evaluator, including the introduction

of a Bank-wide Risk Registry. More

information can be found in the Risk

Committee Report on pages 224 to 228.

Succession

During 2023 we continued to execute our

succession plans to comply with the NBG

seven year independence requirement,

with Hanna Loikkanen stepping down as

Chair of the Remuneration Committee

and replaced by Cecil Quillen with effect

from 1 January 2023.

During the year we undertook a search

for an additional Non-executive Director

with the appropriate skills, knowledge and

experience to succeed as Audit Chair in

the future. We were pleased to welcome

Andrew McIntyre as a Non-executive

Director and member of the Audit

Committee and Nomination Committee

as announced to the market on 15 March

2024. Al Breach stepped down as a

Non-executive Director and a member

of the Remuneration Committee, Risk

Committee, and Nomination Committee

on the same date. On behalf of the Board

and the Company, I would like to thank Al

Breach for his significant contributions to

the Company over the years.

Succession planning will remain a key

focus throughout 2024, ensuring we

appropriately refresh the Board – taking

into consideration both the Code and

the new nine-year NBG independence

requirements, as well as taking further

steps towards achieving our target

of 40% of women on the Board by

2025. During succession planning and

Mel Carvill

Chairman of the Board

Directors’ Governance Statement

189

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

appointments we remain conscious of

the importance of achieving the right

blend of skills, experience and diversity to

provide the appropriate level of oversight,

challenge and corporate knowledge.

Further information on succession

planning and the appointment process is

available in the Nomination Committee

report on pages 207 to 209.

Engagement with stakeholders

The Board is focused on achieving the

best outcomes for our stakeholders by

ensuring they are given the opportunity

to raise their voice and for the Board

to listen. We have continued to engage

with our employees through Employee

Voice meetings, and continued to receive

updates on eNPS and the values and

culture survey. Whilst in Georgia, I have

continued to take every opportunity to

liaise with both internal and external

stakeholders including executives, senior

management, employees, external

advisors and senior governmental

regulatory advisors. I also met with

shareholders at the Company’s AGM

and many investors during the investor

roadshow. As a Board we acknowledge

that any opportunity to meet with

stakeholders helps inform the Board’s

decisions and shape the business as we

move forward. As always, my fellow

Directors and I look forward to engaging

with more stakeholders during 2024.

More information on our stakeholder

engagement and how we consider

stakeholders when making key decisions

can be found on pages 52 to 59.

Looking ahead

2024 will be an important year as we

move forward with the integration of

Ameriabank into the Group, embed

succession planning and continue to

enhance our governance, risk and internal

controls frameworks. I look forward to

developing the Board’s agenda for 2024,

incorporating the Evaluator’s suggestions.

I would like to thank the Directors for

their support during 2023 and their

additional commitments and focus as

weexplored and considered the future

ofthe Company.

Mel Carvill

Chairman of the Board

24 April 2024

Section 172 Statement

In discharging its duty to act

in good faith and in a way that

is the 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 various

stakeholders. See page 52 for

our Section 172 statement

(which is incorporated to the

Strategic Report), and on how

the Board has engaged with our

stakeholders.

Statement of compliance with the UK Corporate Governance Code

The Board believes good governance enhances performance, reduces risk and promotes the long-term success of the

Company for the benefit of our stakeholders. The Board is committed to ensuring high standards of corporate governance

are maintained, and the Company continues to take steps to enhance and evolve its governance framework and underlying

governance structure in line with best practice. This Governance Report – which forms part of the Directors’ Report – and the

reports of the Board Committees describe how during 2023 the Company has applied the main principles and complied with

the relevant provisions of the Code. The Code is publicly available at the FRC’s website: www.frc.org.uk.

The Board confirms that, for the year ended 31 December 2023, the Company has complied with all provisions of the Code.

TheBoard is aware of the publication of the revised Corporate Governance Code 2024 which will apply to the Company’s

reporting period starting on 1 January 2025, excluding Provision 29 which will apply to the reporting period starting on

1 January 2026. The Board and its committees have received updates from Management, the Company Secretary and the

Company’s External Auditor regarding the changes to the Code and have taken steps to prepare for the proposed changes.

Inparticular, the Audit Committee has undertaken substantial work during 2023 to ensure that the Bank is well positioned

and where needed, has started to implement the documentation and process changes. The Audit Committee members also

oversaw the Company’s feedback to the FRC under the consultation on the proposed changes to the Code.

190

Annual Report 2023 Bank of Georgia Group PLC

Board

Group Executive Officer

Audit Committee

See pages 214 to 223

Risk Committee

See pages 224 to 228

Remuneration Committee

See pages 229 to 247

Nomination Committee

See pages 206 to 213

Management Teams

Directors’ Governance Statement continued

Division of responsibilities

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: Nomination,

Audit, Risk and Remuneration. Their

Terms of Reference are reviewed

annually to ensure they are aligned with

the Code and 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.

Roles and responsibilities

The roles of Chairman, Senior

Independent Director and CEO are held

by separate individuals. Their clearly

defined responsibilities, as well as those

of Non-executive Directors, are set out

in writing and regularly reviewed by the

Board. The division of responsibilities

can be found on our website: https://

bankofgeorgiagroup.com/storage/

documents/Roles%20and%20

Responsibilities.pdf

Leadership and purpose

The role of the Board

The Board is responsible for the overall

management of the Group and provides

strong leadership and support to the

Executive Management to deliver the

Group’s strategic aims. The Board

ensures management strikes the right

balance between delivering on short-term

objectives and ensuring sustainable long-

term growth.

The Board is responsible to shareholders

for creating and delivering sustainable

shareholder value through the effective

oversight of the Company’s business.

The Board recognises its duties under

the UK Companies Act 2006 to promote

the long-term success of the Company,

considering not only the views and

interests of our shareholders but also

our various stakeholders, including

our employees, customers, investors,

regulators, suppliers and communities 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 52 to 59.

The Board retains a schedule of matters

reserved for its decision, to safeguard

the areas material to the delivery of

the Company’s strategy. This ensures

the necessary framework and resources

are in place for the Group to meet

its stated objectives. The Schedule

of Matters Reserved for the Board is

available on our website at: https://www.

bankofgeorgiagroup.com/governance/

documents.

Operation of the Board

The Board, led by the Chair, fosters a

culture of openness and transparent

decision-making. This is supported

by clearly defined roles, and open

communication channels both in and

outside of Board meetings.

Meeting agendas are developed in

conjunction with the Company Secretary,

UK General Counsel, the Chair, Directors

and the CEO, ensuring adequate time is

allocated to all items to support effective

and constructive discussion. The Chair

and CEO receive regular input from the

Non-executive Directors ahead of Board

meetings to ensure any matters raised

by them are included on the agenda. As

a key responsibility of the Non-executive

Directors is to challenge and provide

counsel to management, Board meetings

are chaired efficiently and effectively

to allow the views of all Directors to be

considered.

The Non-executive Directors review

and challenge proposals and

recommendations presented by

management and share their ideas by

drawing on experience gained outside

the Company, providing alternative

suggestions to management where

suitable. To maximise efficiency and the

opportunity for adequate discussion

and challenge, Directors ensure written

materials submitted through the

electronic meeting portal are thoroughly

reviewed in advance, and presenters

are available for questions and further

discussion on key matters both before

and during the meeting. The Board

invites senior management, internal and

external subject matter experts, and

representatives from key teams to attend

Board meetings to present key matters,

answer questions and provide further

detail. This strengthens the Board’s

knowledge and understanding of the

Group, the sector and the macroeconomic

environment.

The Senior Independent Non-executive

Director supports the Chairman by

acting as an intermediary for other Non-

executive Directors and liaising with the

Non-executive Directors outside of the

Board and Committee meetings. The

Chairman meets with the Non-executive

Directors without the CEO present as

required.

191

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Key activities of the Board

during 2023

During the year the Board held eight

meetings and three ad hoc meetings. Six

Board meetings were held in Georgia,

where all Directors attended in person,

with the others held in London and via

video conference. Attendance at these

meetings is set out on page 187.

At each quarterly meeting the Board

receives updates from the CEO, its

committees and the Company Secretary

and is presented with local and regional

macroeconomic and geopolitical updates,

finance reports and competitor analysis.

The Board also reviews the minutes of

previous meetings and receives updates

on matters raised or outstanding.

Throughout the year the Board discusses

and closely monitors the financial

performance and strategic direction of

the Group.

During 2023 the Board received

presentations and deep-dive sessions in

key business areas, including the following

topics:

• CSR.

• Corporate Banking.

• Digital channels and strategy.

• ESG.

• Human capital development.

• IT and data analytics.

• Mass Retail Banking.

• Recovery Plan.

• Regulatory changes.

• SME Banking.

• Values, culture and principles.

• Board effectiveness review.

• International opportunities.

A non-exhaustive list of the key Board

activities considered, reviewed and

monitored during the year is set out

below.

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.

• Received presentations from

external speakers regarding

the international geopolitical

environment.

• Continued to monitor the

ongoing impact of the Russia-

Ukraine war.

• Received updates on key projects

• Attended a two-day in-person

strategy meeting.

Further information about the

strategy meeting can be found on

page 192.

Financial performance

• 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 2022 of GEL 5.80 per

share, and an interim dividend

in respect of the period ended

30 June 2023 of GEL 3.06 per

ordinary share, in line with the

Company’s dividend and capital

distribution policy.

• Approved an increase of up

to GEL 148 million in its share

buyback and cancellation

programme, which commenced

in February 2023.

• Approved the launch of a GEL

62 million share buyback and

cancellation programme in the

second half of 2023.

• Completed its previous GEL

260.7 million buyback and

cancellation programme, having

repurchased and cancelled

3,254,705 ordinary shares,

representing 6.6% of the

Company’s issued share capital.

• Reviewed key financial metrics

including the annual budget and

quarterly forecasts.

• Reviewed and approved the

Group’s Annual Report and

Accounts.

• Reviewed and approved the

Notice of Annual General

Meeting.

Governance, regulation,

and compliance

• Conducted an externally

facilitated effectiveness

evaluation of the Board, its

Committees, individual Directors

and the Chairman of the Board.

• Discussed Board succession

planning and began recruitment

for the Audit Chair.

• Received governance updates

and considered legislative and

governance developments and

their impact on the Company.

• Reviewed conflicts of interest.

• Reviewed and approved

amended governance

documents including Roles

and Responsibilities, Terms of

Reference, Matters Reserved

for the Board and other Board-

owned policies.

• Approved the new Responsible

Supply Chain Policy and the

Environmental Policy.

Culture and engagement

with stakeholders

• Received reports about

engagement with shareholders

and other stakeholders, including

reports from the investor

roadshow.

• Received the results of employee

and customer surveys.

• Discussed employee retention

strategies.

• Reviewed the Bank’s equity pay

gap.

• Reviewed the Bank’s CSR

initiatives.

• Received reports on engagement

with the NBG.

• Received reports from the

designated Non-executive

Director for engagement with

the workforce.

• Reviewed the findings of

the employee values and

culture survey noting areas of

opportunity.

192

Annual Report 2023 Bank of Georgia Group PLC

Board meetings and stakeholder engagement during 2023

February 2023

• Ad hoc meeting

• 4Q22 and FY2022

Preliminary Results

• Strategy meeting

March 2023

• Board meeting

• Approval of FY2022 Annual

Report and the Notice of

Annual General Meeting

• Employee Voice meeting

May 2023

• Ad hoc meeting

• 1Q23 Results

• Annual General Meeting

All resolutions were passed

with the requisite majority.

Further details about the

meeting can be found on

https://bankofgeorgiagroup.

com/information/meetings.

June 2023

• Board meeting

• Employee Voice meeting

Directors’ Governance Statement continued

Purpose

• To discuss and review the Company’s strategy and performance, considering stakeholder views and

the long-term success of the Company.

Attendees

• The Board.

• External speakers from the banking sector and fintech sector.

Key themes and

discussions

• Review of the Company’s strategy and performance.

• Customer perspectives.

• Investor perspectives.

Outcomes

• The Board agreed that there was appetite and support for the Group’s excess capital to be deployed

for international growth.

Board strategy days

Culture

In February 2023 the Board attended a dedicated two-day in-person strategy meeting.

Aligning with purpose,

values and strategy

People are at the heart of our strategy

and guide everything we do. We aspire

to support them at different stages of

their lives – empowering our customers

with an integrated ecosystem of products

and services, empowering our employees

with a 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 brand values and business principles

– developed in consultation with the

Board and management, and taking into

consideration eNPS surveys, employee

feedback and the Barrett Organisational

Culture and Values assessment – have

been designed to ensure our purpose

isachieved.

Our brand values

Motivation

Courage

Creation/Action

Encouragement

Our business principles

Fairness

Customer-centricity

Teamwork

Development

Innovation

Operational excellence

193

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

August 2023

• Ad hoc meeting

• Approval of Interim

Dividend

• Launch of buyback and

cancellation programme

• 2Q23 and HY23 Results

September 2023

• Board meeting

• Employee Voice meeting

November 2023

• 3Q23 Results

December 2023

• Board meeting

Taking into account employee feedback

– including as raised in the Employee

Voice meetings (see below for details on

this forum) – and how the values and

principles were being embedded to date,

the Board reviewed and considered these

brand values and business principles again

during the period and confirmed that

theyremained appropriate.

Tone from the top

We strive to cultivate a culture of

collaboration and learning, and promote

this throughout the Group by setting

the tone at the top – demonstrating the

Company’s values and principles through

our decisions and actions. In conjunction

with management, the Board ensures the

implementation of appropriate policies and

procedures clearly setting the expectation

that every employee acts ethically and

transparently in all their dealings. This

fosters an environment where business and

compliance are interlinked.

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 48.8% as at 31 October

2023 – 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 12

overall

and ranked 2

in the banking sector. To

encourage all employees to participate in

the development of the Group’s culture,

our CEO writes a vlog 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 where employees

can ask questions and talk directly with

him. More information on our employee

engagement initiatives can be found on

pages 53 to 54 and 119 to 132, and later in

this report.

In line with the recommendations of

the Code, Hanna Loikkanen has been

appointed as the designated Non-

executive Director to engage with

the workforce. Three Employee Voice

meetings, which aim to support the

exchange of opinions, ideas and views

between the Board and employees –

were held in March, June and September

2023, facilitated by Hanna Loikkanen

and with all Board members invited to

participate. A total of 61 employees from

across the business attended, discussing

the current employee experience,

challenges and opportunities, and how

to increase employee engagement

and the attractiveness of the Bank as

an employer. Employees valued the

opportunity to have face-to-face time

with members of the Board and share

their thoughts on the Company.

Separately, several Board members

provide regular mentoring to members

of the Executive Management team

and senior management on leadership,

employee engagement and culture

creation. The Board regularly make

themselves available to the business and

attend social gatherings with mid and

senior level employees to hear directly from

employees.

Monitoring and measuring

During 2023, the Board continued to

monitor and assess the Group’s culture.

We received regular updates on our

employees to ensure they are listened to

and that outcomes from interactions are

followed up. We also received an update

on the scores from the internal eNPS and

Employee Engagement survey which was

undertaken by Korn Ferry, the details of

which can be found on pages 130 to 131 in

our Empowering employees 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. We also receive updates on

NetPromotor Score (‘NPS’) and customer

satisfaction, including how the Company

performs versus its peers.

The Board considers that below activities are effective ways for the Directors and Executive Management to gain insight into the

Group’s culture and employee satisfaction.

People Customers External Recognition

• Employee Voice

• eNPS

• Employee Engagement scores

• Retention

• Career progression

• Talent development

• Diversity and inclusion

• Whistleblowing and ethics reports

• Completion of mandatory training

• NPS

• Customer satisfaction

• Awards

• Competitor analysis

194

Annual Report 2023 Bank of Georgia Group PLC

Composition, succession and evaluation

Diversity

We believe 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 considers the following targets

when reviewing Board composition,

drawing on the FTSE Women Leaders

Review, the Parker Review and the 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 woman in the Chair,

Senior Independent Director, Chief

Executive Officer or Finance Director

roles by the end of 2025; and

• one Director from a minority ethnic

background on the Board by 2024

Compliance with these targets is

discussed further in the Nomination

Committee Report on pages 210 to 212.

In respect of the target outlined in the

second bullet point above, 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

2024 FTSE Women Leaders Review for

the FTSE 250, with 48.8% women in the

Executive Committee equivalent and

direct reports, we placed 12th overall

and 2nd for the banking sector. Female

representation on the Board is 33%.

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. We are pleased to

confirm that the Company has met this

target, with three members of the Board

from a minority ethnic background.

The Company notes the Parker Review

is asking companies to consider

setting a percentage target for senior

management team that will be occupied

by ethnic minority executives in December

2027. Given the majority of the senior

management identify as being from an

ethnic minority background, it is believed

that setting a target for our Group would

be artificial. Further information on

diversity can be found on pages 210 to

212.

As part of the ongoing succession cycle,

the Board takes into consideration all

aspects of diversity during the process for

recruiting new Non-executive Directors.

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.

Further information on the composition,

evaluation and succession of the Board

can be found on pages 208 to 209.

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

socioeconomic background.

The Board, Audit Committee, Nomination

Committee, Risk Committee and

Remuneration Committee have regard

for the Diversity and Inclusion Policy when

reviewing their composition, succession

planning and future appointments.

More information on the Group’s Diversity

and Inclusion Policy can be found on page

211 in the Nomination Committee Report.

As part of the annual review of Board-

owned policies, in September 2023 the

Board approved the following policies:

• Diversity and Inclusion Policy

• Anti-discrimination and Anti-

harassment Policy

• Human Rights Policy

These policies are clear and easy to follow,

and are based on international best

practice.

We were pleased to see high levels

of engagement with the eNPS and

Employee Engagement survey and

that the scores have increased from

2022. Thisincrease is attributed to the

development of key initiatives including:

• the Employee Experience team

gathering regular feedback from

employees and providing insights

intoissues and solutions;

• the enhancement of the onboarding

experience to become more structured

and uniform;

• the refinement of process and

promotion criteria at the Bank level

which has created transparent

guidelines for every position,

simplifying career paths and

empowering employees with a clear

view of their professional trajectory;

• the enhancement of collaboration

and engagement through improved

interpersonal communication; and

• the comprehensive annual review of

employee pay to recognise the intrinsic

value of each role and respond to

market dynamics.

These concerted efforts collectively

foster a positive and motivating work

environment, aligning with our corporate

ethos of prioritising employee satisfaction

and professional development.

91% of our employees completed the

Risk and Compliance programme,

an improvement on 86% in 2022. We

recognise that further improvement

is required in this area as we strive for

100% completion to enhance risk culture.

Initiatives to increase the effectiveness of

this training programme are underway,

including improving the user experience

of the courses and content, and reviewing

the courses to change the frequency of

required retaking where necessary.

In 2024, the Board will continue to engage

with our employees, monitor culture,

further improve employee experiences,

and monitor the output from the eNPS,

Employee Engagement surveys and other

appropriate metrics which provide insight

into the Group’s culture.

Directors’ Governance Statement continued

195

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Cecil Quillen

Archil

Gachechiladze

Mariam

Megvinetukhutsesi

Andrew

McIntyre

Hanna Loikkanen

Jonathan

Muir

Mel Carvill

Véronique

McCarroll

Tamaz

Georgadze

Composition and

independence

The Board’s composition is formally

reviewed on an annual basis. We consider

that 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 free from

any business interest or relationship

that could materially interfere with the

exercise of their judgement in accordance

with the Code. Further information on

the review of the Board and Committee

compositions can be found on pages

208to 209.

Time commitment

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.

Succession planning

The succession plan for the Board and

its Committees is a continuous process

taking into consideration both short- and

long-term plans for the refreshment and

retirement of Directors. During the year,

in particular, the Board has been mindful

of the NBG independence requirements

that stipulate a Non-executive Director’s

independence is affected when they have

served on the Board more than seven

years. To comply with this rule, Hanna

Loikkanen stepped down as Chair of

the Remuneration Committee and was

replaced by Cecil Quillen with effect from

1 January 2023.

Under the NBG independence

requirement at the time of reviewing

the Directors succession planning,

Jonathan Muir was considered to be

non-independent and unable to Chair

the Audit Committee from July 2024.

Accordingly, during the year we undertook

a search for an additional Non-executive

Director with the appropriate skills,

knowledge and experience to succeed

Jonathan Muir as Audit Chair in the

future and we were pleased to identify

Andrew McIntyre as our preferred

candidate – confirming his appointment

on 15 March 2024 as announced to

the market on the same day. For this

recruitment process, the Committee

engaged Korn Ferry, an executive search

firm to support the Committee and

ensure a broad selection of appropriate

candidates was reviewed. Korn Ferry has

no other connection with Bank of Georgia

or its Directors.

Since year end, Al Breach stepped down

as a Non-executive Director and a

member of the Remuneration Committee,

Risk Committee, and Nomination

Committee on 15 March 2024.

At the end of 2023, the NBG updated

theindependence requirement

increasing this from seven to nine

years. The Committee will take this into

consideration when reviewing succession

planning during 2024.

Additional consideration was given to

the succession of the CEO from different

time horizon perspectives, including

contingency and long-term planning.

Further information on succession

planning and the Director appointment

process can be found on page 209 of the

Nomination Committee Report.

196

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Governance Statement continued

Recognising that there are different

ways an external evaluation can

be conducted, we reflected on the

approach we thought would be most

beneficial and provide the most value,

including interviews and an open

question on views on culture. This

was taken into consideration when

reviewing potential evaluators and the

selection of an appropriate evaluator.

The Evaluator conducted one-to-one

interviews with the members of the

Board and a selection of other regular

meeting attendees, including the CFO,

CRO, the UK General Counsel, Head of

Human Capital Management, Head of

Internal Audit and the EY Audit Partner.

The Evaluator followed the agreed

interview agenda and discussed further

questions and topics as appropriate.

The initial findings of the external

evaluation were discussed with the

Chair and the UK General Counsel

prior to presenting the results to

the Board and its Committees in

September 2023.

Further information regarding the 2023 effectiveness evaluation, the key outcomes and progress made against the agreed action

plan can be found on page 212 of the Nomination Committee Report.

Managing the

agenda and materials

Succession planning Risk and compliance

Additional time for

strategic discussions

Invitations to tender were issued to several

providers and interviews were conducted

with those who offered to provide services.

The Chairman and the Senior Independent

Director considered the experience and

approach of each provider, and a preferred

evaluator was identified. Following

recommendation from the Chairman and

the Senior Independent Director, the Board

appointed Clare Chalmers Ltd as the

external evaluator and agreed the timeline

and process of the evaluation.

On 15 and 16 June 2023, the Evaluator

attended the meetings of the Board,

Audit Committee, Nomination

Committee, Risk Committee and

Remuneration Committee in person

inTbilisi.

Key suggestions were put forward by the

Evaluator for our review and consideration.

The Board and its Committees reviewed

these suggestions, and a schedule of

actions was created to monitor their

implementation and adoption.

The Chair and the UK General Counsel

met with the Evaluator to establish

the evaluation process. The evaluation

focused on Board composition and

culture, Board oversight, stakeholders,

Board efficiency, the Committees, and

Board and Committee papers. A meeting

between the Chairman and the Evaluator

was held to agree the focus and scope of

the evaluation and the framework for the

interview agenda.

The Evaluator conducted a thorough

document review, including but not

limited to the Board and Committee

papers, Board and committee minutes,

Committee Terms of Reference, the

Board calendar and forward agenda

planners, director training materials, the

skills matrix, the outputs of the last Board

evaluation, and the 2022 Annual Report.

In December 2023 the Nomination

Committee reviewed progress to date

against the actions – and will continue to

monitor this throughout 2024.

1. Evaluation design

6. Interviews

7. Analysis, presentations and

discussions

Key outcome topics

2. Selection and appointment of

an independent evaluator

5. Board and Committee

observations

8. Actions

3. Design and scope of evaluation

4. Document review

9. Progress

External effectiveness evaluation

In line with best practice and in accordance with the UK Code and the FRC Guidance on Board Effectiveness, the performance of

the Board, its Committees, the Chairman and the individual Directors is evaluated annually. The evaluation is externally evaluated

every three years and during 2023 was externally facilitated by Clare Chalmers Ltd – the process of which is detailed below. The

Evaluator has no other connection to the Company or the individual Directors and is thereforeindependent.

197

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Board induction, 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, each

Board Committee and their respective

delegated powers. They are also advised

by the UK General Counsel and Company

Secretary of their legal and regulatory

obligations as 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

continued development of our Directors

so they can 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 2023, including briefings and

presentations by the UK General Counsel,

our Company Secretary, members of

management and our professional

advisors. During the year the Directors

received updates on regulatory and

legislative changes, including but not

limited to: the FRC’s minimum standards

for audit committees; the FRC’s

consultation and proposed updates to

the Code; proposed and actual changes

to the UK Listing Regime; the Economic

Crime and Corporate Transparency Act

(‘ECCTA’); changes to the NBG rules

regarding conflicts of interest, persons

closely associated and ESG guidelines;

changes to Georgian data protection

requirements; and proxy advisor voting

guidelines.

Audit Committee members also received

updates on developments in audit and

accounting, including: delayed primary

legislation relating to the audit and

corporate governance reform; mandatory

climate-related financial disclosures; the

FRC’s consultation and proposed updates

to the Code; TCFD reporting; and the

ECCTA.

During the year the Directors also

received training materials on Directors’

duties. 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.

Audit, risk and internal

control

The Group has a comprehensive system

of risk management and internal controls

in place, designed to ensure risks are

identified, assessed and mitigated, and

that the Group’s objectives are attained.

The Board believes risk culture is at the

heart of the Group’s risk management

framework. Further information on the

risk framework is available on page 144

and information on the risk culture of the

Group is available on page 145.

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 present 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 248.

During the year the Audit Committee

has retained focus on the review and

improvement of internal controls,

despite delays to the UK legislation

required to establish the Audit, Reporting

and Governance Authority. Further

information on internal controls can be

found in the Audit Committee Report on

page 222.

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 145 and

information on the effectiveness review is

available on page 146.

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 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 143 to 148. For details on the

management of principal risks and

uncertainties please refer to pages 149

to 169. Please refer to pages 214 to 223

for further details on the role of the

Audit Committee and pages 224 to 228

for further details on the role of the Risk

Committee.

Remuneration

The Remuneration Committee ensures

our remuneration policies and practices

supporting the Company’s strategy and

promoting its long-term sustainable

success. Directors exercise independent

judgement and discretion when

authorising remuneration outcomes,

taking account Company and individual

performance and wider circumstances.

The Committee has adopted a formal

and transparent procedure for developing

policy on executive remuneration

and determining Director and senior

management remuneration. No

Director is involved in deciding their own

remuneration outcome.

Detailed information regarding the

Company’s remuneration arrangements

can be found on pages 229 to 247 of the

Directors’ Remuneration Report.

198

Annual Report 2023 Bank of Georgia Group PLC

Mel Carvill Archil Gachechiladze

CEO

Hanna Loikkanen

Senior Independent

Non-executive Director

Board of Directors

Date of appointment

March 2022

Date of appointment

February 2018

Date of appointment

January 2019

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 Clearbank Group Holdings Ltd

• Chairman of Financial Services

Opportunities Investment Fund Ltd

• Member of the operating board of Genesis

Investment Management LLP

• Director of Guernsey Investment Fund

• Director of Home Credit B.V.

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

• Executive director of OnBoardSolution Oy

• Chief Investment Officer at FinnFund

(Finnish Fund for Industrial Cooperation

Ltd)

• Non-executive director of VEF AB

• Non-executive director of Eastnine AB

• Non-executive board member of Caucasus

Nature Fund

Committee memberships

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 UK.

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).

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Andrew McIntyre

Independent Non-executive Director

Tamaz Georgadze

Independent Non-executive Director

Jonathan Muir

Independent Non-executive Director

Date of appointment

March 2024

Committee memberships

A N

Skills and experience

Mr McIntyre is a qualified Chartered

Accountant with broad experience of

financial services businesses operating

around the world. Since retiring from Ernst

& Young in 2016, he has built a portfolio

career, predominantly in the financial services

industry. He holds a master’s degree from

Cambridge University in Medical Sciences

and Music.

Career

Mr McIntyre was a partner at Ernst &

Young from 1988 to 2016, specialising in

international financial services. He was based

in the firm’s London offices during this time,

apart from a period spent in the Zurich office

between 2004 and 2010. At Ernst & Young, he

acted for some of the firm’s largest financial

services clients and held various management

positions, including as a member of the

UK firm’s board. Mr McIntyre is the senior

independent director of C. Hoare & Co. and

is a non-executive director of Lloyds Bank

Corporate Markets plc. He has previously held

board positions at National Bank of Greece

S.A., Ecclesiastical Insurance Group plc and

the Centre for Economic Policy Research.

Other appointments

• Senior independent director of C.Hoare

& Co

• Non-executive director of Lloyds Bank

Corporate Markets plc

• Non-executive director of Target Group

Limited

• Trustee and treasurer of the Foundling

Museum

Date of appointment

February 2018

Committee memberships

Re Ri N

Skills and experience

Mr Georgadze has extensive experience with

a 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

• Member of Digital Finance Forum at the

Ministry of Finance of Germany

• Member of the main management board of

Bitkom, the German association of

software companies and telco providers

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

SA. 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 including positions on its Audit and

Nomination Committees.

Other appointments

• Director of LetterOne Holdings SA and of

LetterOne Investment Holdings SA

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Annual Report 2023 Bank of Georgia Group PLC

Véronique McCarroll

Independent Non-executive Director

Board of Directors continued

Date of appointment

February 2018

Date of appointment

March 2021

Date of appointment

October 2018

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.

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.

Committee memberships

Re A N

Skills and experience

Mr Quillen has extensive legal and

commercial experience in Europe and the

US, particularly with respect to regulated

financial institutions and emerging markets.

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 global law firm Linklaters LLP,

where he is a leading US capital markets

practitioner 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 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

• Trustee of the Dulwich Picture Gallery

Board Committees

Remuneration Committee

Risk Committee

Nomination Committee

Audit Committee

Chair of Committee

Cecil Quillen

Independent Non-executive Director

Mariam

Megvinetukhutsesi

Independent Non-executive Director

Mr Al Breach served as an Independent Non-

Executive Director of Bank of Georgia Group

Plc, as a member of the Remuneration, Risk

and Nomination Committees, and served on

the Supervisory Board, until 15 March 2024.

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Management Team

Archil Gachechiladze

Executive Director and CEO of Bank of Georgia Group PLC and CEO of Bank of Georgia

See page 198 for his biography

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

Nutsiko Gogilashvili

Deputy CEO, Mass Retail Banking

Skills and experience: Nutsiko 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.

Prior to her recent appointment, Nutsiko was Head of Human Capital

Management and Customer Experience during 2019-2022, directly

reporting to the CEO.

Before joining Bank of Georgia, Nutsiko was at TBC Bank where she

held the role of Head of Strategic Planning and Budgeting. Before

taking up this role, during 2011-2014, Nutsiko worked as an analyst at

JP Morgan in London, covering different products.

Education: Nutsiko 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

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Annual Report 2023 Bank of Georgia Group PLC

Management Team continued

Eteri Iremadze

Deputy CEO, Premium Banking

Skills and experience: Eteri was appointed Head of SOLO in May

2019and became Deputy CEO in March 2021, and has been leading

SOLO and WM businesses since April 2021

Eteri 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, Eteri spent two years as Head of

Strategic Projects Department at Georgian Global Utilities (formerly

part of BGEO Group PLC).

Education: Eteri holds an MBA from Grenoble Business School and

a bachelor’s degree in economics and commerce from Tbilisi State

University.

Appointed: March 2021

Mikheil Gomarteli

Deputy CEO, Strategic Projects Direction

Skills and experience: Mikheil joined Bank of Georgia in 1997 and served

in various senior and executive roles.

Prior to this appointment, Mikheil was Deputy CEO, leading the

Bank’s Retail Banking business since 2009. 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

Davit Chkonia

Deputy CEO, Chief Risk Officer

Skills and experience: Prior to his current role, Davit 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, Davit

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, Davit Chkonia worked

at European Resolution Capital.

Education: Davit 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

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Strategic Report Governance Financial Statements Additional Information

Vakhtang Bobokhidze

Co-director of International Business

Skills and experience: Vakhtang joined the Bank in 2005 as a Quality

Control Manager and progressed through a number of positions,

including Analyst-Developer, IT Business Consultant, Director of IT

Department, culminating in his appointment as Deputy CEO in charge

of IT in March 2018. From January 2021 to June 2022 he served as

Deputy CEO in charge of IT, Data Analytics, and Digital Channels.

Education: Vakhtang received his bachelor’s degree in computer

sciences, economics and master’s degree in informatics from Tbilisi

State University.

Appointed: January 2023

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

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

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Management Team continued

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 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

Tornike Kuprashvili

Head of SME Business Banking

Skills and experience: Tornike joined Bank of Georgia in 2014 as a

Principal Corporate Banker and during his 10 year career he has

progressed through the career path within Corporate Banking

business. He held various senior roles in Corporate Banking Business,

including Head of Corporate Rehabilitation and Head of Corporate

Banking Department, directly reporting to Deputy CEO during

2020-2024. Prior to joining Bank of Georgia, Tornike worked at KPMG

Tbilisi office for 3 years as an Audit assistant.

Education: Tornike holds bachelor of business administration from

Caucasus School of Business.

Appointed: April 2024

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Elene Okromchedlishvili

Head of Human Capital Management

Skills and experience: Elene 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.

Prior to her recent appointment, Elene served as Head of Business

Processes, Lean Transformation and Transactions.

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

Giorgi Gureshidze

Head of Operations

Skills and experience: Prior to this role, Giorgi had a diverse

professional experience during 2017-2023 at Georgia Global Utilities

(GGU – formerly part of BGEO Group PLC) where he held various

positions, including Investment Analyst, Head of Financial Analysis and

Research, and Head of Strategic Projects and Business Development,

before serving as Chief Financial Officer of the company during 2020-

2023. He played an instrumental role in the first Green Eurobond

issuance from the region on the Irish stock exchange in 2020 and

in the sale of GGU, the largest private transaction in Georgia.

Giorgi started his career working as an Auditor at Deloitte and also

worked as an Investor Relations Manager at TBC Bank.

Education: Giorgi holds a bachelor’s degree in Economics and Global

Affairs from Yale University.

Appointed: September 2023

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

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Nomination Committee Report

Membership of Nomination Committee

Committee membership Date of membership

Mel Carvill (Chair) 10 March 2022

Alasdair Breach* 24 February 2018

Tamaz Georgadze 24 February 2018

Véronique McCarroll 1 October 2018

Mariam Megvinetukhutsesi 12 March 2021

Jonathan Muir 24 February 2018

Hanna Loikkanen 24 February 2018

Cecil Quillen 24 February 2018

* Alasdair Breach resigned as a Non-executive Director and as a member of

the Committee on 15 March 2024.

The skills and experience each member contributes can be

found on pages 198 to 200.

All members of the Committee are independent Non-

executive Directors of the Board. The CEO and other

members of management may be invited to attend

meetings to provide insight into key developments.

Key objectives of the Committee

The Nomination Committee focuses on the following

matters:

Board leadership

• Identifies the skills, knowledge and experience required

for effective leadership, managing the balance of the

Board through effective succession planning.

Board Committees

• Monitors the size, structure and composition of the

Board’s Committees.

Succession planning

• Ensures appropriate Board skills, knowledge, experience

and independence.

Talent pipeline

• Monitors senior leadership pipeline and initiatives to

develop and promote internal talent.

Diversity and inclusion

• In accordance with the Diversity and Inclusion Policy,

considers the perspectives and attributes of the Board

and senior leadership.

Leading on the promotion of Board dynamics through effective succession

planning, Board evaluations and a robust executive talent pipeline.

Meeting attendance

Details of the members’ attendance at the meetings of the

Committee are as follows:

Committee membership

No. of meetings

attended

Mel Carvill (Chair) 4/4 scheduled

Alasdair Breach 4/4 scheduled

Tamaz Georgadze 4/4 scheduled

Véronique McCarroll 4/4 scheduled

Mariam Megvinetukhutsesi 4/4 scheduled

Jonathan Muir 4/4 scheduled

Hanna Loikkanen 4/4 scheduled

Cecil Quillen 4/4 scheduled

2024 action plan

In the coming year the main areas of focus for the

Committee will be:

• Succession planning.

• Director induction.

• Diversity and inclusion.

• Talent pipeline.

• Internal Board Evaluation and progression of external

evaluation actions.

• Ameriabank structure and board composition.

The Committee’s Terms of Reference set out its role and

authority, and can be found on the corporate website at

www.bankofgeorgiagroup.com/governance/documents

Regular attendees at meetings

CEO, UK General Counsel and Company Secretary.

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Mel Carvill

Chair of 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 – particularly our role in

ensuring the Board has the right skills,

experience, knowledge and diversity to

deliver our strategy and ensure long-term

sustainable success.

Board and Committee

evaluations

The Committee carefully reviewed and

considered the 2022 Board evaluation

and the progress of actions. In addition,

it carefully considered its external Board

evaluation to ensure it provided the most

impactful outcomes for the Board and its

Committees.

After a tender process we engaged Clare

Chalmers Ltd as our external evaluator

and were pleased with the evaluation

results and areas of opportunity to

improve further. On behalf of the

Committee, we would like to thank Clare

Chalmers Ltd for their guidance.

Information on the progress of the

2022 internal evaluation outcomes can

be found on page 213 and information

regarding the 2023 external evaluation

can be found on pages 212.

Succession planning

We have been cognisant of the additional

independence requirements placed on

us by the NBG and carefully balance

these with the importance of retaining

appropriate corporate memory. When

reviewing and considering succession

planning the Committee takes care to

ensure resignations happen in an orderly

manner to comply with the NBG and

Code independence requirements.

During the year we undertook a search

for an additional Non-executive Director

with the appropriate skills, knowledge

and experience to succeed as Audit

Chair in the future – and were pleased to

identify Andrew McIntyre as our preferred

candidate.

Since year end, and in accordance with

our succession planning procedures,

Andrew McIntyre was appointed as a

Non-executive Director and member of

the Audit Committee and Nomination

Committee on 15 March 2024 and

Alasdair Breach stepped down as a

Non-executive Director and a member

of the Remuneration Committee, Risk

Committee, and Nomination Committee

on the same date. On behalf of the

Committee, I would like to welcome

Andrew McIntyre and thank Alasdair

Breach for his significant contributions to

the Company over the years.

Further information on succession

planning can be found on pages 208 and

information on the Director appointment

process can be found on pages 209.

Diversity and inclusion

Whilst there is always more that can

be done, the Committee is proud of the

work and achievements of the Company

regarding diversity and inclusion. We

remain committed to further enhancing

our female representation on the Board

to 40% by 2025 and are pleased to have

met the new regulatory requirements,

which includes having a female director

in a senior position and a director from

a minority ethnic background. Further

details on this and our commitment to

diversity can be found on pages 210 to

212.

Looking ahead

During 2024, the Committee will focus

on supporting the smooth integration

of Ameriabank CJSC, ensuring an

appropriate structure and board

composition is established for the Group.

The Committee will also continue to

implement succession planning for the

Board and senior management.

I invite you to read more about our work

in the following report.

Mel Carvill

Chair of the Nomination Committee

24 April 2024

“ The Committee remains focused on succession

planning and ensuring the appropriate balance

of the Board. We were pleased with the

external evaluation process and look forward to

embedding the recommendations during 2024

and beyond.“

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Annual Report 2023 Bank of Georgia Group PLC

Key Committee meeting topics during 2023

March June September December

• Executive succession

planning;

• 2022 internal Board

evaluation;

• External evaluation

approach;

• Independence and re-

election of Directors; and

• 2022 Nomination

Committee Report.

• Skills matrix;

• Board succession planning;

• Board composition;

• Board diversity;

• Employee Voice/workforce

engagement update; and

• External evaluation process.

• Board succession planning;

• Board composition;

• Workforce diversity;

• Employee Voice/workforce

engagement update;

• External evaluation results;

and

• Corporate governance

review.

• Board succession planning;

• Board composition; and

• External evaluation – action

deep dive.

Key activities during the year

Topic Summary of activity Find out more

Succession planning Reviewed the Board composition with regards to succession

planning.

Page 208

New Non-executive Director

Identified the required Board skills and knowledge and

identified a new Non-executive Director.

Page 209

External Board evaluation Identified an external evaluator, identified an appropriate

review process and considered the results of the external

Board evaluation.

Page 209

Workforce engagement Received updates on workforce engagement and the

Employee Voice programme.

Page 210

Board skills and experience

For balanced and effective decision

making, it is important the Board has

a broad range of skills and experience.

The Committee maintains a skills

matrix of the Board to identify areas for

enhancement, allowing the mapping of

the Board’s skills against the evolving

needs of the business and ensuring any

future search for Non-executive Directors

is focused. A summary of the Board skills

matrix can be found on page 187.

Board composition and

succession planning

A key focus during the year was the NBG

independence rules, tenure and potential

future Board retirements, and the impact

on the Board and its Committees. The

Committee remains committed to

ensuring we have a well-balanced Board

with the appropriate skills, knowledge,

experience and diversity to support the

continued growth of the Group. During

2023 the Committee considered the size,

structure, tenure and diversity of the

Board, as well as the skills and experience

of each Director.

Following this review, and taking into

consideration the NBG and Code

independence requirements in place at

the time, it was agreed the Board would

undertake a search of external candidates

with the appropriate skills, knowledge and

experience, retaining a focus on diversity,

to support the Company and ensure a

robust pipeline of potential candidates.

At the end of 2023, the NBG updated the

independence requirement increasing this

from seven to nine years. The Committee

will take this into consideration when

reviewing succession planning during 2024.

All changes to the Board and its

Committees are overseen by the

Committee and strong succession

planning remains a key focus.

Senior management and

talent pipeline

We are committed to talent development

programmes and initiatives within the

Group. We develop 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 employees 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 make a stronger us’;

• value meritocracy;

• encourage dialogue over an

authoritative decision-making style;

and

• favour cooperation over individualistic

or ‘heroic’ behaviour.

During 2023 the Bank continued initiatives

to encourage talent development, with a

focus on young talent and those with high

potential.

Bank of Georgia runs Leaderator, the

most-recognised student internship

programme on the market, designed to

provide opportunities for young people to

develop various skills and competencies,

explore business and operational units,

and gain practical experience with real

projects. 376 employees have participated

in Leaderator since its launch in 2017.

Further details regarding Leaderator can

be found in the Empowering employees

section of this report on page 125.

During the year the Committee reviewed

and approved the appointment of

Vakhtang Bobokhidze to Co-director

of International Business and the

appointment of Giorgi Gureshidze as

Head of Operations. In addition, the

Committee received updates on members

of the Executive Management Team and

proposed promotions.

Further information on talent management

can be found in the Empowering employees

section on page 126 to 127.

Nomination Committee Report continued

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Strategic Report Governance Financial Statements Additional Information

During 2023 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 Management

Team as part of the wider strategic

development of the Group.

Board and Committee

changes

To ensure compliance with the

requirements of the NBG and the UK

Code, Hanna Loikkanen stepped down as

Chair of the Remuneration Committee

and was replaced by Cecil Quillen with

effect from 1 January 2023. Cecil 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 200.

Following this review, and as a result of

the required refreshment of the Board

to meet independence requirements, it

was agreed that Andrew McIntyre be

appointed as a Non-executive Director

and member of the Audit Committee and

Nomination Committee with effect from

15 March 2024.

The Committee received the resignation

of Alasdair Breach on 15 March 2024 as

announced to the market on the same

day.

The Committee is pleased to welcome

Andrew McIntyre to the Company and

is looking forward to working with him

to support the continued success of the

Company.

Board appointment process

Engagement of external

recruitment advisor

External recruitment advisor:

Korn Ferry

Key search criteria:

Successful senior executive finance

career, either as a CFO or former

audit partner; technically adept;

experience of UK listed company

environment; relevant geographic

experience; various characteristics,

traits and drivers; appointment to

be in accordance with the Diversity

and Inclusion Policy and to consider

diversity targets; appointment,

experience and character also to

be in accordance with JSC Bank of

Georgia Nomination Policy and the

Georgian Regulatory Framework for

administrators of Commercial Banks.

Following the decision to review Board composition, the Committee agreed the remit

and required skills, experience, independence and diversity of any new appointment.

The Committee, with support from the UK General Counsel and Company Secretary:

The Committee reviewed and considered the appointment

of the preferred candidate and recommended their

appointment to the Board. The Board considered the

recommendation and, following approval of the new Director,

an announcement was released to the market.

Made

recommendation

for Board approval

The Committee undertook a review of Board knowledge,

skills and experience, balanced with tenure and independence

requirements of the NBG and Code. Further information on

the Boards skills can be found on page 187 and information on

Board independence can be found on pages 187 and 210.

Evaluated

Board skills and

requirements:

The Committee agreed to engage an external recruitment

consultant, Korn Ferry, to support the candidate search. The

Committee instructed Korn Ferry with a job profile for the

skills and experience required with a strong focus towards

receipt of diverse candidates. Other than providing employee

engagement research to the Group, Korn Ferry has no

further connection with Bank of Georgia or its Directors.

Undertook a

candidate search:

Following receipt of a list of candidates, the Chair and the

UK General Counsel met with Korn Ferry to create a short-

list of candidates with the appropriate knowledge, skills,

experience and time to undertake the role. The Committee

reviewed the short-list and established an interview panel,

consisting of the Chair and the Audit Committee Chair, to

meet with candidates.

Reviewed the

candidates:

The Chair and Audit Committee Chair met with five

candidates before narrowing our search to the final two.

The Committee then reviewed the knowledge, skills and

experience of the candidates.

Interviewed

candidates:

The candidates were given the opportunity to meet

the Executive Management Team to help their own

understanding of the Group.

Arranged an

Executive

Management Team

meet and greet

Having identified a preferred candidate, the Committee

recommended they attend the next quarterly meeting to

observe and ensure an opportunity for both parties to assess

cultural fit.

Invited the

candidate to

observe a meeting

On appointment our Non-executive Directors are sent 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 a minimum of 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 remains satisfied that all

Non-executive Directors dedicate the necessary amount of time to contribute to the

effectiveness of the Board.

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Annual Report 2023 Bank of Georgia Group PLC

Election by shareholders

All Non-executive Directors undertake

a fixed term of three years subject to

annual re-election by shareholders.

The fixed term can be extended and,

consistent with best practice, does not

exceed nine years, subject to defined

circumstances as identified by the

Committee.

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, Tamaz Georgadze, Hanna

Loikkanen, Véronique McCarroll, Mariam

Megvinetukhutsesi, Jonathan Muir and

Cecil Quillen, and the election of Andrew

McIntyre at the 2024 AGM. As Alasdair

Breach resigned as a Director on 15 March

2024, he will not stand for re-election.

Board induction

Each Director, upon appointment,

receives a comprehensive and tailored

induction to the Company, details of

which are set out on page 197.

Andrew McIntyre will undergo a

comprehensive and tailored induction

during 2024 and further information

regarding this will be provided in next

year’s Annual Report.

During the year Committee members

were briefed on recent developments

regarding diversity and inclusion in the UK,

and wider diversity initiatives, and were

provided information on appointment

processes, independence criteria and

review of the NBG requirements.

Workforce engagement

Mel Carvill, Hanna Loikkanen and Mariam

Megvinetukhutsesi undertook a series

of Employee Voice meetings during the

year, engaging with 61 employees. 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. The Employee

Voice meetings discuss the current

employee experience, challenges and

opportunities, how to increase employee

engagement, and the attractiveness of

the Bank as an employer, and ensure

appropriate time for attendees to raise

any items they deem appropriate. Further

information on workforce engagement

can be found in the Empowering

employees section on pages 119 to 132.

After the Employee Voice meetings,

participants’ feedback is gathered in

an anonymous format and a summary

is presented by the designated Non-

executive Director at the next Committee

meeting for discussion. Overall, employee

feedback has been positive. Employees

have noted that “the environment was

good and pleasant for the meeting,

where everyone could state their opinion

freely and ask questions”; “it was a very

interesting conversation... a very informal

and friendly environment was created

by board members, thank you for this

opportunity”.

The Committee believes the designated

Non-executive Director for workforce

engagement, with supplementary

engagement from the wider Board as

required, remains appropriate for the

Company to receive fair and balanced

views across the Bank and continue to

monitor and assess opportunities to

further enhance workforce engagement.

Time commitments and

conflicts of interest

Prior to accepting any external

appointments, Directors are required

to seek the Board’s consent. The Board

believes other external directorships

and positions provide the Directors with

valuable expertise, enhancing their ability

to act as Non-executive Directors of

the Company. The number of external

directorships and positions should,

however, be limited – particularly for

Executive Directors – to ensure they can

dedicate the amount of time necessary to

contribute effectively to the Board.

Independence, tenure and

time commitments

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,

considering any external directorships,

their length of service and their

independence of character and integrity.

Based on these reviews the Committee

makes a recommendation to the Board

regarding the suitability of each Non-

executive Director for re-election.

The Board has assessed the independence

of the Chairman and each Non-executive

Director in line with Principle G and Provision

9 of the Code, and is of the opinion that the

Chairman and each Non-executive Director

acts in an independent and objective

manner. We consider that, under the UK

Corporate Governance 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. Hanna Loikkanen was originally

appointed to the Board of BGEO on

24 October 2011, before resigning 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 considered and noted the

following:

• There were substantial changes in the

executive management upon demerger

of BGEO in 2018 and since (only one

out of the 11 executive managers have

remained since early 2018 and there

has been two changes of CEO).

• 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

geographical, geopolitical and market

environment:

• Any new Board member must clearly

understand the operating, economic

and political environment in Georgia

and the region 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, and be willing to take

responsibility for an emerging-market-

focused Group.

Considering the matters above, the Board

considers that all current Directors have

retained their independence and strongly

recommends their election or re-election

by shareholders.

The Board 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 was overseeing an orderly

transition of changes to the Board, in

accordance with the seven-year NBG

independence requirement. Accordingly,

Hanna Loikkanen stepped down as

Remuneration Committee Chair but

remained a member of the Committee

with effect from 1 January 2023.

Diversity, equity and

inclusion

The Board has adopted a Diversity and

Inclusion Policy incorporating a wide

range of factors including, but not

limited to, ethnicity, sexual orientation,

disability and socioeconomic background

– mirroring current best practice, which

was reviewed by the Board in September

2023.

Nomination Committee Report continued

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Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

The Board encourages a diverse

and inclusive work environment. The

Committee will continue to examine ways

the Board can become more diverse, and

the Group is also working to maintain

high levels of female representation at

senior management level. In 2020 we

committed to a target of 33% female

representation on the Board, which

was achieved in 2021 and has been

maintained. During 2023 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 the Board by 2024.

The Committee has continued to

monitor and assess its progress against

these objectives during the year. The

Board has been carefully considering its

composition and intends to have 40% of

women on the Board by the end of 2025.

The Committee noted that the Senior

Independent Director of the Company is

female and the Board remains committed

to meeting this obligation.

Archil Gachechiladze, Tamaz Georgadze

and Mariam Megvinetukhutsesi are

Georgian and identify as being from

other ethnic groups, including Arab. It

is noted that being of minority ethnic

background takes into account many

different aspects, such as country of

birth, nationality, language spoken

at home, skin colour, national and

geographical origin, and religion. Georgia

has its own distinct and ancient language

with its own script, its own religion in the

orthodox church of Georgia, and a unique

geographic location at the intersection of

Europe, Asia and Middle Eastern countries

and cultures.

The Board considers diversity to 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 review the diversity of skills and

experience, gender, social and ethnic

backgrounds, cognitive and personal

strengths throughout the Group,

amongst other factors including merit

and other objective criteria.

The Company notes the Parker Review

is asking companies to consider

setting a percentage target for senior

management team that will be occupied

by ethnic minority executives in December

2027, however given the majority of the

senior management are from an ethnic

minority background, setting a target for

our Group would be artificial.

The Committee noted that, with the

Group’s workforce primarily based in

Georgia, its ethnic make-up is different

to that of a UK-based group. The

Board itself is highly diverse in terms of

nationality, with our nine Directors being

citizens of six different countries. The

Committee continues 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 there is

always further work to do. We continue

to score highly on gender diversity of the

Executive Committee and direct reports.

The Committee was pleased to note that,

in the 2023 edition of the FTSE Women

Leaders Review, the Company was ranked

overall and 2

in the banking sector

for female representation in the Executive

Committee and direct reporting positions

– with a combined total of 48.8%. This

reflects some of the talent development

and management processes and

initiatives we have in place, as detailed

below.

Details regarding equal opportunity

and diversity are also provided in the

Empowering employees section on pages

120 to 122.

In September 2023 the Board was

pleased to approve the significantly

improved Diversity and Inclusion

Policy which outlines the Company’s

commitment to ensuring a diverse and

inclusive culture within the Group and

recognises that this is crucial to the

Group’s success, innovation, and progress.

The Group has committed to several

principles within this Policy to continue its

transformation.

The Board also approved an Anti-

Discrimination and Anti-Harassment

Policy in September 2023.

Through this Policy the Group commits

to the elimination of discrimination

and harassment of any form within the

Group. The 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’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:

• United Nations’ Universal Declaration

of Human Rights

• 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

• United Nations’ Guiding Principles on

Business and Human Rights

• OECD Guidelines for Multinational

Enterprises

• United National Global Compact

• International Finance Corporation’s

Performance Standards

These policies will be kept under regular

review and updated in accordance with

local legal requirements and international

standards.

The policies can be found on the Group’s

website at

https://www.bankofgeorgiagroup.com/

governance/documents.

In accordance with Listing Rule 9.8.6(10), as at the reference date of 31 December 2023, the composition of the Board and executive

management was as follows:

Board and Executive Management gender representation

Number of

Board members

Percentage of

the Board

Number of senior

positions on the Board

(CEO, SID and Chair)

Number in executive

management

Percentage of executive

management

Male 6 66.67% 2 11 73.33

Female 3 33.33% 1 4 26.67

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Annual Report 2023 Bank of Georgia Group PLC

Board and Executive Management ethnic representation

Number of

Board members

Percentage of

the Board

Number of senior

positions on the

Board (CEO, SID

and Chair)

Number in executive

management

Percentage

of executive

management

White British or Other White

(including minority-white groups)

6 66.67% 2 - -

Mixed/Multiple Ethnic Groups - - - - -

Asian/Asian British - - - - -

Black/African/Caribbean/Black British - - - - -

Other Ethnic Group, including Arab 3 33.33% 1 15 100%

Not specified/prefer not to say - - - - -

The information presented in the above tables was collected on a self-reporting basis by the Directors, who were asked to confirm

which of the categories specified in the prescribed tables were most applicable to them.

Board evaluation

Nomination Committee Report continued

Year 1 Year 2 Year 3

Internal Board

evaluation

Internal Board

evaluation

External Board

evaluation

During 2023 the performance and effectiveness of the Board and its committees was reviewed through an externally facilitated

evaluation process conducted by Clare Chalmers Ltd.

The Board undertook a careful approach in ensuring the external evaluation was appropriate and that the evaluator understood the

sector and its challenges. Clare Chalmers Ltd has no connection with the Company or its individual Directors.

In conducting this evaluation, the Board set out to ensure the process not only met the requirements of the Code but also had a

clear focus on enhancing the effectiveness of the Board and its committees. Details of the evaluation process can be found on page

196 and its outcomes are detailed below.

Key outcomes of the 2023 external Board evaluation

Opportunities Actions

Managing the agenda and materials The Board felt it would benefit from updates from other external parties with regards

to shareholder and stakeholder feedback. It was agreed the Board would receive

additional external updates as required.

Succession planning The Board remains focused on succession planning, ensuring Board departures are

appropriately managed and continuing to monitor senior management succession

planning. In addition, the Board felt it would benefit from considering enhancements

to the skills matrix during 2024.

Risk and compliance To consider a consolidated, Bank-wide assurance plan to centralise the work of the

Risk, Compliance, and Internal Audit functions.

Additional time for strategic discussions In addition to the work undertaken in managing the agenda and materials, the Board

felt additional discussion on strategy and further Board strategy sessions would be

positive in supporting the continued growth of the Group. It was agreed the Board

would continue to hold annual strategy days.

Review of Directors’ performance

The performance of the Directors was assessed as part of the external evaluation process. Following careful consideration, the

Committee determined that each Director continued to perform effectively and that each should be recommended for re-election

by shareholders at the 2024 AGM.

Review of Chair’s performance

The performance of the Chair was assessed as part of the external evaluation process. Following careful consideration, the

Committee determined that the Chair continued to perform effectively and that he should be recommended for re-election by

shareholders at the 2024 AGM.

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Strategic Report Governance Financial Statements Additional Information

Progress on areas of focus from the 2022 internal Board evaluation

In 2022 an internal evaluation of the effectiveness of the Board, its committees, the individual Directors and the Chair was

undertaken. Throughout 2023 the Committee reviewed the key actions arising from the internal evaluation and reviewed the

progress against each. A summary is outlined below:

Opportunities Actions Progress during 2023

Managing the agenda and materials The Board would benefit from additional

time for discussion, supported by more

focused papers and timely receipt of

papers.

During the year Board papers have

become more focused and the quality

has improved. In addition, there has

been a focus on ensuring the timely

delivery of meeting papers to allow

more time for review. The presenters

have also been briefed to focus

on material items of reports and

allow more time for questions and

discussions.

Additional time for strategic discussions The Board felt it would benefit from a

strategy day to ensure appropriate time

to deep-dive on specific items and receive

updates from other speakers. In addition,

the Board thought it would be beneficial to

receive updates on the evolving economies

in Georgia and the region.

A two-day strategy meeting was held

during 2023 and further updates on this

can be found on page 192.

The Board has received updates on the

evolving economies in Georgia and the

region.

Additional risk and compliance reporting The Group has a robust and well-

developed risk and compliance function.

To maintain this in an evolving legal and

regulatory landscape the Board recognised

it was important to continue to receive

updates on the proposed Audit Reporting

and Governance Authority reforms, the

Listing Rule updates regarding diversity,

and the NBG rules on independence.

These suggestions were added to the

Board and committee agendas and

updates are provided on a regular

basis. Additional information on this is

available as follows:

• Internal controls – pages 145, 197, 215

and 222.

• Diversity – pages 186 to 187, 194, 210

to 212.

• Independence – pages 187 and 210.

• Updates on legal and regulatory

developments – pages 197.

Review of the Committee’s performance

The Committee undertook an evaluation of its own effectiveness as part of the external review. The Committee was pleased with

the findings, noting its professional and structured processes with discipline and a clear remit under the Chair.

The findings of the review were considered by the Committee at its September 2023 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 and its outcomes see page 196.

214

Annual Report 2023 Bank of Georgia Group PLC

Audit Committee Report

Ensuring robust financial reporting and internal controls to support the

long-term success of the Company.

Membership of Audit Committee

Committee membership Date of membership

Jonathan Muir (Chair) 24 February 2018

Hanna Loikkanen 24 February 2018

Cecil Quillen 24 February 2018

The skills and experience each member contributes can be

found on pages 198 to 200.

All members of the Committee are independent Non-

executive Directors of the Board. Committee members

have the right to attend meetings, as well as any other

Non-executive Directors of the Board. Other individuals,

including the CEO, CFO and CRO, and other members of

the Management Team, may be invited to attend meetings

to provide insight into key developments.

In accordance with the Code, we are pleased to confirm

the Committee meets the requirements of comprising at

least three independent Directors. Furthermore, the Board

is satisfied that Jonathan Muir has recent and relevant

financial experience.

The Committee as a whole has competence relevant to

the financial and banking sector in which the Company

operates, and holds the relevant combination of skills and

experience to discharge its responsibilities.

Key objectives of the Committee

The Audit Committee focuses on the following matters:

Financial reporting

• Ensures the integrity of the Company’s financial and

non-financial reporting.

• Ensures disclosures are fair, balanced and

understandable.

Risk management and internal controls

• Ensures adequacy and effectiveness of our systems of

internal controls.

• Ensures appropriate compliance monitoring.

• Ensures appropriate whistleblowing procedures and

monitors any developments.

• Reviews procedures for detecting and reporting on fraud.

Internal Audit

• Monitors and reviews the effectiveness of the Internal

Audit function.

• Approves the Internal Audit plan.

• Considers an independent third-party review of the

Internal Audit function.

External Audit

• Ensures the Company complies with audit tender and

rotation obligations.

• Determines the External Auditor’s remuneration, terms

of engagement, independence, conflicts, and ensures

appropriate qualifications, experiences and resources of the

external auditor.

• Reviews the External Auditor’s effectiveness.

• Monitors, reviews and approves any non-audit services

and associated fees.

Meeting attendance

Details of the members’ attendance at the meetings of the

Committee are as follows:

Committee membership

No. of meetings

attended

Jonathan Muir (Chair) 4/4 scheduled

5/5 ad hoc*

Hanna Loikkanen 4/4 scheduled

5/5 ad hoc*

Cecil Quillen 4/4 scheduled

5/5 ad hoc*

* There was one ad hoc meeting during the year where the Audit Committee and

Risk Committee met jointly

2024 action plan

In the coming year the main areas of focus for the Committee

will be:

• Approving the financial statements for the year ended

31 December 2023.

• Reviewing the key areas of financial judgement and

estimates used by management.

• Assisting the Board in the review of the effectiveness of

the Group’s risk management and internal controls.

• Reviewing the performance of the external auditors.

• Reviewing the performance of Internal Audit and

monitoring progress of the Internal Audit Plan.

• Overseeing plans for compliance with new 2024 UK

Corporate Governance Code, particularly in relation to

Internal Controls.

• Providing required reporting and assurance on the

acquisition of Ameriabank.

• Ensuring Ameriabank is integrated into the risk, reporting

and internal control framework of the Bank.

Regular attendees at meetings

CEO, CFO, CRO, Head of Internal Audit, CLO, UK General

Counsel, Company Secretary and representatives of

the External Auditor. Invitations to attend meetings are

extended to all Directors.

Collaboration with the Risk Committee

The Committee also works closely with the Risk Committee

to ensure both Committees are updated and aligned on

matters of common interest, to maintain a broad and full

view of the Group’s risk management and internal control

matters. Joint meetings of the Risk and Audit Committees

are held quarterly, with ad hoc meetings scheduled as

required.

The Committee’s Terms of Reference set out its role and

authority, and can be found on the corporate website at

https://bankofgeorgiagroup.com/governance/documents.

215

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Strategic Report Governance Financial Statements Additional Information

Dear Shareholders,

I am pleased to report on the activities of

the Audit Committee (the ‘Committee’)

throughout 2023 on behalf of the Board,

and to provide details on how the

Committee operated and discharged its

responsibilities.

Financial statements

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 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.

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 2023 included Expected Credit

Loss (ECL) provisions and impairments,

impact of sanctions, cost capitalisation

and accounting/valuation for repossessed

assets.

Internal controls

The Committee has reviewed and

challenged management across a

number of areas during 2023, including

the monitoring of the control framework

during the changing environment. This

change in particular focused on the

impact of the Russia-Ukraine war on

inflation, influx of migrants and resultant

change in money flows into Georgia

and the Bank. 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

quarterly and annual financial results.

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 protection

risks, and compliance-related matters,

among others. These will continue to be

areas of focus in 2024.

Internal Audit

During the year the Committee has

continued to oversee the role and

effectiveness of the Internal Audit

function. We have reviewed and approved

the Internal Audit Plan and its execution

for 2023, and approved the Internal

Audit Plan for 2024. We recognise the

importance of the Internal Audit function

to the control environment and have been

working closely with Internal Audit to

further enhance the outputs during the

year. At each meeting, the Committee

also reviews the key results of the Internal

Audit work, challenging management

where appropriate and ensuring that

remediation plans are in place and

executed.

Further information on our work with

Internal Audit is available on pages 218

to 219.

Viability statement

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.

Further information on our work and

the process in assessing the viability

statement is available on pages 221 to

222.

External Audit

We oversee the relationship with Ernst

& Young LLP (‘EY’), the Group’s external

auditor, reviewing EY’s effectiveness,

independence, objectivity and compliance

with ethical, professional and regulatory

requirements. We reviewed and approved

the 2023 audit plan and audit fees. We

continue to monitor management’s

responsiveness to the External Auditor’s

findings and recommendations.

Preparation for planned

financial governance

changes

A key legislative and regulatory change

proposed by the UK Government will

result from the measures proposed by

the Department for Business, Energy

“ The Committee has worked with the

Board and management to ensure robust

operational controls and processes

are embedded.”

Jonathan Muir

Chair of Audit Committee

216

Annual Report 2023 Bank of Georgia Group PLC

Audit Committee Report continued

& Industrial Strategy, arising from its

consultation into restoring trust in audit

and corporate governance and the

proposed revisions to the UK Corporate

Governance Code, including enhanced

focus on internal controls. The Committee

undertook substantial work during 2023

to review the proposals and ensure that

the Group was well positioned, where

needed, to begin to implement the

documentation and process changes. The

Audit Committee members oversaw the

Company feedback to the FRC under the

consultation on the proposed changes to

the Code.

Acquisition of Ameriabank

CJSC

The Committee undertook extensive

work in respect of the Ameriabank CJSC

(‘Ameriabank’) acquisition to ensure

appropriate due diligence, feasibility,

working capital and reporting. Further

information on the work undertaken by

the Committee is set out on page 223.

During 2024 the Committee will focus on

ensuring appropriate process and control

around reporting and compliance.

Committee composition

Due to the seven year NBG independence

requirement in place during the year, it

was important to identify a potential

Non-executive Director to join the

Committee and aid the succession

planning of the Committee. Following

this process, it was determined that

Andrew McIntyre has the requisite

skills, knowledge and experience to be

appointed as a member, and future Chair

of the Committee. I look forward to

working with Andrew and the experience

he will bring to the Committee.

More information of the appointment

process, led by the Nomination

Committee, is available in the Nomination

Committee Report on pages 209.

Work with the Risk

Committee

We have continued to work closely with

our colleagues on the Risk Committee

on matters including liquidity, adequacy

of capital (including adequate buffers),

Risk Registry, AML and sanction controls,

information security, cybersecurity and

compliance.

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 2024.

Further detail of the Committee’s work

during the year is set out in the following

report.

Jonathan Muir

Chair of the Audit Committee

24 April 2024

217

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Key Committee meeting topics during 2023

March June September December

• Internal Audit performance.

• Internal Audit KPIs and

KBOs.

• Internal Audit progress and

findings.

• Internal Audit team;

• Finance and accounting

update, including on ECL

provisions.

• Ongoing litigation update.

• 2022 Annual Report and

Accounts.

• External Auditor report.

• Internal Audit progress and

findings.

• Internal Audit Plan.

• Internal Audit KPIs and

KBOs;

• Finance and accounting

update including

remediation of Audit

findings and Impairment of

Assets review.

• Ongoing litigation update.

• External Auditor update

including subsidiary audits.

• Legal and regulatory

developments.

• Data protection update.

• External Auditor

effectiveness review.

• Internal Audit progress and

findings.

• Internal Audit Plan.

• Finance and accounting

update, including valuation

approach.

• Ongoing litigation update.

• External Auditor update.

• Legal and regulatory

developments.

• External Auditor

effectiveness review.

• Audit-owned policies.

• Committee effectiveness

result.

• Audit quality results.

• Internal Audit progress and

findings.

• Internal Audit Plan.

• Finance and accounting

update.

• Ongoing litigation update.

• External Auditor update.

• Legal and regulatory

developments.

• NBG data protection

requirements.

• External Audit Plan.

• Review of FRC

recommendations on the

2022 Annual Report.

• Entity rationalisation.

• Update on actions in

relation to amendments

to the UK Corporate

Governance Code including

on Internal Controls.

At each of the quarterly meetings the Audit Committee met with the External Audit and Internal Auditor without management

present. During the year there were five ad hoc meetings, one of which was held jointly with the Risk Committee.

Key activities during the year

Topic Summary of activity

Find out more

(where applicable)

External Audit Oversaw the external audit process and a review of

the effectiveness of the external audit.

Pages 219 to 221

Internal Audit • Internal Audit Plan.

• Internal Audit function review.

• KPIs.

• Internal Audit progress.

• Internal Audit risk assessment and follow-up

methodology.

• Internal Audit organisational structure.

Pages 218 to 219

Capital distribution Reviewed the capital distribution proposals in relation

to share buybacks and dividends.

AML and sanctions compliance risk

management

Oversaw the enhancement of the Group’s AML and

sanctions compliance risk management in conjunction

with the Risk Committee.

Pages 216 and 219

Regulatory and governance updates Reviewed the latest regulatory developments and the

work undertaken in relation to internal controls, the

Code, NBG, and Accounting Standards.

Page 215

218

Annual Report 2023 Bank of Georgia Group PLC

Committee effectiveness

As part of the wider Board and

Committee effectiveness review, an

internally facilitated evaluation of

the Committee’s effectiveness was

undertaken during 2023. The findings

were considered by the Board at its

September 2023 meeting.

The review concluded the Committee

functioned well and 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 196

and 212.

Meetings with the auditors

During the year the Committee met

privately, without management present,

with EY and the Head of Internal Audit.

The Chair 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 concerns in more detail,

directly with the external auditor and

the Bank’s Head of Internal Audit. In

addition, the Chair of the Committee

has maintained regular dialogue with the

external auditor throughout the year.

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 CFO 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, and 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.

The significant governance and control

matters, financial judgements and

significant issues considered by the

Committee in relation to the financial

statements are addressed below.

Matters 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.

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 was 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 accounting treatment of a number of significant items, including

advisory fees received at G&T, gain on the sale of repossessed assets and change

to interchange fee commission.

• 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 of the ongoing economic environment and the

continuing Russia-Ukraine war.

• Reviewed and recommended the going concern and viability statements to the

Board for its approval.

Internal Audit • Reviewed reports of internal audits and monitored action points and follow-up

actions arising.

• 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.

Audit Committee Report continued

219

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Matters considered Action taken by the Audit Committee

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 22 to the Consolidated Financial Statements

on page 327.

ECL provisions • Reviewed the controls around the development of the model used to assist in

determining the appropriate provisions.

• Reviewed key inputs of the model, including 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 revaluation of repossessed assets.

Group reorganisation • Reviewed the approach and accounting provisions for the Group reorganisation.

The Committee also received regular reports on recoveries and loan write-offs, information security strategy, data protection and

cyber risks.

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.

Internal Audit is led by the Head of

Internal Audit, who reports functionally

to the Chair of the Audit Committee and

administratively to the CEO. They have

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 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, significant findings

and 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 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 to enhance efficiency and

overall effectiveness.

The effectiveness of the Internal Audit

function and its work is continually

monitored using a variety of inputs

reported on a quarterly basis, including

quality of reports, status of completion

of the Audit Plan and execution of

remediation actions. 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

and retains appropriate independence.

External audit

A material responsibility of the

Committee is to oversee the external

audit process on behalf of the Board.

During its oversight and review of the

external audit process the Committee:

• approved the annual external 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;

• 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; and

• recommended the appointment,

reappointment or removal, as

applicable, of the external auditor.

FRC Minimum Standard

The Committee considered the FRCs

External Audit: Minimum Standard

(the ‘Minimum Standard’) issued

in May 2023 and confirms that

the Committee’s activities during

the year have been performed in

compliance.

More information on the application

of the Bank’s accounting policies can

be found on pages 275 to 287.

220

Annual Report 2023 Bank of Georgia Group PLC

Auditor independence

The Committee has adopted a Non-audit

Services Policy to safeguard the auditor’s

independence and objectivity. The Policy

was reviewed and updated in September

2023.

The provision of non-audit services by

our External Auditors aligns with the

current EU Statutory Audit regime, the

FRC Ethical Standard 2019 (the ‘Ethical

Standard’) and the Code. Any work

other than for the 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 on our website

https://bankofgeorgiagroup.com/

governance/documents.

In accordance with the Minimum

Standard and the Code, the Committee

has formally assessed the independence

of EY. This included the review of 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 the review of the value

of non-audit services provided by EY.

The Committee also reviewed and

discussed EYs independence in respect

on the non-audit services provided for

the acquisition of Ameriabank. The

Committee received an update from EY

confirming their continued independence

and the Committee agreed that it

remained satisfied of EY’s independence.

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 26 to the

Consolidated Financial Statements on

page 332, the total fees paid to EY for

the year ended 31 December 2023 were

GEL7.210 million, of which GEL 4.620

million 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 services delivered to the Company,

and does not consider that this work

compromised EY’s independence. Further

information regarding non-audit services

can be found below.

External auditor fees

The total fees paid to EY in the year

ended 31 December 2023 were GEL 7.210

million, of which:

Audit Services

• GEL 0.971 million – audit of these

financial statements

• GEL 1.048 million – audit of financial

statements of subsidiaries

Non-Audit Services

• GEL 0.571 million – audit-related

services

• GEL 4.620 million – other non-audit

services

Further disclosure on the remuneration

paid to EY can be found in Note 26 on

page 332.

Non-audit services

A review of the Non-audit Services

Policy has been undertaken, and it was

confirmed that the policy is in accordance

with the FRC Ethical Standard issued in

December 2019, which limits the non-

audit services External Auditor may

provide to the Company.

In all circumstances where it is proposed

to engage the External Auditors to

perform non-audit work in accordance

with this policy, this is subject to the

approval of the Audit Committee after it

has properly assessed potential threats to

the independence of the external auditors

and the safeguards applied in the Ethical

Standard.

EY undertook non-audit services in the form

of assurance work carried out in connection

with the announcement of the Company’s

2023 half-year results. This non-audit

service is of direct benefit to shareholders.

EY also undertook non-audit services in

respect of the acquisition of Ameriabank.

It was considered that EY was best

placed to undertake such services due

to having suitable scale, experience and

independence to be able to execute the

work within the required timeframe

particularly in light of the geopolitical

environment, lack of alternative providers

and historically low non-audit service fees

to date. As the level of costs incurred

in connection with the acquisition was

likely to exceed a 1:1 non-audit fee to

audit fee ratio and the 70% non-audit

services fee cap provision of the Ethical

Standard, EY requested a two-year

waiver from the FRC in respect of US$

950,000 of fees for reporting accounting

work in connection with the Ameriabank

transaction. The waiver was granted by

the FRC.

The Committee recognises and supports

the importance of auditor independence.

It reviewed EY’s performance of non-

audit services during 2023 and is

satisfied that it did not – and will not

– impair its independence. As a result,

the value of non-audit services work

by EY was GEL4.620 million in 2023

(2022: GEL0.012 million), representing

approximately 64.1% of the total fees

paid to EY as set out in Note 26 to the

Accounts on page 332.

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

2023 AGM. The Committee was also

authorised to set the remuneration of the

auditor, with 98.52% and 100% 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.

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 had required EY to rotate out from

the JSC Bank of Georgia audit following

the 2022 audit. The Chair of the Committee

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 2023 the Company complied

with the Statutory Audit Services for

Large Companies Market Investigation

(Mandatory Use of Competitive

Tender Processes and Committee

Responsibilities) Order 2014.

Auditor reappointment

There are a number of areas the

Committee considers in relation to EY

as the external auditor: its performance;

reappointment and length of service;

effectiveness of the external audit

process; independence and the provision

of non-audit services; objectivity; and

remuneration.

The Committee reviewed and made a

recommendation to the Board in relation

to the continued appointment of EY as

the external auditor. Furthermore, the

Committee approved EY’s remuneration

and terms of engagement for the 2023

financial year.

During the year the Committee reviewed

and approved the external audit plan for

2023 which was presented by EY together

with its key areas of risk and details of the

proposed audit approach.

Audit Committee Report continued

221

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

External auditor

Assurance from the

external auditor covering

independence (further

information available on

page 220) and matters

raised in the FRC’s Annual

Quality Review inspection

reports and remedial

actions taken (if any).

Audit process

Assess delivery of

the Audit Plan and

independent auditor’s

report including the

materiality level set by

the External Auditor and

the process to identify

financial statement risk

and key areas of focus.

Throughout the year

there will be regular

communications between

the external auditor and

both the Committee

and management,

including discussion of

regular papers prepared

by management and

EY. Assurance on the

operation of the audit

quality process at EY is

received and reviewed by

the Committee.

Management

Management will take

part in and receive the

output from a survey

of those involved in the

external audit process.

Furthermore, assurance

on the disclosure process

from the provision of

information to the

auditors is sought from

the CEO and CFO to

ensure disclosures are

appropriate.

Audit Committee

The Committee assesses

the output of the annual

Committee effectiveness

evaluation to identify

any opportunities of

improvement or areas of

concern. In addition, the

Committee will review

the output from the

survey on the external

audit process and discuss

the findings with EY. A

review of the final audit

report is undertaken,

noting key areas of

auditor judgement and

the reasoning behind the

conclusions reached.

The Committee has

regular discussions with

EY without management

present and with

management without EY

present, to discuss the

external audit process.

Outcome

Following consideration of all elements of the audit effectiveness review process – in addition to taking account of the

engagement and communication between the Audit Committee, management and external auditor – the Committee

confirmed it was satisfied that the external audit process provided by EY had been delivered effectively. The Committee

concluded that EY had demonstrated a depth of knowledge and an appreciation of complex issues, whilst providing

constructive, independent and objective challenge to management. The Committee requested that debrief sessions be held

between the external auditor and the finance management teams across the organisation to consider any areas to enhance the

audit process control environment.

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 2024 AGM.

Going concern

The Group has prepared forecasts,

including various sensitivities, taking

into account the principal risks and

uncertainties identified on pages 149 to

169. Having considered these forecasts

the Directors remain of the view that the

Group has sufficient capital and access

to capital to conduct its business for at

least the next 12 months. The Committee

reviewed the forecasts and the Directors’

expectations based thereon, and agreed

that they were reasonable. Accordingly

the Consolidated Financial Statements

have been prepared on a going concern

basis.

Viability statement

In accordance with 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. Details on

our work in developing and assessing the

viability statement can be found below.

Developing a robust viability

statement

In collaboration with the Risk Committee,

and considering 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 appropriate as the budget

and business processes are based on a

three-year horizon. It also considers that

uncertainty increases as the time horizon

extends.

External Auditor effectiveness

The Committee and management undertake a formal questionnaire to provide feedback on the external audit process. The

Committee reviews the findings and, where necessary, arranges any follow-up sessions to obtain further information. In addition,

the Committee has an established framework for assessing the effectiveness of the external audit process. This includes:

222

Annual Report 2023 Bank of Georgia Group PLC

Stage 1: Risk identification

A review of the principal risks

to viability over the period was

undertaken, including risks that

would impact the solvency and

liquidity of the Group either

separately or jointly.

Stage 3: Scenario sensitivity

analysis

Management undertook stress-

testing to review plausible

circumstances and how this may

affect the business over the long-

term, as well as reverse stress-

testing to consider what level of

disruption may cause the Company

to fail.

Stage 2: Risk assessment

Each identified risk was carefully

reviewed in accordance with our risk

appetite, existing control framework

and the quantum of risk.

Stage 4: Conclusions

The Audit Committee considered

the findings from the analysis. The

conclusion was presented to the

Board to provide the opportunity

for review and challenge.

Assessing the Group’s viability

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 170.

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 anonymously raise

concerns about business practices. The

Group uses an advanced, independent

whistleblowing reporting channel and

case management tool, WhistleB. 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.

The Audit Committee received reports

on any Code of Conduct and Ethics

violations. There were 27 claims in the

year ended 31 December 2023. Only one

instance was substantiated which related

to unethical behaviour and misconduct.

The employees were mandated to

familiarise themselves with the Bank’s

corporate guidelines and related rules of

conduct and ethics. There were no other

significant findings during 2023.

The Committee also oversees compliance

with GDPR 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 it

envisages would be required, and will

carefully monitor the progress of further

regulatory updates.

With the ongoing Russia-Ukraine war

and wider geopolitical developments, the

Committee kept the evolving sanctions

landscape under review and ensured

the Company remained compliant with

sanctions. The Group’s compliance

programme ensured there were processes

in place to manage these risks and

reviews performed to evaluate sanctions

compliance.

The Committee is supported by a

number of sources of internal assurance

within the Group in order to discharge

its responsibilities. Risks are regularly

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 and reports on any

compliance issues and litigation updates.

The Internal Audit Plans for 2023 and

2024 included a thorough risk heatmap.

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.

Further information on our risk

management and internal controls can be

found in the Risk Committee Report on

pages 224 to 228.

Audit Committee Report continued

223

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

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. The

Committee continued to gain assurance that there is a robust process of review and challenge at different levels within the Group to

ensure balance and consistency. Details of our process is set out below:

1. Audit Committee review

The Committee reviewed the Annual Report throughout the process and actively provided

input and challenge to ensure balance and consistency.

2. Report from the CFO

The Committee received a report from the CFO covering the financial statements within

the Annual Report and Accounts, including any amendments to areas of focus and any new

accounting standards during the period.

3. Fair, balanced and

understandable assessment

A fair, balanced and understandable assessment was prepared by the Management Team

and presented to the Audit Committee. In addition, the overall messages and tone of the

Annual Report was discussed with the Bank’s CEO and CFO, and the Committee considered

other information regarding performance presented to the Board during the period.

4. External audit review

The external auditor presented the results of its audit work to the Committee.

5. Recommendation to

the Board

The Board received and approved the Committee’s recommendation that a fair, balanced

and understandable statement could be made as detailed within the Directors’ Responsibility

Statement on page 248.

Outcome

Following this review, we believe the 2023 Annual Report and Accounts is representative

of the year and presents an understandable overview providing the necessary information

for shareholders to assess the Group’s position, performance, business model and

strategy.

Acquisition of Ameriabank CJSC

The Committee undertook extensive work in respect of the Ameriabank acquisition to ensure appropriate due diligence, feasibility,

working capital and reporting. The Committee received updates from management regarding their findings during the due diligence

process and the accounting methodology adopted by Ameriabank was reviewed and considered appropriate.

The Committee has also received updates from management regarding financials and the Ameriabank finance team which were

considered to be strong. The Committee has identified areas of opportunity to enhance controls and to align with the Company’s

approach as a UK listed entity.

During 2024 the Committee will focus on ensuring appropriate processes and controls are in place, particularly in respect of

reporting and compliance.

FRC correspondence

During the year the FRC conducted a review of the Company’s 2022 Annual Report and Accounts in accordance with Part 2 of

the FRC Corporate Reporting Review Operating Procedures and wrote a letter to the Company regarding their findings. The

FRC stated that there were ‘no questions or queries’ in relation to the 2022 Annual Report and Accounts which they wished

to raise with the Company. The FRC highlighted certain matters which the Company were invited to consider in relation

to preparation of the 2023 Annual Report and Accounts, to improve on in future reporting for the benefit of the users and

stakeholders. The Committee reviewed the letter from the FRC, and the Company’s response letter, and noted the matters

highlighted to Company for future reporting which have been addressed in the 2023 Annual Report and Accounts.

The FRC’s letter noted that the scope of their review was limited to the 2022 Annual Report and Accounts and did not benefit

from detailed knowledge of the Group’s business. In line with FRC requirements, the letter provides no assurance that the 2022

Annual Report and Accounts are correct in all material respects. The FRC’s role is not to verify the information provided but to

consider compliance with reporting requirements.

224

Annual Report 2023 Bank of Georgia Group PLC

Risk Committee Report

Key objectives of the Committee

The Risk Committee focuses on the following matters:

Risk oversight

• Provides advice in relation to risk exposures.

• Oversees 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 the strategy and

the regulatory requirements.

• 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, measure 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 risk management policies, processes,

methodologies and infrastructure.

• Reviews the principal risks and uncertainties disclosures

in the Half-year and Annual Reports.

Safeguarding the Group by ensuring a robust oversight of the Group’s ERM

framework and risk management activities.

Membership of Risk Committee

Committee membership Date of membership

Véronique McCarroll (Chair) 1 October 2018

1 January 2022 (Chair)

Alasdair Breach* 24 February 2018

Tamaz Georgadze 24 February 2018

Mariam Megvinetukhutsesi 12 March 2021

* Alasdair Breach resigned as a Non-executive Director and as a member of the

Committee on 15 March 2024.

The skills and experience each member contributes can be

found on pages 198 to 200.

All members of the Committee are independent Non-

executive Directors of the Board. Committee members

have the right to attend Committee meetings, as well as

any other Non-executive Directors of the Board. Other

individuals including the Chair of the Board, Group CEO,

CFO, CRO, other representatives of the Group’s risk

function, CLO, Internal Audit and External Auditor may

be invited to attend all or part of any meeting if deemed

appropriate and necessary with the agreement of the

Committee Chair. The Bank’s CRO is David Chkonia,

who has full access to the Committee and attends all its

meetings.

Meeting attendance

Details of the members’ attendance at the meetings of the

Committee are as follows

Committee membership

No. of meetings

attended

Véronique McCarroll (Chair) 4/4 scheduled

1/1 ad hoc*

Alasdair Breach 4/4 scheduled

1/1 ad hoc*

Tamaz Georgadze 4/4 scheduled

1/1 ad hoc*

Mariam Megvinetukhutsesi 4/4 scheduled

1/1 ad hoc*

* There was one ad hoc meeting during the year where the Audit Committee and

Risk Committee met jointly.

Regular attendees at meetings

CRO, CEO, UK General Counsel and Company Secretary.

Invitations to attend meetings are extended to all Directors.

2024 focus areas

In the coming year the main areas of focus for the

Committee will be:

• Continuing to monitor and review the risks and potential

threats caused by the Russia-Ukraine war, particularly

in relation to compliance, information security and

fluctuations in interest and FX rates, as well as

consideration for longer-term economic impacts.

• Updating and enhancing the risk appetite framework,

including new metrics as appropriate in relation to

operational or AML risks.

• Creating a Bank-wide Risk Registry to provide a

comprehensive view of risk within the Bank – including

operational, financial, strategic and compliance risk.

• Overseeing the integration of recently acquired

Ameriabank in the risk governance framework of the

Group.

Collaboration with the Audit Committee

The Committee also works closely with the Audit

Committee to ensure both Committees are updated and

aligned on matters of common interest, to maintain a broad

and full view of the Group’s risk management matters.

Joint meetings of the Risk and Audit Committees are held

quarterly, with ad hoc meetings scheduled as required.

The Committee’s Terms of Reference set out its role and

authority, and can be found on the corporate website at

www.bankofgeorgiagroup.com/governance/documents

225

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Dear Shareholders,

As the Chair of the Risk Committee (the

‘Committee’), I am pleased to report on

the Company’s Risk Committee activities

and focus during 2023 on behalf of the

Board, and to provide details on how the

Committee operated and discharged its

responsibilities.

Risk oversight

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. The ongoing impact of the

Russia-Ukraine war and wider global

macroeconomic factors have remained a

focus area during 2023 and we received

regular updates via reports from the CRO

– particularly in relation to international

sanctions, liquidity risk and credit risk

exposures in 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,

together with continuing to monitor

the developments and changes to the

operational risk management framework,

the organisational structure of the

Risk department, the redefinition of

the ERM framework and reporting to

the Committee, as agreed in 2023.

The risk appetite framework is now

well embedded in the Group’s risk

governance and regularly monitored in

line with the Group’s strategy, capital

planning and regulatory requirements.

This year, the Bank reported its Internal

Capital Adequacy Assessment Process

(ICAAP) and Internal Liquidity Adequacy

Assessment Process (ILAAP) reports as

requested by the NBG, which were also

reviewed by the Committee.

The Committee has continued to

support CRO David Chkonia with

the enhancement of the Group’s risk

management framework, including

embedding the three-lines-of-defence

model, developments to the operational

risk management framework and

improving the organisational structure

of the Risk department. The Committee

has been pleased with the developments

as well as the improvements made in

reporting to the Committee through risk

reports and risk dashboards.

Risk management

framework

The Committee confirmed it is pleased

with the ongoing implementation of

and improvements to the Group’s risk

management framework, together with

the Group’s operational risk management

framework, which has enabled the

proactive management of the operational

risks of the business and ensured our

operational risk profile remains robust.

During the year the Committee undertook

a deep-dive review of the Corporate

Banking top exposures to review single-

name and specific sector concentration

risk. Special attention was also directed

to the monitoring of liquidity risk in

the light of the international banking

context in the first half of the year, the

enhancement of the of AML screening

and monitoring systems, and consumer

lending risk models and processes. The

Committee recognises the importance

of monitoring other risks such as

information security, climate risks or

cyber risk which may affect the business.

Regulatory requirements

The Bank regularly engages 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 and compliance

with the NBG requirements.

Committee effectiveness

evaluation

We were delighted to welcome Clare

Chalmers Ltd as our Evaluator to

undertake an effectiveness evaluation

of the Committee during 2023. We were

pleased with the evaluation results and

the suggestions on how the Committee

can improve further, which we will keep

under review during 2024.

Further detail of the Committee’s work

during the year is set out in the following

report.

Véronique McCarroll

Chair of the Risk Committee

24 April 2024

Véronique McCarroll

Chair of Risk Committee

“ The Committee has continued to support

the ongoing enhancement of the Group’s

risk management framework, challenging

how the Group assesses, monitors and

mitigates risk.”

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Annual Report 2023 Bank of Georgia Group PLC

Key Committee meeting topics during 2023

March June September December

• Risk Report.

• IFRS-based NBG Basel III

capital requirements.

• Unsecured consumer

lending transformation

project.

• Risk KPIs and KBOs.

• Stress test assumptions,

ICAAP and ILAAP progress.

• Risk Report.

• AML initiatives and alerts

monitoring dashboard

review in light of the rise in

international sanctions.

• Group risk structure.

• NBG stress test exercise.

• Liquidity risk exposure

profile and potential

deposit outflows scenarios.

• ICAAP and ILAAP reports.

• Risk Report.

• Liquidity Coverage Ratio in

the perspective of new NBG

modelling requirements.

• Received an update on the

unsecure consumer lending

transformation project

outcome.

• Liquidity risks and Interest

Risk Rate.

• Committee Terms

of Reference for

recommendation to the

Board.

• Related Party Transaction

(RTP) Policy.

• External committee

effectiveness report.

• Risk Report.

• Liquidity Coverage Ratio.

• Corporate loan book deep-

dive analysis, including

specific outlook on top

sector and single-name

exposures.

• NBG Review Assessment on

ALM and structural interest

rate risk.

Key activities during the year

Activity Summary of Activity Find out more (where applicable)

RPT Policy Reviewed and considered the RPT Policy

and recommended its approval by the

Board.

Organisation structure and operational

risk management framework

Oversaw the continued implementation

of the new organisation structure and

operational risk management framework.

Bank-wide Risk Registry In conjunction with the Audit Committee,

considered and agreed to introduce a

Bank-wide Risk Registry to provide a

comprehensive view of risk within the Bank

– including operational, financial, strategic

and compliance risk.

Page 224

AML and sanctions compliance risk

management

Oversaw the enhancement of the Group’s

AML and sanctions compliance risk

management.

Pages 227 to 228

ICAAP/ILAAP Reviewed the development and

documentation of the ICAAP/ILAAP

reports requested by the NBG.

Page 227

Liquidity Risks and Interest Risk Rate Reviewed the liquidity trends, current

liquidity buffer and interest rate risk

exposure.

Page 227

Risk Committee Report continued

227

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Committee effectiveness

The Committee undertakes an annual

review of its effectiveness. During 2023

the performance and effectiveness of

the Board and its Committees were

reviewed through an externally facilitated

evaluation process conducted by Clare

Chalmers Ltd. As part of the process,

Clare Chalmers Ltd reviewed documents

and observed the Committee in person at

the June 2023 meeting held in Tbilisi.

The Committee was presented with

the evaluation report and reviewed the

findings and proposals at the September

2023 meeting. The Committee was

described as a constructive forum

benefiting from the knowledge of its Non-

executive Directors, the Risk team and

external consultants, highlighting that

dynamic discussions take place between

these parties.

Following the evaluation the Committee

and the Audit Committee agreed upon

the creation of a Bank-wide Risk Registry

to provide a comprehensive view of risk

within the Bank – including operational,

financial, strategic and compliance risks.

The Committee will continue to consider

areas where it can improve in the future

to the benefit of the Company.

Reporting to the

Committee

During the year the Committee received

and considered a range of reports, updates

and presentations from the CRO, the

wider Risk team and management. The

Committee is pleased with the continued

increase in quality of reports and the

growing risk culture across the business.

External risks

Prior to each quarterly Committee

meeting the Board considers the

macroeconomic situation and geopolitical

risks, providing context for the

Committee’s discussions on the Group’s

management of risks.

During the year the Committee continued

to receive and discuss 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.

Challenges in relation to increased client

inflows were highlighted as potential risks

to some entities using legal channels for

sanction evasion/avoidance, and were

mitigated through heightened monitoring

capabilities in the front and back offices,

increased AML resources and systems for

sanctions screening, and enhanced due

diligence for SWIFT transactions from or

to Russia – with all transactions in online

stopped by default. Georgia continues to

align its regulatory framework with that

of the EU, and during the year these areas

continued to be a focus of monitoring

and review by the Committee to ensure

each of the risks was being mitigated

satisfactorily.

Credit risk

1. Consumer lending

During the year the Committee reviewed

and received updates on the Unsecured

Consumer Lending Transformation

project to redesign the unsecured

consumer risk management process with

the aim of streamlining the collaboration

of all involved directions.

A new set of risk models was developed

by the Bank’s data scientists in

collaboration with McKinsey, providing

the Bank with a best-in-class model

governance framework. The new models

rely on fewer variables, which enables

easier monitoring and greater stability.

Implementation of the new risk band

management methodology is designed

to maintain risk levels and adjust the

underwriting strategy continuously. Risk

levels are aligned with the Bank’s risk

appetite and any deviation in the risk

profile is pre-determined, allowing the

Bank to improve alignment between the

main stakeholders and adjust the policy

to preserve the current risk level.

2. Corporate 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

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 buffers; 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 total

foreign currency share of the retail loan

book.

In December 2023 the Committee,

at its request, reviewed a deep-dive

analysis of the corporate loan book.

The analysis focused on changes to the

concentration of exposures, higher-risk

areas within sectors, watch points and

mitigation levers. The results presented

an analysis of the aggregate corporate

portfolio showing single-name and sector

exposures, as well as a specific analysis

and economic outlook of four sectors:

hotel; residential real estate development;

commercial real estate; and healthcare.

It was assessed that the largest risk

exposures were carefully selected at

origination, and that the Bank had

enough mitigation capabilities to manage

the related risks.

Financial risks

In the first half of the year, the

Committee requested and reviewed a

deep dive analysis on the liquidity risk

exposure of the Bank, in the light of the

international banking context and the

liquidity problems that several banks

had faced in the US and Europe. The

results evidenced the Bank’s solid liquidity

position and healthy balance sheet, with

no major residual interest rate risks linked

to its securities portfolios.

The Committee and the Audit Committee

received updates on the ICAAP and

ILAAP, reviewed the reports and ensured

the Bank’s capital ratios were within the

regulatory requirements. The Committee

also reviews stress testing results,

including internally developed stress-tests

and those using the criteria specified

by the NBG. The NBG stress testing

results demonstrated that the Company

has a suitable buffer in line with the

requirement threshold.

During the year the Bank undertook an

independent consultation review of the

Group’s Interest Rate Risk in the Banking

Book (‘IRRBB’), which was initiated by

the NBG in coordination with the ERBD

and performed by an independent

consultant, ALM Vision. The Committee was

pleased that the Bank’s current exposure

to IRRBB was assessed as compliant with

international standards.

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, mitigating actions and

remediation plans.

Furthermore, the Committee continued

to review monitoring metrics and agreed

to include an additional metric for

operational risk monitoring, together

with the redesign and implementation

of a new operational risk management

framework implemented in 2023 that

aims to enhance first-line engagement

in the processes and improve operational

risk management governance. The Bank

has also established an Operational Risk

Management Committee to further

improve decision-making processes.

AML and financial

crime risks

AML and sanctions compliance risk

management has been a key focus for the

Committee during 2023. The Committee

has reviewed and discussed the risks and

actions taken by the Bank regarding these

matters. The Committee has overseen

the creation of the Transaction Online

Screening and Global Banking Business

Direction to create a first line of defence

and increase the effectiveness of the

AML function. Improvements have also

228

Annual Report 2023 Bank of Georgia Group PLC

been made to offline monitoring tools,

allowing monitoring to take place more

frequently and improving reporting

in this area. Sanctions training was

enhanced during the year to provide

a general understanding of different

sanctions regimes and the Bank’s internal

methodologies pertaining to client

onboarding and transaction screening.

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 and

maintenance of a cyber risk register.

The Bank 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 neither external nor malicious

internal actors can harm the core

database backup in any technological

way.

Following the appointment of a DDoS

mitigation service provider in 2023, which

has the capability to defend the Bank’s

infrastructure from larger DDoS attacks

and keep services available, the Committee

continues to see positive progress of the

cyber response plans with IT and other key

stakeholders actively engaged.

Emerging risks

The Committee continues to monitor

emerging risks, including those related

to climate and ESG, and oversees the

implementation of the TCFD disclosures.

Climate risk analysis is now embedded in

the credit approval request process and

was also included in the corporate loan

book analysis. For more details on climate

action, please see pages 99 to 118 of the

Sustainable Business section.

ERM

The Committee considered a wide range

of risks facing the Group, both principal

and emerging, across all key areas of risk

management. The Committee assists the

Board in setting the Group’s Risk Appetite

Statement and updating the Company’s

risk appetite metrics. 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 UK Corporate

Governance Code and FRC guidance.

Management reviewed the risk mitigation

tools and control functions and reported

to the Committee and 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

and Annual Report.

In conjunction with the Audit Committee,

the Committee reviewed the viability

statement as detailed on page 170.

Risk Committee Report continued

229

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Overview

The members of the Remuneration

Committee during the year were as

follows:

Committee

membership

Date of

membership

Cecil Quillen 24 February 2018.

Chair since

1 January 2023.

Al Breach 24 February 2018

Tamaz Georgadze 24 February 2018

Hanna Loikkanen 20 September

2019

Mel Carvill 10 March 2022

Cecil Quillen became Chair of the

Committee on 1 January 2023, having

previously been a member. Al Breach

stepped down from the Board and the

Committee on 15 March 2024.

All members of the Committee are

independent Non-executive Directors of

the Board. The skills and experience that

each member contributes can be found on

pages 198 to 200.

The members’ meeting attendance for

the year is set out below.

Committee

member

No. of meetings

attended

Cecil Quillen

(Chair)

3/3 scheduled

1/1 ad hoc

Al Breach 3/3 scheduled

1/1 ad hoc

Tamaz Georgadze 3/3 scheduled

1/1 ad hoc

Hanna Loikkanen 3/3 scheduled

1/1 ad hoc

Mel Carvill 3/3 scheduled

1/1 ad hoc

In addition to formal meetings held during

the year, the Committee also participated

in various telephone discussions.

There is a standing invitation for other

Board members to attend meetings. The

CEO and other members of management

may be invited to attend meetings to

provide more insight into key issues

and developments. Other attendees at

Committee meetings who provided advice

or assistance on remuneration matters

from time to time include the CEO, the

Head of Human Capital and Employee

Experience Management, Business

Processes and Lean Transformation

Capital Management, the Chief Legal

Officer 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 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

remuneration structures.

The Committee’s terms of reference set

out the Committee’s role and authority,

and can be found on the corporate

website at https://bankofgeorgiagroup.

com/governance/documents.

The Committee considers outside

guidelines, for example the Investment

Association Principles of Remuneration.

The UK General Counsel attends

events organised by investor bodies,

proxy advisors, accountancy firms, law

firms, regulatory bodies and similar

organisations to keep the Committee up

to date with developing market practice.

Cecil Quillen

Chair of the Remuneration

Committee

What is in this report?

This Directors’ Remuneration Report includes:

• The Annual Statement by the Chair of the Remuneration Committee and the Annual

Report on Remuneration describe the implementation of Bank of Georgia Group

PLC Directors’ Remuneration Policy and discloses the amounts earned relating to

the year ended 31 December 2023.

A summary of the current Remuneration Policy approved at the 2022 AGM is set

out on pages 243 to 247, 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 Listing Rules.

Directors’ Remuneration Report

230

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

Dear Shareholders,

On behalf of the Board, I am pleased

to present the Directors’ Remuneration

Report for the financial year ended

31 December 2023.

The Remuneration Committee received

market and stakeholder updates, set the

KPIs for and considered the remuneration

of the CEO, of the executives and of the

wider workforce. It also underwent an

external evaluation and strengthened its

Terms of Reference.

Shareholders voted 92.83% in support

of the Remuneration Report at the 2023

AGM. The Committee discussed the

feedback from engagement with specific

investors on remuneration matters and

on our remuneration structure. The

Board appreciates such engagement

and, as ever, continues to be available to

stakeholders on such matters.

Remuneration Structure

The Committee believes the Director’s

Remuneration Policy (the ‘Policy’) is

in the best interests of the Group.

It is consistent with the regulatory

requirement of the National Bank

of Georgia (‘NBG’), and has very

strong alignment with the interests of

shareholders.

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. Nil-cost options

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.

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 Policy and are over a total period

of five years for salary shares.

• Performance-based remuneration is

capped at a maximum of 100% of

salary (cash and share salary).

• The vesting and holding periods for

discretionary performance-based

remuneration result in shares being

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.

• Pension entitlements for Executive

Directors and senior management are

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.

There is an increased focus on clawback

and malus in the forthcoming changes to

the UK Corporate Governance Code to

be effective from 2025. We believe that

this is an area in which the Company is

already ahead of market practice and

so is able to disclose early ahead of the

forthcoming Code:

• Malus and clawback provisions are

extensive, and were expanded further

in 2022 – see page 246 for a summary.

• Clawback applies for two years from

date of vesting, an increase from one

year under the previous Policy.

• There are additional ‘bad leaver’

provisions in the Executive Director’s

contract, allowing for the forfeiture

of all unvested discretionary deferred

shares in certain circumstances.

The period of two years is appropriate

as it allows enough time for matters to

come to light and be considered. Malus

and clawback were not utilised in the last

reporting period. The Executive Director’s

contract includes the malus and clawback

provisions.

Context of remuneration

The Committee considered market

updates on remuneration proposals,

market practice, proxy advisors’ updates

and reports and policies.

Following previous feedback from a

major shareholder, we disclose the total

shareholdings of top management in

this report. Also, further to feedback in

previous years, there is a higher overall

weighting for financial KPIs than for non-

financial KPIs for the CEO’s performance-

related pay.

Given the importance of ESG matters

to stakeholders, the Committee selected

KPIs for the CEO relating to material

ESG matters. The Company identified

financial inclusion as a key material ESG

area given our position as a systemic bank

in an emerging economy. This year we

have introduced two additional financial

inclusion metrics: sCoolApp Monthly

Active Users and the number of self-

employed borrower clients. See pages 86

to 91 in the Sustainable Business section

for further information on financial

inclusion and the reasons for selection as

a material area of focus.

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 Group’s values, identified by an

employee engagement exercise, are

motivation, courage, creation/action

and encouragement. 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.

The Committee set the KPIs for the

CEO for 2023 early in the year, including

threshold, target and maximum levels for

each and weightings for each. Relevant

KPIs were also cascaded to each member

of senior management who also had

additional KPIs in accordance with their

roles and responsibilities.

Terms of Reference

The Committee reviewed its Terms of

Reference and made recommendations

for changes to the Board. These included

adding wording, in accordance with best

practice, that remuneration policies

and practices should be, amongst other

matters, (i) linked to the successful

delivery of the Group’s long-term

strategy and linked to Environmental,

Social and Governance related targets

where appropriate, and (ii) open to the

use of discretion to override formulaic

outcomes and/or to recover or withhold

sums or share awards under appropriate

circumstances.

Workforce remuneration

matters

During the year, the Committee

considered the results of market

comparisons to salaries in the Bank,

including at entry positions, mass

positions and senior positions. Further,

a position levelling and job ranking

exercise was carried out by the Human

Capital Management department and

the Committee noted that work was

ongoing to make levelling factors more

specific and applicable to performance

evaluations.

Progress was also made in the review of

front office compensation packages to

resolve any gaps with the market.

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The Committee discussed equal pay

gap and raw gender pay gap data.

Work is ongoing to continue various

talent development activities to support

professional and career progression of

employees in lower positions.

The Committee considered minor

amendments to workforce remuneration

policies for employees of the Bank.

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 considered and approved

an overview of the employee bonuses for

2023. These are divided along business

lines and comprise both cash bonuses and

share bonuses.

Year on year, for 2023 the average cash

salary increased by 23.5%, the average

deferred share salary decreased by 5.2%

and the average employee total bonus

increased by 10.1%.

Hanna Loikkanen is a member of the

Remuneration Committee and designated

Non-executive Director to engage with

the workforce. She facilitated three

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 210.

The Committee also considered the

performance of senior management

against each of their KPIs (which

were each weighted) and their overall

performance and approved the

discretionary awards. Remuneration for

senior management is predominantly in

deferred shares.

2023 performance-based

remuneration for Executive

Director

2023 was another successful year

during which the Group, led by the CEO,

continued to deliver on our strategic

priorities. Focus on customer needs and

product quality translated into profit

before tax of GEL 1,634 million (adjusted

for one-offs) and an ROAE of 29.9%

(adjusted for one-offs). Cost:income

ratio was a historical low at 29.8%. The

continued strength of the loan portfolio

translated into a lower cost of credit risk

ratio of 0.7%.

The Group closed the year with a Net

Promoter Score of 59.3, highlighting its

dedication to customer satisfaction and

an Employee Net Promoter Score of 55.6.

As stated in the ‘Further stakeholder

considerations’ section above we have

expanded the accountability of the CEO

for “Developing ESG in line with the

Group’s material areas of focus”, with four

different metrics measured and disclosed

in the KPI table below in this report.

The Committee considered the personal

contribution of the CEO to the fulfilment

of the Group’s strategy and to the

overall corporate performance. The

Group achieved excellent results under

his leadership and in part through his

initiatives.

During 2023 the CEO executed the

strategy set by the Board for careful

deployment of surplus capital in a

thorough and efficient manner. He

carried out thorough due diligence and

negotiations and presented to the Board

the attractively accretive acquisition of

Ameriabank. This was achieved with no

dilution for shareholders and the Group

continued to implement its capital

distribution policy.

Shareholders received a final dividend for

2022 in July following the 2023 AGM. An

interim dividend of GEL 3.06 per share

was paid in October 2023. In February

2023, the Board approved an increase of

up to GEL 148 million in its share buyback

and cancellation programme. In August

2023, the Board approved the launch

of a GEL 62 million share buyback and

cancellation programme. As disclosed in

the Preliminary Financial Results release,

for full year 2023 the Board intends to

recommend to shareholders at the AGM

a final dividend of GEL 4.94 per share. In

addition, the Board has also approved an

extension of the buyback and cancellation

programme by an additional GEL 100

million. The Committee noted that the

market cap increased 47% during 2023

from GBP 1,237 million at FY 2022 to

GBP 1,817 million at FY 2023.

Each KPI was considered against the

threshold, target and maximum level and

in accordance with these calculations

Mr Gachechiladze was awarded 97.0% of

his maximum opportunity, which was paid

in deferred shares. The Remuneration

Committee concluded that the level

of deferred share award as calculated

against the KPIs remained appropriate

and it did not exercise discretion.

The level of award is considered to be

appropriate as it reflected his very strong

performance against 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 stakeholder

experience of the Company (including the

increase to the employees’ salaries and

bonuses).

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 2023’

later in this Report.

Remuneration Committee

effectiveness review and

priorities for 2024

An independent evaluator, Clare

Chalmers Ltd (the ‘Evaluator’) undertook

an external review of the Committee in

2023. They reviewed Committee papers,

interviewed members of the Committee,

management and others and observed

the Committee meeting in person.

The Evaluator noted that the Committee

changed its Chair at the beginning of

year, and credit was given to the outgoing

Chair for her efforts in engagement with

shareholders. I was judged as Chair to be

aware of the major issues and UK listing

context. The Committee was observed

as having good discussions on the issues

and aiming to strike a balance between

different stakeholders. Those members of

the Board who are not members of the

Committee expressed to the Evaluator

that feedback to the Board is good.

In 2024, the Committee’s priority will

be to consider and consult on a new

Remuneration Policy, which will be put

to shareholders at the 2025 AGM in

accordance with the three-year cycle.

Cecil Quillen

Chair of the Remuneration Committee

24 April 2024

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Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

Annual Report on Remuneration

Shareholder context

Below are the shareholder voting figures for the most recent Directors’ Remuneration Report (2022), as presented at our AGM on

19 May 2023:

Resolution Votes for % Votes against % Total votes cast Votes withheld

Approval of the Directors’

Remuneration Report 34,832,255 92.82 2,692,899 7.18 37,525,154 408

The Directors’ Remuneration Policy was last 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

In response to the significant minority of votes against the Policy, the Committee undertook an extensive shareholder engagement

exercise covering 50% of our shareholder base, with focus on those who voted against the Policy (as well as including many who did

not). We extensively disclosed on the process, the results and action taken in the previous year’s Annual Report. You can read more

about this in the ‘Shareholder Engagement and response’ section in the Chair’s Letter of the Directors’ Remuneration Report 2022

at https://bankofgeorgiagroup.com/reports/annual.

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. 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

237, 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 in line with the Group’s material areas of focus.

See the Chair’s Letter for further explanation of the alignment to the Group’s purpose and values.

Advisors

The Committee was not advised by remuneration consultants during 2023 or 2024 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.

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Strategic Report Governance Financial Statements Additional Information

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 2023 and 31 December 2022.

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. The current Policy has applied since

1 January 2022.

For 2023, 80.2% 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 Policy.

Cash salary

(US$)

Deferred

share salary

(US$)

Taxable

benefits

(US$)

Pension

benefits

(US$)

Dividend

equivalents

(US$)

Total

fixed pay

(US$)

Discretionary

deferred

remuneration

(US$)

Total

variable pay

(US$)

Single

total figure

(US$)

2023 370,000 2,200,000 62,597 3,400 722,386 3,358,383 2,492,902 2.492,902 5,851,285

2022 370,000 2,200,000 58,054 3,400 282,676 2,914,130 2,490,343 2,490,343 5,404,473

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 2023 and 2022 work years. For 2023,

Mr Gachechiladze was awarded 71,694 BOGG shares, the number of shares were calculated by reference to US$ 30.6859 share price which is the average share price of

the five working days before 25 December 2022. For 2022 Mr Gachechiladze was awarded 106,034 BOGG shares, the number of shares was calculated by reference to a

US$ 20.7481 share price (which is the average share price of the five working days before 25 December 2021). For each award, 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.

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.

5. Dividend equivalents. The figure shows the dividend value paid in respect of nil-cost options exercised in the relevant year. The difference in dividend equivalents is a result of

total number of deferred shares held and of the Group’s dividend growth and not of a change in Policy or in the application of Policy.

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 2023 Mr Gachechiladze was awarded 51,462 shares. The number of shares were calculated by reference to the closing share price on 12 February 2024

(the working day before the meeting) which was US$48.4416 (based on the official share price of GBP 38.40 per share converted into Dollars using an exchange rate of

1.2615, being the official exchange rate published by the Bank of England on the same date). For 2022 Mr Gachechiladze was awarded 74,962 BOGG shares. For 2022 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). In each cash 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 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 Policy. The basis for determining Mr Gachechiladze’s 2023 discretionary award is described on pages 234 to 235.

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, 2022 or 2023. 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 2023, 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 last closing share price before the date

of relevant Remuneration Committee meeting.

2019 2020 2021 2022 2023

Single total figure of remuneration (US$) 3,558,415

1,561,020 3,886,930 5,404,473

5,851,285

Discretionary compensation as a percentage of

maximum opportunity (%) 100% 0%

97.0%

96.9% 97.0%

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 executive 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

and has been retained in the above amount.

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 and 2023 was cash converted into deferred shares in accordance with the approved Policy and NBG requirements.

4. 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 NBG

requirements.

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Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

Basis for determining Mr Gachechiladze’s discretionary deferred share remuneration in

respect of 2023

Mr Gachechiladze’s KPIs included both financial and non-financial components. They largely track the Group’s published KPIs as he is

expected to deliver on the Group’s key strategic, financial and ESG priorities.

The following table sets out the financial KPIs set for Mr Gachechiladze in respect of 2023, and his performance against them. The

table below provides further explanation of each KPI.

The financial KPIs were selected to reflect key 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 four metrics within the Developing ESG KPI to help measure our key initiative of

financial inclusion in Georgia: Digital Transactional Monthly Active Users, Payments Monthly Active Users, sCool App Monthly Active

Users and Self-employed borrower clients.

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 term target, in line with strategy,

although the KPI has been made more challenging

20.0% 23.5% 26.5% 29.9%

See note 1 below

15.0%

2. Cost:income ratio (15%) 36.9% 34.9% 32.9% 29.8%

See note 2 below

15.0%

3. COR (15%)

Cost of credit risk ratio

1.4% 1.2% 0.9% 0.7%

See note 3 below

15.0%

4. PBT (15%)

Profit before tax

GEL 1,110mln GEL 1,210mln GEL 1,310mln GEL 1,634mln

See note 4 below

15.0%

Non-financial KPIs – 20%

5. NPS (6%)

Net Promoter Score

40.0 45.0 60.0 59.3

See note 5 below

5.9%

6. eNPS (6%)

Employee Net Promoter Score

46.0 54.0 62.0 55.6

See note 6 below

4.6%

7. Developing ESG in line with the

Group’s material areas of focus (8%)

• Transactional MAU

• Payments MAU

• sCoolApp MAU

• Self-employed borrower clients

1,000,000

1,100,000

50,000

1,100,000

1,200,000

70,000

57,000

1,170,000

1,300,000

100,000

64,000

1,182,399

1,248,713

89,641

54,705

See note 7 below

2.0%

1.7%

1.8%

1.1%

KPI total:

6.6%

Individual KPIs 20%

8. Individual Key Business Objectives Below Met Exceeded Exceeded

See note 8 below

20%

Total

97.0%

Further information on each KPI (corresponding to the numbering in the table above):

1. Return on Average Equity (ROAE): 29.9% achieved (adjusted for one-offs). ROAE reported was 30.4%. ROAE is a long-standing

metric of the Company and a key indicator of profitability for shareholders. Our communicated medium-term target remains

20%+. ROAE was 32.4% in 2022, 25.8% in 2021, 13.0% in 2020 and 26.1% in 2019 (adjusted for one-offs in 2022 and 2019). The

Committee notes that the achievement of 29.9% represents a high result.

2. Cost:income ratio: 29.8% achieved (adjusted for one-offs). Unadjusted cost:income ratio was 29.5%. Cost:income was 32.0% in

2022 (adjusted for one-offs), 37.2% in 2021, 39.7% in 2020 and 37.8% in 2019 (adjusted for one-offs).

3. Cost of Credit Risk ratio (COR): 0.7% achieved. The Group has maintained strong loan portfolio quality and its costs of credit risk

ratio was below its guided normalised range of 1.0-1.2%. Cost of credit risk ratio was 0.8% in 2022, 0.0% in 2021, 1.8% in 2020

and 0.9% in 2019.

4. Profit before tax (PBT): GEL 1,634 million achieved (adjusted for one-offs). PBT reported was 1,656 million. PBT was GEL 1,244

million in 2022 (adjusted for one-offs), GEL 802 million in 2021, GEL 316 million in 2020 and GEL 573 million in 2019 (adjusted for

one-offs). PBT is an important measure of overall performance for any business.

5. Net Promoter Score (NPS): 59.3 achieved in the fourth quarter 2023. NPS is based on external research and is one of the

key metrics for measuring customer satisfaction. Based on external research by IPM Georgia, surveying a random sample of

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Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

customers with face-to-face interviews. 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 58.4 in 2022, 55 in 2021, 46 in 2020 and 37 in 2019.

6. Employee Net Promoter Score (eNPS): 55.6 achieved. Employee NPS is calculated by the response to a confidential survey of

employees. It is based on the question, “On a scale of 0-10, how likely are you to recommend Bank of Georgia as a place to

work?” 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 52.9 in 2022, 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.

7. Developing ESG in line with the Group’s material areas of focus: Following a materiality assessment to gain a multi-stakeholder

perspective, and then a mapping of topics by importance to stakeholders and to business, three pillars were identified for

the Bank’s most material ESG impact areas: employee engagement, sustainable financial inclusion, and education/financial

education. Two metrics were originally identified in respect of sustainable financial inclusion: Digital MAU (also called digital

transactional monthly active users in this Annual Report) and Payments MAU and added as KPIs. Two further metrics were added

as KPIs in 2023 to reflect other areas of society: the sCool App for school students MAU and Self-employed borrower clients. The

results are disclosed in the table above.

Please see the Sustainable Business section on the importance of financial inclusion for individuals and businesses in our

emerging economy, on pages 86 to 91.

8. Individual Key Business Objectives (‘KBOs’): Outperformance achieved. The CEO’s KBOs were (i) the strategic deployment of

excess capital including careful international growth where merited and (ii) enhancement of the relationship with the Regulator.

The Board reviewed the strategy in February 2023 following discussions with key investors through roadshows and meetings

with the Board throughout the year, which had highlighted that there was appetite and support for the Group’s excess capital

to be deployed for international growth. Archil Gachechiladze’s subsequent implementation of the strategy during 2023 was

carried out in a thorough and efficient manner. He presented several potential targets to board meetings that were carefully and

appropriately chosen for strategic growth in underserved emerging markets. These were weighed against the merits of other

deployment of capital, including additional returns to shareholders. He carried out thorough due diligence and negotiations and

presented to the Board the attractively accretive acquisition of Ameriabank. Ameriabank is a leading universal bank in Armenia,

a neighbouring country to Georgia with a similarly high GBP growth rate. It is a leading franchise in the local market with further

upside to grow, especially in the retail and SME segments, and to increase in digitalisation.

Mr Gachechiladze led the negotiations, ultimately resulting in an acquisition price of 0.65x net asset value as at 31 October 2023

implying a 2.6x price-to-earnings ratio. Further the cost of the acquisition was achieved with the Group’s surplus capital and with

no dilution for shareholders. Importantly, the Company’s dividend and capital distribution policy and payout ratio of 30-50% did

not change. This model implementation of his main Individual KBO was outstanding.

Additionally, Mr Gachechiladze worked carefully with the regulator to enhance our relationship in 2023. Our main entity, Bank of

Georgia, is classified as a systemically important financial institution in its jurisdiction. We are aware of our responsibilities and,

whilst working in a fully compliant manner with all respective regulations, we also remain committed to achieving a constructive

relationship with the regulator. Closely working with the regulator throughout the international expansion project, as well

as in constructive dialogue on many regulatory changes that the Georgian banking sector has implemented during the year,

Mr Gachechiladze has assisted the Group in achieving the desirable outcomes.

Overall, the CEO outperformed against most of the KPIs. The Committee considered the outstanding personal contribution of the

CEO to the overall corporate performance and noted the Group achieved excellent results under his leadership and in part through

his initiatives.

As well as the stakeholder matters covered by KPIs, the Committee also noted the wider stakeholder picture. Shareholders received

a final dividend for 2022 in July following the 2023 AGM. An interim dividend of GEL 3.06 per share was paid in October 2023. In

February 2023, the Board approved an increase of up to GEL 148 million in its share buyback and cancellation programme. In August

2023, the Board approved the launch of a GEL 62 million share buyback and cancellation programme. As disclosed in the Preliminary

Financial Results release, for full year 2023 the Board intends to recommend to shareholders at the AGM a final dividend of GEL 4.94

per share. In addition, the Board has also approved an extension of the buyback and cancellation programme by an additional GEL

100 million. The Committee noted that the market cap increased 47% during 2023 from GBP 1,237 million at FY 2022 to GBP 1,817

million at FY 2023.

From an employee perspective, the Committee was pleased to note that the average employee bonus for 2023 increased by 10.1%

year-on-year, the average cash salary increased by 23.5% while the average employee deferred share salary (which is paid to the

more senior managers) decreased by 5.2%. The change in total remuneration for the CEO was minimal (0.1% increase for bonus,

with cash salary and deferred shares salary each unchanged at 0.0%).

In accordance with the results of the KPIs as determined above, taking into account Mr Gachechiladze’s outstanding performance,

the Remuneration Committee awarded the CEO 97% of the maximum deferred share opportunity, which was paid in deferred

shares. This level of award is considered to be appropriate for performance but also as it reflected the experience of shareholders in

terms of value creation (through the buybacks, dividends and the increase in share price) and the wider experience of stakeholders of

the Company (including the increases 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

2023 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 2023 financial year.

236

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

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 make a 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 in the notes to the table.

The ‘Single total figure of remuneration’ table on page 233 includes an explanation of cash salary, deferred share salary, taxable

benefits and discretionary deferred remuneration of the Executive Director in the notes to the table.

Year-on-year change in pay for Directors compared to the Group’s employees as a whole for FY2023

Executive Director Non-Executive Directors

Average

employee

Archil

Gachechiladze

Mel

Carvill

Hanna

Loikkanen

Breach

Jonathan

Muir

Tamaz

Georgadze

Cecil

Quillen

Véronique

McCarroll

Mariam

Meghvinetukhutsesi

Total cash salary 23.5% 0.0% 29.9% -3.6% 0.0% 0.0% 0.0% 4.6% 0.0% 0.0%

Total deferred

share salary

-5.2% 0.0% – – – – – – – –

Taxable benefits 0.5% 7.8% – – – – – – – –

Total bonus

10.1% 0.1% – – – – – – – –

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

Neil Janin

Mel

Carvill

Hanna

Loikkanen

Breach

Jonathan

Muir

Tamaz

Georgadze

Cecil

Quillen

Véronique

McCarroll

Mariam

Meghvinetukhutsesi

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

28.9% 30.5% – – – – – – – – –

Taxable benefits 14.1% 1748.3% – – – – – – – – –

Total bonus

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

Neil Janin

Hanna

Loikkanen

Breach

Jonathan

Muir

Tamaz

Georgadze

Cecil

Quillen

Véronique

McCarroll

Mariam

Meghvinetukhutsesi

Total cash salary (5.7)% 20% 0.0% 2.7% (3.4)% 0.0% 0.0% 0.0% 0.0% –

Total deferred

share salary

89.9% 35% – – – – – – – –

Taxable benefits 1.9% 229.2% – – – – – – – –

Total bonus

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

Neil Janin

Hanna

Loikkanen

Breach

Jonathan

Muir

Tamaz

Georgadze

Cecil

Quillen

Véronique

McCarroll

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

(27.3)% (22.4)% – – – – – – –

Taxable benefits (4.4)% (42.8)% – – – – – – –

Total bonus

(43.1)% NMF – – – – – – –

Notes:

1. The number of salary shares for Mr Gachechiladze was constant at 75,000 shares per annum for 2019, 2020 and 2021 share prices, with share prices at 31 December 2019

(US$ 21.466), 31 December 2020 (US$ 16.652) and 31 December 2021 (US$ 22.480) used for the deferred shares salary comparison, but in accordance with the 2022 Policy

and NBG requirements the deferred share salary is based on a fixed 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.

237

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

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. She stepped down as Chair on 1 January

2023, but remained a member of the Committee.

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. Cecil Quillen was appointed as Chair of the Remuneration Committee on 1 January 2023.

12. 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%; year-on-year changes from 2022 to 2023 for cash salary was 7.1% and bonus was 10.0%;

deferred share salary and taxable benefits are not applicable for all years.

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 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; Capitec Bank

Holdings; Investec Plc; 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 due 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 the 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 competitive

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 recruitment 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.

238

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

Further details of fixed and discretionary deferred share compensation granted during

2023 (audited)

The following table details nil-cost options over BOGG shares granted to Mr Gachechiladze in 2023.

Deferred share salary Discretionary deferred share remuneration

Number of underlying shares and

basis on which award was made

71,694 granted for the 2023 work year on

the basis of the Policy available at https://

bankofgeorgiagroup.com/governance/

documents

74,962 granted for the 2022 work year on

the basis of the 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$ 2,490,343

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$ 2,490,343

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 2022 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 2024 but is subject

to holding periods so that 40% is released in

2025, and 20% is released in each of 2026,

2027 and 2028.

40% immediately and 15% on each of the

third, fourth, fifth and sixth anniversaries of

the work year. Each tranche is subject to a

further two-year holding period.

Performance measures None. See the Policy available at https://

bankofgeorgiagroup.com/governance/

documents

See the Policy available at https://

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 for 2022 and 2023.

Bank of Georgia Group

PLC fees

(US$)

JSC Bank of Georgia fees

(US$)

Pension Related Benefits

(US$)

Total

(US$)

2022 2023 2022 2023 2022 2023 2022 2023

Mel Carvill

83,934 103,587 157,735 210,313 – – 241,669 313,900

Neil Janin

19,582 – 52,578 – – – 72,160 –

Alasdair Breach 53,405 53,405 96,391 96,391 – – 149,796 149,796

Tamaz Georgadze

53,405 53,405 96,391 96,391 – – 149,796 149,796

Hanna Loikkanen

71,582 68,516 129,022 124,934 – – 200,604 193,450

Véronique McCarroll

48,932 48,932 96,204 96,204 – – 145,136 145,136

Mariam Meghvinetukhutsesi

46,835 46,835 87,631 87,631 1,437 1,722 135,903 136,188

Jonathan Muir 53,405 53,405 96,391 96,391 – – 149,796 149,796

Cecil Quillen

56,471 59,537 100,479 104,567 – – 156,950 164,104

Total 487,551 487,622 912,822 912,822 1,437 1,722 1,401,810 1,402,166

Notes:

1. Mel Carvill was appointed to the PLC Board on 10 March 2022. JSC Bank of Georgia fees in 2022 included 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 1 January 2022 but remained a member of the Committee.

4. Hanna Loikkanen stepped down as Chair of the Remuneration Committee on 1 January 2023 but remained a member of the Committee.

5. Véronique McCarroll was appointed as Chair of the Risk Committee on 1 January 2022, having previously been a member.

6. Georgian law requires that the JSC Bank of Georgia provides pension contributions for Mariam Megvinetukhutsesi, as a Georgian resident, into the mandatory Georgian

government pension scheme at a level of 2% of her fee. This pension scheme applies only to JSC Bank of Georgia and does not apply to Bank of Georgia Group PLC.

7. Cecil Quillen was appointed as Chair of the Remuneration Committee on 1 January 2023, having previously been a member.

8. The maximum amount for Non-executive Director 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 or variable remuneration.

239

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance 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 2023.

Total Shareholder Return (‘TSR’)

We note the group demerged and relisted as two separate businesses with separate listed shares in May 2018. 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 2023.

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

Oct 23

Sep 23

Aug 23

Jul 23

Jun 23

May 23

Apr 23

Mar 23

Feb 23

Jan 23

Dec 23

Nov 23

Nov 22

Bank of Georgia Group PLC FTSE 250 (rebased) FTSE All Share (rebased)

120

170

220

270

Relative importance of spend on pay

The following table shows the difference in remuneration paid to all employees of the Group between 2022 and 2023, as well as the

difference in value of distribution paid to shareholders by way of dividends and buybacks between 2022 and 2023.

Remuneration paid to all

employees of the Group

Distributions to

shareholders by way of

dividends and buybacks

Year ended 31 December 2023 (US$) 169,438,514 216,330,023

Year ended 31 December 2022 (US$) 131,910,967 106,060,435

Percentage change 28.4% 104.0%

Notes:

1. Difference in remuneration paid to all employees of the Group was 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 2022 and 2023. In 2022 US$ 38,660,254 was for buybacks and cancellation and US$ 67,400,181 for dividends.

In 2023 US$ 65,397,932 was for buybacks and cancellation and US$ 150,932,091 for dividends. Figures are converted into US$ using an average US$/GEL exchange rate.

240

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

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 2023 and 2022.

As at 31 December 2022 As at 31 December 2023

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

– N/A N/A – – N/A N/A –

Archil

Gachechil-

adze

209,225 N/A 414,753 623,978 399,505 N/A 318,702 718,207

Alasdair

Breach

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 4,102 N/A N/A 4,102 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. As at 2023 year-end, MDB Ltd, a PCA of Mel Carvill, held 19,018 ordinary shares.

2. 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 22 February 2023,

Mr Gachechiladze exercised options in respect of 106,688 shares, of which 23,045 were withheld to satisfy tax liabilities. The net gain of these options was US$2,730,108.

On 23 March 2023, Mr Gachechiladze exercised options in respect of 106,034 shares, of which 22,904 were withheld to satisfy tax liabilities. The net gain of these options

was US$2,600,306. On 31 March 2023, Mr Gachechiladze received 74,962 nil-cost options over ordinary shares in respect of discretionary deferred shares for the 2022 work

year. On 8 June 2023, Mr Gachechiladze exercised options in respect of 29,985 shares, of which 6,477 were withheld to satisfy tax liabilities. The net gain of these options was

US$898,711. On 19 March 2024 Mr Gachechiladze exercised options in respect of 162,893 shares, of which 35,185 were withheld to satisfy tax liabilities and on 20 March 2024,

Mr Gachechiladze received 45,785 nil-cost options over ordinary shares in respect of the deferred salary shares for the 2024 work year. These will be reported in the 2024

Annual Report and Accounts and are not included in the table above, which is as at 31 December 2023. As at the last practicable date of 17 April 2024, Mr Gachechiladze’s

total number of share interests is 728,807.

3. At 2023 year-end, Gemsstock Fund, which Mr Breach manages, held 1,255,318 beneficial holdings in ordinary shares or economic interests in financial instruments with a

similar economic effect. This is not included in the table.

As at 31 December 2023, Mr Gachechiladze’s total vested and unvested and direct shareholding was 718,207 shares, representing

approximately 1.6% 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 Executive

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 2023, 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 2023 and the last practicable date of 17 April 2024 are as shown in the notes

to the table above.

241

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Executives’ interests in shares

In response to a shareholder feedback request to show our Executive Management team’s 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

2023 (unvested shares vest in tranches over several years):

Total vested and unvested and direct

shareholding in number of shares

Archil Gachechiladze 718,207

Sulkhan Gvalia 290,304

Davit Chkonia 84,297

David Davitashvili 57,913

Nutsiko Gogilashvili 34,202

Eteri Iremadze 101,674

Zurab Kokosadze 100,265

Zurab Masurashvili 36,373

Mikheil Gomarteli 396,990

Vakhtang Bobokhidze 174,723

Levan Gomashiavili 24,293

Ana Kostava 19,017

Elene Okromchedlishvili 5,278

Giorgi Gureshidze 0

Andro Ratiani 1,294

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, 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, Mel Carvill’s from 10 March 2022 and Andrew

McIntyre’s from 15 March 2024. Al Breach resigned on 15 March 2024. 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 of the Committee was undertaken in 2023 by Clare Chalmers Ltd. Further details of the overall evaluation

process including the selection of the Evaluator, are set out on pages 196 and 212. The Evaluator attended a Committee meeting

in person and separately interviewed each of the members of the Committee as well as members of management involved in

informing and advising the Committee (including the Head of Human Capital Management and the UK General Counsel). The

Evaluator noted that the Committee changed its Chair at the beginning of the year, and credit was given to the outgoing Chair for

her efforts in engagement with shareholders. The new Chair was judged to be aware of the major issues and UK listing context. The

Committee was observed as having good discussions on the issues and aiming to strike a balance between different stakeholders.

Those members of the Board who are not members of the Committee expressed to the Evaluator that feedback provided to the

Board by the Committee is good. The Evaluator recommended early engagement with shareholders on the Remuneration Policy, and

the Committee will take this into account this year ahead of the Policy to be put forward for shareholder approval at the 2025 AGM.

242

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

Implementation of Remuneration Policy for 2024

Details of how the current Policy will be implemented for the 2024 financial year are set out below. There will be no significant

change in the way the Policy will be implemented in 2024, and no significant deviations from the procedure for the implementation

of the 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 Director are on page 245.

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. 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 2024 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 2024:

1. Return on average equity (ROAE)

2. Cost:income ratio

3. Cost of credit risk ratio (COCR)

4. Profit before tax (PBT)

5. Lowest team member performance

6. NPS

7. eNPS

8. ESG/impact metrics

9. Individual Key Business Objectives

See the Policy available at https://bankofgeorgiagroup.com/governance/documents, for details of malus and clawback, and of

provisions regarding lapse of shares in the event of termination of the contracts (natural malus).

243

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Strategic Report Governance Financial Statements Additional Information

For Non-executive Directors:

The table below shows the fee structure for Non-executive Directors for 2024. Non-executive Directors’ fees are determined by the

Board.

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 commitment 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.

The Board intends to review the amount of remuneration during the year.

Where required by Georgian Law, Non-Executive Directors resident in Georgia will receive pension contributions of 2% of fees

payable to the Georgian National Pension fund.

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 2024. The full Policy is available at https://bankofgeorgiagroup.

com/governance/documents.

It is a provision of this Policy that the Group will honour all pre-existing obligations and commitments that were entered into prior

to this Policy taking effect. The terms of those pre-existing obligations and commitments may differ from the terms of the Policy

and may include (without limitation) obligations and commitments under service agreements (as detailed in the information below),

deferred share remuneration schemes and pension and benefit plans.

The Remuneration Committee retains its discretion under the Policy to make minor amendments to the Policy for regulatory,

exchange control, tax or administrative purposes or to take account of a change in legislation without obtaining prior shareholder

approval.

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 the 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

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Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

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.

245

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance 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

246

Annual Report 2023 Bank of Georgia Group PLC

Directors’ Remuneration Report continued

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.

247

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Strategic Report Governance Financial Statements Additional Information

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 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

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 the Company 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 the Company 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 Policy had been approved at AGM) for an employment term of three years from

the effective date, which is terminable by the JSC Bank of Georgia 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

24 April 2024

248

Annual Report 2023 Bank of Georgia Group PLC

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 (IFRS).

Directors cannot approve the

consolidated and separate financial

statements contained within this Annual

Report unless they are satisfied they are

a true and fair reflection of the state of

affairs of Bank of Georgia Group PLC

(the ‘Company’) and the Group, 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

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 198 to 200 – confirm that, to

the best of their knowledge:

• the consolidated and separate

financial statements, prepared

in accordance with UK-adopted

international accounting standards

(IFRS), 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 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

Chair

24 April 2024

Archil Gachechiladze

CEO

24 April 2024

249

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Directors’ Report

The Directors present their Annual

Report and the audited Consolidated

Financial Statements for the year ended

31 December 2023.

Strategic Report

The Strategic Report on pages 4 to 183

was approved by the Board of Directors

on 24 April 2024 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 183,

forms the Management Report for the

basis of the Disclosure Guidance and

Transparency Rules 4.1.5R.

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 the Annual Report

Future developments, including research and development activities pages 4 to 183

Going Concern Statement page 170

Viability Statement page 170

Risk management pages 144 to 148

Principal risks and uncertainties pages 149 to 169

Directors’ Governance Statement pages 184 to 197

The Board of Directors pages 198 to 200

Nomination Committee Report pages 206 to 213

Audit Committee Report pages 214 to 223

Risk Committee Report pages 224 to 228

Related-party disclosures Note 33 on page 359

Climate-related financial disclosures pages 100 to 114

GHG emissions pages 115 to 118

Energy consumption page 82

Energy-efficient action pages 82 to 85

Employee matters, including employee engagement

pages 119 to 132 and Nomination

Committee Report page 210

Environmental matters pages 60 to 142

Share capital Note 23 on pages 328 to 329

Engagement with suppliers, customers and others in a business relationship with the Company pages 52 to 59

Information on the Group’s financial risk management objectives and policies, and its exposure

to credit risk, foreign currency risk and financial instruments Note 30 on pages 335 to 350

250

Annual Report 2023 Bank of Georgia Group PLC

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 23 to

the Consolidated Financial Statements

on pages 328 to 329 of this Annual

Report.

As at 31 December 2023 there was

a single class of 45,766,293 ordinary

shares of one pence each in issue, each

with one vote – of which 57,191 ordinary

shares were held in treasury pending

cancellation. As of 17 April 2024 there

was a single class of 45,590,314 ordinary

shares, of which 115,000 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 April 2024,

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

10,966,545 shares – representing 24.05%

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

19 May 2023 for the Group to purchase up

to 4,711,853 shares – approximately 10%

of the Group’s shares. This authority will

expire at the conclusion of the Company’s

AGM in 2024 or, if earlier, the close of

business on 19 June 2024.

A renewal of the authority to make

market purchases will be sought from

shareholders at each AGM. 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 2023 Apex Group Fiduciary

Services Limited, acting as a trustee

of the BOG Group Employee Trust,

purchased 172,951 ordinary shares

with a nominal value of one pence per

share – representing 0.4% of the issued

share capital as at 31 December 2023.

In addition, acting as a trustee of the

Rubicon Executive Equity Compensation

Trust, Apex Group Fiduciary Services

Limited purchased 585,864 ordinary

shares with a nominal value of one pence

per share – representing 1.3% of the

issued share capital as at 31 December

2023. The trusts hold the shares for

the purpose of satisfying awards to

beneficiaries.

At the 2023 AGM the Directors were

given the power to (a) allot shares up

to a maximum nominal amount of GBP

157,046.07, representing approximately

one third of the Company’s issued share

capital as at 23 March 2023; and (b) allot

equity securities up to an aggregate

nominal amount of GBP 157,046.07, 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

Directors’ Report continued

251

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

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 legal,

regulatory or practical problems in, or

under the laws of, any territory.

These authorities will expire at the

conclusion of the 2024 AGM – or, if earlier,

at the close of business on 19 August 2024

– 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 1,633.71 million for

the year ended 31 December 2023. The

Group’s profit after taxation for the year

was GEL 1,397.33 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.

In the AGM of 19 May 2023, shareholders

approved the Board recommended a final

dividend of GEL 5.80 per ordinary share in

respect of the period ended 31 December

2022, payable to ordinary shareholders of

the Group on 14 July 2023. On 17 August

2023, the Board declared an interim

dividend of GEL 3.06 in respect of the

period ended 30 June 2023, payable to

shareholders on 27 October 2023.

In June 2023, the Company completed

its GEL 260.7 million buyback and

cancellation programme. The Board of

Directors approved a further GEL 62

million share buyback in August 2023.

The distributions are 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 believes these to be in the

best interests of the Company and its

shareholders.

The Board intends to recommend a final

dividend in respect of the year ended

31 December 2023 of GEL 4.94 per

ordinary share.

Equity Settled Option Plan

The Group operates two employee

benefit trusts (EBTs) – one for Executive

Management and the other for

employees below the executive level (the

‘ESOP’) – 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 London Stock Exchange

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. These have been followed

during 2023.

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 and must be in accordance with

the Directors’ Remuneration Policy last

approved by shareholders in 2022. The

fees paid to the Non-executive Directors

in 2023, pursuant to their letters of

appointment, are shown on page 238.

The fees paid to our sole Executive

Director for the period 1 January 2023 to

31 December 2023, pursuant to his service

agreements, are shown on page 233.

Directors’ interests

The Directors’ beneficial interests in

ordinary shares of Bank of Georgia Group

PLC as at 31 December 2023 are shown

on page 240, 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

Computershare Company Secretarial

Services Limited is the appointed

Company Secretary to Bank of Georgia

Group PLC.

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 UK Corporate Governance

Code’s recommendations all Directors

seek re-election annually. Accordingly, all

Directors who wish to continue on the

Board will stand for election or re-election

in 2024.

The Board will set out in its Notice of

Annual General Meeting the qualifications

of each Director and support for re-

election as applicable.

252

Annual Report 2023 Bank of Georgia Group PLC

Annual General Meeting

The Notice of Annual General Meeting

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 UK Corporate

Governance Code, all resolutions

proposed at the 2024 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 information on shareholder

and stakeholder engagement see pages

52 to 59.

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 248 of this Annual Report.

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. Further information on the fair,

balanced and understandable statement

assessment can be found on page 223.

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 273) and additional offices in

Budapest, Istanbul and Tel Aviv, as well as

the BNB Bank in Belarus and Ameriabank

CJSC in Armenia.

Political donations

The Group did not make any political

donations or expenditure during 2023.

Authority to make political donations and

incur political expenditure will be put to

shareholder vote at the 2024 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, and all 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 at: https://www.

bankofgeorgiagroup.com/governance/

documents.

Independent auditors

The NBG granted an extension in respect

of the local mandatory audit rotation to

allow EY to continue as auditor of Bank

of Georgia Group PLC for the 2024 audit.

A resolution to reappoint EY as auditor of

Bank of Georgia Group PLC will be put to

shareholders at the 2024 AGM.

Major interests in shares

As at 31 December 2023 the following

interests in the ordinary share capital of

the Company have been notified to the

Directors:

Shareholder

No. of voting

rights

% of voting

rights

JSC Georgia Capital 9,009,849 19.71%

M&G PLC 2,214,571 4.84%

Dimensional Fund Advisors (DFA) LP 1,877,694 4.11%

JP Morgan Asset Management (UK) Ltd 1,846,062 4.04%

BlackRock Investment Management (UK) 1,637,535 3.58%

Vanguard Group Inc 1,524,432 3.33%

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 2024 up to

and including 17 April 2024 (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 at https://

bankofgeorgiagroup.com/news/

regulatory and the LSE website at

https://www.londonstockexchange.com.

Directors’ Report continued

253

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Post-balance-sheet events

On 19 February 2024, the Company

announced that it and its subsidiary, JSC

Bank of Georgia, had conditionally agreed

to acquire 100% of the total issued share

capital of Ameriabank CJSC, a leading

universal bank in Armenia. At a General

Meeting of the Company held on 14 March

2024, 83.60% of issued share capital

voted, with 100.0% votes in favour of the

acquisition. Having received all necessary

shareholder and regulatory approvals as

of 29 March 2024, the acquisition was

completed on 3 April 2024 after which

the Company acquired 60% and JSC

Bank of Georgia acquired 30% of issued

share capital. ERBD retained a 10%

shareholding in Ameriabank’s total issued

share capital, subject to the Shareholders’

Put and Call Option Agreement as

disclosed in the class 1 circular published

by the Company on 19 February 2024.

Al Breach stepped down as a Non-

executive Director and a member of

the Remuneration Committee, Risk

Committee and Nomination Committee

with effect from 15 March 2024.

Andrew McIntyre was appointed as a

Non-executive Director and member of

the Audit Committee and Nomination

Committee with effect from 15 March

2024.

On 8 April 2024, the Company changed

its registered office to 29 Farm Street,

London, United Kingdom, W1J 5RL

Further information regarding the events

after the reporting period can be found in

Note 35 on pages 361 to 362.

Statement of disclosure of

information to the External

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 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 248

to 253 was approved by the Board of

Directors on 24 April 2024 and signed

on its behalf:

By order of the Board

Computershare Company Secretarial

Services Limited

Company Secretary

24 April 2024

254

Annual Report 2023 Bank of Georgia Group PLC

FINANCIAL

STATEMENTS

255

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report 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 Parent 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 2023

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 ‘Company’ or ‘Parent Company’) and its subsidiaries

(the ‘Group’) for the year ended 31 December 2023 which comprise:

Group

• Consolidated statement of financial position as at

31 December 2023

• 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 35 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 2023

• Statement of changes in equity for the year then ended

• Statement of cash flows for the year then ended

• Related notes 1 to 35 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.

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, incorporating a consideration of 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.

256

Annual Report 2023 Bank of Georgia Group PLC

Full scope

components

94%

Specified

procedures

components

Other

procedures

Full scope

components

97%

Specified

procedures

components

Other

procedures

Full scope

components

96%

Specified

procedures

components

Other

procedures

Profit before tax Revenue Total assets

Independent Auditor’s Report continued

To the Members of Bank of Georgia Group PLC

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 four components and specified audit

procedures on balances for a further two components.

• The components where we performed full or specific audit procedures accounted for 94% of profit

before tax, 97% of Revenue and 97% of Total assets.

Key audit matters • Allowance for Expected Credit Loss and application of IFRS 9 ‘Financial Instruments’.

• Measurement of fair value of investment properties.

Materiality • Overall Group materiality of GEL 83m which represents 5% of profit before tax.

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, the potential impact of climate change 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-three 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 four components (‘full scope

components’) which were selected based on their size or risk characteristics. For the remaining two components (‘specified

procedures components’), we performed specified 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 reporting components where we performed audit procedures accounted for 94% (2022: 98%) of the Group’s profit before

tax, 97% (2022: 97%) of the Group’s Revenue and 97% (2022: 98%) of the Group’s Total assets. For the current year, the full scope

components contributed 94% (2022: 87%) of the Group’s profit before tax less non-recurring items, 97% (2022: 93%) of the Group’s

Revenue and 95% (2022: 92%) of the Group’s Total assets. We also instructed two locations to perform specified procedures over

cash at bank balances.

Of the remaining seventeen components that together represent 6% of the Group’s profit before tax, none are individually greater

than 2% of the Group’s profit before tax. For these components, we performed other procedures, analytical reviews and testing of

consolidation journal entries and intercompany eliminations to respond to any potential risks of material misstatement to the Group

financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

257

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Changes from the prior year

As part of the current year audit, we have assigned JSC BGEO Group as a full scope component. Previously it was a specific scope

component, the change in assigned scope was due to its increase in size relative to the Group.

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

operating under our instruction. Of the four full scope components, audit procedures were performed on all four of these directly

by the primary audit team. For the two 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 meetings with these teams and the client. During the current year’s audit cycle,

visits were undertaken by the primary audit team to the component teams in Georgia. These visits involved discussing the audit

approach with the component team and any issues arising from their work, meeting with local management, and reviewing relevant

audit working papers on risk areas. 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 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 148 of the Risk Management section of the Annual Report. This is explained on

pages 100 to 118 in the required Task Force On Climate Related Financial Disclosures and on pages 149 to 170 in the principal risks

and uncertainties. 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.

There are no significant judgements or estimates relating to climate change in the notes to the financial statements.

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, their climate commitments, the effects of material climate risks

disclosed on pages 168 and 169 and the and the Risk management in Note 30; 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 specialists, to determine the risks of material misstatement in the financial statements from climate change.

We also challenged the Directors’ considerations of climate change risks in their 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.

258

Annual Report 2023 Bank of Georgia Group PLC

Independent Auditor’s Report continued

To the Members of Bank of Georgia Group PLC

Allowance for Expected Credit Loss (‘ECL’) and application of IFRS 9 ‘Financial instruments’

Expected credit loss allowance related to Loans to customers of GEL 328m (2022: GEL 326m), Note 9

Risk Our response to the risk

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.

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;

• 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.

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.

Information on the impairment of loans to customers is included

in Note 9, Loans to Customers and Note 30, Risk Management,

to the consolidated financial statements.

• 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 credit risk 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 credit risk 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.

• Our credit risk specialists performed 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

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.

• 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. Involving our valuation specialists, we assessed the

reasonableness of valuation methodology of collaterals.

• We evaluated the adequacy and appropriateness of

disclosures related to ECL for compliance with the

requirements of IFRS.

Key observations communicated to the Audit Committee

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 2023. Specifically, we highlighted the following to the Audit

Committee:

• We considered the overall valuation and treatment of collateral to be materially reasonable.

• 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.

259

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Valuation of investment properties

Investment property of GEL 124m (2022: GEL 167m) Note 15

Risk Our response to the risk

The Group applies the fair value model for its investment

property. The Group engaged a professional valuer to determine

the fair value for a selection of its investment properties. Real

estate valuations are inherently uncertain and subject to an

estimation process.

The Group’s real estate properties are located primarily in

Georgia, where the secondary market is relatively illiquid,

which increases the judgement involved in determining these

valuations.

Information on the valuation of investment properties is included

to Note 3, Summary of Significant Accounting Policies, Note 15,

Investment Properties, Note 31, Fair Value Measurements, to the

consolidated financial statements.

We engaged our Real Estate specialists to evaluate a sample of

the Group’s real estate valuations. The specialists’ assessment

included evaluation of the competence and objectivity of the

external valuers engaged by the Group, analysis of the methods

and assumptions used and testing of the data provided by the

valuers.

In respect of properties, which were not subject to individual

valuation by the external valuer, we assessed management’s

assumptions relating to changes in the prices of such properties

for the reporting period. We corroborated these by reviewing

the market overview reports prepared by external valuers, and

by reference to our understanding of the Group’s real estate

portfolio and observable market information.

We reviewed the presentation and disclosure of investment

properties in the financial statements are in accordance with

relevant accounting standards.

Key observations communicated to the Audit Committee

Based on the results of our audit procedures, we concluded that:

• The valuation of investment properties as at 31 December 2023 is reasonable, including management’s specialist valuations and

relevant adjustments.

• The financial statements disclosures are appropriate and in compliance with relevant accounting standards.

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 83m (2022: GEL 62m), which is 5% (2022: 5%) of Group of profit before tax.

We believe that profit before tax 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 83m (2022: GEL 62m), which is the lower of GEL 110m (2% of equity)

and the Group materiality. We believe that equity 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.

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% (2022: 50%) of our planning materiality, namely GEL 41.5m (2022: GEL 31m). We have

set performance materiality at this percentage due to 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 12.5m to GEL 36.5m (2022:

GEL 4m to GEL 29m).

260

Annual Report 2023 Bank of Georgia Group PLC

Independent Auditor’s Report continued

To the Members of Bank of Georgia Group PLC

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 4.15m

(2022: GEL 3m), 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.

Other information

The other information comprises the information included in the annual report set out on pages 3 to 253, other than the financial

statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual

report.

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 those reports have been prepared in accordance with applicable legal

requirements;

• the information about internal control and risk management systems in relation to financial reporting processes and about

share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook

made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in

accordance with applicable legal requirements; and

• information about the Company’s corporate governance statement and practices and about its administrative, management

and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

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; or

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.

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 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; or

• a Corporate Governance Statement has not been prepared by the Company.

261

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

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 170;

• Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is

appropriate set out on page 170;

• 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 170;

• Directors’ statement on fair, balanced and understandable set out on page 248;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 150 to 170;

• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set

out on page 197; and

• The section describing the work of the audit committee set out on pages 215 to 223.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 248, 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

company 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 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.

262

Annual Report 2023 Bank of Georgia Group PLC

Independent Auditor’s Report continued

To the Members of Bank of Georgia Group PLC

• 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.

• 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.

• 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.

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 company 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 7 years, covering the years

ending 31 December 2017 to 31 December 2023.

• 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

24 April 2024

263

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Consolidated Statement of Financial Position

As at 31 December 2023 (Thousands of Georgian Lari)

		Notes 2023	2022	2021
Assets
Cash and cash equivalents	6	3, 101,824	3,584,843	1,520,562
Amounts due from credit institutions	7	1, 752,657	2, 433,028	1, 931,390
Investment securities	8	5, 129, 757	4,349 ,729	2,595,66 4
Loans to customers and finance lease receivables	9	20,232, 721	16,861, 706	16, 168, 973
Accounts receivable and other loans	10	4 7 ,562	397 ,990	3,680
Prepayments		37 ,511	43,612	4 0,878
Foreclosed Assets*	12	271,712	119 , 924	3,216
Right-of-use assets	11	138,695	117 ,387	80, 186
Investment properties	15	124 ,068	166,546	226,849
Property and equipment	13	436, 955	398,855	378,808
Goodwill	16	41,253	33,351	33,351
Intangible assets	14	167 ,862	1 4 9,4 4 1	14 4,251
Income tax assets	17	2,520	864	292
Other assets*	18	245,072	215,058	255,245
Assets held for sale		27 ,389	29,566	46,731
Total assets		31,757 ,558	28, 901,900	23,430,07 6
Liabilities
Client deposits and notes	19	20,522,739	18,261,397	14,038,002
Amounts owed to credit institutions	20	5, 156,009	5,266,653	4,318,4 45
Debt securities issued	21	421,359	645,968	1,518,685
Lease liability	11	141, 934	114 ,470	8 7, 6 6 2
Accruals and deferred income		129 ,355	106,366	80, 157
Income tax liabilities	17	199 ,058	99 ,533	110,868
Other liabilities	18	167 ,268	158,691	183,3 49
Total liabilities		26,737 ,722	24,653,078	20,337 ,168
Equity	23
Share capital		1,506	1,563	1,618
Additional paid-in capital		465,009	506,30 4	492,243
Treasury shares		(71)	(83)	(75)
Capital redemption reserve		112	55	–
Other reserves		21,385	14 ,564	(3,223)
Retained earnings		4,510,780	3, 709 , 170	2,588, 463
Total equity attributable to shareholders of the Group		4, 998,721	4 ,231,573	3 ,079,026
Non-controlling interests		21, 115	17 ,249	13,882
Total equity		5,019 ,836	4,248,822	3,092,908
Total liabilities and equity		31,757 ,558	28,901, 900	23,430,07 6

The financial statements on pages 263 to 362 were approved by the Board of Directors and signed on its behalf by:

Archil Gachechiladze

Chief Executive Officer

Bank of Georgia Group PLC

Registered No. 10917019

24 April 2024

* To improve the quality and understandability of its consolidated statement of financial position, the Group has revisited the presentation of foreclosed assets, inventories

and other assets. Further details are disclosed in Note 3

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

264

Annual Report 2023 Bank of Georgia Group PLC

Consolidated Income Statement

For the year ended 31 December 2023 (Thousands of Georgian Lari)

		Notes 2023	2022	2021
Interest income calculated using EIR method		2,734,208	2,236,307	1,822,307
Other interest income		14,053	20,57 4	28,737
Interest income		2,748,261	2,256,881	1,851,04 4
Interest expense		(1, 112,568)	(1,056,829)	(882,474)
Deposit insurance fees		(20,24 7)	(17 ,717)	(14,629)
Net interest income	24	1,615,4 46	1,182,335	953, 941
Fee and commission income		707,765	559,465	390,829
Fee and commission expense		(273,283)	(241, 974)	(158,398)
Net fee and commission income	25	434,482	3 1 7, 4 9 1	232,431
Net foreign currency gain		365,711	466,094	109 ,099
Net gains/(losses) on extinguishment of debt		564	(8,717)	(2,892)
One-off other income from settlement of legacy claim	10	22 ,585	391, 100	–
Net other gains/(losses)	28	114, 171	44,809	73,098
Operating income		2, 552,959	2,393,112	1,365,677
Salaries and other employee benefits	26	(419,454)	(362,019)	(281,087)
Administrative expenses	26	(205,368)	(164 ,450)	(129 ,524)
Depreciation, amortisation and impairment	11, 13, 14	(124, 723)	(111,089)	(93,618)
Other operating expenses		(4,508)	(3,628)	(3,723)
Operating expenses		(754,053)	(641, 186)	(507 , 952)
Profit/(loss) from associates		1,456	754	(3,781)
Operating income before cost of risk		1,800,362	1,752,680	853,944
Expected credit loss on loans to customers	27	(124,298)	(128,678)	(1,452)
Expected credit loss on finance lease receivables	27	(2 ,762)	(3,208)	(4 ,9 5 0)
Other expected credit loss	27	2 , 5 49	(16, 189)	9,899
Impairment charge on other assets and provisions	27	(19 ,553)	29 ,007	(54, 909)
Cost of risk		(144 ,064)	(119 ,068)	(51,412)
Net operating income before non-recurring items		1,656,298	1,633,612	802,532
Net non-recurring items		–	1,038	(590)
Profit before income tax expense		1,656,298	1,634 ,650	801, 942
Income tax expense	17	(258, 971)	(190,651)	(74,824)
Profit for the year		1,397 ,327	1, 443,999	727 ,118
Total profit attributable to:
– shareholders of the Group		1,391,277	1,439 ,507	723,806
– non-controlling interests		6,050	4, 49 2	3,312
		1,397 ,327	1, 443,999	727 ,118
Basic earnings per share:	23	31.2967	3 0.9 94 6	15.2240
Diluted earnings per share:	23	30.4252	30.3328	14.8801

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

265

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023 (Thousands of Georgian Lari)

	2023	2022	2021
Profit for the year	1,397 ,327	1, 443,999	727 ,118
Other comprehensive (loss)/income
Other comprehensive (loss)/income 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)	25, 000	29 ,232	(39,573)
– Realised gain on financial assets measured at FVOCI	(8,330)	(7 ,921)	(30,0 4 4)
– Change in allowance for expected credit losses on investments in debt instruments
measured at FVOCI reclassified to the consolidated income statement	1,04 6	6,568	(1,643)
– Loss from currency translation differences	(4 1, 176)	(18,278)	(7 , 184)
Net other comprehensive (loss)/income not to be reclassified to profit or loss in subsequent years, net of tax	(23,460)	9 ,601	(78, 44 4)
Other comprehensive loss not to be reclassified to profit or loss in subsequent years:
– Net gain (loss) on investments in equity instruments designated at FVOCI	1,7 76	(1,369)	884
Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent
years, net of tax	1 ,7 76	(1,369)	884
Other comprehensive (loss)/income for the year, net of tax	(21,684)	8,232	(77 ,560)
Total comprehensive income for the year	1,375,643	1,452,231	649 ,558
Total comprehensive income attributable to:
– shareholders of the Group	1,369 ,869	1,447 ,816	6 46 ,74 9
– non-controlling interests	5 ,7 74	4 , 41 5	2,809
	1,375,643	1,452,231	649 ,558

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

266

Annual Report 2023 Bank of Georgia Group PLC

					Attributable to shareholders of the Group
		Additional			Capital			Non-
	Share	paid-in	Treasury	Other	redemption	Retained		controlling	Total
	capital	capital	shares	reserves	reserve	earnings	Total	interests	equity
31 December 2020	1,618	526,634	(54)	71,227	–	1, 939 , 122	2,538,547	11,368	2 ,5 49,9 15
Profit for the year	–	–	–	–	–	723,806	723,806	3,312	727 , 118
Other comprehensive income for the year	–	–	–	(74,430)	–	(2,627)	(77 ,057)	(503)	(77 ,560)
Total comprehensive income for the year	–	–	–	(74,430)	–	721, 179	6 46 , 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 23)	–	–	–	–	–	(71,838)	(7 1,838)	–	(7 1,838)
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 , 492	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 23)	–	–	–	–	–	(19 6,514)	(19 6,514)	–	(196,514)
Increase in share capital of subsidiaries	–	–	–	(89)	–	–	(89)	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	–	–	–	–	–	–	–	(1,06 7)	(1,067)
31 December 2022	1,563	506,30 4	(8 3)	14 ,564	55	3,709 , 170	4 ,231,573	17 ,249	4,248,822
Profit for the year	–	–	–	–	–	1,391,277	1,39 1,277	6,050	1,397 ,327
Other comprehensive income for the year	–	–	–	6, 787	–	(28, 195)	(21,408)	(2 76)	(21,684)
Total comprehensive income for the year	–	–	–	6,787	–	1,363,082	1,369 ,869	5 ,7 74	1,375,643
Increase in equity arising from share-based payments	–	72 ,009	46	–	–	–	72,055	518	72 ,573
Purchase of treasury shares
under share-based payments	–	(106,295)	(32)	–	–	–	(106,327)	–	(106,327)
Dividends to shareholders
of the Group (Note 23)	–	–	–	–	–	(396,627)	(396,627)	–	(396,627)
Increase in share capital of subsidiaries	–	–	–	34	–	–	34	38	72
Non-controlling interests arising
on acquisition of subsidiary	–	–	–	–	–	–	–	241	241
Purchase of treasury shares	–	(7 ,009)	(164 ,847)	–	–	–	(171,856)	–	(171,856)
Cancellation of treasury shares	(57)	–	16 4,845	–	57	(164 ,845)	–	–	–
Dividends of subsidiaries to non-controlling shareholders	–	–	–	–	–	–	–	(2,705)	(2,7 05)
31 December 2023	1,506	4 65,009	(7 1)	21,385	112	4,510,780	4, 998,721	21, 115	5,019 ,836

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2023 (Thousands of Georgian Lari)

267

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Consolidated Statement of Cash Flows

For the year ended 31 December 2023 (Thousands of Georgian Lari)

		Notes 2023	2022	2021
Cash flows from operating activities
Interest received		2,711,08 7	2,299,639	1,866,371
Interest paid		(1, 130,065)	(1,0 18, 118)	(898,342)
Fees and commissions received		6 16,371	522,586	380,264
Fees and commissions paid		(235,775)	(241, 97 4)	(158,398)
Net cash inflow from real estate		9 ,601	7 , 111	2 7, 6 7 7
Net realised gain from foreign currencies		355,473	453,998	134 ,851
Recoveries of loans to customers previously written off	9	4 7,0 2 9	84 ,542	81,329
Cash received from/(paid for) derivatives		–	–	(235)
Other income received	10	381,746	11,799	8,651
Salaries and other employee benefits paid		(346,880)	(279 ,7 04)	(235, 780)
General and administrative and operating expenses paid		(200,534)	(171,389)	(140, 191)
Cash flows from operating activities before changes in operating assets
and liabilities		2,208,053	1,668,490	1,066, 197
Net (increase)/decrease in operating assets
Amounts due from credit institutions		624, 130	(902,255)	(25,839)
Loans to customers and finance lease receivables		(3,662,4 87)	(2,332,9 75)	(2 ,750,486)
Prepayments and other assets*		11,775	(6,912)	(19,417)
Foreclosed assets*		159 ,204	(11, 700)	(5, 907)
Net increase/(decrease) in operating liabilities
Amounts due to credit institutions		(103,488)	1,019 ,092	1,090,386
Debt securities issued		(45,504)	(73,772)	9 1,775
Client deposits and notes		2 ,213,868	5,509 ,461	5 20,03 4
Other liabilities		23, 913	94 ,581	826
Net cash flows from/(used in) operating activities before income tax		1,429,464	4, 964, 010	(32,431)
Income tax paid		(161, 102)	(202,558)	(4 , 6 49)
Net cash flows from/(used in) operating activities		1,268,362	4,7 61,452	(37 ,080)
Cash flows from/(used in) investing activities
Net (purchases) sales of investment securities		(7 47 ,379)	(1,80 7 ,355)	(86,798)
Purchase of investments in associates		(642)	–	–
Purchase of investments in subsidiaries		(3,716)	–	–
Proceeds from sale of investment properties and assets held for sale		4 7, 9 5 0	92 ,690	124,805
Proceeds from sale of property and equipment and intangible assets		550	3,658	1,822
Purchase of property and equipment and intangible assets		(155,370)	(121,666)	(97 ,575)
Dividends received		232	–	401
Net cash flows used in investing activities		(858,375)	(1,832,673)	(57,345)
Cash flows (used in) from financing activities
Repurchase of debt securities issued	21	(20, 980)	(617,194)	(28,825)
Repayment of the principal portion of the debt securities issued	21	(230, 995)	(31,581)	(46,706)
Proceeds from Tier 2 notes issued	21	78, 921	–	–
Proceeds from Additional Tier 1	20	–	148, 120	–
Cash payments for the principal portion of the lease liability	11	(32, 151)	(25, 980)	(29 ,518)
Dividends paid		(398, 156)	(196,948)	(71,985)
Purchase of treasury shares under share-based payments		(106,327)	(68,262)	(79 ,719)
Purchase of treasury shares		(171,856)	(112,719)	–
Net cash used in financing activities		(881,544)	(904,564)	(256,753)
Effect of exchange rates changes on cash and cash equivalents		(11,280)	40,400	(99 ,263)
Effect of expected credit losses on cash and cash equivalents		(182)	(3 3 4)	48
Net increase/(decrease) in cash and cash equivalents		(483,019)	2,06 4,281	(450,393)
Cash and cash equivalents, beginning of the year	6	3,584,8 43	1,520,562	1,97 0, 955
Cash and cash equivalents, end of the year	6	3,101,824	3,584,843	1,520,562

* To improve the quality and understandability of its consolidated statement of cash flows, the Group has revisited the presentation of foreclosed assets, inventories and

other assets. Further details are disclosed in Note 3.

268

Annual Report 2023 Bank of Georgia Group PLC

Bank of Georgia Group PLC has elected for the 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.

In 2023 the Company completed an internal reorganisation process intended to optimise its subsidiaries’ holding structure. The

reorganisation resulted in the extinguishment of its outstanding loan towards the subsidiary as well as receipt of additional

investment in the subsidiary through dividend in specie distribution recognised as part of profit or loss. The reorganisation did not

have any economic substance and was accounted as a common control transaction with no effect on the Group’s consolidated

financialstatements.

Notes 2023 2022 2021

Assets

Cash and cash equivalents 6 50,970 10,850 384

Investments in subsidiaries 2 5,451,902 4,981,658 4,981,658

Other assets 8,426 177 104

Total assets 5,511,298 4,992,685 4,982,146

Liabilities

Interest-bearing loans and borrowings 16,987 1,675,941 2,064,708

Other liabilities 5,748 802 46

Total liabilities 22,735 1,676,743 2,064,754

Equity

Share capital 23 1,506 1,563 1,618

Additional paid-in capital 592,075 599,084 599,084

Treasury shares (2) – –

Capital redemption reserve 112 55 –

Retained earnings 2,160,240 2,010,537 2,176,026

Net profit/(loss) for the period 2,734,632 704,703 140,664

Total equity 5,488,563 3,315,942 2,917,392

Total liabilities and equity 5,511,298 4,992,685 4,982,146

The financial statements on pages 263 to 362 were approved by the Board of Directors and signed on its behalf by:

Archil Gachechiladze

Chief Executive Officer

Bank of Georgia Group PLC

Registered No. 10917019

24 April 2024

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

Separate Statement of Financial Position

As at 31 December 2023 (Thousands of Georgian Lari)

269

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

capital

Additional

paid-in

capital

Treasury

Capital

redemption

reserve

Retained

earnings

Total

equity

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 23) – – – – (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 23) – – – – (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

Total comprehensive income – – – – 2,734,632 2,734,632

Dividends to shareholders of the Group (Note 23) – – – – (390,155) (390,155)

Purchase of treasury shares – (7,009) (164,847) – – (171,856)

Cancellation of treasury shares (57) – 164,845 57 (164,845) –

31 December 2023 1,506 592,075 (2) 112 4,894,872 5,488,563

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

Separate Statement of Changes in Equity

For the year ended 31 December 2023 (Thousands of Georgian Lari)

270

Annual Report 2023 Bank of Georgia Group PLC

2023 2022 2021

Net cash flows used in operating activities

Interest income received 5,772 1,499 156

Fees and commissions paid (750) (714) (759)

Salaries and other employee benefits paid (2,785) (3,064) (3,408)

General and administrative expenses paid (5,349) (2,269) (3,134)

Net cash flows from/(used in) operating activities before income tax (3,112) (4,548) (7,145)

Income tax paid (2,053) – –

Net cash flows used in operating activities (5,165) (4,548) (7,145)

Net cash flows from investing activities

Dividends received 607,539 322,717 70,185

Net cash flows from investing activities 607,539 322,717 70,185

Net cash (used in)/from financing activities

Borrowings received – – 7,128

Dividends paid (390,155) (194,015) (69,864)

Purchase of treasury shares (171,856) (112,719) –

Net cash flows (used in)/from financing activities (562,011) (306,734) (62,736)

Effect of exchange rates changes on cash and cash equivalents (243) (969) (119)

Net increase/(decrease) in cash and cash equivalents 40,120 10,466 185

Cash and cash equivalents, beginning of the year 10,850 384 199

Cash and cash equivalents, end of the year 50,970 10,850 384

The accompanying Notes on pages 271 to 362 are an integral part of these financial statements.

Separate Statement of Cash Flows

For the year ended 31 December 2023 (Thousands of Georgian Lari)

271

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Notes to Consolidated Financial Statements

(Thousands of Georgian Lari)

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 99.56% of the share capital of JSC Bank of Georgia (the ‘Bank’) as at 31 December 2023, 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 2023, the Bank has 189 operating outlets in all major cities of Georgia

(31 December 2022: 211, 31 December 2021: 211). The Bank’s registered legal address is 29a Gagarini Street, Tbilisi 0160, Georgia.

BOGG’s registered legal address is 29 Farm Street, London, W1J 5RL, United Kingdom.

As at 31 December 2023, 31 December 2022 and 31 December 2021, 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	31 December	31 December
	2023	2022	2021
JSC Georgia Capital**	19.71%	20.60%	19.90%
M&G Investment Management Ltd	4.84%	4.10%	2.86%
Dimensional Fund Advisors (DFA) LP	4.11%	3.67%	3.13%
JP Morgan Asset Management	4.04%	2.60%	1.17%
BlackRock Investment Management (UK)	3.58%	2.31%	1.57%
Vanguard Group Inc	3.33%	3.20%	2.42%
Gemsstock Ltd	2.57%	2.47%	0.04%
Others	57.82%	61.05%	68.91%
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 2023, the members of the Board of Directors of BOGG owned 760,209 shares or 1.7% (31 December 2022:

665,980 shares or 1.4%, 31 December 2021: 516,116 shares or 1.0%) of BOGG. Interests of the members of the Board of Directors of

BOGG were as follows:

Shareholder

	31 December		31 December		31 December
	2023,	shares	2022,	shares	2021,	shares
		held		held		held
Neil Janin*		N/A		N/A		32,880
Mel Carvill*		–		–		N/A
Archil Gachechiladze		718,207		623,978		442,234
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		2,900
Véronique McCarroll		–		–		–
Mariam Megvinetukhutsesi		4,102		4,102		3,102
Total		760,209		665,980		516,116

* Neil Janin stepped down from the Board in 2022 and was replaced by Mel Carvill.

272

Annual Report 2023 Bank of Georgia Group PLC

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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 2023.

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 months 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 30 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 (less than 2 years) to medium (2 to 5 years) term impact

of climate change expected. The Group continues to refine its assessment of such risks and will reassess whether the impact of

climate-related risks on its financial position and performance need to be considered in future reporting periods.

273

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

2. Basis of preparation continued

Subsidiaries and associates

The consolidated financial statements as at 31 December 2023, 31 December 2022 and 31 December 2021 include the following

subsidiaries and associates:

Proportion of voting rights and

ordinary share capital held

31 December

Country of

Date of

Subsidiaries

2023

2022

2021

incorporation

Address

Industry

incorporation

acquisition

BGEO Group Limited

100.00%

United

29 Farm Street,

Holding

14/10/2011

–

Kingdom

London, W1J 5RL

Company

JSC BGEO Group

100.00%

Georgia

29a Gagarini

Investment

28/5/2015

–

Street, Tbilisi, 0105

Þ JSC Idea

100.00%

Georgia

3 Pushkin Street,

Insurance

26/12/2018

–

Tbilisi, 0105

Þ JSC Bank of

99.56%

99.55%

Georgia

29a Gagarini

Banking

21/10/1994

–

Georgia

Street, Tbilisi, 0105

Þ Bank of Georgia

100.00%

United

29 Farm Street,

Information

17/8/2010

–

Representative

Kingdom

London, W1J 5RL

sharing and

Office UK

market research

Limited

Þ Tree of Life

100.00%

Georgia

3 Pushkin Street,

Charitable

25/8/2008

–

Foundation

Tbilisi 0105

activities

NPO (formerly

known as Bank of

Georgia Future

Foundation,

NPO)

Þ Bank of Georgia

100.00%

Hungary

1054

Budapest,

Representative

18/6/2012

–

Representative

Szabadság tér 7;

office

Office Hungary

Bank Center

Representative

100.00%

Turkey

Süleyman Seba

Representative

25/12/2013

–

Office of JSC

Caddesi No:48

office

Bank of Georgia

A Blok Daire 82

in Turkey

Akaretler Beşiktaş

34357

Istanbul

Georgia Financial

100.00%

Israel

7 Menahem Begin,

Information

9/2/2009

–

Investments, LLC

Ramat Gan 52681

sharing and

market research

Benderlock

100.00%

Cyprus

Arch. Makariou III

Investments

12/5/2009

13/10/2009

Investments

58, IRIS TOWER,

Limited

8th floor, Flat/

Office 702 P.C.

1075,

Nicosia

Þ JSC Belarusky

99.98%

Belarus

Nezavisimosty

Banking

16/4/1992

3/6/2008

Narodny Bank

Avenue 87A, Minsk,

220012

BNB Leasing,

99.90%

Belarus

Nezavisimosty

Leasing

30/3/2006

3/6/2008

LLC

Avenue 87A, room

3, Minsk, 220012

Georgian Leasing

100.00%

Georgia

3-5 Kazbegi

Leasing

29/10/2001

31/12/2004

Company, LLC

Street,Tbilisi

Prime Leasing

100.00%

Georgia

Didube-Chughureti

Leasing

27/1/2012

21/1/2015

district, Ak. Tsereteli

Avenue №114, Tbilisi

Þ JSC BG Financial

100.00%

Georgia

79 David

Investment

7/8/2015

–

Agmashenebeli

Avenue, 0102,

Tbilisi

Þ JSC Galt &

100.00%

Georgia

79 David

Brokerage

19/12/1995

28/12/2004

Taggart

Agmashenebeli

and asset

Avenue, 0102,

Tbilisi

management

Branch

100.00%

Azerbaijan

1C Mikayil Mushvig,

Representative

28/12/2013

–

Office of ‘BG

Kempinski Hotel

office

Kapital’ JSC

Badamdar, 6th

in Azerbaijan

floor, Yasamal.

AZ1006,

Baku

Galt and

100.00%

0.00%

Georgia

Krtsanisi district,

Representative

22/9/2023

–

Taggart SPV

Pushkin street N3,

office

2 LLC*

Tbilisi

Galt and

100.00%

Cyprus

Arch. Makariou III

Investments

3/7/2006

–

Taggart

58, IRIS TOWER,

Holdings

8th floor, Flat/

Limited

Office 702 P.C.

1075,

Nicosia

BG Capital

100.00%

Belarus

5A-3Н, K.Chornogo

Brokerage

19/2/2008

–

(Belarus),

lane, Minsk, 220012

LLC

274

Annual Report 2023 Bank of Georgia Group PLC

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

Proportion of voting rights and

ordinary share capital held

31 December

Country of

Date of

Subsidiaries

2023

2022

2021

incorporation

Address

Industry

incorporation

acquisition

Þ JSC Digital Area

100.00%

Georgia

79 David

Digital

8/6/2018

–

(former JSC

Agmashenebeli

Polymath Group)

Avenue, 0102,

Tbilisi

Þ JSC Extra area

100.00%

99.34%

98.68%

Georgia

79 David

Digital

22/5/2019

–

Agmashenebeli

Avenue, 0102,

Tbilisi

Easy Box LLC

100.00%

Georgia

41, Pekini Street,

Transportation

22/12/2020

–

Tbilisi

Þ JSC Optimo

100.00%

0.00%

Georgia

41, Pekini Street,

Digital

8/11/2022

–

Global

Tbilisi

OPTIMO, FE

100.00%

0.00%

Uzbekistan

Mirabadski District,

Digital

31/8/2023

–

LLC**

81-38, Tashkent

Þ JSC Delivery***

81.38%

25.75%

0.00%

Georgia

6 A. Andronikashvili

Digital

14/12/2017

8/11/2022

Street II Dead End,

Tbilisi

El. Biletebi

83.34%

0.00%

Georgia

Aleksandre Kazbegi,

Digital

11/12/2008

29/9/2023

LLC****

N29, apartment N6,

Tbilisi

Þ Ticketing Area

100.00%

0.00%

Georgia

41, Pekini Street,

Digital

6/7/2023

–

LLC*****

Tbilisi

Solo, LLC

100.00%

Georgia

79 David

Trade

22/4/2015

–

Agmashenebeli

Avenue, 0102,

Tbilisi

Þ JSC United

100.00%

Georgia

74a Chavchavadze

Registrar

29/5/2006

–

Securities Registrar

Avenue, Tbilisi, 0162

of Georgia

Þ JSC Express

100.00%

Georgia

1b, Budapest

Investments

29/10/2007

–

Technologies

Street, Tbilisi, 0160

Þ JSC Georgian

99.41%

Georgia

221

Nutsubidze

Card processing

17/1/1997

20/10/2004

Card

Street, Tbilisi, 0168

Direct Debit

100.00%

Georgia

Luxemburg 25,

Electronic

7/3/2006

–

Georgia, LLC

Tbilisi, 0160

payment

services

Þ LLC Didi Digomi

100.00%

Georgia

80-82,

Communication

23/4/2007

–

Research Center

D.Agmashenebeli

services

Street, Tbilisi, 0102

Þ Metro Service +,

100.00%

Georgia

74a Chavchavadze

Business

10/5/2006

–

LLC

Avenue, Tbilisi, 0162

servicing

Premium Compliance

100.00%

Georgia

Kazbegi Street 3-5,

Various

17/2/2012

–

Advisory, LLC

Tbilisi

	Proportion of voting rights and ordinary share
		capital held
	31 December	31 December	31 December	Country of			Date of	Date of
Associates	2023	2022	2021	incorporation	Address	Industry	incorporation	acquisition
JSC Credit info	21.08%	21.08%	21.08%	Georgia	2 Tarkhnishvili	Financial	14/2/2005	14/2/2005
					Street, Tbilisi	intermediation
JSC Tbilisi Stock	24.04%	24.04%	24.04%	Georgia	72 Vazha-Pshavela	Financial	8/5/2015	23/12/2016
Exchange					Avenue, Tbilisi	intermediation

* JSC BG Financial established a new company – LLC Galt and Taggart SPV 2 on 22 September 2023 and has increased its capital by GEL 304,900.

** OPTIMO, FE LLC was established on 31 August 2023, in the Republic of Uzbekistan. Authorised capital amounts to 1,224,150,000 UZS, which is equivalent to 264,874 GEL.

*** JSC Digital Area invested US$ 1,108,535 in JSC Delivery in 2023 and owns an 81.38% stake.

**** JSC Digital Area bought 83.34% worth of shares in El. Biletebi LLC in 2023 and total investment amounts to GEL 1,200,000.

***** JSC Digital Area established a new company, LLC Ticketing Area, on 6 July 2023 and has increased its capital by GEL 1,000,000.

2. Basis of preparation continued

275

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance 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 2023.

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.

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

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. Acquisition-related costs are expensed as incurred and included in

administrative expenses.

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.

Common control transactions

The Group generally accounts for common control transaction at cost. Those transactions involving the acquisition of investment in

a subsidiary, associate or joint venture are accounted at the fair value of the consideration given. When the purchase consideration

does not correspond to the fair value of the investment acquired the investment is accounted at fair value with the corresponding

effect recognised in the acquirer’s standalone income statement.

Accounting for common control transactions has no effect on the Group’s consolidated financial statements.

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. 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.

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 31.

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.

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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.

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.

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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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 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 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.

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.

The Group does not recycle gains and losses on these equity instruments to profit or loss nor does it make impairment assessment

for these instruments. Dividends received are recognised in profit or loss.

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 other gains/(losses), 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 contracts whereby it is 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.

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Non-financial guarantees

The Group enters into non-financial guarantee contracts whereby it is 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.

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. The Group also holds cash in nominal ownership

on behalf of its clients. The Group does not control this cash nor does it have the potential to produce economic benefits to the

Group, therefore asset recognition criteria is not met in such cases. Respectively, the Group does not recognise these amounts in its

consolidated statement of financial position.

Borrowings

The Group classifies issued financial instruments or their components 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). The Group initially recognises these liabilities 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 an unconditional right to avoid delivering cash upon

a predetermined trigger event that is beyond the control of both the issuer and the holder of the instrument. 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.

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

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 contracts 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 at an initial amount of the lease

liability adjusted for lease payments made at or before the commencement date. 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 occupancy and rent expense on a straight-line basis over the lease term and presents them as

part of General and administrative expenses.

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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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

The Group classifies leases that transfer substantially all the risks and benefits incidental to ownership of the lease item to the

lessee 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 Group uses the interest rate

implicit in the lease as a discount factor. 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.

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’.

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 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 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 expected credit losses (LTECL) 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 probability of default (LTPD) that represents the PD occurring over

the remaining lifetime of the financial instrument. Allowance for credit losses are 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.

Unless POCI, 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 ECLs 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 in ECL calculation are disclosed in Note 4.

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3. Summary of significant accounting policies continued

Derecognition of financial assets and liabilities

Derecognition of financial assets

The Group derecognises a financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial

assets) 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.

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 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

The Group derecognises a financial liability 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 the majority of the realisations 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.

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.

Realisation gain/loss from above assets are included under Net other gains/(losses) in the Group’s consolidated income statement.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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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.

Assets and liabilities classified as held for sale are presented separately from other assets and liabilities in the statement of

financial position.

Taxation

The Group calculates the current income tax expense 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.

The Group recognises a deferred tax asset 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

The Group recognises investment property initially at cost, including transaction costs, and subsequently remeasured 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.

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.

Property and equipment

The Group records property and equipment at cost less accumulated depreciation and any accumulated impairment in value.

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.

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3. Summary of significant accounting policies continued

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 initially measured at cost and subsequently 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.

Provisions

The Group recognises provisions when it 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.

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 subsequent holding period does not imply any employment service

provision from the share recipient side, therefore it does not affect the expense recognition period. 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.

Where the terms of an equity-settled award are modified, the Group recognises the minimum expense 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 the Group cancels an equity-settled award, 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’s 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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Dividends

The Group recognises dividends as liabilities and deducts them 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 the dividend amount and recorded directly through equity.

Contingencies

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.

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.

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

The Group recognises fees income for the provision of services over a period of time 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.

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.

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.

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3. Summary of significant accounting policies continued

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 2023,

31 December 2022 and 31 December 2021 were:

	Lari to GBP	Lari to US$	Lari to EUR	Lari to BYN
31 December 2023	3.4228	2.6894	2.9753	0.8162
31 December 2022	3.2581	2.702	2.8844	1.073
31 December 2021	4.1737	3.0976	3.504	1.2101

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.

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 2023

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. The Group evaluated whether its contracts

contain insurance risk, focusing on performance guarantees and concluded that there are no material contracts in scope of IFRS

17 considering practical expedients available. The amendment had no material impact on the Group’s 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 so that it no longer applies to

transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendment had no

material impact on the Group’s consolidated financial statements.

Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement

. 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 amendment had no material impact on the Group’s consolidated financial statements.

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 amendment had no material impact on the Group’s consolidated financial statements.

International Tax Reform – Pillar Two Model Rules

– Amendments to IAS 12.

The amendments to IAS 12 have been introduced in

response to the OECD’s BEPS Pillar Two rules and include:

• A mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional

implementation of the Pillar Two model rules; and

• Disclosure requirements for affected entities to help users of the financial statements better understand an entity’s exposure to

Pillar Two income taxes arising from that legislation, particularly before its effective date.

The mandatory temporary exception – the use of which is required to be disclosed – applies immediately. The remaining disclosure

requirements apply for annual reporting periods beginning on or after 1 January 2023, but not for any interim periods ending on or

before 31 December 2023. The amendments had no impact on the Group’s consolidated financial statements.

Reclassifications

To improve the quality and understandability of its consolidated statement of financial position and consolidated statement of cash

flows, the Group has revisited the presentation of foreclosed assets, inventories and other assets. The Group considered it more

appropriate to present foreclosed assets separately from other assets and present inventories within other assets. Comparative

amounts were reclassified in line with the updated presentation.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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3. Summary of significant accounting policies continued

The following reclassifications were made to year ended 31 December 2022 and 31 December 2021 consolidated statement

of financial position and consolidated statement of cash flows to conform to the year ended 31 December 2023

presentation requirements:

	As previously
Consolidated Statement of Financial Position for the year ended 31 December 2022	reported	Reclassification	As reclassified
Foreclosed Assets	–	119,924	119,924
Inventories	17,096	(17,096)	–
Other assets	317,886	(102,828)	215,058

	As previously
Consolidated statement of cash flows for the year ended 31 December 2022	reported	Reclassification	As reclassified
Net (increase) decrease in operating assets
Prepayments and other assets	(18,612)	11,700	(6,912)
Foreclosed assets	–	(11,700)	(11,700)

	As previously
Consolidated Statement of Financial Position for the year ended 31 December 2021	reported	Reclassification	As reclassified
Foreclosed Assets	–	3,216	3,216
Inventory	11,514	(11,514)	–
Other assets	246,947	8,298	255,245

	As previously
Consolidated statement of cash flows for the year ended 31 December 2021	reported	Reclassification	As reclassified
Net (increase) decrease in operating assets
Prepayments and other assets	(25,324)	5,907	(19,417)
Foreclosed assets	–	(5,907)	(5,907)

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 1 January 2024 with early adoption permitted.

The Group is assessing the potential effect of the amendment on its consolidated financial statements.

Amendments to IFRS 16: Lease Liability in a Sale and Leaseback

In September 2022, the IASB issued amendments to IFRS 16 to specify the requirements that a seller-lessee uses in measuring the

lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss

that relates to the right of use it retains. The amendments are effective for annual reporting periods beginning on or after 1 January

2024 and must be applied retrospectively to sale and leaseback transactions entered into after the date of initial application of

IFRS 16. Earlier application is permitted and that fact must be disclosed.

The Group is assessing the potential effect of the amendment on its consolidated financial statements.

Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7

In May 2023, the IASB issued amendments to

IAS 7 Statement of Cash Flows

and

IFRS 7 Financial Instruments: Disclosures

clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements. The disclosure

requirements in the amendments are intended to assist users of financial statements in understanding the effects of supplier

finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk. The amendments will be effective for annual

reporting periods beginning on or after 1 January 2024. Early adoption is permitted, but will need to be disclosed.

The amendments are not expected to have a material impact on the Group’s financial statements.

Lack of Exchangeability – Amendments to IAS 21

IASB has published ‘Lack of Exchangeability’ (Amendments to IAS 21) that contains guidance to specify when a currency is

exchangeable and how to determine the exchange rate when it is not. The amendments are applicable for annual reporting periods

beginning on or after 1 January 2025. Earlier application is permitted.

The amendments are not expected to have a material impact on the Group’s financial statements.

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3. Summary of significant accounting policies continued

Non-current Liabilities with Covenants – Amendments to IAS 1

On 31 October 2022, the IASB published

Non-current Liabilities with Covenants (Amendments to IAS 1)

to clarify how conditions

with which an entity must comply within 12 months after the reporting period affect the classification of a liability. The amendments

are effective for reporting periods beginning on or after 1 January 2024. The amendments are applied retrospectively in accordance

with IAS 8 and earlier application is permitted.

The amendments are not expected to have a material impact on the Group’s financial statements.

Interest Rate Benchmark Reform

The UK’s Financial Conduct Authority (‘FCA’) announced on 5 March 2021 that publication of main Libor currency interest rate

benchmark settings including EUR LIBOR would cease at the end of 2021, while the publication of the most widely used US dollar

Libor settings would be extended until 30 June 2023. As a result, the Bank initiated the transition programme for those contracts

that reference Ibors to alternative rate products. As at 31 December 2023, the transitioning to alternative benchmark rates for all

material contracts was substantially completed.

The below table provides a summary of financial contracts disaggregated by significant interest rate benchmark at the reporting

date that are yet to transition to an alternative benchmark rate:

		Balance at	Balance at
		31 December	31 December
	Currency	2023	2022
Financial assets
Loans to customers and finance lease receivables	US$	70	631,180
Financial liabilities
Amounts owed to credit institutions	US$	373,769	515,129
Debt securities issued	US$	267,113	267,702

Business combination

On 25 May 2023, the Group acquired 45.63% of the voting shares in JSC Delivery, an online grocery shopping platform in Georgia.

The Group had previously held 34.37% shares in the company and accounted for the shareholding as an investment in associate.

Following the above transaction the shareholding was increased to 80% resulting in the Group obtaining control over the entity. The

company was acquired with the purposes of entering the quick-commerce market.

The Group has simultaneously formed an agreement with one of the non-controlling interests (NCI) whereby the parties agreed on

the sale/purchase of the additional 15.58% shareholding held by the NCI. As a result, the Group has recognised respective liability for

NCI forward at the date of business combination.

The Group has elected to measure the remaining non-controlling interests in the acquiree at proportionate share of the net

assets acquired.

Assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities of JSC Delivery as at the date of acquisition were:

	Fair value
	recognised on
	acquisition
Assets
Cash and cash equivalents	468
Inventories	302
Property and equipment	263
Intangible assets	182
Other assets	64
	1,279
Liabilities
Trade payables	(353)
Other liabilities	(1)
	(354)
Total identifiable net assets at fair value	925
Non-controlling interest measured at proportionate share of net assets	(41)
Fair value of Investment in Associate derecognised	(2,309)
NCI Forward liability	(1,270)
Goodwill arising on acquisition	5,765
Purchase consideration	3,070

On 29 September 2023, the Group additionally acquired 80% of El. Biletebi LLC, an e-tickets selling platform with the purpose

to enter the e-tickets market. The Group has elected to measure the remaining non-controlling interests in the acquiree at

proportionate share of the net assets acquired.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities of El. Biletebi LLC as at the date of acquisition were:

	Fair value
	recognised on
	acquisition
Assets
Cash and cash equivalents	595
Property and equipment	19
Intangible assets	745
Other assets	582
	1,941
Liabilities
Advances received	(706)
Trade payables	(31)
	(737)
Total identifiable net assets at fair value	1,204
Non-controlling interest measured at proportionate share of net assets	(241)
Goodwill arising on acquisition	2,137
Purchase consideration	3,100

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 are 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 15, while valuation inputs and techniques

are presented in Note 31. 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 30)

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 the 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 an 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, the exit criteria is determined as repayment of the entire overdue amount other

than through refinancing or foreclosure.

Once a credit-impaired financial asset meets the 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.

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4. Significant accounting judgements and estimates continued

Significant increase in credit risk (SICR)

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. The threshold applied

depends on the original credit quality of the borrowers. Higher threshold is set for those instruments with a low PD at origination.

The table below summarises SICR thresholds (the actual thresholds are applied on a more granular level):

			SICR threshold
Loan portfolio type	Rating type	Initial rating	(notches)
Commercial loans	Internal	2-4+	5-12
Commercial loans	Internal	5-7+	1-5
Micro and SME loans	External	A-C	5-8
Mortgage loans	External	A-C	6-8
Consumer loans	External	A-C	4-10
Gold – pawn loans	External	A-C	6-10
Micro and SME loans, Mortgage, Consumer, Gold – pawn loans	External	D-E	1-5

• 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 the financial instrument level in order to track changes in credit risk since the 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 the 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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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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.

Management Overlays and improvements to the ECL methodology

In prior periods the Group applied a 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 the

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 an increase of ECL. This

together with the removal of management overlays and other minor improvements to the methodology resulted in the decrease of

ECL by GEL 21.4 million for the Group in 2022.

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 2023 per geographical segments are set out

below. The scenarios ‘base’, ‘upside’ and ‘downside’ were used for all portfolios.

Georgia

	ECL	Assigned	As at 31 December 2023			Assigned	As at 31 December 2022			Assigned	As at 31 December 2021
Key drivers	scenario	weight	2024	2025	2026	weight	2023	2024	2025	weight	2022	2023	2024
GDP growth in %	Upside	25%	6.50%	5.50%	5.00%	25%	6.00%	5.00%	5.00%	25%	6.00%	5.00%	4.50%
	Base case	50%	5.00%	4.50%	5.00%	50%	4.00%	5.50%	5.00%	50%	5.00%	4.00%	4.50%
	Downside	25%	3.00%	4.00%	5.00%	25%	2.00%	4.00%	5.00%	25%	2.00%	4.00%	5.00%
GEL/US$ exchange rate	Upside	25%	3.00%	2.00%	0.00%	25%	2.00%	0.00%	0.00%	25%	4.00%	2.00%	2.00%
	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%	0.00%	5.00%	25%	-15.00%	5.00%	5.00%	25%	-10.00%	2.00%	3.00%
CPI inflation rate in %		Upside	25%	3.25%	3.00%	3.00%	25%	5.00%	3.00%	3.00%	25%	5.50%	3.00%	3.00%
	Base case	50%	3.60%	3.10%	3.00%	50%	5.30%	3.10%	3.00%	50%	7.00%	2.50%	3.00%
	Downside	25%	5.00%	4.00%	3.00%	25%	9.00%	6.00%	3.00%	25%	8.00%	4.00%	3.00%

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4. Significant accounting judgements and estimates continued

Belarus

	ECL	Assigned		As at 31 December 2023	Assigned		As at 31 December 2022	Assigned		As at 31 December 2021
Key drivers	scenario	weight	2024	2025	weight	2023	2024	weight	2022	2023
GDP growth in %	Upside	25%	3.77%	3.13%	10%	2.66%	4.26%	25%	2.92%	5.01%
	Base case	50%	1.95%	0.49%	50%	0.31%	0.50%	50%	0.56%	1.24%
	Downside	25%	0.14%	-2.15%	40%	-2.05%	-3.26%	25%	-1.80%	-2.52%
BYN/US$ exchange rate %	Upside	25%	0.66%	0.62%	10%	0.71%	0.65%	25%	0.56%	0.52%
	Base case	50%	1.00%	1.23%	50%	2.53%	1.65%	50%	2.44%	1.37%
	Downside	25%	1.31%	1.77%	40%	4.09%	2.41%	25%	4.05%	1.98%
CPI inflation rate in %	Upside	25%	-0.09%	-0.52%	10%	0.38%	-0.58%	25%	-0.07%	-0.85%
	Base case	50%	1.94%	1.82%	50%	2.20%	1.66%	50%	1.83%	1.38%
	Downside	25%	3.86%	4.01%	40%	3.93%	3.76%	25%	3.63%	3.46%

All other parameters held constant, increase in GDP growth and decrease in foreign exchange rate and inflation would result in

a 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 2023
		ECL coverage by scenarios
		Reported ECL
	Reported ECL	coverage	Upside	Base case	Downside
Commercial loans	100,378	1.43%	1.37%	1.40%	1.44%
Residential mortgage loans	22,750	0.50%	0.49%	0.50%	0.51%
Micro and SME loans	71,661	1.76%	1.74%	1.76%	1.78%
Consumer loans	131,633	2.80%	2.75%	2.79%	2.86%
Gold – pawn loans	1,390	0.93%	0.92%	0.92%	0.93%

Key drivers

		As at 31 December 2022
		ECL coverage by scenarios
		Reported ECL
	Reported ECL	coverage	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%

Key drivers

		As at 31 December 2021
		ECL coverage by scenarios
		Reported ECL
	Reported ECL	coverage	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%

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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4. Significant accounting judgements and estimates continued

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. The need for write-off of corporate loans

is assessed individually, 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, while other non-secured portfolio is written-off

after 150 days overdue. 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

Climate, and the impact of climate on the Group’s balance sheet is considered as an area of accounting estimate and judgement

through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liabilities. While the

effects of climate change are a source of uncertainty, as at 31 December 2023 management does not consider climate to have

a qualitatively material impact on its financial statements. The Group has assessed the impact of climate risk on its financial

statements as disclosed below.

The estimated areas of impact, limited to a qualitative assessment, were expected credit loss and the impact on lending portfolios

including physical risk on the mortgage lending portfolio and forward-looking cash flows that impact the recoverability of certain

assets. Transition risk is managed through reviews of clients by the Group’s Risk function which includes an ongoing process of

identifying clients susceptible to climate transition risks.

The Group Climate Risk team has performed a top-down qualitative assessment of the impact of climate risk on the IFRS 9 ECL

provision. This assessment has mostly been focused across corporate and mortgage portfolios. The portfolios identified as most

susceptible to climate risks were identified as mining and quarrying, heavy metals and construction, the concentration of which is

not signficant for the overall Group loan exposure. The assessment of the portfolios is undertaken by considering the maturity profile

of the exposures which is relatively shorter term compared to long-term climate impact. The above assessment did not result in any

material effect on the Group’s consolidated financial statements.

While some indicators that are more influenced by climate change (e.g. energy prices) are factored into the current PD models where

they have demonstrated statistical relevance, the Group currently does not use a specific climate risk related scenario in addition

to the existing economic scenarios applied to derive the weighted-average ECL. The reason for this is lack of sufficient historical

data and limitations in the risk assessments. Where climate factors have impacted the economy in the recent past or present, these

impacts are implicitly embedded in the Group’s IFRS 9 ECL models through the projected macroeconomic indicators (e.g. inflation

rates) and individual analysis of corporate loan related cash flows.

It should also be noted that the Group is currently working on a corporate plan in respect of its response to climate risks, with the

commitment to transition away or limit certain high carbon sector financing while introducing more green finance products.

Based on the best information available at the time these consolidated annual financial statements were prepared, the Group sees

no additional climate change risk having a substantial impact on its equity, financial situation and results in 2024. However, as the

matter is constantly changing, the Group is working on developing methodologies to better measure potential loan loss in line with

the new management needs, best practice and regulators’ requirements.

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 the 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.

SME – SME Banking (excluding SME Banking of BNB) – principally provides SME loans, micro loans, consumer and mortgage

loans, funds transfers and settlement services, and the handling of customers’ deposits for legal entities. The SME

Banking business targets small and medium-sized enterprises and micro businesses.

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Annual Report 2023 Bank of Georgia Group PLC

5. Segment information continued

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.

During the financial year, the Group’s operations were 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 2023, 2022 or 2021.

In the first quarter of 2023 the SME Banking segment was split from Retail Banking and the majority of the Micro portfolio, where

customers had business-related needs, was transferred to SME Banking. The remaining Micro portfolio has been transferred to

Mass Retail. The SME segment has grown significantly over the past few years. In addition, the value proposition for business

clients has been different from the value proposition for retail customers, leading to our decision to change the segmentation.

The comparative figures have been restated accordingly to reflect this change. 2021 amounts have not been restated due to the

unavailability of necessary data and impracticability of restatement.

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 2023:

			Corporate
	Retail		Investment			Group
	Banking	SME	Banking	BNB	Eliminations	Total
Net interest income	790,630	256,013	520,237	48,486	80	1,615,446
Net fee and commission income	302,555	40,574	83,718	7,379	256	434,482
Net foreign currency gain	197,379	38,357	88,369	41,606	–	365,711
Net gains/(losses) on extinguishment of debt	184	52	107	221	–	564
Other income from settlement of legacy claim	–	–	22,585	–	–	22,585
Net other gains/(losses)	18,287	5,997	88,928	1,788	(829)	114,171
Operating income	1,309,035	340,993	803,944	99,480	(493)	2,552,959
Operating expenses	(469,855)	(99,780)	(119,397)	(65,514)	493	(754,053)
Profit from associates	1,391	65	–	–	–	1,456
Operating income before cost of risk	840,571	241,278	684,547	33,966	–	1,800,362
Cost of risk	(83,847)	(32,316)	(30,549)	2,648	–	(144,064)
Net operating income before non-recurring
items	756,724	208,962	653,998	36,614	–	1,656,298
Net non-recurring items	–	–	–	–	–	–
Profit before income tax	756,724	208,962	653,998	36,614	–	1,656,298
Income tax expense	(121,126)	(34,094)	(95,274)	(8,477)	–	(258,971)
Profit for the year	635,598	174,868	558,724	28,137	–	1,397,327
Assets and liabilities
Total assets	14,247,054	5,969,620	10,366,433	1,280,167	(105,716)	31,757,558
Total liabilities	12,479,270	5,137,430	8,095,296	1,131,442	(105,716)	26,737,722
Other segment information
Property and equipment	81,636	8,403	2,823	5,273	–	98,135
Intangible assets	40,937	5,919	2,681	7,031	–	56,568
Capital expenditure	122,573	14,322	5,504	12,304	–	154,703
Depreciation, amortisation and impairment	(97,938)	(12,206)	(5,319)	(9,260)	–	(124,723)

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Strategic Report Governance 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:

			Corporate
	Retail		Investment			Group
	Banking	SME	Banking	BNB	Eliminations	Total
Net interest income	565,175	202,793	376,771	37,511	85	1,182,335
Net fee and commission income	221,495	34,792	49,543	11,500	161	317,491
Net foreign currency gain	234,425	43,183	123,993	64,493	–	466,094
Net gains/(losses) on extinguishment of debt	(1,943)	(730)	(5,740)	(304)	–	(8,717)
Other income from settlement of legacy claim	–	–	391,100	–	–	391,100
Net other gains/(losses)	20,841	3,233	20,039	1,474	(778)	44,809
Operating income	1,039,993	283,271	955,706	114,674	(532)	2,393,112
Operating expenses	(387,147)	(93,507)	(105,632)	(55,432)	532	(641,186)
Profit from associates	700	54	–	–	–	754
Operating income before cost of risk	653,546	189,818	850,074	59,242	–	1,752,680
Cost of risk	(164,099)	(8,603)	79,461	(25,827)	–	(119,068)
Net operating income before non-recurring
items	489,447	181,215	929,535	33,415	–	1,633,612
Net non-recurring items	1,241	–	–	(203)	–	1,038
Profit before income tax	490,688	181,215	929,535	33,212	–	1,634,650
Income tax expense	(76,489)	(28,785)	(77,693)	(7,684)	–	(190,651)
Profit for the year	414,199	152,430	851,842	25,528	–	1,443,999
Assets and liabilities
Total assets	13,231,085	5,432,635	9,006,313	1,381,366	(149,499)	28,901,900
Total liabilities	11,662,975	4,682,905	7,226,769	1,229,928	(149,499)	24,653,078
Other segment information
Property and equipment	67,285	6,167	2,304	2,241	–	77,997
Intangible assets	28,252	5,567	1,965	4,886	–	40,670
Capital expenditure	95,537	11,734	4,269	7,127	–	118,667
Depreciation, amortisation and impairment	(86,546)	(13,193)	(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:

		Corporate
	Retail	Investment			Group
	Banking	Banking	BNB	Eliminations	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 (loss)	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)
Profit 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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6. Cash and cash equivalents

	2023	2022	2021
Cash on hand	1,024,048	1,052,055	751,063
Current accounts with central banks, excluding obligatory reserves	713,212	805,503	126,627
Current accounts with credit institutions	652,244	965,046	414,214
Time deposits with credit institutions with maturities of up to 90 days	712,786	762,590	228,683
Cash and cash equivalents, gross	3,102,290	3,585,194	1,520,587
Less – Allowance for expected credit loss	(466)	(351)	(25)
Cash and cash equivalents, net	3,101,824	3,584,843	1,520,562

As at 31 December 2023, GEL 975,099 (2022: GEL 1,453,844, 2021: GEL 419,324) 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%-10.35% interest per annum on these deposits (2022: up to 11.10%, 2021: up to

0.07%). 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 2023, cash and cash equivalents held by BOGG of GEL 50,970 (2022: GEL 10,850, 2021: GEL 384) is represented

by placements on current accounts with Georgian and OECD banks.

7. Amounts due from credit institutions

	2023	2022	2021
Obligatory reserves with central banks	1,746,288	2,354,470	1,898,052
Time deposits with maturities of more than 90 days	–	15,721	28,939
Restricted cash	7,263	68,155	4,730
Amounts due from credit institutions, gross	1,753,551	2,438,346	1,931,721
Less – Allowance for expected credit loss	(894)	(5,318)	(331)
Amounts due from credit institutions, net	1,752,657	2,433,028	1,931,390

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 2023 (2022: 0.00%, 2021: 0.00%).

8. Investment securities

	2023	2022	2021
Investment securities measured at FVOCI – debt instruments	4,424,160	3,960,299	2,586,083
Investment securities designated as at FVOCI – equity investments	8,004	10,893	9,581
Investment securities measured at FVTPL – debt instruments	435	–	–
Investment securities measured at FVTPL – equity instruments	6,852	–	–
Investment securities measured at FV	4,439,451	3,971,192	2,595,664

	2023	2022	2021
Investment securities measured at amortised cost	691,119	381,735	–
Less – Allowance for expected credit loss	(813)	(3,198)	–
Investment securities measured at amortised cost, net	690,306	378,537	–

	2023	2022	2021
Ministry of Finance of Georgia treasury bonds	1,891,684	1,470,473	1,312,001
Ministry of Finance of Georgia treasury bills	155,955	176,483	82,196
Foreign treasury bills	1,645,286	1,062,095	–
Foreign treasury bonds	54,151	92,817	79,156
Certificates of deposit of central banks	10,855	17,675	39,410
Other debt instruments	666,229	1,140,756	1,073,320
Investment securities measured at FVOCI – debt instruments	4,424,160	3,960,299	2,586,083

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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8. Investment securities continued

	2023	2022	2021
Ministry of Finance of Georgia treasury bonds	77,367	119,918	–
Foreign treasury bonds	–	12,230	–
Other debt instruments	613,752	249,587	–
Investment securities measured at amortised cost – debt instruments, gross	691,119	381,735	–
Less – Allowance for expected credit loss	(813)	(3,198)	–
Investment securities measured at amortised cost – debt instruments, net	690,306	378,537	–

	Pledged treasury bonds 2023	2022	2021
For short-term loans from the NBG	1,375,687	709,597	490,592
For repo-operations with commercial 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
Total	1,375,687	1,186,771	725,792

	Pledged treasury bills 2023	2022	2021
For cash kept by the NBG at the Group’s premises under cash custodian services	–	24,180	–
Total	–	24,180	–

	Pledged corporate bonds 2023	2022	2021
For short-term loans from the NBG	127,685	121,592	–
For deposits of Ministry of Finance of Georgia	–	205,079	109,109
Total	127,685	326,671	109,109

Other debt instruments measured at FVOCI – debt instruments as at 31 December 2023 mainly comprises bonds issued by the

European Bank for Reconstruction and Development of GEL 326,916 (2022: GEL 531,351, 2021: GEL 521,394), GEL-denominated

bonds issued by the International Finance Corporation of GEL 203,617 (2022: GEL 56,523, 2021: GEL 203,351), GEL-denominated

bonds issued by the Netherlands Development Finance Company of GEL Nil (2022: GEL 131,126, 2021: GEL 163,593), GEL-

denominated bonds issued by the Black Sea Trade and Development Bank of GEL Nil (2022: GEL 200,913, 2021: GEL 65,407),

US$-denominated bonds issued by the National Bank Of Uzbekistan of GEL Nil (2022: GEL 12,230, 2021: GEL Nil) and

GEL-denominated bonds issued by the Asian Development Bank of GEL 30,594 (2022: GEL 107,835, 2021: GEL 61,609).

Foreign treasury bonds and bills measured at FVOCI – debt instruments comprise of US Treasury Notes in the amount of GEL

1,621,219 (2022: GEL 1,062,095, 2021: GEL Nil), Ministry of Finance of the Republic of Lithuania treasury bonds in the amount of GEL

Nil (2022: GEL Nil, 2021: GEL 15,992), United Kingdom treasury bonds in the amount of GEL Nil (2022: GEL 32,516, 2021: GEL Nil),

Ministry of Finance of the Republic of Belarus treasury bonds in the amount of GEL 54,151 (2022: GEL 60,301, 2021: GEL 63,164) and

US treasury bills in the amount of GEL 24,068 (2022: GEL Nil, 2021: GEL Nil).

For the period ended 31 December 2023 net gains on derecognition of investment securities comprised GEL 12,520 (2022: GEL 7,921,

2022: GEL 30,044) which is included in net other income.

As at 31 December 2023, allowance for ECL on investment securities measured at FVOCI comprised GEL 7,684 (2022: GEL 7,086,

2021: GEL 3,145).

9. Loans to customers and finance lease receivables

	2023	2022	2021
Commercial loans	7,017,617	5,315,666	5,554,184
Consumer loans	4,699,969	3,602,054	2,981,305
Residential mortgage loans	4,557,525	4,193,204	4,022,058
Micro and SME loans	4,073,022	38,25,663	3,731,756
Gold – pawn loans	150,228	164,554	165,417
Loans to customers at amortised cost, gross	20,498,361	17,101,141	16,454,720
Less – Allowance for expected credit loss	(327,812)	(326,005)	(404,804)
Loans to customers at amortised cost, net	20,170,549	16,775,136	16,049,916
Finance lease receivables, gross	73,487	95,348	124,952
Less – Allowance for expected credit loss	(11,315)	(8,778)	(5,895)
Finance lease receivables, net	62,172	86,570	119,057
Total loans to customers and finance lease receivables	20,232,721	16,861,706	16,168,973

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9. Loans to customers and finance lease receivables continued

As at 31 December 2023, loans to customers carried at GEL 954,695 (2022: GEL 1,092,475, 2021: GEL 1,125,955) were pledged for

short-term loans from the NBG.

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 2022	4,511,821	611,307	176,588	15,950	5,315,666
New financial asset originated or purchased	6,382,411	62,180	8	15,820	6,460,419
Transfer to Stage 1	218,262	(218,262)	–	–	–
Transfer to Stage 2	(408,616)	413,869	(5,253)	–	–
Transfer to Stage 3	(9,314)	(35,720)	45,034	–	–
Assets derecognised due to pass-through arrangement	(165,947)	(418)	(164)	–	(166,529)
Assets repaid	(4,279,698)	(318,744)	(96,967)	(10,324)	(4,705,733)
Resegmentation	76,352	(56)	2,959	–	79,255
Impact of modifications	(755)	733	(143)	9	(156)
Foreign exchange movement	105,029	4,490	(375)	83	109,227
Net other changes	60,821	111	(10,563)	664	51,033
Write-offs	–	–	(11,502)	–	(11,502)
Recoveries of amounts previously written off	–	–	8,723	957	9,680
Unwind of discount	–	–	(2,224)	416	(1,808)
Currency translation differences	(113,478)	(3,701)	(4,756)	–	(121,935)
Balance at 31 December 2023	6,376,888	515,789	101,365	23,575	7,017,617
Individually assessed	–	–	92,801	21,497	114,298
Collectively assessed	6,376,888	515,789	8,564	2,078	6,903,319
Balance at 31 December 2023	6,376,888	515,789	101,365	23,575	7,017,617

Commercial loans at amortised cost, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	19,215	23,530	44,247	4,565	91,557
New financial asset originated or purchased	31,952	697	1	–	32,650
Transfer to Stage 1	3,811	(3,811)	–	–	–
Transfer to Stage 2	(5,004)	6,393	(1,389)	–	–
Transfer to Stage 3	(994)	(1,406)	2,400	–	–
Impact on ECL of exposures transferred between stages
during the year	(1,777)	4,522	17,549	–	20,294
Assets derecognised due to pass-through arrangement	(529)	(9)	–	–	(538)
Assets repaid	(13,364)	(12,030)	(29,709)	(1,325)	(56,428)
Resegmentation	1,102	(1,224)	870	–	748
Impact of modifications	(1)	17	(149)	3	(130)
Foreign exchange movement	(14)	103	(641)	127	(425)
Net other measurement of ECL	(20,005)	16,327	17,249	4,195	17,766
Income statement (releases)/charges	(4,823)	9,579	6,181	3,000	13,937
Write-offs	–	–	(11,502)	–	(11,502)
Recoveries of amounts previously written off	–	–	8,723	957	9,680
Unwind of discount	–	–	(2,224)	416	(1,808)
Currency translation differences	(272)	82	(1,296)	–	(1,486)
Balance at 31 December 2023	14,120	33,191	44,129	8,938	100,378
Individually assessed	–	–	39,561	8,936	48,497
Collectively assessed	14,120	33,191	4,568	2	51,881
Balance at 31 December 2023	14,120	33,191	44,129	8,938	100,378

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

297

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

Residential mortgage loans at amortised cost, gross:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	3,925,906	169,566	69,657	28,075	4,193,204
New financial asset originated or purchased	1,527,164	32	–	14,796	1,541,992
Transfer to Stage 1	268,798	(268,798)	–	–	–
Transfer to Stage 2	(320,140)	352,400	(32,260)	–	–
Transfer to Stage 3	(17,355)	(33,670)	51,025	–	–
Assets repaid	(1,081,098)	(45,148)	(37,682)	(11,487)	(1,175,415)
Impact of modifications	530	137	(83)	(185)	399
Foreign exchange movement	11,210	(150)	(263)	165	10,962
Net other changes	(7,727)	(147)	1,571	451	(5,852)
Write-offs	–	–	(2,534)	(263)	(2,797)
Recoveries of amounts previously written off	–	–	1,385	543	1,928
Unwind of discount	–	–	215	94	309
Currency translation differences	(6,950)	(170)	(85)	–	(7,205)
Balance at 31 December 2023	4,300,338	174,052	50,946	32,189	4,557,525
Individually assessed	–	–	168	2,092	2,260
Collectively assessed	4,300,338	174,052	50,778	30,097	4,555,265
Balance at 31 December 2023	4,300,338	174,052	50,946	32,189	4,557,525

Residential mortgage loans at amortised cost, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	8,862	2,601	14,085	4,507	30,055
New financial asset originated or purchased	8,396	–	–	–	8,396
Transfer to Stage 1	4,415	(4,415)	–	–	–
Transfer to Stage 2	(2,766)	9,962	(7,196)	–	–
Transfer to Stage 3	(3,612)	(1,152)	4,764	–	–
Impact on ECL of exposures transferred between stages
during the year	(1,133)	(5,845)	5,016	–	(1,962)
Assets repaid	(1,516)	(747)	(8,701)	(3,395)	(14,359)
Impact of modifications	19	5	1,049	43	1,116
Foreign exchange movement	(1)	(3)	(46)	28	(22)
Net other measurement of ECL	(8,690)	1,632	3,842	3,318	102
Income statement (releases)/charges	(4,888)	(563)	(1,272)	(6)	(6,729)
Write-offs	–	–	(2,534)	(263)	(2,797)
Recoveries of amounts previously written off	–	–	1,385	543	1,928
Unwind of discount	–	–	215	94	309
Currency translation differences	(2)	(2)	(12)	–	(16)
Balance at 31 December 2023	3,972	2,036	11,867	4,875	22,750
Individually assessed	–	–	50	271	321
Collectively assessed	3,972	2,036	11,817	4,604	22,429
Balance at 31 December 2023	3,972	2,036	11,867	4,875	22,750

298

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables continued

Micro and SME loans at amortised cost, gross:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	3,475,839	200,463	146,517	2,844	3,825,663
New financial asset originated or purchased	2,729,133	606	1,502	1,685	2,732,926
Transfer to Stage 1	147,013	(147,013)	–	–	–
Transfer to Stage 2	(308,580)	333,045	(24,465)	–	–
Transfer to Stage 3	(20,855)	(115,231)	136,086	–	–
Assets repaid	(2,273,519)	(81,401)	(65,161)	(1,572)	(2,421,653)
Resegmentation	(75,858)	88	(3,141)	–	(78,911)
Impact of modifications	(86)	616	(2,971)	(7)	(2,448)
Foreign exchange movement	27,031	1,678	2,494	7	31,210
Net other changes	25,537	677	6,187	130	32,531
Write-offs	–	–	(36,568)	(70)	(36,638)
Recoveries of amounts previously written off	–	–	7,998	124	8,122
Unwind of discount	–	–	2,316	56	2,372
Currency translation differences	(15,785)	(1,998)	(2,369)	–	(20,152)
Balance at 31 December 2023	3,709,870	191,530	168,425	3,197	4,073,022
Individually assessed	–	–	29,131	–	29,131
Collectively assessed	3,709,870	191,530	139,294	3,197	4,043,891
Balance at 31 December 2023	3,709,870	191,530	168,425	3,197	4,073,022

Micro and SME loans at amortised cost, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	20,078	5,448	37,317	659	63,502
New financial asset originated or purchased	16,897	–	128	–	17,025
Transfer to Stage 1	4,627	(4,627)	–	–	–
Transfer to Stage 2	(5,665)	11,372	(5,707)	–	–
Transfer to Stage 3	(2,902)	(6,647)	9,549	–	–
Impact on ECL of exposures transferred between stages
during the year	(754)	(4,692)	29,591	–	24,145
Assets repaid	(7,515)	(3,001)	(18,747)	(524)	(29,787)
Resegmentation	(1,093)	1,226	(868)	–	(735)
Impact of modifications	2	19	(1,241)	(7)	(1,227)
Foreign exchange movement	129	149	1,179	(1)	1,456
Net other measurement of ECL	(12,661)	6,463	30,543	596	24,941
Income statement (releases)/charges	(8,935)	262	44,427	64	35,818
Write-offs	–	–	(36,568)	(70)	(36,638)
Recoveries of amounts previously written off	–	–	7,998	124	8,122
Unwind of discount	–	–	2,316	56	2,372
Currency translation differences	(139)	(172)	(1,204)	–	(1,515)
Balance at 31 December 2023	11,004	5,538	54,286	833	71,661
Individually assessed	–	–	14,564	–	14,564
Collectively assessed	11,004	5,538	39,722	833	57,097
Balance at 31 December 2023	11,004	5,538	54,286	833	71,661

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

299

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

Consumer loans at amortised cost, gross:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	3,243,191	213,875	121,992	22,996	3,602,054
New financial asset originated or purchased	4,547,920	5,818	833	17,964	4,572,535
Transfer to Stage 1	289,459	(289,423)	(36)	–	–
Transfer to Stage 2	(473,300)	524,075	(50,775)	–	–
Transfer to Stage 3	(72,199)	(110,688)	182,887	–	–
Assets repaid	(3,179,954)	(107,858)	(69,753)	(12,030)	(3,369,595)
Resegmentation	(494)	(32)	517	–	(9)
Impact of modifications	699	(11)	(12,180)	(600)	(12,092)
Foreign exchange movement	5,109	65	524	89	5,787
Net other changes	(508)	(1,333)	21,566	595	20,320
Write-offs	–	–	(113,820)	(2,408)	(116,228)
Recoveries of amounts previously written off	–	–	25,870	1,376	27,246
Unwind of discount	–	–	4,199	530	4,729
Currency translation differences	(34,164)	(259)	(355)	–	(34,778)
Balance at 31 December 2023	4,325,759	234,229	111,469	28,512	4,699,969
Individually assessed	(1)	–	2,464	–	2,463
Collectively assessed	4,325,760	234,229	109,005	28,512	4,697,506
Balance at 31 December 2023	4,325,759	234,229	111,469	28,512	4,699,969

Consumer loans at amortised cost, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	40,598	19,309	67,956	7,587	135,450
New financial asset originated or purchased	128,968	702	380	–	130,050
Transfer to Stage 1	19,103	(19,094)	(9)	–	–
Transfer to Stage 2	(23,869)	54,205	(30,336)	–	–
Transfer to Stage 3	(49,393)	(21,319)	70,712	–	–
Impact on ECL of exposures transferred between stages
during the year	(2,120)	(24,929)	26,592	–	(457)
Assets repaid	(41,913)	(8,393)	(41,821)	(4,886)	(97,013)
Resegmentation	(9)	(2)	(2)	–	(13)
Impact of modifications	13	(7)	(5,235)	(122)	(5,351)
Foreign exchange movement	13	4	34	(4)	47
Net other measurement of ECL	(29,175)	17,623	59,529	5,681	53,658
Income statement (releases)/charges	1,618	(1,210)	79,844	669	80,921
Write-offs	–	–	(113,820)	(2,408)	(116,228)
Recoveries of amounts previously written off	–	–	25,870	1,376	27,246
Unwind of discount	–	–	4,199	530	4,729
Currency translation differences	(269)	(55)	(161)	–	(485)
Balance at 31 December 2023	41,947	18,044	63,888	7,754	131,633
Individually assessed	–	–	1,062	–	1,062
Collectively assessed	41,947	18,044	62,826	7,754	130,571
Balance at 31 December 2023	41,947	18,044	63,888	7,754	131,633

300

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables continued

Gold – pawn loans at amortised cost, gross:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	147,525	8,613	8,416	–	164,554
New financial asset originated or purchased	103,553	–	401	–	103,954
Transfer to Stage 1	11,660	(11,660)	–	–	–
Transfer to Stage 2	(16,775)	18,268	(1,493)	–	–
Transfer to Stage 3	(2,147)	(2,800)	4,947	–	–
Assets repaid	(106,379)	(3,676)	(2,124)	–	(112,179)
Resegmentation	–	–	(335)	–	(335)
Foreign exchange movement	(2)	(1)	(48)	–	(51)
Net other changes	(19)	(48)	(746)	–	(813)
Write-offs	–	–	(5,438)	–	(5,438)
Recoveries of amounts previously written off	–	–	(13)	–	(13)
Unwind of discount	–	–	549	–	549
Balance at 31 December 2023	137,416	8,696	4,116	–	150,228
Collectively assessed	137,416	8,696	4,116	–	150,228
Balance at 31 December 2023	137,416	8,696	4,116	–	150,228

Gold – pawn loans at amortised cost, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	70	32	5,339	–	5,441
Transfer to Stage 1	32	(32)	–	–	–
Transfer to Stage 2	(19)	184	(165)	–	–
Transfer to Stage 3	(2)	(8)	10	–	–
Impact on ECL of exposures transferred between stages
during the year	–	(1)	–	–	(1)
Assets repaid	(24)	(8)	1,007	–	975
Net other measurement of ECL	(13)	(143)	33	–	(123)
Income statement (releases)/charges	(26)	(8)	885	–	851
Write-offs	–	–	(5,438)	–	(5,438)
Recoveries of amounts previously written off	–	–	(13)	–	(13)
Unwind of discount	–	–	549	–	549
Balance at 31 December 2023	44	24	1,322	–	1,390
Collectively assessed	44	24	1,322	–	1,390
Balance at 31 December 2023	44	24	1,322	–	1,390

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

301

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

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
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
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)
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
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)
Income statement (releases)/charges	5,670	17,716	(72,491)	(1,582)	(50,687)
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)
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

302

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables 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)
Foreign exchange movement	(254,899)	(20,553)	(10,022)	(2,527)	(288,001)
Net other changes	8,928	(2,211)	348	155	7,220
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)
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)
Impact of modifications	4	1	937	64	1,006
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
Income statement (releases)/charges	(839)	(1,202)	(2,628)	2,278	(2,391)
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	(2)	–	–	–	(2)
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

(Thousands of Georgian Lari)

303

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables 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)
Foreign exchange movement	(275,010)	(27,918)	(17,669)	(350)	(320,947)
Net other changes	51,417	168	7,865	38	59,488
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)
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)
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
Income statement (releases)/charges	(7,956)	(1,012)	22,989	496	14,517
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)
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

304

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables 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)
Foreign exchange movement	(86,830)	(4,100)	(1,319)	(610)	(92,859)
Net other changes	33,406	(79)	31,671	1,021	66,019
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)
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)
Foreign exchange movement	(191)	(60)	(763)	(63)	(1,077)
Net other measurement of ECL	(32,188)	29,344	90,779	8,785	96,720
Income statement (releases)/charges	(16,449)	(90)	154,242	9,406	147,109
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)
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

(Thousands of Georgian Lari)

305

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables 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
Foreign exchange movement	(33)	(4)	4	–	(33)
Net other changes	(1,461)	13	2,196	–	748
Write-offs	–	–	(635)	–	(635)
Recoveries of amounts previously written off	–	–	(25)	–	(25)
Unwind of discount	–	–	1	–	1
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
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)
Net other measurement of ECL	756	(89)	3,412	–	4,079
Income statement (releases)/charges	(1,753)	21	5,757	–	4,025
Write-offs	–	–	(635)	–	(635)
Recoveries of amounts previously written off	–	–	(25)	–	(25)
Unwind of discount	–	–	1	–	1
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

306

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables 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
Foreign exchange movement	(361,065)	(27,796)	(9,555)	(380)	(398,796)
Net other changes	13,629	(806)	3,810	79	16,712
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)
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
Foreign exchange movement	(942)	(141)	(5,254)	10	(6,327)
Net other measurement of ECL	(26,543)	(648)	21,578	(551)	(6,164)
Income statement (releases)/charges	(19,353)	(1,188)	(46,706)	2,846	(64,401)
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)
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)

307

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables 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
Foreign exchange movement	(155,793)	(11,366)	(9,238)	(1,648)	(178,045)
Net other changes	(6,450)	(1,472)	(590)	300	(8,212)
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)
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
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
Income statement (releases)/charges	1,051	(7,607)	(3,684)	(479)	(10,719)
Write-offs	–	–	(5,750)	(561)	(6,311)
Recoveries of amounts previously written off	–	–	993	205	1,198
Unwind of discount	–	–	244	17	261
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

308

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables 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)
Foreign exchange movement	(180,781)	(27,138)	(9,910)	(271)	(218,100)
Net other changes	44,191	(1,777)	6,684	73	49,171
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)
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)
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)
Income statement (releases)/charges	2,082	(13,981)	11,594	(435)	(740)
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)
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)

309

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables 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)
Foreign exchange movement	(51,792)	(1,590)	(688)	(223)	(54,293)
Net other changes	12,381	(215)	13,559	(373)	25,352
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)
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)
Foreign exchange movement	(153)	(37)	(643)	(29)	(862)
Net other measurement of ECL	(27,338)	15,067	30,779	925	19,433
Income statement (releases)/charges	16,496	(6,120)	65,135	(297)	75,214
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)
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

310

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables 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
Foreign exchange movement	(18)	(6)	(3)	–	(27)
Net other changes	644	51	128	–	823
Write-offs	–	–	(253)	–	(253)
Recoveries of amounts previously written off	–	–	3	–	3
Unwind of discount	–	–	(1)	–	(1)
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
New financial asset originated or purchased	497	138	–	–	635
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)
Resegmentation	519	94	–	–	613
Net other measurement of ECL	936	(281)	447	–	1,102
Income statement (releases)/charges	1,783	(5)	320	–	2,098
Write-offs	–	–	(253)	–	(253)
Recoveries of amounts previously written off	–	–	3	–	3
Unwind of discount	–	–	(1)	–	(1)
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

The contractual amounts outstanding on all loans to customers that have been written off during the reporting period but are still

subject to enforcement activity was GEL 138,972 (2022: GEL 188,545, 2021: GEL 95,469).

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

311

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

Without taking into account the discounted value of collateral, the ECL for credit-impaired loans would be as follows:

		ECL without
		taking into
		account the
		discounted
	ECL for credit-	value of
2023	impaired loans	collateral
Commercial loans	53,067	118,367
Residential mortgage loans	16,742	56,851
Micro and SME loans	55,119	152,430
Consumer loans	71,642	105,437
Gold – pawn loans	1,322	3,290
Total	197,892	436,375

		ECL without
		taking into
		account the
		discounted
	ECL for credit-	value of
2022	impaired loans	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

		ECL without
		taking into
		account the
		discounted
	ECL for credit-	value of
2021	impaired loans	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

Concentration of loans to customers

As at 31 December 2023, the concentration of loans granted by the Group to the ten largest third-party borrowers comprised

GEL 1,507,812 accounting for 7% of the gross loan portfolio of the Group (2022: GEL 1,017,629 and 6% respectively, 2021:

GEL 1,375,536 and 8% respectively). An allowance of expected credit loss of GEL 13,524 (2022: GEL 8,209, 2021: GEL 2,770)

was established against these loans.

As at 31 December 2023, the concentration of loans granted by the Group to the ten largest third-party group of borrowers

(borrower and its related parties) comprised GEL 2,414,054 accounting for 12% of the gross loan portfolio of the Group (2022:

GEL 1,736,614 and 10% respectively, 2021: GEL 2,136,228 and 13% respectively). An allowance of expected credit loss of GEL 3,599

(2022: GEL 17,392, 2021: GEL 7,386) was established against these loans.

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Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables continued

As at 31 December 2023, 31 December 2022 and 31 December 2021, loans were principally issued within Georgia, and their

distribution by industry sector was as follows:

	2023	2022	2021
Individuals	11,445,733	10,011,378	9,184,255
Real estate	1,608,487	1,024,364	1,025,298
Manufacturing	1,477,204	1,065,693	1,377,023
Trade	1,476,325	1,135,693	1,189,036
Hospitality	975,621	828,577	946,224
Electricity, gas and water supply	665,454	458,415	384,554
Financial intermediation	401,116	291,778	244,215
Construction	377,857	512,345	379,813
Service	306,465	302,442	307,602
Transport and communication	273,071	190,175	234,512
Mining and quarrying	160,261	148,489	183,270
Other	1,330,767	1,131,792	998,918
Loans to customers, gross	20,498,361	17,101,141	16,454,720
Less – Allowance for expected credit loss	(327,812)	(326,005)	(404,804)
Loans to customers, net	20,170,549	16,775,136	16,049,916

Loans have been extended to the following types of customers:

	2023	2022	2021
Individuals	11,445,733	10,011,378	9,184,255
Private companies	9,050,061	7,086,069	7,257,993
State-owned entities	2,567	3,694	12,472
Loans to customers, gross	20,498,361	17,101,141	16,454,720
Less – Allowance for expected credit loss	(327,812)	(326,005)	(404,804)
Loans to customers, net	20,170,549	16,775,136	16,049,916

Finance lease receivables

	2023	2022	2021
Minimum lease payments receivable	91,182	120,740	168,508
Less – Unearned finance lease income	(17,695)	(25,392)	(43,556)
	73,487	95,348	124,952
Less – Allowance for expected credit loss/impairment loss	(11,315)	(8,778)	(5,895)
Finance lease receivables, net	62,172	86,570	119,057

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 2023, finance lease receivables carried at GEL 0 were pledged for inter-bank loans received from several credit

institutions (2022: GEL 16,965, 2021: 67,556).

As at 31 December 2023, the concentration of investment in the five largest lease receivables comprised GEL 18,436 or 25% of total

finance lease receivables (2022: GEL 20,515 or 22%, 2021: GEL 22,417 or 18%). An allowance of GEL 474 (2022: GEL 973, 2021: GEL

956) was established against these lease receivables.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

313

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

Future minimum lease payments to be received after 31 December 2023, 31 December 2022 and 31 December 2021 are as follows:

	2023	2022	2021
Within 1 year	48,985	51,944	76,407
From 1 to 2 years	10,136	22,480	35,929
From 2 to 3 years	7,639	18,109	24,390
From 3 to 4 years	2,053	7,613	14,996
From 4 to 5 years	3,169	3,036	3,159
More than 5 years	19,200	17,559	13,627
Minimum lease payment receivables	91,182	120,740	168,508

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 2022	59,531	6,451	14,155	15,211	95,348
New financial asset originated or purchased	28,851	–	–	10,525	39,376
Transfer to Stage 1	9,296	(8,702)	(594)	–	–
Transfer to Stage 2	(17,459)	21,451	(3,992)	–	–
Transfer to Stage 3	(1,597)	(10,139)	11,736	–	–
Assets repaid	(37,236)	(3,603)	(5,285)	(6,389)	(52,513)
Impact of modifications	(221)	–	138	–	(83)
Foreign exchange movement	2,285	198	117	(804)	1,796
Net other changes	987	(2)	(148)	(59)	778
Write-offs	–	–	(3,429)	313	(3,116)
Recoveries of amounts previously written off	–	–	66	–	66
Unwind of discount	–	–	23	284	307
Currency translation differences	(7,420)	(426)	(626)	–	(8,472)
Balance at 31 December 2023	37,017	5,228	12,161	19,081	73,487
Individually assessed	–	–	384	–	384
Collectively assessed	37,017	5,228	11,777	19,081	73,103
Balance at 31 December 2023	37,017	5,228	12,161	19,081	73,487

Finance lease receivables, ECL:	Stage 1	Stage 2	Stage 3	POCI	Total
Balance at 31 December 2022	852	258	3,588	4,080	8,778
New financial asset originated or purchased	1,375	–	–	–	1,375
Transfer to Stage 1	275	(262)	(13)	–	–
Transfer to Stage 2	(663)	782	(119)	–	–
Transfer to Stage 3	(542)	(434)	976	–	–
Impact on ECL of exposures transferred between stages
during the year	(142)	238	291	–	387
Assets repaid	(558)	(184)	(3,122)	(2,394)	(6,258)
Impact of modifications	(2)	–	–	–	(2)
Foreign exchange movement	50	37	4	–	91
Net other measurement of ECL	353	(56)	5,307	1,565	7,169
Income statement (releases)/charges	146	121	3,324	(829)	2,762
Write-offs	–	–	(316)	313	(3)
Recoveries of amounts previously written off	–	–	66	–	66
Unwind of discount	–	–	23	284	307
Currency translation differences	179	106	(880)	–	(595)
Balance at 31 December 2023	1,177	485	5,805	3,848	11,315
Individually assessed	–	–	158	–	158
Collectively assessed	1,177	485	5,647	3,848	11,157
Balance at 31 December 2023	1,177	485	5,805	3,848	11,315

314

Annual Report 2023 Bank of Georgia Group PLC

9. Loans to customers and finance lease receivables continued

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
Foreign exchange movement	865	(66)	86	–	885
Net other changes	339	10	213	85	647
Write-offs	–	–	(2,724)	–	(2,724)
Unwind of discount	–	–	105	–	105
Currency translation differences	(6,273)	(1,022)	(1,040)	–	(8,335)
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

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)
Foreign exchange movement	64	(3)	5	–	66
Net other measurement of ECL	27	(487)	611	4,741	4,892
Income statement (releases)/charges	(292)	(487)	1,102	2,885	3,208
Write-offs	–	–	(480)	–	(480)
Unwind of discount	–	–	105	–	105
Currency translation differences	18	(18)	51	(1)	50
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

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

315

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

9. Loans to customers and finance lease receivables continued

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
Foreign exchange movement	(641)	(47)	(66)	(249)	(1,003)
Net other changes	(535)	(7)	20	6,833	6,311
Write-offs	–	–	(21,232)	–	(21,232)
Unwind of discount	–	–	10	13	23
Currency translation differences	(2,087)	(1,057)	(931)	–	(4,075)
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)
Net other measurement of ECL	(207)	(78)	328	1,195	1,238
Income statement (releases)/charges	513	204	3,038	1,195	4,950
Write-offs	–	–	(2,704)	–	(2,704)
Unwind of discount	–	–	10	13	23
Currency translation differences	(36)	(550)	(152)	(12)	(750)
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

The Group writes off the finance lease receivable balance when it takes possession of the underlying asset. The difference between

the gross and ECL balances at the time of write-off represents the value of the repossessed asset.

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Annual Report 2023 Bank of Georgia Group PLC

10. Accounts receivable and other loans

In 2016 the Group disbursed a loan to a 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 arose 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

the respective receivable estimated at fair value in its consolidated financial statements. On 9 January 2023 the Group received part

of the settlement in the amount of GEL 371,922. As for the outstanding receivable, it has been remeasured at fair value (since the

final amount to be received is based in part on profitability of the industrial asset) and the Group recognised additional GEL 22,585

one-off income in its consolidated financial statements in 2023. The receivable was fully settled on 31 January 2024. The Group does

not expect any material tax consequences from this settlement in the foreseeable future.

11. Right-of-use assets and lease liabilities

	2023	2022	2021
Right-of-use assets	138,695	117,387	80,186
Lease liability	141,934	114,470	87,662

Administrative expenses include occupancy and rent expenses on lease contracts where the recognition exemptions have been applied:

	2023	2022	2021
Short-term leases	(4,872)	(4,672)	(3,982)
Leases of low-value assets	(2,264)	(1,585)	(1,908)
	(7,136)	(6,257)	(5,890)

Movement in liabilities arising from financing activities

	Movement in
	liabilities arising
	from financing
	activities
Carrying amount at 1 January 2021	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
Cash payments for the principal portion of the lease liability	(32,151)
Change in accrued interest	(665)
Additions	64,120
Other movements*	(3,840)
Carrying amount at 31 December 2023	141,934

* Other movement mainly includes translation effect of foreign currency contracts and cancelled lease contracts .

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

317

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Strategic Report Governance Financial Statements Additional Information

11. Right-of-use assets and lease liabilities continued

The movements in right-of-use assets were as follows:

	Office buildings
	and service	Computers and
	centres	equipment	Total
Cost
31 December 2022	181,227	2,333	183,560
Additions	64,385	–	64,385
Disposals	(16,785)	–	(16,785)
Currency translation differences	(5,284)	(559)	(5,843)
31 December 2023	223,543	1,774	225,317
Accumulated depreciation
31 December 2022	65,073	1,100	66,173
Depreciation charge	32,601	315	32,916
Disposals	(11,100)	–	(11,100)
Currency translation differences	(1,051)	(316)	(1,367)
31 December 2023	85,523	1,099	86,622
Net book value
31 December 2022	116,154	1,233	117,387
31 December 2023	138,020	675	138,695

	Office buildings
	and service	Computers and
	centres	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

	Office buildings
	and service	Computers and
	centres	equipment	Total
Cost
31 December 2020	115,970	2,749	118,719
Additions	42,728	–	42,728
Disposals	(31,478)	–	(31,478)
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)
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

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Annual Report 2023 Bank of Georgia Group PLC

12. Foreclosed Assets

	Foreclosed Assets 2023	2022	2021
At 1 January	119,924	3,216	5,989
Additions	239,872	128,170	2,587
Disposals	(77,324)	(8,063)	(5,168)
Write-down	(2,114)	(3,399)	(192)
Transfers to property and equipment	(3,516)	–	–
Transfers to investment property	(3,428)	–	–
Currency translation differences	(1,702)	–	–
At 31 December	271,712	119,924	3,216

13. Property and equipment

The movements in property and equipment were as follows:

	Office
	buildings		Computers		Leasehold
	and service	Furniture	and	Motor	improve-	Assets under
	centres	and fixtures	equipment	vehicles	ments	construction	Total
Cost
31 December 2022	235,249	193,103	279,259	8,729	29,084	4,755	750,179
Additions	20,485	25,363	28,301	4,573	1,644	17,769	98,135
Transfers	2,557	–	2,059	–	8,507	(13,123)	–
Transfers to investment properties	(641)	–	–	–	–	–	(641)
Transfers to assets held for sale	(1,363)	–	–	–	–	–	(1,363)
Transfers from foreclosed assets	3,516	–	–	–	–	–	3,516
Transfers (to) from other assets	934	(1,421)	(7,714)	(207)	(29)	(243)	(8,680)
Disposals	(26)	(273)	(3,070)	(660)	(222)	–	(4,251)
Write-offs	–	(208)	(73)	(284)	(2,979)	(1,088)	(4,632)
Business combination	–	62	171	66	51	–	350
Currency translation differences	(2,661)	(452)	(2,128)	(141)	(402)	(34)	(5,818)
31 December 2023	258,050	216,174	296,805	12,076	35,654	8,036	826,795
Accumulated impairment
31 December 2022	2,557	36	98	8	–	–	2,699
Impairment charge	–	19	–	–	–	770	789
31 December 2023	2,557	55	98	8	–	770	3,488
Accumulated depreciation
31 December 2022	31,325	121,415	177,260	4,615	14,010	–	348,625
Depreciation charge	5,120	11,825	32,364	1,647	4,839	–	55,795
Transfers to investment properties	(225)	(1)	–	–	–	–	(226)
Transfers to assets held for sale	(1,065)	–	–	–	–	–	(1,065)
Transfers to other assets	–	(996)	(5,526)	(203)	–	–	(6,725)
Disposals	(10)	(199)	(2,465)	(443)	(217)	–	(3,334)
Write-offs	–	(542)	(812)	(85)	(1,967)	(770)	(4,176)
Business combination	–	13	31	15	42	–	101
Currency translation differences	(1,272)	(211)	(966)	(29)	(165)	–	(2,643)
31 December 2023	33,873	131,304	199,886	5,517	16,542	(770)	386,352
Net book value
31 December 2022	201,367	71,652	101,901	4,106	15,074	4,755	398,855
31 December 2023	221,620	84,815	96,821	6,551	19,112	8,036	436,955

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

319

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

13. Property and equipment continued

	Office
	buildings		Computers		Leasehold
	and service	Furniture	and	Motor	improve-	Assets under
	centres	and fixtures	equipment	vehicles	ments	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

	Office
	buildings		Computers		Leasehold
	and service	Furniture	and	Motor	improve-	Assets under
	centres	and fixtures	equipment	vehicles	ments	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

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14. Intangible assets

The movements in intangible assets were as follows:

	Software and
	licence	Other	Total
Cost
31 December 2022	247,943	27,449	275,392
Additions	56,537	31	56,568
Disposals	(8,321)	–	(8,321)
Write-offs	(1,258)	–	(1,258)
Currency translation differences	(3,560)	–	(3,560)
31 December 2023	291,341	27,480	318,821
Accumulated impairment
31 December 2022	2,358	–	2,358
Impairment charge	2,201	–	2,201
31 December 2023	4,559	–	4,559
Accumulated amortisation
31 December 2022	117,629	5,964	123,593
Amortisation charge	32,844	178	33,022
Disposals	(7,815)	–	(7,815)
Write-offs	(1,261)	–	(1,261)
Currency translation differences	(1,139)	–	(1,139)
31 December 2023	140,258	6,142	146,400
Net book value
31 December 2022	127,956	21,485	149,441
31 December 2023	146,524	21,338	167,862

	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	27,449	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

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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14. Intangible assets continued

	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

15. Investment properties

	2023	2022	2021
At 1 January	166,546	226,849	231,241
Additions	4,882	5,871	83,912
Disposals	(38,175)	(54,713)	(68,713)
Net gains from revaluation of investment property	756	7,421	437
Transfers to assets held for sale	(10,756)	(16,955)	(28,390)
Transfers from (to) property and equipment	415	(924)	8,937
Transfers from foreclosed assets	3,428	–	–
Currency translation differences	(3,028)	(1,003)	(575)
At 31 December	124,068	166,546	226,849

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 2023, the fair values of the properties

are based on valuations performed by accredited independent valuers. Refer to Note 31 for details on fair value measurements of

investment properties.

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16. Goodwill

Movements in goodwill were as follows:

	2023	2022	2021
Cost
1 January	57,745	57,745	57,745
Business combination	7,902	–	–
At 31 December	65,647	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
Business combination	7,902	–	–
At 31 December	41,253	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:

	2023	2022	2021
Retail Banking	23,386	23,386	23,386
Corporate Banking	17,867	9,965	9,965
Total	41,253	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
	2023	2022	2021	2023	2022	2021
Discount rate	5.3%	4.3%	3.9%	6.6%	8.4%	8.1%

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 2023. 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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Strategic Report Governance Financial Statements Additional Information

17. Taxation

The corporate income tax expense in the income statement comprises:

	2023	2022	2021
Current income benefit/(expense)	(324,452)	(137,430)	(111,652)
Deferred income tax benefit/(expense)	65,481	(53,221)	36,828
Income tax expense	(258,971)	(190,651)	(74,824)

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% (2022: from 15% to 25%, 2021: 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, which

became effective from 1 January 2023, existing taxation rules for financial institutions, including banks, are to be maintained. At the

same time, the existing corporate tax rate for banks 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 and interest income will be taxed one-off at 15% and 20% 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 were

remeasured, 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 2023, 31 December 2022 and

31 December 2021, a reconciliation of the income tax expense based on statutory rates with the actual expense is as follows:

		For the six months ended
	2023	2022	2021
Profit before income tax expense	1,656,298	1,634,650	801,942
Statutory tax rate in Georgia	20%	15%	15%
Theoretical income tax expense at average tax rate	(331,260)	(245,198)	(120,291)
Non-taxable income	76,934	115,636	50,671
Non-deductible expenses	(4,520)	(3,229)	(2,931)
Correction of prior year declarations	(2,342)	(2,846)	(15)
Tax at the domestic rates applicable to profits in each country	(1,007)	(1,991)	(2,401)
Effects from changes in tax legislation	110	(53,074)	–
Tax deductible expenses	7,030	–	–
Other	(3,916)	51	143
Income tax expense	(258,971)	(190,651)	(74,824)

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 2023, 31 December 2022 and 31 December 2021, income tax assets and liabilities consist of the following:

	2023	2022	2021
Current income tax assets	2,056	224	109
Deferred income tax assets	464	640	183
Income tax assets	2,520	864	292
Current income tax liabilities	185,440	20,258	85,270
Deferred income tax liabilities	13,618	79,275	25,598
Income tax liabilities	199,058	99,533	110,868

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Annual Report 2023 Bank of Georgia Group PLC

17. Taxation continued

Deferred tax assets and liabilities as at 31 December 2023, 31 December 2022 and 31 December 2021, and their movements for the

respective years, are as follows:

		Origination and reversal of		Origination and reversal of		Origination and reversal of
	temporary differences			temporary differences		temporary differences
	In the income			In the income		In the income
	2020	statement	2021	statement	2022	statement	2023
Tax effect of deductible temporary
differences:
Amounts due to credit institutions	–	–	–	193	193	(30)	163
Investment securities	–	–	–	294	294	(489)	(195)
Investment properties	59	108	167	1,954	2,121	(2,121)	–
Insurance premiums receivables	–	–	–	–	–	–	–
Allowances for impairment and provisions
for other losses	–	–	–	–	–	–	–
Tax losses carried forward	–	–	–	–	–	–	–
Property and equipment	2,385	29	2,414	(182)	2,232	(1,072)	1,160
Intangible assets	–	–	–	–	–	–	–
Assets held for sale	–	–	–	465	465	(127)	338
Lease liability	6,006	(2,236)	3,770	19,389	23,159	5,012	28,171
Accruals and deferred income	7,205	12,539	19,744	18,388	38,132	5,393	43,525
Other assets and liabilities	67	368	435	3,845	4,280	1,439	5,719
Deferred tax assets	15,722	10,808	26,530	44,346	70,876	8,005	78,881
Tax effect of taxable temporary differences:
Amounts due to credit institutions	2,228	59	2,287	1,660	3,947	(651)	3,296
Debt securities issued	1,624	(932)	692	1,259	1,951	(414)	1,537
Cash and cash equivalents	–	–	–	–	–	–	–
Investment securities	–	–	–	–	–	–	–
Loans to customers and finance lease
receivables	54,066	(24,192)	29,874	30,697	60,571	(57,006)	3,565
Client deposits and notes	176	(176)	–	–	–	104	104
Property and equipment	9,021	(3,121)	5,900	37,342	43,242	4,309	47,551
Right-of-use assets	5,510	(2,294)	3,216	20,606	23,822	3,719	27,541
Investment properties	340	625	965	7,822	8,787	(1,277)	7,510
Intangible assets	–	–	–	–	–	–	–
Assets held for sale	1,540	(1,055)	485	(485)	–	–	–
Accruals and deferred income	293	(180)	113	(113)	–	–	–
Other assets and liabilities	3,166	5,246	8,412	(1,221)	7,191	(6,260)	931
Deferred tax liabilities	77,964	(26,020)	51,944	97,567	149,511	(57,476)	92,035
Net deferred tax liabilities	(62,242)	36,828	(25,414)	(53,221)	(78,635)	65,481	(13,154)

The Group has not recognised a deferred tax liability for its receivable under settlement discussed in Note 10, as the receivable is

originated in a subsidiary subject to income tax only on distributed profits and the Group does not expect to use these proceeds

for distribution.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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18. Other assets and other liabilities

Other assets comprise:

	2023	2022	2021
Receivables from remittance operations	138,833	86,742	35,041
Inventories	20,969	17,096	11,514
Other receivables	15,932	17,365	17,534
Derivatives margin	12,129	21,053	18,586
Derivative financial assets	10,942	39,270	135,079
Investments in associates	10,699	11,606	10,079
Operating tax assets	7,725	4,809	8,169
Assets purchased for finance lease purposes	2,019	2,140	13,093
Investment securities at FVTPL	–	2,660	2,146
Other	41,293	29,542	18,487
Other assets, gross	260,541	232,283	269,728
Less – Allowance for impairment of other assets	(15,469)	(17,225)	(14,483)
Other assets, net	245,072	215,058	255,245

Other liabilities comprise:

	2023	2022	2021
Payables for remittance operations	59,079	24,671	8,457
Creditors	34,038	29,562	25,814
Derivative financial liabilities	25,779	59,020	7,865
Accounts payable	12,731	5,605	7,708
Provisions	6,304	5,127	6,993
Other taxes payable	4,244	6,504	12,498
Dividends payable to non-controlling shareholders	3,555	2,379	1,746
Advances received	2,034	838	268
Derivatives margin	–	–	98,844
Other	19,504	24,985	13,156
Other liabilities	167,268	158,691	183,349

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.

		2023
	Notional	Fair value
	amount	Asset	Liability
Foreign exchange contracts
Forwards and swaps – domestic	1,099,787	2,703	3,712
Forwards and swaps – foreign	3,776,221	8,239	22,067
Interest rate contracts
Forwards and swaps – foreign (IR)	–	–	–
Options – foreign (IR)	–	–	–
Total derivative assets/liabilities	4,876,008	10,942	25,779

		2022			2021
	Notional	Fair value		Notional	Fair value
	amount	Asset	Liability	amount	Asset	Liability
Foreign exchange contracts
Forwards and swaps – domestic	1,392,118	5,688	2,873	1,065,639	931	3,141
Forwards and swaps – foreign	4,615,758	33,234	56,147	5,678,727	131,321	3,339
Interest rate contracts
Forwards and swaps – foreign (IR)	1,209	348	–	1,129	296	–
Options – foreign (IR)	–	–	–	7,434	2,531	1,385
Total derivative assets/liabilities	6,009,085	39,270	59,020	6,752,929	135,079	7,865

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Annual Report 2023 Bank of Georgia Group PLC

19. Client deposits and notes

The amounts due to customers include the following:

	2023	2022	2021
Current accounts	12,198,454	11,002,863	6,997,946
Time deposits	8,324,285	7,258,534	7,040,056
Client deposits and notes	20,522,739	18,261,397	14,038,002
Held as security against letters of credit and guarantees	334,092	121,753	117,379

At 31 December 2023, amounts due to customers of GEL 1,955,839 (10%) were due to the ten largest customers (2022: GEL

2,107,058 (12%), 2021: GEL 1,953,107 (14%)).

Amounts due to customers include accounts with the following types of customers:

	2023	2022	2021
Individuals	12,907,914	11,188,080	8,501,021
Private enterprises	7,120,507	6,382,083	4,914,845
State and state-owned entities	494,318	691,234	622,136
Client deposits and notes	20,522,739	18,261,397	14,038,002

The breakdown of customer accounts by industry sector is as follows:

	2023	2022	2021
Individuals	12,907,914	11,188,080	8,501,021
Financial intermediation	1,451,014	1,261,530	1,280,955
Trade	1,367,858	1,158,977	853,307
Construction	1,140,925	796,019	664,695
Service	822,284	709,442	345,130
Transport and communication	639,882	513,099	418,243
Manufacturing	492,647	759,005	444,095
Government services	445,880	682,809	613,710
Real estate	344,279	232,508	214,082
Hospitality	108,103	173,639	70,375
Electricity, gas and water supply	76,384	186,517	112,244
Other	725,569	599,772	520,145
Client deposits and notes	20,522,739	18,261,397	14,038,002

20. Amounts owed to credit institutions

Amounts due to credit institutions comprise:

	2023	2022	2021
Short-term loans from the NBG	2,101,653	1,715,257	1,413,333
Borrowings from international credit institutions	1,794,696	1,439,136	1,839,921
Time deposits and inter-bank loans	130,382	777,638	226,015
Correspondent accounts	431,232	660,767	170,410
	4,457,963	4,592,798	3,649,679
Non-convertible subordinated debt	562,520	537,794	668,766
Additional Tier 1	135,526	136,061	–
Amounts due to credit institutions	5,156,009	5,266,653	4,318,445

During the year ended 31 December 2023, the Group paid up to 9.36% on US$ borrowings from international credit institutions

(2022: up to 7.52%, 2021: up to 4.18%). During the year ended 31 December 2023, the Group paid up to 11.82% on US$ subordinated

debt (2022: up to 10.73%, 2021: up to 7.75%).

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 2023, 31 December 2022 and 31 December 2021, the Group complied with all the Lender Covenants of the significant

borrowings from international credit institutions.

On 31 August 2023, the Bank signed a US$ 100 million loan agreement with Japan International Cooperation Agency as lender with

maturity of five years, which was fully utilised as at 31 December 2023.

On 13 September 2023, the Bank signed a loan agreement with Asian Development Bank as lender with maturity of five years in the

amount of the GEL equivalent of US$ 100 million, which was fully utilised as at 31 December 2023.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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20. Amounts owed to credit institutions continued

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.

21. Debt securities issued

Debt securities issued comprise:

	2023	2022	2021
Additional Tier 1 capital notes issued	267,112	267,702	306,239
Tier 2 notes issued	83,158	–	–
Eurobonds and notes issued	–	226,725	932,260
Local bonds	6,810	44,520	151,703
Certificates of deposit	64,279	107,021	128,483
Debt securities issued	421,359	645,968	1,518,685

Changes in liabilities arising from financing activities

		Additional Tier
	Eurobonds and	1 capital notes	Tier 2 notes
	notes issued	issued	issued
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	–
Repurchase of debt securities issued	(20,980)	–	–
Repayment of the principal portion of the debt securities issued	(230,995)	–	–
Proceeds from Tier 2 notes issued	–	–	78,921
Other movements	25,250	(590)	4,237
Carrying amount at 31 December 2023	–	267,112	83,158

22. Commitments and contingencies

Legal

Sai-invest

As at 31 December 2023, 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 of 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 the timeline as to when the judgement is to be expected is

not available. 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.

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Annual Report 2023 Bank of Georgia Group PLC

22. Commitments and contingencies continued

Financial commitments and contingencies

As at 31 December 2023, 31 December 2022 and 31 December 2021, the Group’s financial commitments and contingencies comprised

the following:

	2023	2022	2021
Credit-related commitments
Financial and performance guarantees issued*	1,918,997	1,717,308	1,686,913
Letters of credit	77,545	116,309	71,676
Undrawn loan facilities	1,014,951	869,061	809,481
	3,011,493	2,702,678	2,568,070
Less – Cash held as security against letters of credit and guarantees (Note 19)	(334,092)	(121,753)	(117,379)
Less – Provisions	(6,304)	(5,127)	(6,993)
Operating lease commitments
Not later than 1 year	1,808	1,975	1,875
Later than 1 year but not later than 5 years	2,293	2,592	2,486
Later than 5 years	–	451	986
	4,101	5,018	5,347
Capital expenditure commitments	7,559	6,790	4,539

* Out of total guarantees issued as at 31 December 2023 financial and performance guarantees of the Group comprised GEL 1,162,825 (31 December 2022: GEL 988,094,

31 December 2021: GEL 1,030,122) and GEL 756,172 (31 December 2022: GEL 729,214, 31 December 2021: GEL 656,791), 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.

23. Equity

Share capital

As at 31 December 2023 issued share capital comprised 45,766,293 (31 December 2022: 47,498,982 31 December 2021: 49,169,428)

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 2023 are described below:

	Number of	Share
	ordinary shares	Capital
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
Buyback and cancellation of own shares	(1,732,689)	(57)
31 December 2023	45,766,293	1,506

In the second half of 2022, the Group commenced a share buyback and cancellation programme in amount of GEL 112,700 to reduce

its share capital and consistent with its dividend and capital 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.

On 16 February 2023, the Group’s Board of Directors approved a GEL 147,984 share buyback and cancellation programme. The share

buyback and cancellation programme was completed by June 2023 with purchased and cancelled ordinary shares of 1,584,259.

On 17 August 2023, the Group’s Board of Directors approved a GEL 62,000 share buyback and cancellation programme.

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 2023, comprised 2,155,535 (31 December 2022: 2,516,151,

31 December 2021: 2,268,446), with a nominal amount of GEL 71 (31 December 2022: GEL 83, 31 December 2021: GEL 75).

Dividends

Shareholders are entitled to dividends in pounds sterling.

In 2023, 2022 and 2021 the Group distributed dividends on the shares vested and exercised during 2023, 2022 and 2021, respectively.

On 17 August 2023, the Board of Directors of Bank of Georgia Group PLC declared an interim dividend for 2023 of Georgian Lari

3.06 per share. The currency conversion period was set to be for the period 2 October to 6 October 2023, with the official GEL:GBP

exchange rate of 3.2559, resulting in a GBP-denominated final dividend of 0.9398 per share. Payment of the total GEL 134,078

interim dividends was received by shareholders on 27 October 2023.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

329

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

23. Equity continued

On 19 May 2023, the shareholders of Bank of Georgia Group PLC declared a final dividend for 2022 of Georgian Lari 5.80 per share.

The currency conversion period was set to be for the period 26 June to 30 June 2023, with the official GEL:GBP exchange rate of

3.3360, resulting in a GBP-denominated final dividend of 1.7386 per share. Payment of the total GEL 262,549 final dividends was

received by shareholders on 14 July 2023.

On 16 August 2022, the Board of Directors 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 Directors 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.

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 2023, 31 December 2022 and 31 December 2021 are presented in

the statements of other comprehensive income.

The movements in foreign currency translation reserve were as follows:

	Foreign
	currency
	translation
	reserve
31 December 2020	(56,876)
Loss from currency translation differences	(3,949)
31 December 2021	(60,825)
Loss from currency translation differences	(9,451)
31 December 2022	(70,276)
Loss from currency translation differences	(8,344)
31 December 2023	(78,620)

Earnings per share

	2023	2022	2021
Basic earnings per share
Profit for the year attributable to ordinary shareholders of the Group	1,391,277	1,439,507	723,806
Weighted average number of ordinary shares outstanding during the year	44,454,395	46,443,820	47,543,881
Basic earnings per share	31.2967	30.9946	15.2240

	2023	2022	2021
Diluted earnings per share
Effect of dilution on weighted average number of ordinary shares:
Dilutive unvested share options	1,273,359	1,013,330	1,098,682
Weighted average number of ordinary shares adjusted for the effect of dilution	45,727,754	47,457,150	48,642,563
Diluted earnings per share	30.4252	30.3328	14.8801

330

Annual Report 2023 Bank of Georgia Group PLC

24. Net interest income

	2023	2022	2021
Interest income calculated using EIR method	2,734,208	2,236,307	1,822,307
From loans to customers	2,315,010	1,917,053	1,614,647
From investment securities	356,945	297,528	199,802
From amounts due from credit institutions	76,633	47,864	18,312
Net (losses)/gains on modification of financial assets	(14,380)	(26,138)	(10,454)
Other interest income	14,053	20,574	28,737
From finance lease receivable	13,962	20,574	28,727
From other assets	91	–	10
Interest income	2,748,261	2,256,881	1,851,044
On client deposits and notes	(796,724)	(569,436)	(497,742)
On amounts owed to credit institutions	(290,198)	(426,950)	(297,953)
On debt securities issued	(45,305)	(84,990)	(112,431)
Interest element of cross-currency swaps	25,276	29,402	30,632
On lease liability	(5,617)	(4,855)	(4,980)
Interest expense	(1,112,568)	(1,056,829)	(882,474)
Deposit insurance fees	(20,247)	(17,717)	(14,629)
Net interest income	1,615,446	1,182,335	953,941

25. Net fee and commission income

	2023	2022	2021
Settlements operations	539,537	446,092	307,471
Currency conversion operations	49,370	34,546	15,783
Guarantees and letters of credit	45,323	35,283	34,402
Advisory	33,089	4,241	5,981
Cash operations	24,790	26,896	14,439
Brokerage service fees	8,759	7,676	6,912
Other	6,897	4,731	5,841
Fee and commission income	707,765	559,465	390,829
Settlements operations	(229,251)	(197,089)	(134,390)
Cash operations	(20,315)	(27,211)	(9,626)
Currency conversion operations	(10,146)	(6,403)	(2,571)
Brokerage service fees	(5,587)	(5,079)	(4,894)
Guarantees and letters of credit	(239)	(323)	(724)
Advisory	(301)	(316)	(653)
Other	(7,444)	(5,553)	(5,540)
Fee and commission expense	(273,283)	(241,974)	(158,398)
Net fee and commission income	434,482	317,491	232,431

Revenue from customers

In 2023, the Group recognised GEL 584,860 revenue from contracts with customers in the income statement, including fee and

commission as well as net other income (2022: GEL 481,375, 2021: GEL 341,873).

Contract assets and liabilities

As at 31 December 2023, the Group has recognised GEL 60,165 of revenue-related contract liabilities (2022: GEL 50,451, 2021:

GEL 40,878). Accounts receivables 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 2023, the Group recognised GEL 48,303 revenue (2022: GEL 38,495, 2021: GEL 10,619) that relates to carried-forward contract

liabilities and was previously included in the deferred income.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

331

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

25. Net fee and commission income continued

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 2023	55,733	2,428	1,325	594	87	60,167
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

26. Salaries and other employee benefits, and general

and administrative expenses

Salaries and other employee benefits

	2023	2022	2021
Salaries and bonuses	(405,764)	(350,758)	(272,148)
Social security costs	(7,899)	(6,818)	(5,107)
Pension costs	(5,791)	(4,443)	(3,832)
Salaries and other employee benefits	(419,454)	(362,019)	(281,087)

In 2023, salaries and bonuses include GEL 72,055 of the Equity Compensation Plan costs (2022: GEL 82,025, 2021: GEL 45,307),

associated with the existing share-based compensation scheme approved by the Group (Note 29).

The average number of staff employed by the Group for the years ended 31 December 2023, 31 December 2022 and 31 December

2021, comprised:

	2023	2022	2021
The Bank	6,981	6,324	6,012
BNB	802	654	540
Other	1,072	1,041	1,035
Average total number of staff employed	8,855	8,019	7,587

General and administrative expenses

	2023	2022	2021
Repairs and maintenance	(56,343)	(47,943)	(40,257)
Marketing and advertising	(44,645)	(35,316)	(23,264)
Legal and other professional services	(31,551)	(17,396)	(14,682)
Operating taxes	(13,397)	(13,539)	(13,393)
Office supplies	(10,097)	(8,571)	(6,562)
Communication	(7,808)	(7,959)	(6,440)
Corporate hospitality and entertainment	(7,361)	(6,181)	(2,022)
Occupancy and rent	(7,136)	(6,257)	(5,890)
Travel expenses	(7,093)	(5,387)	(3,808)
Personnel training and recruitment	(6,956)	(4,304)	(1,895)
Security	(4,369)	(3,219)	(3,461)
Insurance	(3,553)	(3,945)	(3,685)
Other	(5,059)	(4,433)	(4,165)
General and administrative expenses	(205,368)	(164,450)	(129,524)

Increase in expenses related to legal and other professional services was partly attributable to the transaction costs incurred in

relation to the acquisition of Ameriabank as well as the consulting projects in IT and several other business areas (totalling GEL

10.5 million).

332

Annual Report 2023 Bank of Georgia Group PLC

26. Salaries and other employee benefits, and general

and administrative expenses continued

Auditor remuneration

Auditor remuneration comprises:

	2023	2022	2021
Fees payable for the audit of the Company’s current year Annual Report	971	770	635
Fees payable for other services:
Audit of the Company’s subsidiaries	1,048	905	968
Total audit fees	2,019	1,675	1,603
Audit-related assurance services:
Review of the Company’s and subsidiaries’ interim accounts	539	397	366
Other assurance services	32	32	31
Total audit-related fees	571	429	397
Non-audit services:
Other assurance services	4,620	12	12
Total other services fees	4,620	12	12
Total fees	7,210	2,116	2,012

The figures shown in the above table relate to the fees of Ernst & Young LLP (‘EY’) and its associates. In 2023, fees paid to other

auditors not associated with EY in respect of the audit of the Parent and Group’s subsidiaries were GEL 1,031 (2022: GEL 247, 2021:

GEL 273), and in respect of other services of the Group were GEL 1,605 (2022: GEL 579, 2021: GEL 823). In 2023 other non-audit

assurance services are related to the acquisition of Ameriabank.

27. 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
	Individual	Collective	Individual	Collective	Individual	Collective	POCI	Total
Cash and cash equivalents	–	(182)	–	–	–	–	–	(182)
Amounts due from credit institutions	–	4,260	–	–	–	–	–	4,260
Investment securities measured at amortised cost – debt instruments	–	3,284	–	–	–	–	–	3,284
Investment securities measured at FVOCI –
debt instruments	–	(1,937)	–	–	–	–	–	(1,937)
Loans to customers at amortised cost	–	17,054	–	(8,060)	(446)	(129,119)	(3,727)	(124,298)
Loans to customers at FVTPL	–	–	–	–	–	–	–	–
Finance lease receivables	–	(146)	–	(121)	(92)	(3,232)	829	(2,762)
Accounts receivable and other loans	–	–	–	–	(81)	–	–	(81)
Other financial assets	–	–	–	–	(3,854)	(1)	–	(3,855)
Financial and performance guarantees	–	284	–	(2)	24	5	–	311
Letter of credit to customers	–	15	–	–	–	–	–	15
Other financial commitments	–	721	–	13	–	–	–	734
For the year ended 31 December 2023	–	23,353	–	(8,170)	(4,449)	(132,347)	(2,898)	(124,511)

		Stage 1		Stage 2		Stage 3
	Individual	Collective	Individual	Collective	Individual	Collective	POCI	Total
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)

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

27. Cost of risk continued

		Stage 1		Stage 2		Stage 3
	Individual	Collective	Individual	Collective	Individual	Collective	POCI	Total
Cash and cash equivalents	–	48	–	–	–	–	–	48
Amounts due from credit institutions	–	66	–	–	–	–	–	66
Investment securities measured at amortised cost – debt instruments	–	763	–	–	–	–	–	763
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

In addition, in 2023 the ECL charge includes GEL 500 (2022: 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 consolidated income statement.

Impairment charge on other assets and provisions comprise:

	2023	2022	2021
Litigation provision reversal/(charge)	(2,946)	46,645	(35,584)
Impairment (charge)/reversal on assets held for sale	(4,550)	(4,296)	(3,805)
Other impairment charge	(12,057)	(13,342)	(15,520)
Impairment charge on other assets and provisions	(19,553)	29,007	(54,909)

28. Net other gains/(losses)

	2023	2022	2021
Net real estate gains/(losses)	91,868	20,498	33,206
Net gains/(losses) on derecognition of financial assets measured at fair value through other comprehensive income	12,520	7,921	30,044
Net gains/(losses) on financial assets at fair value through profit or loss	(660)	(2,710)	760
Net gains/(losses) from revaluation of investment property	756	7,421	437
Net other gains/(losses)	9,687	11,679	8,651
Net other gains/(losses)	114,171	44,809	73,098

During 2021-2023, the Group repossessed significant movable and immovable assets from its defaulted group of borrowers via

public auction as a result of bankruptcy proceedings of the borrower at a deep discount. The properties were classified as Foreclosed

Assets and measured at the lower of cost and net realisable value. The Group managed to realise large properties at then current

market prices in 2023 and recorded the respective real estate gain in an amount of GEL 81,327 in its consolidated financial

statements.

334

Annual Report 2023 Bank of Georgia Group PLC

29. Share-based payments

Executives’ Equity Compensation Plan (EECP) and Employees’ Equity Compensation Plan

In 2015, the Group set up the Executive Equity Compensation Trustee – Sanne Fiduciary Services Limited (the ‘Trustee’) which acts as

the trustee of the Group’s EECP. In 2023, the Trustee has repurchased 585,864 shares (2022: 695,750 shares, 2021: 699,998 shares).

In 2019, the Group set up the Group’s Employee Equity Compensation Trustee – Sanne Fiduciary Services Limited (the ‘Trustee’)

which acts as the trustee of Employees’ Equity Compensation Plan. In 2023, the Trustee has repurchased 172,951 shares (2022:

319,231 shares, 2021: 485,820 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 a four-year holding period. For the CEO, annual

remuneration paid in shares is fixed every three years, whereas for other members of the Management Board and MRTs the

remuneration is set on an 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 February 2023, BOGG’s Remuneration Committee resolved to award 241,500 ordinary shares of Bank of Georgia Group PLC to

the members of the Management Board and 74,520 ordinary shares of Bank of Georgia Group PLC to the Group’s 18 executives.

Shares awarded to the Management Board are subject to five-year vesting and two-year holding periods, while those awarded to

the other 18 executives are subject to three-year vesting periods with continuous employment being the only vesting condition for

both awards. The Group considers 9 February, 10 May and 20 October 2023 as the grant dates. The Group estimates that the fair

value of the shares awarded on 9 February, 10 May and 20 October 2023 were Georgian Lari 87.65, 99.04 and 106.31 per share.

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 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 2023, Management Board members signed fixed contingent share-based compensation agreements, with fixed contract values

of GEL 16,248. The Group considers 1 January 2023 as the grant dates for the awards. The Group estimated the value of the shares

was Georgian Lari 82.91 per share, based on the five working day average share price before 25 December 2022, respectively. The

awards will be subject to one-year vesting and three-year holding periods.

In 2023, the Group’s other executive members signed fixed contingent share-based compensation agreements, with fixed contract

values of GEL 4,149. The Group considers 1 January 2023, 1 April 2023, 27 April 2023, 1 May 2023 and 1 June 2023 as the grant

dates for the awards. The Group estimated the value of the shares were Georgian Lari 82.91, 78.44, 76.77, 76.61 and 79.99 per share

respectively, based on the five working day average share price before the 25 December 2022. The awards will be subject to one-year

vesting and three-year holding periods.

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 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 25 December 2021, respectively. The awards will be subject to one-year vesting and three-year holding periods.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

335

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

29. Share-based payments continued

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 was 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 was 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.

The Bank grants share compensation to its non-executive employees. In February 2023, January 2022 and March 2021, the

Supervisory Board of the Bank resolved to award 157,146, 212,327 and 188,694 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 9 February 2023, 31 January 2022 and 11 March 2021 as the grant dates of

these awards, respectively. The Group estimated that the fair values of the shares awarded on 9 February 2023, 31 January 2022

and 11 March 2021 were Georgian Lari 87.65, 59.98 and 50.12 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 amounted to Georgian Lari 84.87 per share in year ended

31 December 2023 (31 December 2022: Georgian Lari 62.25 per share, 31 December 2021: Georgian Lari 50.93).

The Group’s total share-based payment expenses for the year ended 31 December 2023 amounted to GEL 72,055 (31 December

2022: GEL 82,025, 31 December 2021: GEL 45,307) and are included in ‘salaries and other employee benefits’ as ‘salaries and

bonuses’. Below is the summary of the share-based payments-related data:

	2023	2022	2021
Total number of equity instruments awarded	724,296	1,405,389	434,770
– Among them, to the Management Board	437,461	1,071,053	30,100
Weighted average value at grant date, per share (GEL in full amount)	84.87	62.25	50.93
Value at grant date, total (GEL)	61,469	87,481	22,143
Total expense recognised during the year (GEL)	(72,055)	(82,025)	(45,307)

During 2023 BOGG Directors exercised 242,707 (2022: 70,646) shares with a fair value of GEL 20,827 (2022: 3,602). The weighted

average share price was GEL 85.81 per share (2022: 50.99). During 2021 BOGG Directors did not exercise any shares.

30. 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 cybersecurity), 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.

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30. Risk management continued

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 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.

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management continued

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 an 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.

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.

			External Rating Grades
Internal Rating Description*	Internal 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
Standard grade	Baa3	4-		BBB-
	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.

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30. Risk management 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 an

individual basis based on other available information regarding financial difficulties of the borrower.

Other financial assets include receivables from remittance operations and other receivables.

Cash and cash equivalents, excluding cash on hand	Stage 1	Total
High grade	1,097,876	1,097,876
Standard grade	654,907	654,907
Low grade	32,398	32,398
Not rated	293,061	293,061
Balance at 31 December 2023	2,078,242	2,078,242

Amounts due from credit institutions	Stage 1	Total
High grade	1,734,224	1,734,224
Not rated	19,327	19,327
Balance at 31 December 2023	1,753,551	1,753,551

Investment securities measured at amortised cost – debt instruments	Stage 1	Total
High grade	415,713	415,713
Standard grade	160,758	160,758
Not rated	114,648	114,648
Balance at 31 December 2023	691,119	691,119

Investment securities measured at FVOCI – debt instruments	Stage 1	Total
High grade	2,277,147	2,277,147
Standard grade	2,058,495	2,058,495
Not rated	88,518	88,518
Balance at 31 December 2023	4,424,160	4,424,160

Commercial loans at amortised cost	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	4,388,581	68,175	–	339	4,457,095
Standard grade	1,389,821	58,796	–	755	1,449,372
Low grade	133,487	372,006	–	–	505,493
Not rated	464,999	16,812	1	–	481,812
Defaulted
Non-performing	–	–	101,364	22,481	123,845
Balance at 31 December 2023	6,376,888	515,789	101,365	23,575	7,017,617

Residential mortgage loans at amortised cost	Stage 1	Stage 2		Stage 3	POCI	Total
High grade	3,346,499	11,608		–	4,209	3,362,316
Standard grade	714,568	45,712		–	3,689	763,969
Low grade	86,008	116,000		–	6,839	208,847
Not rated	153,263	732		–	131	154,126
Defaulted
Non-performing	–	–	37,77	1	16,214	53,985
Other	–	–		13,175	1,107	14,282
Balance at 31 December 2023	4,300,338	174,052		50,946	32,189	4,557,525

Micro and SME loans at amortised cost	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	2,480,970	29,931	–	316	2,511,217
Standard grade	1,012,833	73,925	–	228	1,086,986
Low grade	75,930	76,380	–	242	152,552
Not rated	140,137	11,294	48	–	151,479
Defaulted
Non-performing	–	–	167,506	2,364	169,870
Other	–	–	871	47	918
Balance at 31 December 2023	3,709,870	191,530	168,425	3,197	4,073,022

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management continued

Consumer loans at amortised cost	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	2,693,767	7,996	–	2,406	2,704,169
Standard grade	1,179,793	50,968	–	3,069	1,233,830
Low grade	233,382	173,992	–	4,607	411,981
Not rated	218,817	1,273	90	–	220,180
Defaulted
Non-performing	–	–	91,584	16,090	107,674
Other	–	–	19,795	2,340	22,135
Balance at 31 December 2023	4,325,759	234,229	111,469	28,512	4,699,969

Gold – pawn loans at amortised cost	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	65,002	48	–	–	65,050
Standard grade	40,495	733	–	–	41,228
Low grade	17,381	7,915	–	–	25,296
Not rated	14,538	–	273	–	14,811
Defaulted
Non-performing	–	–	2,566	–	2,566
Other	–	–	1,277	–	1,277
Balance at 31 December 2023	137,416	8,696	4,116	–	150,228

Finance lease receivables	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	5,832	80	–	4,274	10,186
Standard grade	2,731	381	–	1,697	4,809
Low grade	475	1,261	–	2,161	3,897
Not rated	27,979	3,506	–	–	31,485
Defaulted
Non-performing	–	–	12,161	10,392	22,553
Other	–	–	–	557	557
Balance at 31 December 2023	37,017	5,228	12,161	19,081	73,487

Accounts receivable	Stage 1	Total
Not rated	52,696	52,696
Balance at 31 December 2023	52,696	52,696

Other financial assets	Stage 1	Total
Not rated	154,765	154,765
Balance at 31 December 2023	154,765	154,765

Financial and performance guarantees issued	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	997,529	–	–	–	997,529
Standard grade	347,015	257	–	–	347,272
Low grade	264,715	161,350	–	–	426,065
Not rated	140,467	8	–	–	140,475
Defaulted
Non-performing	–	–	1,915	–	1,915
Other	–	–	5,741	–	5,741
Balance at 31 December 2023	1,749,726	161,615	7,656	–	1,918,997

Letters of credit	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	69,260	–	–	–	69,260
Standard grade	7,546	–	–	–	7,546
Low grade	307	–	–	–	307
Not rated	432	–	–	–	432
Balance at 31 December 2023	77,545	–	–	–	77,545

Undrawn loan facilities	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	668,644	215	12	–	668,871
Standard grade	240,974	1,203	–	–	242,177
Low grade	23,791	6,757	–	1	30,549
Not rated	71,305	278	–	–	71,583
Defaulted
Non-performing	–	–	1,764	7	1,771
Balance at 31 December 2023	1,004,714	8,453	1,776	8	1,014,951

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30. Risk management continued

Cash and cash equivalents, excluding cash on hand	Stage 1	Stage 3	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	Stage 3	Total
High grade	2,396,898	–	2,396,898
Standard grade	11,871	–	11,871
Not rated	29,577	–	29,577
Balance at 31 December 2022	2,438,346	–	2,438,346

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
Not rated	76,381	1,619	78,000
Balance at 31 December 2022	3,960,916	1,619	3,962,535

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

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management continued

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

Finance lease receivables	Stage 1	Stage 2	Stage 3	POCI	Total
High grade	17,702	4,495	–	–	22,197
Standard grade	–	694	–	–	694
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	Stage 2	Stage 3	POCI	Total
Not rated	400,111	–	–	–	400,111
Balance at 31 December 2022	400,111	–	–	–	400,111

Other financial assets	Stage 1	Stage 2	Stage 3	POCI	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
Defaulted
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

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30. Risk management continued

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

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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30. Risk management 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	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	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	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	915
Balance at 31 December 2021	799,325	9,227	923	809,481

Types of collateral the Group accepts include real estate and 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 2023, up to 80.1% of the collateral held has been revalued

within the last two years (2022: 78.6%, 2021: 76.0%). For residential mortgage loans, in cases where the collateral for a loan may not

be officially registered until its construction is complete, the respective loan is shown as unsecured, even though it is usually secured

by the corporate guarantee of the construction company.

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							As at 31 December 2023
	Total gross						Loan-to-value %
	carrying		Less than							More than
	amount	Unsecured	50%	50-80%	80-90%	90-100%	100-200%	200-300%	300-400%	400%
Commercial loans	7,017,617	837,104	1,235,492	1,618,714	297,635	370,658	1,454,192	531,632	133,244	538,946
ECL coverage	1.43%	0.62%	0.55%	0.42%	0.21%	2.63%	2.11%	4.45%	2.41%	2.54%
Residential
mortgage loans	4,557,525	105,607	1,097,126	1,997,629	613,407	533,097	175,455	9,783	5,224	20,197
ECL coverage	0.50%	2.22%	0.00%	0.24%	0.73%	0.78%	3.56%	1.23%	2.28%	2.09%
Micro and SME loans	4,073,022	241,068	885,575	1,131,643	358,909	314,671	981,784	82,058	26,254	51,060
ECL coverage	1.76%	6.03%	0.01%	0.57%	0.79%	1.23%	3.85%	3.02%	4.57%	4.75%
Consumer loans	4,699,969	2,266,702	815,573	919,577	330,004	257,059	87,651	8,396	4,722	10,285
ECL coverage	2.80%	5.16%	0.01%	0.38%	0.83%	1.10%	5.61%	3.85%	4.36%	1.62%
Gold – pawn loans	150,228	–	4,362	49,324	93,706	1,083	790	941	–	22
ECL coverage	0.93%	N/A	0.02%	0.06%	0.24%	16.25%	27.72%	76.09%	N/A	81.82%
Loans to customers
at amortised cost, gross	20,498,361	3,450,481	4,038,128	5,716,887	1,693,661	1,476,568	2,699,872	632,810	169,444	620,510

							As at 31 December 2022
	Total gross						Loan-to-value %
	carrying		Less than							More than
	amount	Unsecured	50%	50-80%	80-90%	90-100%	100-200%	200-300%	300-400%	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						Loan-to-value %
	carrying		Less than							More than
	amount	Unsecured	50%	50-80%	80-90%	90-100%	100-200%	200-300%	300-400%	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

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management 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 ECLs.

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 2023:

	Amortised	Net gain/(loss)
	cost before	arising from
	modification	modification
Commercial loans	710,073	599
Residential mortgage loans	44,848	(131)
Micro and SME loans	168,593	(2,362)
Consumer loans	287,667	(12,791)
Gold – pawn loans	–	–
Loans to customers	1,211,181	(14,685)
Finance lease receivables	839	138
Total loans to customers and finance lease receivables	1,212,020	(14,547)

Financial assets modified during 2022:

	Amortised	Net gain/(loss)
	cost before	arising from
	modification	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	Net gain/(loss)
	cost before	arising from
	modification	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)

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 2023

	Gross carrying	Corresponding
	amount	ECL
Commercial loans	96,127	(255)
Residential mortgage loans	63,193	(51)
Micro and SME loans	39,912	(98)
Consumer loans	14,217	(49)
Gold – pawn loans	–	–
Loans to customers	213,449	(453)
Finance lease receivables	–	–
Total loans to customers and finance lease receivables	213,449	(453)

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30. Risk management continued

Financial assets modified since initial recognition, as at 31 December 2022

	Gross carrying	Corresponding
	amount	ECL
Commercial loans	10,100	(24)
Residential mortgage loans	72,919	(104)
Micro and SME loans	40,925	(129)
Consumer loans	19,482	(204)
Gold – pawn loans	–	–
Loans to customers	143,426	(461)
Finance lease receivables	–	–
Total loans to customers and finance lease receivables	143,426	(461)

Financial assets modified since initial recognition, as at 31 December 2021

	Gross carrying	Corresponding
	amount	ECL
Commercial loans	19,521	(121)
Residential mortgage loans	81,892	(231)
Micro and SME loans	35,301	(347)
Consumer loans	25,063	(633)
Gold – pawn loans	–	–
Loans to customers	161,777	(1,332)
Finance lease receivables	–	–
Total loans to customers and finance lease receivables	161,777	(1,332)

The geographical concentration of the Group’s assets and liabilities is set out below:

		2023
			CIS and
			other foreign
	Georgia	OECD	countries	Total
Assets:
Cash and cash equivalents	1,523,046	975,099	603,679	3,101,824
Amounts due from credit institutions	1,733,898	–	18,759	1,752,657
Investment securities	2,368,874	2,332,754	428,129	5,129,757
Loans to customers and finance lease receivables	19,532,803	–	699,918	20,232,721
All other assets	1,314,511	150,031	76,057	1,540,599
	26,473,132	3,457,884	1,826,542	31,757,558
Liabilities:
Client deposits and notes	14,880,493	1,138,532	4,503,714	20,522,739
Amounts owed to credit institutions	2,369,365	2,257,129	529,515	5,156,009
Debt securities issued	273,923	147,436	–	421,359
Lease liability	128,725	–	13,209	141,934
All other liabilities	396,104	87,254	12,323	495,681
	18,048,610	3,630,351	5,058,761	26,737,722
Net balance sheet position	8,424,522	(172,467)	(3,232,219)	5,019,836

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management continued

		2022				2021
			CIS and				CIS and
			other foreign				other foreign
	Georgia	OECD	countries	Total	Georgia	OECD	countries	Total
Assets:
Cash and cash equivalents	1,508,225	1,453,844	622,774	3,584,843	836,325	419,324	264,913	1,520,562
Amounts due from credit
institutions	2,358,551	54,175	20,302	2,433,028	1,922,671	–	8,719	1,931,390
Investment securities	1,798,172	2,436,465	115,092	4,349,729	1,477,367	970,901	147,396	2,595,664
Loans to customers and finance
lease receivables	16,339,883	–	521,823	16,861,706	15,524,427	–	644,546	16,168,973
All other assets	1,473,703	120,271	78,620	1,672,594	977,703	178,765	57,019	1,213,487
	23,478,534	4,064,755	1,358,611	28,901,900	20,738,493	1,568,990	1,122,593	23,430,076
Liabilities:
Client deposits and notes	13,017,449	966,722	4,277,226	18,261,397	11,180,811	894,192	1,962,999	14,038,002
Amounts owed to credit
institutions	2,622,787	2,142,083	501,783	5,266,653	1,609,565	2,619,885	88,995	4,318,445
Debt securities issued	312,053	333,915	–	645,968	450,155	1,061,203	7,327	1,518,685
Lease liability	101,402	–	13,068	114,470	84,875	–	2,787	87,662
All other liabilities	275,030	81,893	7,667	364,590	309,068	55,291	10,015	374,374
	16,328,721	3,524,613	4,799,744	24,653,078	13,634,474	4,630,571	2,072,123	20,337,168
Net balance sheet position	7,149,813	540,142	(3,441,133)	4,248,822	7,104,019	(3,061,581)	(949,530)	3,092,908

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 2023 was 125.2% (2022: 132.4%, 2021: 124.0%).

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 2023 was 130.4%, (2022: 131.9%, 2021: 132.5%), 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, expect for other liabilities, which are presented at carrying amounts due to the short-term nature of these liabilities.

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.

Financial liabilities	Less than 3	3 to 12	1 to 5	Over
As at 31 December 2023	months	months	years	5 years	Total
Client deposits and notes	8,491,287	10,559,684	1,963,380	73,382	21,087,733
Amounts owed to credit institutions	2,777,202	569,441	1,773,329	836,493	5,956,465
Debt securities issued	406	204,747	452,747	83,158	741,058
Lease liability	9,077	27,435	100,420	26,499	163,431
Other liabilities	151,734	13,032	2,369	133	167,268
Total undiscounted financial liabilities	11,429,706	11,374,339	4,292,245	1,019,665	28,115,955

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30. Risk management continued

Financial liabilities	Less than 3	3 to 12	1 to 5	Over
As at 31 December 2022	months	months	years	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
Other liabilities	142,655	14,856	1,062	118	158,691
Total undiscounted financial liabilities	11,737,140	9,370,451	3,747,148	1,013,468	25,868,207

Financial liabilities	Less than	3 to 12	1 to 5	Over
As at 31 December 2021	3 months	months	years	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
Other liabilities	177,528	3,788	2,015	18	183,349
Total undiscounted financial liabilities	7,338,873	8,277,323	5,029,556	974,783	21,620,535

The table below shows the contractual expiry by maturity of the Group’s financial commitments and contingencies.

	Less than 3	3 to 12	1 to	Over
	months	months	5 years	5 years	Total
31 December 2023	1,349,928	636,409	1,009,256	27,560	3,023,153
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

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 repaid 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.

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 2023.

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 2023, 2022 and 2021, sensitivity analysis did not reveal any significant

potential effect on the Group’s equity.

Currency

			Sensitivity
		Sensitivity	of other
	Increase	of net interest	comprehensive
	in basis points	income	income
	2023	2023	2023
GEL	22	6,541	2,289
EUR	8	707	2
US$	12	813	101

Currency

			Sensitivity
		Sensitivity	of other
	Decrease	of net interest	comprehensive
	in basis points	income	income
	2023	2023	2023
GEL	22	(6,541)	(2,289)
EUR	8	(707)	(2)
US$	12	(813)	(101)

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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30. Risk management continued

			Sensitivity
		Sensitivity	of other
	Increase	of net interest	comprehensive
	in basis points	income	income
Currency	2022	2022	2022
GEL	14	2,432	1,348
EUR	24	3,732	107
US$	21	1,624	1,022

Currency

			Sensitivity
		Sensitivity	of other
	Decrease in	of net interest	comprehensive
	basis points	income	income
	2022	2022	2022
GEL	14	(2,432)	(1,348)
EUR	24	(3,732)	(107)
US$	21	(1,624)	(1,022)

Currency

			Sensitivity
		Sensitivity	of other
	Increase	of net interest	comprehensive
	in basis points	income	income
	2021	2021	2021
GEL	53	6,733	5,516
EUR	2	238	–
US$	5	355	–

Currency

			Sensitivity
		Sensitivity	of other
	Decrease	of net interest	comprehensive
	in basis points	income	income
	2021	2021	2021
GEL	53	(6,733)	(5,516)
EUR	2	(238)	–
US$	5	(355)	–

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 2023 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 2023, 31 December 2022 and 31 December 2021, sensitivity analysis did not reveal any

significant potential effect on the Group’s equity.

Currency

		2023		2022		2021
	Change in		Change in		Change in
	currency	Effect on profit	currency	Effect on profit	currency	Effect on profit
	rate in %	before tax	rate in %	before tax	rate in %	before tax
EUR	8.8%	(323)	13.4%	1,251	8.6%	209
US$	4.9%	14,415	10.9%	806	6.4%	1,027

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.

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30. Risk management continued

The estimated effect of prepayment risk on net interest income of the Group for the years ended 31 December 2023, 31 December

2022 and 31 December 2021, is as follows:

	Effect on net
	interest income
2023	(71,177)
2022	(51,899)
2021	(52,552)

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.

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 risk was identified as an emerging risk in 2021 following our first

climate materiality assessment. Climate risk is an evolving risk practice and we are examining risk drivers that may be material for

certain sectors. 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 seven 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. We are conducting a more quantitative approach in

2024 to conduct materiality over multiple reference scenarios in addition to modelling impacts on capital and portfolios. 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. Our current baseline is a climate policy supportive of low carbon transition and low and minimal exposure

to physical risks. Indirect costs from loss of competitiveness are minimal in our view. A more ambitious transition drive, supported by

policies that would increase the cost of capital, would have an overall negative impact on our current portfolio for carbon intensive

sectors. Climate risks are currently managed at the deal level through an enhanced due diligence approach whereby borrowers

within certain sectors are viewed as higher risk against our Heatmaps. Those deemed higher risk are offered additional guidance on

mitigating options.

Our current assessment of climate risk is backward looking and takes into account only weather-related events from immediate

proceeding years. In 2024 we are undertaking a forward-looking view whereby climate scenarios will impact the likelihood and

intensity of weather-related events on our portfolio. 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 judgments 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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Strategic Report Governance Financial Statements Additional Information

31. 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 2023 Level 1	Level 2	Level 3	Total
Assets measured at fair value
Total investment properties	–	–	124,068	124,068
Land	–	–	4,844	4,844
Residential properties	–	–	87,758	87,758
Non-residential properties	–	–	31,466	31,466
Investment securities	7,726	4,424,206	7,519	4,439,451
Other assets – derivative financial assets	–	10,942	–	10,942
Assets for which fair values are disclosed
Cash and cash equivalents	3,101,824	–	–	3,101,824
Amounts due from credit institutions	–	1,752,657	–	1,752,657
Investment securities measured at amortised cost – debt instruments	–	692,781	–	692,781
Loans to customers and finance lease receivables	–	–	19,476,015	19,476,015
Liabilities measured at fair value
Other liabilities – derivative financial liabilities	–	25,779	–	25,779
Liabilities for which fair values are disclosed
Client deposits and notes	–	20,469,692	72,620	20,542,312
Amounts owed to credit institutions	–	3,735,221	1,416,771	5,151,992
Debt securities issued	–	270,524	148,134	418,658
Lease liability	–	13,209	130,236	143,445

	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
Investment securities measured at amortised cost – debt instruments	–	385,800	–	385,800
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

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31. Fair value measurements 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

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.

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.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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31. Fair value measurements continued

Fair value hierarchy

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	Purchase of	At 31 December	Purchase of	At 31 December	Purchase of	At 31 December
	2020	securities	2021	securities	2022	securities	2023
Level 3 financial assets
Equity investment securities	2,076	1,613	3,689	1,858	5,547	1,972	7,519

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 15.

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:

	2023		2022		2021
		Effect of		Effect of		Effect of
		reasonably		reasonably		reasonably
		possible		possible		possible
	Carrying	alternative	Carrying	alternative	Carrying	alternative
	amount	assumptions	amount	assumptions	amount	assumptions
Level 3 financial assets
Equity investment securities	7,519	+/- 1120	5,547	+/- 826	3,689	+/- 549

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.

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:

			Significant
		Valuation	unobservable			Weighted	Other key			Weighted
	2023	technique	inputs	MIN	MAX	average	information	MIN	MAX	Average
Investment	124,068
property
Land	4,844
Development	4,505	Market	Price per	0.012	2.220	1.033	Square	32	20,000	4,026
land		approach	square				metres,
			metre				land
Agricultural	339	Market	Price per	0.001	0.709	0.337	Square	310	140,000	19,296
land		approach	square				metres,
			metre				land
Residential	87,758	Market	Price per	0.049	5.466	1.004	Square	18	3,170	225
properties		approach	square				metres,
			metre				building
Non-residential	31,466
properties	31,466	Market	Price of the	22.870	3,838.861	1,321.071	Square	50	23,884	2,684
		approach	property				metres,
							Land
							Square	32	3,000	984
							metres,
							Building

* Price, rate and cost of unobservable inputs in this table are presented in Georgian Lari (‘GEL’), unless otherwise indicated.

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31. Fair value measurements continued

Set out below is an overview of all financial instruments other than those for which the carrying amount is a reasonable

approximation of fair value held by the Group as at 31 December 2023, 31 December 2022 and 31 December 2021:

		At 31 December 2023
	Amortised cost	FVOCI	FVTPL
Financial assets
Loans to customers and finance lease receivables	20,232,721	–	–
Accounts receivable and other loans	47,562	–	–
Equity instruments	–	7,880	6,976
Debt instruments	690,306	4,424,160	435
Foreign currency derivative financial instruments	–	–	10,942
Total	25,825,070	4,432,040	18,353
Financial liabilities
Client deposits and notes	20,522,739	–	–
Amounts owed to credit institutions	5,156,009	–	–
Debt securities issued	421,359	–	–
Lease liability	141,934	–	–
Trade and other payables (in other liabilities)	113,647	–	–
Foreign currency derivative financial instruments	–	–	25,779
Total	26,355,688	–	25,779

		At 31 December 2022			At 31 December 2021
	Amortised cost	FVOCI	FVTPL	Amortised cost	FVOCI	FVTPL
Financial assets
Loans to customers and finance lease
receivables	16,861,706	–	–	16,168,973	–	–
Accounts receivable and other loans	397,990	–	–	3,680	–	–
Equity instruments	–	10,893	–	–	9,581	–
Debt instruments	378,537	3,960,299	–	–	2,586,083	–
Interest rate contracts	–	–	348	–	–	2,827
Foreign currency derivative financial
instruments	–	–	38,922	–	–	132,252
Investment securities at FVTPL	–	–	2,660	–	–	2,146
Total	23,656,104	3,971,192	41,930	19,624,605	2,595,664	137,225
Financial liabilities
Client deposits and notes	18,261,397	–	–	14,038,002	–	–
Amounts owed to credit institutions	5,266,653	–	–	4,318,445	–	–
Debt securities issued	645,968	–	–	1,518,685	–	–
Lease liability	114,470	–	–	87,662	–	–
Trade and other payables (in other liabilities)	68,721	–	–	56,223	–	–
Interest rate contracts	–	–	–	–	–	1,385
Foreign currency derivative financial
instruments	–	–	59,020	–	–	6,480
Total	24,357,209	–	59,020	20,019,017	–	7,865

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 fair values of which are materially close to their carrying values.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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31. Fair value measurements continued

		At 31 December 2023
			Unrecognised
	Carrying value	Fair value	gain/(loss)
Financial assets
Investment securities measured at amortised cost – debt instruments	690,306	692,781	2,475
Loans to customers and finance lease receivables	20,232,721	19,476,015	(756,706)
Financial liabilities
Client deposits and notes	20,522,739	20,542,312	(19,573)
Amounts owed to credit institutions	5,156,009	5,151,992	4,017
Debt securities issued	421,359	418,658	2,701
Lease liability	141,934	143,445	(1,511)
Total unrecognised change in unrealised fair value			(768,597)

		At 31 December 2022			At 31 December 2021
	Carrying	Fair	Unrecognised		Fair	Unrecognised
	value	value	gain/(loss)	Carrying value	value	gain/(loss)
Financial assets
Investment securities measured at amortised cost – debt instruments	378,537	385,800	7,263	–	–	–
Loans to customers and finance lease
receivables	16,861,706	16,266,826	(594,880)	16,168,973	15,787,725	(381,248)
Financial liabilities
Client deposits and notes	18,261,397	18,228,352	33,045	14,038,002	14,013,500	24,502
Amounts owed to credit institutions	5,266,653	5,242,868	23,785	4,318,445	4,318,445	–
Debt securities issued	645,968	642,367	3,601	1,518,685	1,590,915	(72,230)
Lease liability	114,470	117,738	(3,268)	87,662	94,369	(6,707)
Total unrecognised change in unrealised
fair value			(530,454)			(435,683)

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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32. 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 30 ‘Risk management’ for the Group’s contractual undiscounted

repayment obligations.

					At 31 December 2023
	On	Up to	Up to	Up to	Up to	Up to	Over
	demand	3 months	6 months	1 year	3 years	5 years	5 years	Total
Financial assets
Cash and cash equivalents	2,417,513	684,311	–	–	–	–	–	3,101,824
Amounts due from credit
institutions	1,733,898	–	–	–	–	–	18,759	1,752,657
Investment securities	1,499,313	2,661,776	462,614	228,000	242,779	32,823	2,452	5,129,757
Loans to customers and finance
lease receivables	1,190	2,870,703	1,353,016	2,754,708	5,372,193	2,964,992	4,915,919	20,232,721
Accounts receivable and other loans	1,546	45,630	184	202	–	–	–	47,562
Total	5,653,460	6,262,420	1,815,814	2,982,910	5,614,972	2,997,815	4,937,130	30,264,521
Financial liabilities
Client deposits and notes	5,306,925	3,164,462	1,509,643	8,895,604	1,075,055	517,532	53,518	20,522,739
Amounts owed to credit institutions	476,646	2,297,284	87,969	424,409	810,610	554,167	504,924	5,156,009
Debt securities issued	–	406	25,135	13,388	294,075	5,197	83,158	421,359
Lease liability	–	9,024	8,855	16,762	55,277	31,107	20,909	141,934
Total	5,783,571	5,471,176	1,631,602	9,350,163	2,235,017	1,108,003	662,509	26,242,041
Net	(130,111)	791,244	184,212	(6,367,253)	3,379,955	1,889,812	4,274,621	4,022,480
Accumulated gap	(130,111)	661,133	845,345	(5,521,908)	(2,141,953)	(252,141)	4,022,480

					At 31 December 2022
	On	Up to	Up to	Up to	Up to	Up to	Over
	demand	3 months	6 months	1 year	3 years	5 years	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

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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32. Maturity analysis of financial assets and liabilities continued

				At 31 December 2021
	On	Up to	Up to	Up to	Up to	Up to	Over
	demand	3 months	6 months	1 year	3 years	5 years	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	7,744	–	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

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 2023, client deposits and notes amounted to GEL 20,522,739 (2022: GEL 18,261,397, 2021: GEL 14,038,002) and

represented 77% (2022: 74%, 2021: 69%) 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 2023, amounts owed to credit institutions

amounted to GEL 5,156,009 2023 (2022: GEL 5,266,653, 2021: GEL 4,318,445) and represented 19% (2022: 21%, 2021: 21%) of total

liabilities. As at 31 December 2023, debt securities issued amounted to GEL 421,359 (2022: GEL 645,968, 2021: GEL 1,518,685) and

represented 2% (2022: 3%, 2021: 7%) of total liabilities.

In the Board’s opinion, liquidity is sufficient to meet the Group’s present requirements.

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32. Maturity analysis of financial assets and liabilities continued

The table below shows an analysis of assets and liabilities 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 2023
	Less than	More than
	1 year	1 year	Total
Cash and cash equivalents	3,101,824	–	3,101,824
Amounts due from credit institutions	1,733,898	18,759	1,752,657
Investment securities	4,851,703	278,054	5,129,757
Loans to customers and finance lease receivables	6,979,617	13,253,104	20,232,721
Accounts receivable and other loans	47,562	–	47,562
Prepayments	30,633	6,878	37,511
Foreclosed assets	–	271,712	271,712
Right-of-use assets	–	138,695	138,695
Investment properties	–	124,068	124,068
Property and equipment	–	436,955	436,955
Goodwill	–	41,253	41,253
Intangible assets	–	167,862	167,862
Income tax assets	2,520	–	2,520
Other assets	238,560	6,512	245,072
Assets held for sale	27,389	–	27,389
Total assets	17,013,706	14,743,852	31,757,558
Client deposits and notes	18,876,634	1,646,105	20,522,739
Amounts owed to credit institutions	3,286,308	1,869,701	5,156,009
Debt securities issued	38,929	382,430	421,359
Lease liability	34,641	107,293	141,934
Accruals and deferred income	90,762	38,593	129,355
Income tax liabilities	185,440	13,618	199,058
Other liabilities	167,268	–	167,268
Total liabilities	22,679,982	4,057,740	26,737,722
Net	(5,666,276)	10,686,112	5,019,836

	At 31 December 2022			At 31 December 2021
	Less than	More than		Less than	More than
	1 year	1 year	Total	1 year	1 year	Total
Cash and cash equivalents	3,584,843	–	3,584,843	1,520,562	–	1,520,562
Amounts due from credit institutions	2,402,449	30,579	2,433,028	1,909,479	21,911	1,931,390
Investment securities	4,022,815	326,914	4,349,729	2,464,508	131,156	2,595,664
Loans to customers and finance lease
receivables	5,434,783	11,426,923	16,861,706	5,952,025	10,216,948	16,168,973
Accounts receivable and other loans	379,346	18,644	397,990	3,680	–	3,680
Prepayments	40,020	3,592	43,612	39,276	1,602	40,878
Foreclosed assets	–	119,924	119,924	–	3,216	3,216
Right-of-use assets	–	117,387	117,387	–	80,186	80,186
Investment properties	–	166,546	166,546	–	226,849	226,849
Property and equipment	–	398,855	398,855	–	378,808	378,808
Goodwill	–	33,351	33,351	–	33,351	33,351
Intangible assets	–	149,441	149,441	–	144,251	144,251
Income tax assets	224	640	864	109	183	292
Other assets	206,176	8,882	215,058	246,563	8,682	255,245
Assets held for sale	29,566	–	29,566	46,731	–	46,731
Total assets	16,100,222	12,801,678	28,901,900	12,182,933	11,247,143	23,430,076
Client deposits and notes	16,481,748	1,779,649	18,261,397	12,465,125	1,572,877	14,038,002
Amounts owed to credit institutions	3,865,628	1,401,025	5,266,653	2,385,743	1,932,702	4,318,445
Debt securities issued	340,442	305,526	645,968	287,703	1,230,982	1,518,685
Lease liability	28,206	86,264	114,470	22,335	65,327	87,662
Accruals and deferred income	73,660	32,706	106,366	53,346	26,811	80,157
Income tax liabilities	20,258	79,275	99,533	85,270	25,598	110,868
Other liabilities	157,948	743	158,691	182,070	1,279	183,349
Total liabilities	20,967,890	3,685,188	24,653,078	15,481,592	4,855,576	20,337,168
Net	(4,867,668)	9,116,490	4,248,822	(3,298,659)	6,391,567	3,092,908

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Strategic Report Governance Financial Statements Additional Information

33. 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 effected 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 2023		At 31 December 2022		At 31 December 2021
		Key		Key		Key
	management		management		management
	Associates	personnel*	Associates	personnel*	Associates	personnel*
Loans outstanding at 1 January, gross	–	9,819	–	12,050	–	10,646
Loans issued during the year	–	5,663	–	7,090	–	8,944
Loan repayments during the year	–	(4,993)	–	(7,246)	–	(6,531)
Other movements	–	547	–	(2,075)	–	(1,009)
Loans outstanding at 31 December, gross	–	11,036	–	9,819	–	12,050
Less: allowance for impairment at 31 December	–	(110)	–	(67)	–	(27)
Loans outstanding at 31 December, net	–	10,926	–	9,752	–	12,023
Interest income on loans	–	556	–	745	–	644
Expected credit loss	–	(40)	–	(200)	–	–
Deposits at 1 January	243	12,633	202	31,127	166	32,619
Deposits received during the year	1,796	9,696	–	9,212	36	21,490
Deposits repaid during the year	–	(6,715)	–	(15,773)	–	(32,337)
Other movements	–	(2,263)	41	(11,933)	–	9,355
Deposits at 31 December	2,039	13,351	243	12,633	202	31,127
Interest expense on deposits	–	(863)	–	(959)	–	(1,368)

* 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 229 to 247. Compensation of key management

personnel comprised the following:

	2023	2022	2021
Salaries and other benefits	17,443	11,841	12,915
Share-based payments compensation	50,861	58,208	25,048
Social security costs	381	–	–
Total key management compensation	68,685	70,049	37,963

Key management personnel do not receive cash-settled compensation, except for fixed salaries. The major part of the total

compensation is share-based (Note 29). The number of key management personnel at 31 December 2023 was 23 (31 December

2022: 23, 31 December 2021: 21).

As at 31 December 2023 interest rates on loans issued to key management personnel comprised 16.8% and 4.5% (31 December 2022:

17.9% and 4.5%, 31 December 2021: 28.8% and 4.0%) for GEL and FC denominated loans, respectively. As at 31 December 2023

interest rates on deposits placed by key management personnel comprised 13.5% and 0.0% (as at 31 December 22: 13.5% and 0.0%,

as at 31 December 21: 14.2% and 0.0%) for GEL and FC denominated deposits, respectively.

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Annual Report 2023 Bank of Georgia Group PLC

34. 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 2023, 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 light of the 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.

In January 2023, the NBG transitioned to IFRS-based accounting and introduced a new Pillar 2 buffer – Credit Risk Adjustment

(CRA) buffer, to account for the difference between the NBG-based and the IFRS-based provision levels (higher in the former case).

As at 31 December 2023, 31 December 2022 and 31 December 2021, the Bank’s capital adequacy ratio on this basis was as follows:

IFRS-based NBG (Basel III) capital adequacy ratio

	As at
	31 December
	2023
Tier 1 capital	4,603,352
Tier 2 capital	499,018
Total capital	5,102,370
Risk-weighted assets	23,061,905
Tier 1 capital ratio	20.0%
Total capital ratio	22.1%
Min. requirement for Tier 1 capital ratio	16.7%
Min. requirement for Total capital ratio	19.6%

As at 31 December 2022 and 31 December 2021, the Bank’s capital adequacy were as follows:

NBG (Basel III) capital adequacy ratio

	As at	As at
	31 December	31 December
	2022	2021
Tier 1 capital	3,388,048	2,691,000
Tier 2 capital	618,232	784,800
Total capital	4,006,280	3,475,800
Risk-weighted assets	20,279,424	17,977,949
Tier 1 capital ratio	16.7%	15.0%
Total capital ratio	19.8%	19.3%
Min. requirement for Tier 1 capital ratio	13.8%	13.6%
Min. requirement for Total capital ratio	17.2%	17.7%

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Strategic Report Governance Financial Statements Additional Information

35. Events after the reporting period

On 15 March 2024, the Group’s Board of Directors approved a GEL 100 million extension of the share buyback and cancellation

programme. The shares will be purchased in the open market. The purpose of the buyback is to reduce the surplus capital, and the

cancellation of the treasury shares will be executed on a monthly basis.

Business combinations

On 31 March 2024, with reference to Share Purchase Agreement (‘SPA’) dated 18 February 2024, the Group acquired 90% of the

share capital of Ameriabank CJSC, one of the leading banks operating in Armenia, from selling shareholders IMAST Group (CY)

Limited (owning 48.82% shares in Ameriabank CJSC), European Bank for Reconstruction and Development (owning 17.71% shares

in Ameriabank CJSC out of which 7.71% shares were acquired and remaining 10% is subject to put/call option), Asian Development

Bank (owning 13.92% shares in Ameriabank CJSC), ESPS Holding Limited (owning 12.05% shares in Ameriabank CJSC) and Afeyan

Foundation for Armenia Inc. (owning 7.5% shares in Ameriabank CJSC). The acquisition is financed by cash consideration of US$

276,989 thousand (approximately GEL 746,569 thousand) out of which US$ 21,031 thousand which equals to approximately GEL

56,686 thousand, is deferred and is due in six months after the completion date. The remaining 10% of share capital retained

by European Bank for Reconstruction and Development is subject to a put/call option. Price of the put/call option is US$ 30,777

thousand (approximately GEL 82,955 thousand) with interest accrued till the exercise date at a rate of 6-month SOFR + 3.5% p.a.

subject to offset by any dividends paid to EBRD till exercise date. The Group can exercise call option anytime up to 3 years after

completion, while put option can be exercised by EBRD in 3 years after completion. After the acquisition the Group shall account for

as acquired the entire issued share capital of Ameriabank CJSC, with ownership split between BOG JSC with a 30% shareholding

and BOGG a 70% shareholding (including the present ownership of 10% shares subject to the put/call).

The Group analysed the terms of the put/call option to assess whether the Group has obtained present ownership rights over the shares

subject to option at the acquisition date. The Group has concluded that the shares subject to option shall be accounted for as acquired

(no NCI will be recognised) and the option shall be recorded as a financial liability forming a part of the consideration transferred.

The acquisition will enable the Group’s expansion in the Armenian market and is expected to provide significant strategic,

commercial and financial benefits to the Group as outlined below:

• The Armenian economy and banking sector have certain attractive characteristics similar to those in the Group’s principal

operating country, Georgia, and the Board considers this as an attractive market for expansion that fits very well with the

current footprint. Armenia is a neighbouring country with a high-growth economy of similar size to Georgia. The overall Armenian

economy is less leveraged compared with the Georgian economy, creating a supportive environment for further banking sector

growth in coming years. The Armenian banking sector is financially prudent with low market share concentration levels offering

scope for further consolidation.

• Ameriabank CJSC is one of the leading universal banks in Armenia with prudent risk policies and a strong profitability track

record and has an attractive franchise with significant upside potential from leveraging the Group’s customer focus and digital

capabilities. Ameriabank CJSC has a leading market position in Armenia based on the loan portfolio size and a particularly

strong foothold in the corporate segment. The market share in retail segment is also increasing boosted by improving digital

offerings. The Group believes that Ameriabank CJSC has significant growth potential and further scope to improve commercial

performance, particularly in retail. This is expected to be achieved by combining Ameriabank CJSC’s existing franchise strengths

with the Group’s expertise. Besides, Ameriabank CJSC has a well-regarded and experienced management team who agreed to

stay on after the acquisition (for at least 24 months).

• The acquisition offers multiple strategic benefits to the Group allowing it to diversify its revenue streams, unlock further growth

potential and increase scale. Considering the Group has achieved leading market shares in Georgia, an expansion geographically

unlocks further growth potential beyond the local Georgian market. The acquisition also has strong financial rationale that fulfils

strict internal financial criteria set by the Group and is expected to result in significant value creation for shareholders.

The acquisition-date fair value of the total purchase consideration and its components are as follows:

In thousands of GEL
Cash consideration payment	689,883
Deferred consideration	56,686
Present value of redemption liability for put option	82,955
Total purchase consideration	829,524

Acquisition-related transaction costs of GEL 6,965 thousand were expensed as general and administrative expenses in 2023.

Additionally, GEL 17,713 thousand acquisition-related cost was expensed as general and administrative expenses in 2024.

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Annual Report 2023 Bank of Georgia Group PLC

35. Events after the reporting period continued

The purchase consideration is based on the book value of Ameriabank CJSC based on balance sheet as at 30 October 2023 prepared

under IFRS. However, in accordance with IFRS 3 ‘Business Combinations’, the Group must account for business acquisitions based on fair

values of the identifiable assets acquired, and liabilities assumed. These two different approaches can lead to differences; and, as set

out in the table below, the excess of the net fair value of the acquiree’s identifiable assets and liabilities over cost (‘negative goodwill’)

is immediately recorded in profit or loss for the year. Details of the assets and liabilities acquired and negative goodwill arising from the

acquisition are as follows:

In thousands of GEL

	Attributed fair
	value
Cash and cash equivalents	679,965
Amounts due from credit institutions	735,733
Investment securities	1,179,372
Loans to customers and finance lease receivables	6,558,768
Foreclosed assets	5,259
Right-of-use assets	85,508
Property and equipment	74,213
Intangible assets	103,089
Income tax assets	17,054
Other assets	112,578
Client deposits and notes	(6,125,166)
Amounts owed to credit institutions	(757,763)
Debt securities issued	(831,851)
Lease liability	(85,508)
Accruals and Deferred Income	(42,349)
Income tax liabilities	(78,800)
Other liabilities	(169,397)
Fair value of identifiable net assets of subsidiary acquired	1,460,705
Total purchase consideration	829,524
Negative goodwill arising from the acquisition	(631,181)

The fair values of assets and liabilities acquired are based on discounted cash flow models. The fair value of the identifiable net assets of

GEL 1,460,705 thousand is provisional given it is based on February 2024 valuation which will be updated as at acquisition date.

The valuation of identifiable intangible assets was performed by an independent professional appraiser. Based on the appraisal

report, the following items are included in the purchase price allocation:

• brand name valued at GEL 29,495 thousands; and

• customer relationships valued at GEL 34,516 thousands.

The negative goodwill is primarily attributable to the scarcity of potential buyers in Armenian market considering the value of

the net assets acquired. Additionally, the Group is a UK listed financial institution which gave the Management further ability to

negotiate the deal.

At acquisition, the carrying amount of loans to customers and finance lease receivables classified as POCI by the Group in the

consolidated financial statement is GEL 75,726. The remaining amount of GEL 6,483,042 thousand represents the gross carrying amount

of stage 1 loans to customers and finance lease receivables.

Additional Tier 1 Notes

On 9 April 2024, Bank of Georgia Group PLC’s subsidiary, JSC Bank of Georgia successfully priced a USD 300 million offering of 9.5%

perpetual subordinated callable additional tier 1 notes (the ‘Notes’). The Notes are denominated in USD and settled on 16 April 2024.

The Notes are being issued in accordance with Reg S/Rule 144A and sold at an issue price of 100%.

Notes to Consolidated Financial Statements continued

(Thousands of Georgian Lari)

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Annual Report 2023 Bank of Georgia Group PLC

ADDITIONAL

INFORMATION

364

Annual Report 2023 Bank of Georgia Group PLC

Global Reporting Initiative (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 indicator Description Report section or other documentation

GRI 2: General Disclosures 2021

The organisation and its reporting practices

2-1 Organisational details About Us (page 2)

2-2 Entities included in the organisation’s sustainability

reporting

Sustainable Business (page 61)

Notes to Consolidated Financial Statements

(pages 272 to 274)

2-3 Reporting period, frequency and contact point Sustainable Business (page 61)

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 2)

Our purpose and strategy framework (page 18)

JSC Bank of Georgia business model (page 20)

2-7 Employees Sustainable Business (page 120)

2-8 Workers who are not employees Sustainable Business (page 120)

Governance

2-9 Governance structure and composition Directors’ Governance Statement (pages 188 to 197)

Board of Directors (pages 198 to 200)

2-10 Nomination and selection of the highest governance body Nomination Committee Report (pages 206 to 213)

2-11 Chair of the highest governance body Directors’ Governance Statement (pages 188 to 190)

Board of Directors (pages 198 to 200)

2-12 Role of the highest governance body in overseeing the

management of impacts

Sustainable Business (Page 61; pages 102 to 193)

Directors’ Governance Statement (pages 188 to 197)

2-13 Delegation of responsibility for managing impacts Sustainable Business (pages 61; pages 92 to 98; pages 102

to 193)

Directors’ Governance Statement (pages 188 to 197)

2-14 Role of the highest governance body in sustainability

reporting

Section 172 Statement (page 59)

Sustainable Business (page 61; page 102; page 103)

Directors’ Governance Statement (pages 118 to 197)

2-15 Conflicts of interest Director’s Governance Statement (page 191)

Nomination Committee Report (page 210)

Audit Committee Report (pages 220 and 222)

Directors’ Remuneration Report (page 229)

Directors’ Report (page 251)

2-16 Communication of critical concerns Sustainable Business (page 90; page 122)

Risk Management (page 145)

Audit Committee Report (page 222)

2-17 Collective knowledge of the highest governance body TCFD (page 103)

Governance (page 187)

2-18 Evaluation of the performance of the highest governance

body

Directors’ Governance Statement (pages 196 to 212)

2-19 Remuneration policies Directors’ Remuneration Report (pages 243 to 247)

2-20 Process to determine remuneration Directors’ Remuneration Report (pages 229 to 247)

2-21 Annual total compensation ratio Directors’ Remuneration Report (page 237; page 239)

365

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

GRI indicator Description Report section or other documentation

GRI 2: General Disclosures 2021 (continued)

Strategy, Policies and Practices

2-22 Statement on sustainable development strategy Chairman’s Statement (page 15)

Sustainable Business (pages 62 to 64)

2-23 Policy commitments https://bankofgeorgiagroup.com/governance/documents

Sustainable Business (pages 61 to 142)

2-24 Embedding policy commitments Sustainable Business (pages 61 to 142)

Risk Management (pages 144 to 148)

Principal Risks and Uncertainties (pages 150 to 169)

Directors’ Governance Statement (pages 188 to 197)

2-25 Processes to remediate negative impacts Sustainable Business (pages 67 to 80)

Principal Risks and Uncertainties (pages 150 to 169)

2-26 Mechanisms for seeking advice and raising concerns Sustainable Business (page 122)

https://bankofgeorgiagroup.com/governance/documents

2-27 Compliance with laws and regulations Principal Risks and Uncertainties (page 158)

2-28 Membership associations Sustainable Business (page 65)

Stakeholder Engagement

2-29 Approach to stakeholder engagement Section 172(1) statement (pages 52 to 57)

Directors’ Governance Statement (pages 178 to 183)

GRI 3: Material Topics

3-1 Process to determine material topics Sustainable Business (pages 62 to 63)

3-2 List of material topics Sustainable Business (page 63)

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

(page 18)

Our Key Enablers (page 19)

JCS Bank of Georgia Business model

(page 20)

Strategy and Performance (pages 25 to 51)

Sustainable Business (pages 61 to 142)

201-1 Direct economic value generated and

distributed

Overview of Financial Results (pages 172

to 183)

201-2 Financial implications and other risks and

opportunities due to climate change

Sustainable Business (pages 93 to 117)

GRI 203: Indirect Economic Performance 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 61 to 64)

203-2 Significant indirect economic impacts Sustainable Business (pages 134 to 140)

366

Annual Report 2023 Bank of Georgia Group PLC

Global Reporting Initiative (GRI)

content index continued

GRI indicator Description Report section or other documentation

GRI 200: Economic (continued)

GRI 205: Anti-corruption 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 70 to 71)

Principal Risks and Uncertainties

(pages 160 and 161)

205-3 Confirmed incidents of corruption and

actions taken

Sustainable Business (pages 70 to 71)

Principal Risks and Uncertainties (pages 160

to 161)

GRI 400: Social

GRI 401: Employment 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 120 to 132)

401-1 New employee hires and employee turnover Sustainable Business (pages 124 to 125)

401-3 Parental leave Sustainable Business (page 129)

GRI 404: Training and Education 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 125 to 127)

404-1 Average hours of training per year per

employee

Sustainable Business (page 127)

404-3 Percentage of employees receiving

regular performance and career

development reviews

Sustainable Business (page 127)

GRI 405: Diversity and Equal Opportunity 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (page 122)

https://bankofgeorgiagroup.com/

governance/documents

405-1 Diversity of governance bodies and

employees

Sustainable Business (page 122)

Governance at a glance (page 186)

405-2 Ratio of the basic salary and

remuneration of women to men

Sustainable Business (page 128)

GRI 418: Customer Privacy 2016

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 72 to 77)

Principal Risks and Uncertainties (pages 159

to 163)

418-1 Substantiated complaints concerning

breaches of customer privacy and losses

of customer data

Sustainable Business (page 76)

Non-GRI Disclosures

Customer protection

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 77 to 80)

Topic-specific indicator NPS Sustainable Business (page 8)

Customer experience

GRI 3: Material topics 2021 3-3 Management of material topics Strategy and Peformance (page 19)

Sustainable Business (page 78)

Topic-specific indicator NPS Strategy and Performance (page 19)

Financial inclusion and empowerment

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 87 to 91)

Topic-specific indicator Digital MAU

Volume of payment transactions

in BOG’s acquiring

Payment MAU

sCoolApp MAU

Number of Self-employed Borrowers

Strategy and Performance (pages 23 to 24)

367

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

GRI indicator Description Report section or other documentation

Non-GRI Disclosures (continued)

Product innovation

GRI 3: Material topics 2021 3-3 Management of material topics Strategy and Performance (pages 27; 43)

Topic-specific indicator Digital MAU

Digital DAU

Digital DAU/MAU

Share of products sold digitally

Number of transactions in Busienss mBank

and iBank

Strategy and performance (pages 28; 43)

Ethical business

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 67 to 80)

Topic-specific indicator Number of ethics-related concerns received Sustainable Business (page 80)

Climate, environmental, and social management of loan portfolio

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 93 to 97)

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 108)

Human rights

GRI 3: Material topics 2021 3-3 Management of material topics Sustainable Business (pages 111 to 112)

Sustainable Business (pages 134 to 137)

Topic-specific indicator eNPS Sustainable Business (page 130)

Risk management

GRI 3: Material topics 2021 3-3 Management of material topics Risk Management (pages 144 to 148)

Topic-specific indicator Risk indicators Principal Risks and Uncertainties (pages 150

to 169)

368

Annual Report 2023 Bank of Georgia Group PLC

References

The Bank, BOG, or

Bank of Georgia

JSC Bank of Georgia

The Group Bank of Georgia Group PLC and its group companies as a whole

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

Supervisory Board Supervisory Board of the Bank

Executive Management Team Executive Management and Executive Management Team are used interchangeably throughout

the report. Both represent Management Team of the Group as presented on the Group’s website

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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Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Glossary

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-

today operating decisions;

Strategic terms

Active merchant

At least one transaction executed within

the past month;

Monthly active user –

retail or business (MAU)

Number of customers who satisfied pre-

defined activity criteria within the past

month;

Monthly active digital user

(Digital MAU)

A user with at least one login within past

month in BOG APP/iBank/sCoolApp;

Digital daily active user

(Digital DAU)

Average daily number of retail customers

who logged into our BOG APP/iBank/

sCoolApp at least once within the past

month;

Payment MAU

Number of Bank’s retail customers who

made at least one payment with a BOG

card within the past month;

Ratio definitions

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. To calculate the y-o-y growth

without the currency exchange rate

effect, we used the exchange rates

of relevant currencies to GEL as of

31 December 2022;

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: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). Calculations are made for Bank

of Georgia standalone, based on IFRS;

Loan yield

Interest income from loans to customers

and finance lease receivables divided by

monthly average gross loans to customers

and finance lease receivables;

NBG (Basel III) Common Equity

Tier 1 (CET1) capital adequacy

ratio

Common Equity Tier 1 capital divided

by total risk-weighted assets, both

calculated in accordance with the

requirements of the National Bank of

Georgia. Calculations are made for Bank

of Georgia standalone, based on IFRS;

NBG (Basel III) Tier 1 capital

adequacy ratio

Tier 1 capital divided by total risk-

weighted assets, both calculated in

accordance with the requirements of the

National Bank of Georgia. Calculations

are made for Bank of Georgia standalone,

based on IFRS;

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. Calculations

are made for Bank of Georgia standalone,

based on IFRS;

Net interest margin (NIM)

Net interest income for the year

divided by monthly average interest

earning assets excluding cash and cash

equivalents and corporate shares 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). Calculations are made for Bank of

Georgia standalone, based on IFRS;

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 and finance lease receivables

divided by NPLs (discounted value of

collateral is added back to allowance

for expected credit loss);

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;

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Annual Report 2023 Bank of Georgia Group PLC

Glossary continued

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.

Executive management

functions

CEO

Chief Executive Officer

CFO

Chief Financial Officer

CLO

Chief Legal Officer

CMO

Chief Marketing Officer

CRO

Chief Risk Officer

371

Annual Report 2023 Bank of Georgia Group PLC

Strategic Report Governance Financial Statements Additional Information

Shareholder information

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

29 Farm Street

London W1J 5RL

United Kingdom

Annual General Meeting

The Annual General Meeting of Bank of Georgia Group PLC (the ‘AGM’) will be held at Baker & McKenzie LLP, 280 Bishopsgate,

London EC2M 4RB. 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

E-mail: 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 149 to 169. 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.

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Annual Report 2023 Bank of Georgia Group PLC

www.bankofgeorgiagroup.com

BANK OF GEORGIA GROUP PLC Annual Report 2023