KEEPING UP WITH
KEEPING UP WITH
THE NEW REALITY
THE NEW REALITY
20
20
TBC Bank1 is the largest banking group
in Georgia, serving around 92% of the
country’s adult population.
TBC Bank is listed on the premium
segment of the London Stock
Exchange and is a FTSE 250 constituent.
It is also a member of the MSCI United
Kingdom Small Cap Index.
CONTENTS
STRATEGIC REPORT2
At a glance
Chairman’s statement
Ceo letter
Georgia
Business model and strategy
Divisional overview
Stakeholder engagement
Doing business responsibly
Material existing and emerging risks
Risk management
Financial review
GOVERNANCE2
Directors’ governance statement
Directors’ report
Board biographies
The banks’ management board
biographies
Corporate governance &
Nominiation committe report
Risk committee report
Remuneration committee report
Audit committee report
4
8
10
14
18
28
70
74
102
114
131
146
156
162
166
169
173
177
214
FINANCIAL STATEMENTS
Independent auditors’ report
Consolidated statement of financial position
Consolidated statement of profit or loss
and other comprehensive Income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Separate statement of financial position
Separate statement of changes in equity
Separate statement of cash flows
Notes to the consolidated
and separate financial statements
Shareholders information
Glossary
Abreviations
225
233
234
235
236
237
238
239
240
374
375
376
For more information visit our website
www.tbcbankgroup.com
1 TBC Bank Group PLC (the company) is a public limited com-
pany registered in England and Wales. It is the parent com-
pany of JSC TBC Bank (the Bank) and a group of companies
that principally operate in Georgia in the financial sector and
other closely related fields, together referred as TBC Bank or
the Group. The Group also recently expanded its operations
in Uzbekistan.
2 The figures in the strategic report and governance sections
are unaudited, except where explicitly indicated as audited
3
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 AT A GLANCE
WHO WE ARE ?
We are a leading universal financial group in Georgia with market shares1 of 39.0% and
37.2% in total loans and deposits respectively. We have a strong presence across all our
major business segments – retail banking, micro, small and medium enterprises (MSMEs)
and corporate banking. We also offer a wide range of traditional financial services paired
with innovative digital solutions, creating a seamless customer experience. Recently, we
expanded our banking operations in Uzbekistan, where we pursue an asset light and
highly digitalized strategy.
FULL SUITE OF TRADITIONAL
FINANCIAL SERVICES
BEST-IN-CLASS
DIGITAL CHANNELS
THE LEADING PROVIDER OF PAYMENT
SOLUTIONS IN GEORGIA AND UZBEKISTAN
INTERNATIONAL
EXPANSION
HOW WE ARE DIFFERENT ?
CUSTOMER -
CENTRIC
APPROACH
MARKET LEADING
DIGITAL
EXPERIENCE
1 Based on data published by the National Bank of Georgia as of 31 December 2020
4
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR MISSION
is to make life easier
This approach defines everything we do and how we do it:
all our products and offerings are created with this idea in
mind and we strive to combine excellence with simplicity.
Commercial banking;
Leasing;
Insurance;
Brokerage and investment banking.
Award-winning internet and mobile banking applications;
The innovative and scalable fully digital bank, Space;
Customer focused digital ecosystems operating in e-commerce;
auto and housing sectors.
Our payments ecosystem includes both traditional payment channels such as
e-commerce, POS and self-service terminals as well as innovative payment methods
comprising Apple Pay, QR payments and e-wallet.
Next generation digital banking in Uzbekistan serving clients
through our Space digital banking platform branded as TBC UZ.
ADVANCED
DATA ANALYTICAL
CAPABILITIES
COLLABORATIVE
AND DYNAMIC
CORPORATE
CULTURE
STRONG
AND HIGHLY
TRUSTED
BRAND
5
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
AT A GLANCE CONTINUED
RESILIENT FINANCIAL
PERFORMANCE
SOLID CAPITAL
AND LIQUIDITY
BEST-IN-CLASS
DIGITAL CHANNELS1
OUTSTANDING
CUSTOMER EXPERIENCE
HIGH EMPLOYEE
SATISFACTION LEVELS
STRONG BRAND5
Including Space transactions
1
2 Based on a survey of the retail segment conducted by IPM, an independent research company in December 2020
3 Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank’s employees
4 Employee Happiness Index was assessed internally based on comprehensive survey prepared with the assistance of the world’s leading
consulting firm and measures whether employees feel happy and satisfied with their job. The index was measured in July 2020 for the
Bank’s employees
5 Based on survey conducted by the independent research company, ACT in December 2020
6
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
₾ 322.5 mln
- 40.3% YoY
NET PROFIT
11.7%
- 11.2pp YoY
RETURN ON EQUITY
24.7%
- 2.1pp YoY
RETURN ON EQUITY BEFORE EXPECTED
CREDIT LOSS ALLOWANCES
1.6%
- 1.6pp YoY
RETURN ON ASSETS
10.4%
- 1.6pp YoY
CET 1 CAR
MIN. REQUIREMENT 7.4%
₾ 15,200.5 mln
₾ 12,572.7 mln
+ 20.0% YoY
TOTAL LOANS
+ 25.1% YoY
TOTAL DEPOSITS
17.1%
- 2.0pp YoY
TOTAL CAR
MIN. REQUIREMENT 13.7%
134.2%
+ 24.1pp YoY
LIQUIDITY COVERAGE RATIO
MIN. REQUIREMENT 100%
95%
+ 2pp YoY
RETAIL OFFLOADING RATIO
50%
+ 2pp YoY
INTERNET AND MOBILE BANKING
PENETRATION
BEST SERVICE COMPANY IN GEORGIA2
68%
ENPS3
85%
EMPLOYEE HAPPINESS INDEX4
95%
AIDED BRAND AWARENESS
AMONG GEORGIAN POPULATION
46%
TOP OF MIND IN BANKING SECTOR
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
7
CHAIRMAN’S STATEMENT
Dear Shareholders,
I am proud of the way the
Group has coped with the
challenges of 2020 and
continued to carry out its
duties with great enthusiasm
and commitment. As a result,
I can see TBC emerging as
a stronger and more agile
company for the benefit of
our stakeholders.
In March 2021, Arne Berggren was appointed as the Chairman of the Board and Chairman of the Supervisory Board, after
Nikoloz Enukidze stepped down from these positions. More information can be found in Directors’ Governance Statement.
OVERVIEW AND STRATEGY
During 2020, the Group managed to develop its business and make strategic progress despite the economic head-
winds caused by the global pandemic. Solid revenue generation, coupled with strong efficiency levels, allowed us to
absorb high credit loss provisions related to COVID-19 and at the same time record a return on equity of 11.7%. Our
performance demonstrates the resilience of our customer-centric business model, which is based on core principles
of sustainable development, digitalization, innovation and efficiency.
In the beginning of the year, we reviewed the appropriateness of our strategic directions in light of the pandemic.
The conclusion was to further strengthen our customer-centricity, to accelerate our digital journey, to maximize our
data analytical capabilities and to pursue our international expansion strategy. The development and growth of all
our business segments has been underpinned by these four pillars, and we are confident that they will be essential
for strengthening our competitive position further in the post COVID-19 world. Shaping a strong and agile corporate
culture remained at the top of our agenda and we continued to invest in our colleagues’ wellbeing, safety, profession-
al development and skills, as we realize that our colleagues are the backbone of our success.
At the same time, we continued to invest in new growth opportunities. By the end of the year, we successfully
launched our banking operation in Uzbekistan where our ambition is to become the most innovative digital bank in
the country, with a focus on retail and MSME clients. In parallel, we are developing our payments business in Uzbeki-
stan through our Payme subsidiary, which reached 2.9 million users by the end of 2020.
OPERATING ENVIRONMENT
Georgia’s small and open, tourism-dependent economy was hit hard by the global pandemic. Tourism inflows, which
were growing at around 20% year-on-year at the beginning of 2020 despite the 2019 Russian flight ban, fell close
to zero and stayed there throughout the year. The two separate lockdowns introduced during the year resulted in
additional downward pressure on economic activity. At the same time, exports, remittances, and, to large extent, FDI
inflows have demonstrated resilience. This, coupled with timely fiscal stimulus, predominantly financed externally, to
a significant extent has mitigated the negative impact of the pandemic. In addition, the banking system continued to
grow despite the challenging operating environment, which, coupled with the central bank’s active FX interventions,
provided additional, important shock mitigation to support the local currency.
After contracting by 6.1% in 2020, the Georgian economy is expected to start to recover in 2021 and exceed the 2019
level in 2022, according to a consensus of international financial institutions and major research firms. Once the virus
is contained, the tourism sector should recover relatively quickly and start contributing to economic growth, as its
potential is still untapped. At the same time, the contribution of non-tourism sectors will also be important to create
a more diversified economy. Since the Group is gradually increasing its operations in Uzbekistan, it is important to
highlight that the country was able to grow by 0.6% in 2020 and that growth is expected to accelerate by 4.3% and
4.5% in 2021 and 2022, respectively, according to the World Bank’s projections.
8
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
THE BOARD
During 2020, the following changes of the Board composition took place. In July 2020, Mr Abhijit Akerkar was ap-
pointed as Independent non-executive Director. Mr. Akerkar is an influential thought leader in artificial intelligence in
banking and will bring a wealth of experience in IT technology to the Group. After ten years of dedicated work, our
CFO, Giorgi Shagidze, left the Group to pursue other opportunities and consequently resigned from his position of
the executive Director of the Board. We are grateful to Mr. Shagidze for the significant contribution he has made to
the success of the Group.
Following amendments to the National Bank of Georgia’s (“NBG”) Corporate Governance Code in February 2021,
which are described in detail in Directors’ Governance Statement, more changes to the Board’s composition will
take place during 2021. The Board will continue implementing commitments made to the NBG regarding succession
planning and nominate new members who meet the new independence requirements. The Board’s composition will
be reviewed in order to ensure that it has the right mix of skills, backgrounds and experience to address the challeng-
es facing the Bank and to lead the Group in the right direction.
2020 was a particularly challenging year and I believe that the Board played on important role in steering the compa-
ny through these turbulent times while maintaining profitability as well as unlocking new opportunities for the post
COVID-19 reality. I would like to use this opportunity to thank each Board member for his/her commitment, profes-
sionalism and outstanding efforts.
OUR ESG FOCUS
The importance of sustainable business practices has been highlighted once more by the crisis caused by COVID-19.
It became obvious that caring for the wellbeing of employees, customers and other partners is central not only for
governments but also for companies. Companies with a strong culture of trust, commitment and innovation will
manage to adapt to the new reality and continue their operations with relative ease.
We were among the first companies in Georgia to demonstrate support for our colleagues, customers and the com-
munity. We did this by moving to remote working practices, by offering grace periods to our customers, by continuing
to provide financial support to businesses, and by launching a wide-scale support programme called TBCforyou for
the Georgian population to reduce the damage caused by COVID-19. Moreover, we supported the local production
of disposable medical masks, medical clothes and disinfectants in order to help to contain the spread of the virus,
as well as promote local employment during these challenging times. In addition, in order to help our MSME clients
to withstand the crisis, we supported their digitalization journey by offering them various programmes and partner-
ships, and continued our support programme for start-ups. Full information about our initiatives in this regard is given
in the doing business responsibly section on pages 74-101 and in our divisional review section on pages 28-69.
In 2020, we also became the first bank in Georgia to successfully complete the ISO 14001:2015 certification audit
remotely and receive the ISO 14001:2015 certification for our environmental management system. The certification
is testament to our environmental management system’s full compliance with international standards (our full Envi-
ronment Policy is available at the following link www.tbcbankgroup.com). Furthermore, in 2020, we released the first,
full-scale sustainability report prepared in reference to the Global Reporting Initiative (GRI) standards, which can be
found at the following link: www.tbcbankgroup.com.
I am also delighted that JSC TBC Bank has received the Best Annual Report and Transparency Award1 for the sec-
ond year in a row, showcasing our high reporting standards for both financial and non-financial information, which
enables our investors and other stakeholders to gain a holistic view of our performance.
OUTLOOK
Having seen the way the Group has managed to withstand the challenges in 2020 without losing focus on its daily
operations and strategic objectives, I am filled with confidence that we are well positioned to achieve our ambitions
in the coming years and create sustainable returns for our shareholders and other stakeholders.
Finally, on behalf of the Board, I would like to thank the management team and all our colleagues for their hard work
and dedication. We are fortunate to have such a strong team and I am excited to embark with them on the exciting
agenda that lies ahead of us in 2021.
1 The European Union and World Bank joint project - Georgia Financial
Inclusion and Accountability – in partnership with the National Reforms
Support Foundation in Accounting, Reporting and Auditing.
Arne Berggren
Chairman
26 April 2021
9
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CEO LETTER
Dear Shareholders,
I am delighted to report that
the Group delivered resilient
financial performance
during the year and achieved
remarkable operating results
in an extremely challenging
external environment.
SUMMARY OF THE YEAR
Looking back at 2020, three words come to my mind: support, agility and digitalization.
From the very early days of pandemic outbreak in March, we promptly mobilized all our efforts to support our em-
ployees and customers and stood firmly by their side throughout the year. We were one of the first Georgian com-
panies to implement remote working practices for our back-office employees and equip our front offices with all
the necessary protective measures to ensure the full safety for our customers and employees. In addition, senior
management conducted regular online meetings with our colleagues in order to address any concerns that em-
ployees might have and to provide assurance about our financial stability. We also made the commitment to retain
all our staff during 2020 despite the slowdown in business activities. We pride ourselves on having maintained high
employee motivation and engagement levels during the year, with our Employee Net Promoter score amounting to
68%1 and our Engagement Index reaching as high as 91%2. In addition, this year we measured the Employee Happi-
ness Index for the whole organization for the first time, which yielded a very satisfying result: 85%3 of our employees
felt happy and satisfied with their jobs.
Equally important was extending support to our customers and demonstrating through our actions what customer
centricity actually means to us. First and foremost, we offered eligible customers two major three-month grace pe-
riods, conducted loan restructurings where appropriate, continued to provide funding and actively participated in
various government support programmes.
Conducting business as usual and serving our customers without any disruption via our distribution network was an-
other priority for us. Our market-leading digital channels proved to be essential, enabling our customers to conduct
most of their banking transactions remotely. Moreover, our call center worked with increased capacity during the
early days of the pandemic in order to address our customers’ concerns in a timely manner. We are delighted that
our efforts were acknowledged by our customers and TBC was once again regarded as the best service provider in
the country in 2020, based on a customer satisfaction survey conducted by IPM, an independent research company,
in December.
MACROECONOMIC OVERVIEW
Following a 5.6% drop in the third quarter, real GDP decreased by 6.5% year-on-year in the last quarter of 2020 due
to the reintroduction of a partial lockdown in late November. For the full year 2020, the drop in GDP was 6.1%. Since
the beginning of the pandemic, tourism inflows have remained close to zero, although non-tourism inflows have dis-
played resilience. During the year, exports decreased by 12.0% in US$ terms (or increased by 3.5% without re-exports),
while imports dropped by 15.9% over the same period. As a result, the trade balance improved by around one billion
US$, or by 18.8%, compared to 2019. In addition, remittance inflows increased by 8.8%4 in 2020, including a strong
15.7% year-on-year growth in the fourth quarter.
10
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Alongside fiscal stimulus, credit also supported economic activity. During the year, the total banking loan portfolio
expanded by 9.1%, excluding the exchange rate effect, mainly driven by the retail segment on the back of the state
mortgage subsidy programme. The two major three-month long loan repayment grace periods introduced during
the year also contributed to the increase in loan balances.
Based on TBC Capital’s latest estimates, the economy is expected to recover by 4.2% in 2021. According to the World
Bank’s latest projections5, the Georgian economy will grow by 4.0% and 6.0% in 2021 and 2022, respectively.
RESILIENT FINANCIAL PERFORMANCE
In 2020, our operating income amounted to GEL 1,156 million, up by 2.4% year-on-year basis driven by an increase in
net interest income. Over the same period, our income generation was supported by effective cost management.
During the year, we also recorded a net modification loss of financial instruments in the amount of GEL 41.0 million
to reflect the decrease in the present value of cash flows resulting from the loan repayment grace periods granted to
borrowers. As a result, our ROE before expected credit loss allowances amounted to 24.7% compared to 26.8% a year
ago. For the full year 2020, our net interest margin was 4.7%, while the cost to income ratio for the group amounted
to 38.4%, an improvement of 1.5pp year-on-year, and 32.9% for the standalone bank. In 2020, our provision charges
increased significantly to cover the potential impact of the COVID-19 pandemic on our borrowers, which resulted in
a total cost of risk for the full year of 2.4% compared to 0.7% in 2019. As a result, we recorded a consolidated net profit
of GEL 322.5 million for 2020, while our return on equity and return on assets stood at 11.7% and 1.6%, respectively.
Our loan book increased by 8.7% year-on-year in constant currency terms, which translated into a 39.0% market
share. Over the same period, our deposits increased by 13.8% on constant currency terms. As a result, our market
share in total deposits amounted to 37.2% as of 31 December 2020.
Our liquidity and capital positions remain strong. As of 31 December 2020, our net stable funding (NSFR) and liquidity
coverage ratios (LCR) stood at 126.0% and 134.2%, respectively. Our capital ratios improved quarter-on-quarter as a
result of net profit generation (no extra COVID-19 related provisions were booked in the fourth quarter, per NBG
provisioning rules). Our CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0% and 17.1%, respectively, and remained
comfortably above the eased minimum regulatory requirements by 3.0%, 3.8% and 3.4%, accordingly.
BUSINESS UPDATE
As digital offerings became a true necessity during the pandemic, we further increased our digital focus and intro-
duced new products and services, including a fully digital onboarding process via our internet and mobile banking
platforms, digital lending platforms for retail customers, a mobile app for businesses and a digital platform for fac-
toring. Our offloading ratio in the retail segment6 remained high at 95% in 2020, while the number of digital users7 in
the fourth quarter reached around 692,000, up by 8.7% year-on-year.
In 2020, we maintained our leading position in the payments business, both in terms of payments acceptance and
retail transactions. The total volume of transactions performed by our retail banking customers stood at GEL 76.2
billion, down by 6.3% year-on-year, while our payments acceptance business processed GEL 14.3 billion transactions,
up by 8.3% year-on-year, served around 14,750 merchants and kept our market share in e-commerce & POS of 58%8
by volume of transactions. Our subsidiary, TBC Pay increased its presence in the self-service terminal market to 3,905
terminals and maintained its leading position among peers. During 2020, we focused on further strengthening the
seamlessness of our payment services, introducing innovative payment solutions and strengthening our risk man-
agement practices. For retail customers we introduced subscription services and digital cards, and we also entered
the Tbilisi transportation payment network. For businesses, we further streamlined the onboarding processes and
introduced a digital plug-and-play checkout solution for ecommerce payments.
1 Our Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank’s employees.
2 Our Engagement Index was measured in October 2020 by an independent consultant for the Bank’s employees and measures how
much employees feel involved in and committed to TBC Bank.
3 Our Employee Happiness Index was assessed internally based on a comprehensive survey prepared with the assistance of the world’s
leading consulting firm and measures whether employees feel happy and satisfied with their jobs. The index was measured in July 2020
for the Bank’s employees.
4 Some of the increase was due to the reduced cash inflows and increased digital transfers as a result of the closed borders. Adjusted for
this component, the remittance inflows increased by an estimated 5.0% in 2020
Including Space transactions
5 World Bank, Global Economic Prospects, January 2021
6
7 Retail internet and mobile banking active users, including Space
8 Based on NBG data
11
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Last year was a significant milestone in terms of our international expansion. In April, we received our banking licence
in Uzbekistan, and in October, we launched our services for the wider public under the TBC UZ brand. At the center
of our services is our digital banking platform, Space. By the end of January, we attracted 26,520 users, delivered
12,002 debit cards, gained 1,857 deposit customers and launched our initial lending value proposition. We already
operate around 20 outlets, which are used for customer onboarding and assisted service support. At present, we
are only serving the retail segment, and we plan to extend our offering to MSMEs at a later stage. TBC UZ is run by
an experienced management team, comprised of both Uzbek and Georgian professionals. I am impressed by the
results of our Uzbek payments subsidiary, Payme, which grew significantly during the year, despite COVID-19, and
is the second largest payments provider in the country with its 2.9 million users. Its revenue increased by 94.7% and
amounted to GEL 16.6 million, while net profit grew by 89.1% and reached GEL 8.3 million.
OUTLOOK
2020 was a transformational year, significantly changing the way people lead their daily lives and interact with each
other. We did our best to embrace the change and turn challenges into new opportunities. Remote working practices
have given our employees more flexibility in finding the right work-life balance, online meetings have proved very
effective, while further digitalization of our processes and offerings have helped our customers to save more time.
Going forward, we will continue to strengthen our digital and analytical capabilities across all levels of the group in
line with our vision of making life easier for our customers as well as other stakeholders.
I would also like to re-iterate our medium term guidance: ROE of above 20%, a cost to income ratio below 35%, a
dividend pay-out ratio of 25-35% and loan book growth of around 10-15%.
The strategic report, as detailed on pages 4 to 145, was approved by the Board and signed on behalf of the Board by:
Vakhtang Butskhrikidze
CEO
26 April 2021
12
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020CEO LETTER CONTINUED 13
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GEORGIA
ECONOMIC OVERVIEW
ECONOMIC GROWTH
Georgia’s real GDP decreased by 6.1% in 2020 due to COVID-19 related lockdown measures and restrictions
throughout the year. However, real GDP is expected to increase by 4.2% in 2021, followed by a solid 7.4% YoY
growth in 2022 according to TBC Capital estimates.
REAL GDP GROWTH
6.4%
3.6%
4.4%
3.0%
2.9%
4.8%
4.8%
5.0%
2012
2013
2014
2015
2016
2017
2018
2019
2020**
2020
*Preliminary data
Source: Geostat
EXTERNAL SECTOR
-6.1%
While the tourism sector was hit hard with an 84.0%1 decline in inflows in US$ terms on an annual basis in
2020, other inflows demonstrated much more resilience. In 2020, exports in goods only declined by 12.0%
in US$ terms, but, without re-exports, they increased by 3.5%. It is important to highlight that the Georgian
economy produces very few, if any, investment goods, the demand for which will be more subdued com-
pared to the demand for essentials. In addition, remittance inflows have shown positive dynamics, with
money transfers up by 8.8%2 YoY. Regarding tourism, Georgia’s favorable tourism structure should be con-
sidered: the share of business and long-haul trips in tourism inflows is relatively small; the majority of visitors
arrive by car and Georgia enjoys an abundance of open-air tourism facilities. This, coupled with a roughly
20% growth in tourism inflows before the pandemic, despite the 2019 Russian flight ban, and expected
progress in vaccination and medical treatment, is anticipated to support the recovery of tourism industry. In
the baseline scenario we assume a recovery of 30.0% in tourism inflows in 2021 compared to the 2019 level,
followed by a 90.0% recovery in 2022.
As domestic demand deteriorated further due to the re-introduction of the partial lockdown, the decline
in imports of goods dipped to 17.2% YoY in the fourth quarter, compared to an 11.3% decrease in the third
quarter. For 2020 as a whole, imports dropped by 15.9% compared to 2019. The decline was partially offset by
more resilient food and beverages (-4.6% YoY) and industrial supplies (-6.7% YoY). On the other hand, all oth-
er broad categories suffered from sharp declines: consumer goods (-16.3% YoY), capital goods (-22.1% YoY),
transport equipment (-25.0%), and fuels (-27.5% YoY). As exports were stronger than imports, the balance of
trade in goods improved by US$ 1.075 billion, or by 18.8% YoY in 2020. However, the CA balance still likely
worsened for the full year, as the above-mentioned effects will be outweighed by the deteriorating balance
of trade in services due to the close-to-zero tourism inflows.
14
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CA DEFICIT AND NET FDI (% OF GDP)
9.5
8.2
8.1
10.5
6.0 6.5
5.3
4.6
5.5
5.9
4.4
YoY GROWTH OF INFLOWS AND
IMPORTS (%)
8.8
3.5
-12.0
-15.9
-5.6
-9.8
-11.4
-12.2
-10.2
-11.8
-12.4
-5.1
-6.8
-8.1
-12.0
2010
2011
2012 2013 2014 2015 2016 2017 2018
2019
2020*
CA Deficit to GDP
Net FDI to GDP
*Trailing four quarters as of Q3 2020
Source: NBG, Geostat
FISCAL STIMULUS
Remittance
inflows
Exports
Exports excl.
reexports
Tourism
inflows
Imports
-84.0
Source: NBG, Geostat
In 2020, the economy was strongly supported by the fiscal stimulus. Fiscal spending, which was mainly fi-
nanced by government external borrowings, stood at around 9.1% of GDP in 2020. Going forward, the stimulus
will remain sizable in 2021 and will start to decrease in the coming years as fiscal consolidation takes place.
FISCAL SPENDING (% OF GDP)
GROSS GOVERNMENT DEBT
(% OF GDP)
30
25
20
15
10
5
26.2
25.1
15
13
22.6
21.3
21.4
23.2
22.8
22.2
11
8.0
8.2
7.9
5.7
2.7
6.4
2.3
2.1
9.1
7.6
7.0
4.4
6.3
6.5
3.1
2.6
9
7
5
3
1
58.7
58.8
56.4
54.6
53.1
40.8
40.0
42.6
2017
2018
2019
2020E
2021F 2022F
2023F 2024F
2017
2018
2019
2020E
2021F 2022F
2023F 2024F
Budget deficit
Current spending
Capital spending
(RHS)
Source: MoF
Source: IMF, WEO October 2020
1 From the beginning of the pandemic, the decline in tourism inflows amounted to 95.0% YoY.
2 Some of the increase was due to reduced cash inflows and increased digital transfers as a result of the closed borders. Adjusted for this
component, the inflows stood at around 5.0% YoY.
15
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CREDIT GROWTH
Bank credit growth weakened to 9.1% YoY in FX adjusted terms by the end of 2020, compared to a 16.1% YoY
growth by the end of 2019. In terms of segments, corporate lending slowed to 6.9% YoY, compared to a solid
28.0% YoY in 2019. Similarly, MSME loan book growth slowed to 10.5% YoY from 18.6% YoY growth back in
2019. On the other hand, retail lending displayed a stong performance throughout the year, with 9.9% YoY
growth by the end of 2020, following a 6.1% YoY increase in 2019. Retail lending was supported by strong
mortgage demand on the back of the government mortgage subsidy programme. As for the non-mortgage
segment, growth strengthened on the back of the low base effect in 2019, due to the National Bank of Geor-
gia’s responsible lending regulations. At the same time, the grace periods on loan repayments also contrib-
uted to higher credit balances in 2020.
INFLATION, MONETARY POLICY AND THE EXCHANGE RATE
Although the GEL exchange rate depreciation remained an additional challenge in 2020, the response of
the central bank has been appropriate, compensating for the external shock through active interventions on
the FX market, selling a total of US$ 873.2 million. On the other hand, the National Bank of Georgia remained
prudent, easing the monetary policy rate gradually from 9.0% before the pandemic to 8.0% as of the end of
December 2020. By the end of 2020, the US$/GEL exchange rate stabilized at 3.28. The monthly dynamics
of prices indicate some moderation of inflation by the end of 2020, as prices only went up by 2.4%, however,
this was mostly explained by the government subsidy programme for household utilities. Given the delays in
the exchange rate pass-through to inflation, increased utility bills, and higher production costs, the inflation
rate is first expected to rise in 2021, before gradually retreating to its target level, which is only likely in 2022.
CPI IFLATION (YOY, %) AND MPR (%)
10
8
6
4
2
0
8.0
2.4
2014
2015
2016
2017
2018
2019
2020
-2
Monetary policy rate
Inflation
Source: NBG, Geostat
16
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020GEORGIA CONTINUED SELECTED CURRENCIES AGAINST US$*
150
140
130
120
110
100
90
0
2
-
n
a
J
0
2
-
b
e
F
0
2
-
r
a
M
0
2
-
r
p
A
0
2
-
y
a
M
0
2
-
n
u
J
0
2
-
l
u
J
0
2
-
g
u
A
0
2
-
p
e
S
0
2
-
t
c
O
0
2
-
v
o
N
0
2
-
c
e
D
US$/EUR
US$/RUB
US$/GEL
US$/AZN
US$/TRY
US$/AMD
US$/CNY
US$/UAH
*Index, 1-Jan-20 = 100; increase means depreciation against the US$
Source: NBG
GOING FORWARD
According to the World Bank’s latest Global Economic Prospects1, the Georgian economy is expected to
recover by 4.0% and 6.0% in 2021 and in 2022, respectively. The projection is broadly in line with TBC Capi-
tal’s baseline scenario, with a 4.2% increase in 2021 and a higher 7.4% rebound the following year. In terms of
Uzbekistan economy, the World Bank projects 0.6% growth in 2020, despite the impact of the pandemic. In
2021 and 2022, growth is expected to accelerate to 4.3% and 4.5%, respectively.
More information on the Georgian economy and financial sector can be found at www.tbccapital.ge.
1 World Bank, Global Economic Prospects, January 2021
17
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
BUSINESS MODEL AND STRATEGY
HOW WE CREATE VALUE -
OUR BUSINESS MODEL
We harness our
distinctive
competitive
advantages…
...to make our
customers lives
easier...
Retail segment
Serving 92% of Georgia’s
adult population;
The largest private bank in
Georgia;
Began expansion into
Uzbekistan.
MSME segment
First choice bank for MSMEs
in Georgia providing both
financial and extensive non-
financial services.
Corporate and Investment
Banking (CIB) segment
A leading CIB player in the
country, supporting all major
sectors of the economy.
Best-in-class digital
capabilities built over
the years by continuous
investment in cutting-edge
solutions;
Advanced data analytical
capabilities embedded into
the development of our
value proposition;
Superior customer
experience across our
omni-channel distribution
network;
Strong brand awareness
and superb reputation
for credibility, excellence,
innovation and community
service;
Strong corporate culture
centered on collaboration
and commitment;
Excellent corporate
governance and
sophisticated risk
management system.
18
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 We have a customer-centric business model focused on providing
the best customer experience in servicing the everyday needs
of our clients. Our strategy is centered on the core principles of
sustainable development, digitalization, innovation and efficiency,
and is designed to create value for all our stakeholders.
...which translates
into resilient
financial and
operating results…
...and enables
us to create
value for all our
stakeholders.
Resilient profitability;
Sustainable business
growth;
Sound asset quality;
Strong liquidity level and
prudent capital position;
High digitalization levels
across all business
segments;
Superior customer
satisfaction levels;
Highly motivated and
engaged team.
Generate robust and long-
term sustainable returns for
our shareholders;
Be a reliable partner for our
debt investors;
Provide well-suited
solutions and a superior
customer experience to our
customers;
Offer challenging and
rewarding careers for our
colleagues;
Support business
development and foster job
creation;
Support for the community
through a wide range of
CSR activities and preserve
the environment.
...by creating
customer centric,
digital financial
solutions,
integrated with
other products
and services used
by our clients on a
daily basis...
The leading bank in
Georgia, holding 39.0% and
37.2% market shares1 in total
loans and total deposits
respectively;
The most advanced omni-
channel platform with a
strong focus on digital;
#1 position on the market
in the number and volume
of POS and e-commerce
transactions1;
The innovative and scalable
fully digital bank, Space that
could be easily utilised as
a core banking platform for
the international expansion;
First digital ecosystems
in the country enabling
our customers to access a
variety of related products
and services, including
banking services, on one of
our platforms.
1 Based on NBG data
19
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR STRATEGY
In light of the COVID-19 pandemic, we reviewed our strategic priorities in March, 2020 given the increased
pressure on capital and people, as well as emerging opportunities. It was agreed that, in line with our vi-
sion of making people’s lives easier, our main focus for the year would be supporting our customers by
leveraging our market-leading digital capabilities, advanced data analytics and providing superior customer
experience. In parallel, we have been safeguarding our colleagues by providing them with a safe working en-
vironment and, where possible, enabling them to work remotely. We have also continued to roll out our agile
transformation project across the company, since it helps to develop such skills as autonomy, responsibility
and flexibility, which proved to be crucial during the crisis.
International expansion into Uzbekistan also remained at the top of our agenda, as we believe that our digi-
tally enabled growth strategy, based on our digital banking platform, Space, has become even more relevant
in the light of the pandemic and strengthens our competitive edge.
In terms of financial measures, we have prioritized prudent management of our capital and liquidity positions,
proactive management of our asset quality, as well as cost optimization. We have also concentrated our efforts
on maintaining sound revenue streams despite the economic slowdown by giving careful consideration to our
customers’ needs and offering them the most relevant products and services at suitable prices.
OUR 5 KEY STRATEGIC PRIORITIES
1
Creating a market leading digital experience
We continue to harness our best-in-class digital capabilities to create end-to-end digital experiences for
our customers. This year, we enriched our internet banking applications for retail and business customers
with a number of new, useful features and added several upgrades to our retail mobile app. In addition, we
rolled out a number of new digital lending platforms for our retail customers, which are very user-friendly and
help people to get a loan in a simple and fast way. Another important development was the introduction of
a brand new mobile banking app for businesses. This app features a similar interface to our award-winning
retail mobile banking application and is also equipped with specifically created upgrades to meet the needs
of business owners. On the corporate side, we launched a digital platform for factoring, which significantly
simplifies the process for all parties involved. Furthermore, we continue to enhance our digital experience
by introducing new digital payment solutions and more closely integrating our digital ecosystems with our
core banking products and services.
In parallel, in order to support our digitalization efforts, we have continued to strengthen our in-house IT
competences and architecture by investing in the newest technology, developing IT talent and updating our
legacy systems with modern technologies, as well as increasing the automatization of internal processes.
PROGRESS IN 2020
95% + 2pp YoY
RETAIL OFFLOADING RATIO1
20
+8.7% YoY C. 692,000
RETAIL DIGITAL USERS2
BUSINESS MODEL AND STRATEGY CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2
Utilizing our advanced data analytical capabilities
We aim to strengthen our leading position in the country through enhancing our advanced analytical capabili-
ties. This will help us to build more appealing, personalized, timely and effective value propositions in different
touch points. This, in turn, will lead to improved margins and an increased wallet share across all segments.
For this purpose, we continue to follow our 3-year analytical roadmap, which has been developed in 2018,
with the support of the world’s leading consultant and is comprised of 23 data analytical projects across the
bank and targets to generate an extra GEL 100 million annual net profit by 2023. In 2020, we successfully
rolled out several projects in retail, corporate, MSME and risks departments, which were mainly aimed at
improving our customer centricity.
In parallel, we continue to build a competence center that will unify all business data and analytical capabil-
ities and will enable us to create a competitive advantage. Within our data analytics academy “Avalanche”,
we have conducted various trainings for our dedicated team of 50 employees in order to keep abreast of
new technological developments in this field. Moreover, in June 2020, we conducted TIDA (Tbilisi Interna-
tional Data Analytics Conference), the first business data and analytics conference in the Caucasus, to at-
tract new talent and learn from the world’s industry-leading experts. The event attracted over 400 attendees
from over 100 companies and 25 industries. In addition, to raise awareness about the importance of data
analytics across the company and get a better understanding of business needs, our data analytics special-
ists regularly meet with representatives of different departments and present their work. This year, we also
developed Big Data multi-tenancy technology capabilities to enable advanced analytics within TBC Bank.
PROGRESS IN 2020
9 projects
COMPLETED IN 2020
GEL 20 mln
EXTRA REVENUE GENERATED
Including Space transactions
1
2 Retail internet and mobile banking active users, including Space transactions
21
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 3
Delivering superior customer experience
We aspire to become even more customer-centric and provide the best customer experience in the country.
This is becoming more and more challenging since customer demands and expectations are increasing. We
have therefore come up with truly innovative products and services that are relevant, personalized, simple
and adequately priced. In doing so, we listen carefully to our customers’ feedback through various surveys
and focus groups, as well as utilize our advanced digital and analytical capabilities to create the most up-to-
date and suitable offers. In parallel, we are polishing our digital channel experience through upgrading our
branch design, introducing modern co-working space for our affluent customers and enhancing our digital
banking with new features. We are also streamlining our internal processes to decrease “time to market”
and “time to yes” for our products. Given the critical importance of fostering a customer-centric culture, we
have updated our incentive system for frontline staff and carried out different internal promotional events
and celebrations for important customer-centricity projects. Furthermore, we conduct on regular basis a
“voice of the internal customer” survey, which allows each employee to assess the quality of service of other
departments, which ultimately has an impact on external customer service. Our diverse ecosystems are also
helping us to strengthen our brand and relationships with customers by building our position as a trusted
partner in all key areas of their daily lives.
PROGRESS IN 2020
THE BEST SERVICE
COMPANY IN
GEORGIA1
CUSTOMER PERSPECTIVE
80% SCORE
IN CUSTOMER-
CENTRICITY SURVEY2
EMPLOYEE PERSPECTIVE
22
BUSINESS MODEL AND STRATEGY CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 4
Transforming ways of working
We strive to create a corporate culture that enables the transformation and agility of the group. The ability
to quickly and efficiently reconfigure strategy, structure and processes in order to adjust to new realities is
becoming essential in today’s highly dynamic and challenging world. The COVID-19 pandemic proved that
established working practices can collapse overnight and that businesses need to find new ways to survive.
Naturally, this comes down to corporate culture and the readiness of people to embrace change rather than
resist it. We firmly believe that our agile culture played an important role in helping us to quickly transform
our working practices during the pandemic with minimal disruption to our daily operations. Therefore, we
have continued to expand our agile structure to more departments within the Bank, as well as fine-tune agile
working practices in the departments that have already embraced it. By the end of the year, around 86% of
headquarter delivery functions3 have become part of the agile transformation process, as well as some parts
of the support functions including finance and risks. Next year, we plan to add more support functions to
the agile transformation process.
At the same time, maintaining a high team spirit and caring about our employees’ wellbeing remained at
the top of our agenda and we carried out various initiatives in this regard, the most important of which was
the introduction of remote working practices for back office employees and call center employees, while
ensuring the full safety of our front office employees during the pandemic.
PROGRESS IN 2020
+ 30% YoY
IMPROVED ORGANIZATIONAL AGILITY SCORE4
+ 1.4 times YoY
IMPROVED TIME-TO-MARKET AND RELEASE FREQUENCY5
68% + 27pp
ENPS SCORE6
1 Based on a survey of the retail segment conducted by IPM, an independent research company in December 2020
2 based on internal survey among TBC Bank’s employees in December 2020
3 HQ delivery functions include product development, IT, segment management, central sales management, marketing, excluding sup-
port functions such as HR, Finance, Legal, Risk, Compliance, Accounting, etc.
4 Based on internal survey, which measures the company’s ability to respond to the fast changing environment
5 Time-to-market measures the time it takes for the product to be launched from the idea origination date to the release date, while
release frequency measures how many times the systems are renewed within the given period of time
6 Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank’s employees
23
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 International expansion
5
Despite the COVID-19 related challenges, we continued to pursue our international expansion strategy in
Uzbekistan, given our strong focus on digital banking operations. After obtaining a banking licence in April,
we successfully launched our banking operations in June. Initially, we operated in pilot mode for friends and
family only, while in October, we extended our offerings to the wider Uzbek population. We serve our clients
through our digital banking platform, Space, which has been published on PlayMarket and the Appstore,
and is branded as TBC UZ in Uzbekistan, while our smart, next generation branches are used primarily for cli-
ent advising and consulting purposes. Our current value proposition covers the retail segment and includes
opening an account, ordering a debit card and making payments and transfers. Next year, we plan to add
more products including savings and lending in line with our go-to-market approach. By the end of 2020,
our investment into the charter capital of TBC Uzbekistan amounted to US$ 22 million.
At the same time, our Uzbek payments business, Payme, continued its rapid growth through new customer
acquisition and diversification of its offerings to existing clients. Payme is a fast growing, profitable payment
service provider in Uzbekistan that supplies high-quality payment solutions. It facilitates utility payments, P2P
transfers, loan repayments, mPOS for QR-based payments and e-commerce purchases. It also provides a
marketplace platform for loans from certain Uzbek banks. In 2020, Payme launched a number of new products
including an online wallet, digital cards “visa visual” and USSD (unstructured Supplementary Service Data)
menu. Payme will continue to operate separately from the Bank but the two entities will co-operate closely.
In terms of the Azerbaijan venture, the shareholder agreement with Yelo Bank expired at the end of 2020 be-
fore the merger between TBC Kredit and Yelo Bank could be implemented. Our Azeri subsidiary, TBC Kredit,
will continue to its operations as previously, while for the next 18 months, our international expansion efforts
will be focused on Uzbekistan market.
PROGRESS IN 2020
12,200
REGISTERED CUSTOMERS OF TBC UZ
2.9 mln + 63% YoY
REGISTERED USERS OF PAYME
+ 95% YoY GEL 16.6 mln
PAYME REVENUE
+ 89% YoY GEL 8.3 mln
PAYME PROFIT
24
BUSINESS MODEL AND STRATEGY CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 KEY PERFORMANCE
INDICATORS
We closely monitor progress against our strategy and have
developed key performance indicators (KPIs) that measure our
financial and operational performance. The Board reviewed the
relevance of existing KPIs in the light of COVID-19 pandemic and
was satisfied that they continued to provide the best indication as
to whether our strategy was working and ensured the long-term
sustainable growth of the Group.
FINANCIAL KPIS
NET PROFIT (IN MLN GEL)
BASIC EARNINGS PER SHARE (IN GEL)
322.5
2020
322.5
2019
2018
540.3
437.4
5.8
2020
2019
2018
5.8
9.8
8.1
Net profit was lower in 2020 compared to previous years due to the
slowdown in economic activities and higher provision charges re-
lated to the COVID-19 pandemic.
Basic earnings per share in 2020 decreased in line with our net profit
for the year.
RETURN ON EQUITY1
11.7%
2020 11.7%
2019
2018
22.9%
22.0%
RETURN ON EQUITY BEFORE EXPECTED
CREDIT LOSS ALLOWANCES1
24.7%
2020
2019
2018
24.7%
26.8%
30.5%
In 2020, return on equity decreased on a year-on-year basis given
lower net profit, largely due to higher provision charges, which more
than offset the positive impacts of our strict cost management
measures.
Return on equity before expected credit loss allowances remained
solid in 2020 on the back of our operating income generation and
increased efficiency levels.
1 Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, in 2019
return on equity and return on equity before expected credit loss allowances stood at 22.4% and 26.3%, respectively.
25
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 NET INTEREST MARGIN
COST OF RISK
4.7%
2020
4.7%
2019
2018
5.6%
6.9%
2.4%
2020
2019 0.7%
2018
1.6%
2.4%
In 2020, the year-on-year decrease in net interest margin was due
to a decrease in loan yields, an increase in GEL deposit costs due to
the pandemic, as well as currency depreciation.
Compared to previous years, the cost of risk was elevated in 2020
due to significant provision charges created to cover the potential
impact of the COVID-19 pandemic on our borrowers.
COST TO INCOME
LOAN BOOK MARKET SHARE1
38.4%
2020
2019
2018
38.4%
39.9%
37.8%
39.0%
2020
2019
2018
39.0%
39.5%
38.8%
In 2020, the improvement in our cost to income ratio reflects the
effectiveness of our cost management efforts undertaken during
the year.
In 2020, our loan book increased by 20.1% year-on-year or by 8.7%
on constant currency basis, translating into a 39.0% market share.
Over the same period, total banking system gross loans increased
by 19.8% or by 9.1% on a constant currency basis.
TIER 1 CAR (BASEL III)
TOTAL CAR (BASEL III)
13.0%
2020
2019
2018
13.0%
14.6%
12.8%
17.1%
2020
2019
2018
17.1%
19.1%
17.9%
Decrease of Tier 1 CAR was mainly attributable to the effect of
COVID-19 on the net income and the depreciation of GEL. Despite
the decrease, Tier 1 CAR remained comfortably above the eased
minimum regulatory requirement of 9.2%.
The decrease of Total CAR was due to the effect of COVID-19 on
net income and the depreciation of GEL as well as the additional
amortization of sub-debt instruments. Despite the decrease, Total
1 CAR remained comfortably above the eased minimum regulatory
requirement of 13.7%.
LIQUIDITY COVERAGE RATIO
134.2%
2020
2019
2018
134.2%
110.1%
113.9%
In 2020 we continued to operate with high liquidity buffers, with our
liquidity coverage ratio well above the regulatory minimum require-
ment of 100%.
26
BUSINESS MODEL AND STRATEGY CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OPERATING KPIS
ENPS2
68%
2020
68%
2019
41%
2018
66%
CUSTOMER EXPERIENCE
The best service company in Georgia (gap with peer bank)3
2.9
2020
2019
2018
2.9
2.7
2.3
The employee net promoter score measures employee loyalty and
reflects the likelihood of our colleagues recommending their work-
place to their friends and family.
In 2020 we managed to significantly improve our ENPS by demon-
strating our support and commitment during this challenging year.
In 2020, we maintained our leading position in terms of superior
customer experience not only among the Georgian banking sector
but also among the major retail industries in Georgia, thanks to the
outstanding efforts of each and every team member to make the
lives of our customers easier.
RETAIL INTERNET AND MOBILE
BANKING PENETRATION RATIO4
RETAIL OFFLOADING RATIO4
50%
2020
2019
2018
50%
48%
44%
95%
2020
2019
2018
95%
93%
91%
Our retail internet and mobile banking penetration ratio continued
its steady growth throughout 2020, driven by an increase in the
number of active digital users, which grew by 8.7% on a year-on-
year basis.
Our retail offloading ratio continued to grow in 2020, as we further
strengthened our digital focus and introduced new digital products
and services.
1 Based on data published by the National Bank of Georgia
2 Our Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank’s employees
3 Based on a survey of the retail segment conducted by IPM, an independent research company in December 2020
4
Including Space transactions
27
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DIVISIONAL OVERVIEW
RETAIL BANKING
Our goal is to be the
bank of first choice for the
Georgian population and to
deliver best in-class digital
banking solutions that are
personalized and easy to use
by leveraging our advanced
digital capabilities and big data
analytics.
Tornike Gogichaishvili
OVERVIEW
TBC Bank is a leader in the retail banking segment in Georgia, serving around 2.6 million clients through our
advanced omni-channel platform, which is comprised of branches, a call center and digital channels. Our
innovative and digital distribution platforms have become part of the Georgian population’s daily lives with
around 95%1 of all our transactions being conducted remotely. We pride ourselves on having the highest
customer satisfaction scores in the Georgian banking industry, and we hold the leading position among
all major retail companies in the country, according to various external surveys conducted by independent
research companies.
In 2020, our gross retail loan book amounted to GEL 5,954 million, up by 8.6% year-on-year on a constant
currency basis, mainly driven by an increase in mortgages, which grew by 11.4% without the FX effect. Over
the same period, deposit portfolio increased by 13.8% year-on-year on a constant currency basis, reaching
GEL 7,255 million. More information about the financial performance of the retail segment is provided in the
financial review section on pages 131 to 145.
OUR OMNI-CHANNEL PLATFORM
c.1,570 ATMs2
3,905 SELF-SERVICE TERMINALS
50% INTERNET AND MOBILE BANKING PENETRATION3
VOICE BIOMETRICS RECOGNITION SYSTEM IN THE CALL CENTER
GEORGIAN SPEAKING CHAT-BOT, TI-BOT AVAILABLE THROUGH FACEBOOK MESSENGER
157 BRANCHES
25,163 POS TERMINALS
1st
1st
28
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
2020 HIGHLIGHTS
39.4%
RETAIL LOAN MARKET SHARE4
39.5%
RETAIL DEPOSITS MARKET SHARE4
39.2%
RETAIL LOAN SHARE IN TOTAL PORTFOLIO
57.7%
RETAIL DEPOSIT SHARE IN TOTAL PORTFOLIO
c. 2.6 mln
NUMBER OF CUSTOMERS
95%
RETAIL OFFLOADING RATIO1
THE BEST SERVICE PROVIDER IN GEORGIA5
As the COVID-19 pandemic broke out, we stood firmly by our customers and implemented a number of
actions to support them. First of all, we extended financial support to our retail customers and offered them
a three-month grace period for loan principal and interest payments, in two major stages. More information
about our initiatives is given in our customers section on pages 74-76.
Secondly, we ensured that the bank’s products and services were available to everybody without any
disruption during the lockdowns in the country. In this regard, our market leading digital channels proved
to be as essential as ever, enabling our customers to conduct most of their banking transactions remotely.
In order to ensure an uninterrupted, secure service for our customers and incentivize the use of digital
channels, beginning in mid-March 2020 we also temporarily waived fees on money transfers and utilities
payments executed through our internet and mobile banking platforms for a three-month period, as well as
increased the maximum limits for FX transactions with preferential exchange rates. Moreover, our call center
worked with increased capacity during the early days of the pandemic in order to address our customers’
concerns in a timely manner. In addition, we equipped our branches with all the necessary security and
infection prevention measures to ensure full safety for our customers and employees.
Including Space transactions
1
2 TBC Bank ATMs including partner banks
3
4 Based on data published by the National Bank of Georgia as of 31 December 2020; in this context retail refers to individual customers
5 Based on a survey of the retail segment conducted by IPM, an independent research company in December 2020
Including Space active clients
29
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DIVISIONAL OVERVIEW CONTINUED
SUBSCRIBE
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30
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR STRATEGIC DIRECTIONS IN 2020
Customer-centricity
In line with our aspiration to become a truly customer-centric company, we continue to harness our advanced
data analytical capabilities in order to provide personalized and seamless customer experience across our
omni-channel platform.
This year, we launched and expanded the following two new projects in the retail segment within the scope
of our data analytical roadmap (more information about our roadmap can be found in our strategy section
on page 20-24):
Next product to buy for retail customers - The goal of the project was to build a model that offers our re-
tail customers the most suitable products for their needs. With similar approaches to Netflix and Amazon,
we developed a state-of-art system algorithm, which generates tailored offerings for every customer and
is available in all our sales channels, including internet and mobile banking, branches and the call center.
The new approach resulted in an increase in sales and a reduction of service time to each customer, lead-
ing to increased customer satisfaction;
Subscriptions model for mass and affluent customers - this subscription model offers our customers a
set of different products and services for a fixed monthly or annual fee. The new service packages are well
suited to cover the daily banking needs of our customers and will also include add-ons for a specific pur-
pose. The subscription model will help us to provide more tailored offerings to our customers, increase
their loyalty, reduce the churn rate as well as generate more stable and long-term fee and commission
income. Since the launch, we have already attracted over 31,000 users.
In 2020, we continued to run our wide-scale loyalty programme, Ertguli, which is a part of our mass retail
customer-centric approach. Ertguli is a credit card with a pre-approved instalment limit, which allows our
customers to gather loyalty points while shopping and take advantage of special offers and discounts at
more than 275 partner companies including restaurants, shops, hotels and many more. We continuously
increase our network of partner companies by adding industry leading players, both for online and offline
shopping, and also run various loyalty campaigns. On the one hand, it helps us to strengthen relationships
with our clients and increase their engagement with us, while on the other hand, it increases the usage of our
credit cards. As a result, our Ertguli card holders reached 1.5 million by the end of 2020, while the number of
POS transactions stood at 93 million in 2020, up by 21.4% year-on-year.
Our advanced digital capabilities
Having established ourselves as an undisputable leader for the Georgia in provision of the best-in-class
digital channels, we continue to build upon our strong expertise and introduce even more convenient and
flexible digital solutions for our customers.
As our internet and mobile banking remains the preferred channel of communication for our customers,
accounting for 56% of all transactions, we continue to enrich it with new features. This year, we introduced
several new offerings, including:
A fully digital onboarding process, which enables Georgian residents to go through a personal identifica-
tion process and become TBC customers just in 90 seconds;
A virtual digital card, which is an alternative to the traditional plastic card;
Certain simplifications for money transfers and utility payments; and
Usage of the mobile banking application without an internet balance.
Furthermore, we are developing alternative online lending platforms, which offer a much simpler and faster
way to get a loan, which have become very relevant in the current pandemic. In addition to our existing
online lending platform “TBC credit” (www.tbccredit.ge), which offers consumer loans since 2017, this year,
we added two more innovative platforms:
A mortgage platform, www.tbcmortgage.ge, which gives our customers the opportunity to get mortgage
loans online, without any hassle. The average time to market of such loans is only two days. The platform
also features useful information such as attractive offers from real estate developers;
An installment platform, www.tbcganvadeba.ge, which allows our customers to buy various things at our
partner companies and get an installment loan without leaving home.
31
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In parallel, we continue to develop our digital banking platform, Space, which is particularly appealing to our
youth segment as it offers simple, friendly and gamified user experience, that is completely different from
traditional banking. It also offers attractive loyalty programmes tailored to the young generation, including re-
funds in major food chains and food delivery services, as well as cash-backs for eco-friendly electric scooters.
In 2020, we achieved significant growth in the volume and number of transactions year-on-year, which grew
by 138% and 157%, respectively, and amounted to GEL 367 million and 6.5 million, respectively. This growth
was mainly driven by an increase in the number of active users, as well as by increased customer engage-
ment. Over the same period, our loan book increased by 22% and stood at GEL 34 million. The growth was
limited due to the COVID-19 pandemic. By the end of the year, Space had around 246 thousand registered
customers, up by 36% year-on-year, out of whom 27% were previously inactive customers and 14% were
newly attracted customers. The age of our Space customers ranges from 25-34. In addition, in May 2020,
Space launched its web channel, which makes Space’s services more accessible to the wider population. By
the end of the year, the web platform has attracted around 63 thousand customers.
OUR NEW PRIVATE BANKING SERVICE MODEL - TBC CONCEPT
We were the first bank to introduce private banking services in Georgia more than 14 years ago and to
establish high standards of service. We strive to be the first choice for private banking customers and are
committed to gaining a deep understanding of clients’ needs and goals in order to provide them with a
complete, personalized range of solutions and to build a lifelong partnership. For this purpose, we constantly
fine-tune our value proposition and this year, we rebranded TBC Status as TBC Concept and developed a
new format of customer relations. The new model is called a “subscription model”, which will allow TBC
Private Banking to become more flexible and better tailored to the specific needs of our customers. With
this concept, we give people the opportunity to receive a personalized set of products and services instead
of a standard package.
Currently, our private banking offerings comprise a premium banking service package and an innovative
digital banking service model. The main differentiator between these two options is the service of our private
banker, which is available only to the holders of the former package and is best suited to customers who
prefer traditional banking. Our clients have the opportunity to get a personal consultation from their banker
in specially designed physical spaces located in 24 branches in Georgia. The latter option is designed for
digital customers who prefer to self-manage their daily banking operations and get financial advice online,
while having access to all private banking customer benefits. With an increasing trend towards digitalization,
it is not surprising that our digital model, which was launched in February 2019, has proved to be highly
popular among the Georgian population and continues to attract new clients. In 2020, the number of digital
clients has grown substantially, reaching 44,770, up by 26.9% year-on-year.
In 2020, we created an entirely different, multi-functional space for our private banking customers. This
space features exhibition and presentation halls, a library, cafe, co-working spaces, self-service and personal
banking zones, which will enable our guests to receive banking services and financial consultations with
maximum comfort, as well as provide areas for recreation. As part of our lifestyle offerings, this new Concept
Space will host various events, exhibitions and meetings with different industry professionals – people
whose experience might be an inspiration for our guests and encourage their professional development.
In recognition of our distinguished efforts, we have been named the country’s Best Private Bank by Global
Finance for two years in a row in 2021 and 2020. This prestigious award acknowledges our leading position
in delivering exceptional private banking services and the highest standards of client satisfaction.
32
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED Loan Portfolio
Deposit Portfolio
# of Customers
(GEL million)
+26.5%
(GEL million)
+34.4%
2,975
3,763
2,086
2,804
+16.8%
82,542
96,385
2019
2020
2019
2020
2019
2020
OUR HIGH-NET-WORTH INDIVIDUALS (HNWI)
We continue to serve around 2,700 resident and non-resident HNW individuals and offer them our tailor-
made banking products and services, as well as advise them in relation to various investment opportunities.
Our HNW individuals benefit from special terms on traditional banking and insurance products as well as
exclusive lifestyle offerings for major elite events happening in the country. We also have a representative
office in Israel, TBC Invest, which acts as an intermediary with clients from Israel, offering information
regarding TBC Bank’s products.
While our HNW customers value their relationships with our private bankers and prefer to receive most
of their services in person, during the COVID-19 pandemic, we managed to serve them remotely without
causing them any discomfort. Our private bankers were available 24/7 online to serve their needs promptly
and effectively. In case a client still preferred to come to the VIP lounge, he/she was provided with a full
safety tool kit.
In addition, we continue to offer our HNW individuals brokerage and investment banking solutions in
order to diversify their investments, through our wholly owned subsidiary TBC Capital. TBC Capital is well
positioned on the market to provide a full suite of investment options to meet the diverse investment goals
for experienced and novice investors. In 2020, our HNW individuals acquired GEL 74.8 million bonds and
GEL 15 million stocks via TBC Capital, both on primary and secondary markets.
33
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 TBC Concept
Flagship Space
features an exhibition
and presentation
halls, library, cafe, co-
working spaces, self-
service and personal
banking zones, which
span over 4 floors and
2,400 sq. m.
34
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 35
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CORPORATE INVESTMENT
BANKING
Our goal is to be a
number one strategic and
trusted advisor for our partners.
We distinguish ourselves with
tailored corporate, investment
banking and advisory solutions,
by levering on our highly
professional teams of sectoral
corporate bankers, leading
digital and data analytical
capabilities.
George Tkhelidze
OVERVIEW
TBC bank is a leading corporate and investment banking (CIB) institution in Georgia holding the number
one market position in terms of loans as well as guarantees and letters of credit. We have a strong presence
in all major corporate products and are distinguished with high customer support and satisfaction as well
as long lasting client relationships. In addition, we offer sophisticated investment banking, research and
brokerage services via our subsidiary TBC Capital, which has established itself as a trustworthy partner for
our clients.
We also pride ourselves on having a full suite of trade finance products and advisory services in order to
support our clients in their trade operations both locally and abroad. Throughout the years, we have built
successful partnerships with leading international financial institutions. Our superior performance was
recognized by a number of prestigious awards from the leading industry magazines including:
THE BEST TRADE FINANCE PROVIDER IN GEORGIA IN 2020 AND 2021
by Global Finance
THE MARKET LEADER AND THE BEST SERVICE PROVIDER IN GEORGIA
according to Trade Finance Survey conducted by Euromoney in 2020 and 2021
LEADING PARTNER BANK IN GEORGIA
ADB TSCFP Awards 2020
36
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED
2020 HIGHLIGHTS
38.6%
CORPORATE LOAN MARKET SHARE 1
34.5%
CORPORATE DEPOSITS MARKET SHARE 1
37.4%
CORPORATE LOAN SHARE IN TOTAL PORTFOLIO
31.4%
CORPORATE DEPOSIT SHARE IN TOTAL
PORTFOLIO
52.4%
CORPORATE GUARANTEE AND LETTER OF
CREDITS MARKET SHARE 1
3,665
NUMBER OF CUSTOMERS
During the unprecedented global pandemic and subsequent lockdowns, our focus was to deliver enhanced
customer support by providing tailored solutions to manage their operations. At the same time, we helped
our customers to swiftly shift to remote and digital channels in order to ensure uninterrupted execution of
their daily transactions and core operations. Furthermore, the well-being of our employees is one of our key
priorities, therefore we proactively implemented flexible remote working practices during these challenging
times and provided them with necessary technological tools to enable effective remote working.
DIVERSIFIED PORTFOLIO WITH
STRONG PRESENCE IN ALL MAJOR
SECTORS OF GEORGIAN ECONOMY
Real Estate
Energy & Utilities
Hospitality & Leisure
Food Industry
Construction
Trade
Healthcare
Metals & Mining
Automotive
Agriculture
Oil & Gas
Finantial Services
Other
5.9%
1.1%
2.1%
2.2%
3.2%
3.9%
4.0%
4.7%
6.0%
11.3%
1 Based on data published by the National Bank of Georgia as of 31
December 2020; in this context corporate refers to legal entities
22.4%
18.7%
14.5%
37
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CORPORATE BANKING
FINANCIAL AND OPERATIONAL PERFORMANCE
In 2020, our focus was mainly on supporting our clients and ensuring strong asset quality amid the COVID-19
outbreak. In addition, we attracted several new large corporate borrowers operating in the healthcare indus-
try and manufacturers of medical disposable masks, disinfection solutions as well as medical gowns and
uniforms. As a result, our gross loan book amounted to GEL 5,691 million, up by 7.9% year-on-year on a con-
stant currency basis, with the CAGR growth rate at constant currency amounting to 28.2% for the 2016-2019
years, while the deposit portfolio stood at GEL 3,940 million, up by 16.3% year-on-year without the FX effect.
Over the same period, corporate guarantees and letter of credit portfolio amounted to GEL 2,109 million, up
by 11.2% year-on-year, without the FX effect.
Despite the pandemic, the number of payroll accounts remained broadly flat and amounted to 163,191 in
2020, while over the same period, the payroll fund grew by 4.2% year-on-year, amounting to GEL 315.2 mil-
lion. We maintained our strong position in terms of payment transactions, which increased by 19.6% and to-
taled 112.9 million, whereas volume of transactions amounted to GEL 5,034 million, up by 24.0% year-on-year.
On the backdrop of the virus and the reduced economic activities, the volume of FX transactions in 2020
amounted to GEL 10,449 million, down by 7.2% year-on-year, while the number of FX transactions decreased
by 5.1%, amounting to 114,561.
More information about the financial performance of the corporate segment is provided in the financial
review section on pages 131-145.
OUR STRATEGIC DIRECTIONS IN 2020
Achieving commercial excellence
This year, we launched a wide-scale Commercial Excellence Transformation project within our corporate
banking, which is a strategic response to the key challenges in daily work of CIB bankers and aims to further
strengthen our leading market position across all major products, enhance our customer relationship and
achieve outstanding profitability, as well as increase the happiness of the CIB employees. The project is part
of our 3 year data analytical roadmap (more information about our roadmap can be found in our strategy
section on pages 20-24).
Within the scope of the project, we introduced a new analytics based commercial process for client ac-
count planning and developed an IT tool for our corporate bankers, which serves as a single source of truth
for them and reduces the time spent on less efficient tasks. This tool provides a structured, overarching
view on each client, based on industry benchmarks, publicly available and internal data. In addition, it incor-
porates a machine learning model and enables our employees to calculate the clients’ potential value per
product. This facilitates the opportunity identification, planning and targeting of our clients. Transparency
and instant availability of the information brings our commercial capabilities to a whole new level, enabling
us to come up with the most optimal data-driven solutions to maximize our clients’ business value.
Within the scope of the project, we also revised the customer service model and standardized selling pro-
cesses from lead identification to after-sales support with clear responsibilities for all sales and product
roles in order to serve our clients more efficiently and improve their satisfaction levels. At the same time,
having a clearly defined set of responsibilities helps to increase employee satisfaction and engagement
levels as well as allow us to develop tailored training programmes and set specific careers goals.
Delivering for our customers
Standing by our customers and supporting their growth is the cornerstone of our business. During the
pandemic outbreak we mobilized our resources efficiently and established a special dedicated unit
for vulnerable customers to take care of all their needs and assist them in managing their business. We
provided our customers with strong support, which included provision of necessary funding for the most
affected sectors such as HORECA and real estate, proactively offering loan holidays to the customers in
need, performing daily banking operations without any disruption, as well as informing them in timely
manner about the macroeconomic and sectoral developments. We also signed a long-term partnership
memorandum with Business Technologies University (BTU) and Caucasus University (CU), which envisages
38
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED providing financial support for their current and future projects, as well as includes various educational
projects. In addition, we actively participated in government support programmes aimed at assisting sectors
that has been most affected by pandemic. We contributed to implementation of the government’s mortgage
subsidy programme, which proved to be very effective and allowed real estate developers to continue their
operations. Overall, starting from July 2020 we have issued total of GEL 235 million mortgages under this
programme, which is 38% of our total mortgage issuance. More information about the government support
programmes is given in our customers section on pages 74-76.
Furthermore, to make our customers’ lives easier, we launched a digital platform for factoring, which allows
easy and secure access for both buyers and sellers to full information related to their factoring transactions,
which in turn leads to faster execution of the deals. The platform is available not only for our clients, but for
any company operating on the market for a certain fee.
SUPPORTING
LOCAL
ENTERPRISES
DURING THE
PANDEMIC
Nova
The company Nova has been present
on the Georgian market since
2006, manufacturing and importing
construction and building materials for
B2B clients. We became Nova’s partner
in 2017 and have stood by their side since
then. In summer 2020, with our support,
Nova opened two new mega-centers for
construction and repair materials in Tbilisi
and Batumi. It offers customers materials
from internationally recognized brands, as
well as locally produced goods.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
39
SUPPORTING
COVID-19
RESPONSE
ACTIVITIES
40
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Eco Bohemia
Eco Bohemia is a producer of high-quality antiseptics and
disinfectants in the South Caucasus region. Following
the COVID-19 outbreak, it expanded its production and
opened a new factory in Georgia with support from TBC
Bank. The antiseptic solutions are eco-friendly products
that use the highest quality French essential oils. Current-
ly company’s production capacity amounts to 400 tons
per month and plans to expand it further to supply foreign
markets. The company has an ISO certificate and actively
cooperates with Lugar Laboratory and other accredited
centers.
Doctor Goods
In response to increased demand for medical clothes in
the health care industry, Doctor Goods entered the mar-
ket in May 2020 and started producing medical gowns
and surgical overalls. Currently, its monthly production
capacity amounts to 450 thousand medical clothes. To-
gether with Startup Georgia and the Partnership Fund, we
supported the company in launching its operations.
Mediapharma / New
technologies Impex
With a support of TBC Bank, two new enterprises, Medi-
pharma and the New Technologies Impex, were set up in
spring 2020 to manufacture high quality medical dispos-
al face masks for local and international markets. These
products are not only vital for preventing the virus from
spreading, but also develop high-quality national produc-
tion. Production capacity of Medipharma and the New
Technologies Impex reached around 5.4 million facial
masks per month.
41
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 INVESTMENT BANKING
THE BEST INVESTMENT BANK IN GEORGIA IN 2021
by Global Finance
TBC Capital, is a wholly-owned investment banking subsidiary of TBC Bank and a licensed brokerage firm.
TBC Capital was established in 1999 and has been leading the country in investment, brokerage and corpo-
rate finance solutions. As a member of TBC Group, the company is uniquely positioned to help clients of all
backgrounds meet their financial objectives from structuring to executing deals or advising on complex cor-
porate transactions. TBC Capital is also a shareholder of the Georgian Stock Exchange and contributes to the
development of its infrastructure and the integration of the domestic capital market into international markets.
In 2020, TBC Capital maintained its leadership position in terms of total bonds issued on the Georgian Mar-
ket. While the demand was quite limited due to pandemic, we conducted several transactions including:
acted as the sole lead arranger for bonds of TBC Leasing in the amount of GEL 58.4 million, as well as for
two private placements with a total amount of US$ 25.0 million. Most notably, TBC Capital, together with a
number of leading international investment banks, acted as a co-manager for the green bond of Georgian
Global Utilities in the amount of US$ 250 million. It is a Georgia’s first green bond issuance, which was listed
on Irish Stock Exchange. As a result, the bonds issued publicly and listed by TBC Capital during this year
amounted to GEL 834 million, holding 93.0% of total bonds issued and listed on Georgian Stock Exchange
in 2020. In addition, we support the activation of the secondary bond market for our high net worth clients,
which allow them more flexibility in managing their funds.
GGU
GGU
US$ 250,000,000
5-YEAR
PUBLIC PLACEMENT
7.75% GREEN NOTES
TBC LEASING
GEL 58,400,000
3-YEAR
PUBLIC PLACEMENT
JULY 2020
CO-MANAGER
MARCH 2020
PLACEMENT AGENT
MAY 2020
PLACEMENT AGENT
PRIVATE PLACEMENT
FROM BANKING
INDUSTRY
PRIVATE PLACEMENT
FROM BANKING
INDUSTRY
US$ 15,000,000
3-YEAR
PRIVATE PLACEMENT
US$ 10,000,000
3-YEAR
PRIVATE PLACEMENT
MARCH 2020
PLACEMENT AGENT
Furthermore, TBC Capital’s research division represents a real-time access to comprehensive data and
analytical insights for large corporate borrowers and investors. Its coverage comprises of regular macro,
sectoral and fixed income updates as well as in-depth analytical reports on significant developments and
events. This year, the impact of COVID-19 on the Georgian economy and business environment was thor-
oughly covered in regularly scheduled online events and publications. Other reports were dedicated to
fixed income securities in Georgia, various economic sectors and macroeconomic developments. Overall,
in 2020 TBC Capital published more than 140 publications, keeping the interested audience always updated
about the important macro-sectoral developments and projections of key parameters. The full list of reports
is available at www.tbccapital.ge.
42
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED The coverage of our reports has increased significantly since last year both locally as well as among inter-
national investors and analysts. Additionally, our macro updates are broadcasted on a weekly basis via busi-
ness media online channel. Also, starting from March, TBC conducts sectoral and macro updates for corpo-
rate clients on a monthly basis. Around 300 corporate clients attend these events. Furthermore, throughout
the year we organized several large-scale online conferences for our customers covering challenges and
trends in tourism sectors from the macro as well as from the sectoral perspective.
In line with our goal to deliver the best-in-class investment banking solutions on the market, we plan to di-
versify our value proposition by introducing new products and services for retail and institutional clients, as
well as position ourselves as a trustworthy source of information locally and internationally by covering the
Georgian economy through in-depth sector research and regular updates.
For the full the list of our publications please refer to our website: https://tbccapital.ge/publications
43
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 MSME
Our goal is to be a
reliable partner and supporter
for business community on
every stage of development, by
providing the most simple and
convenient banking services
and integrated solutions for
managing and developing their
business.
Nikoloz Kurdiani
OVERVIEW
TBC Bank is the leading partner bank for micro, small and medium enterprises (MSME) with 59% of all newly
registered legal entities in Georgia1 choosing TBC Bank. Over the years, we have differentiated ourselves by
serving our clients through best-in-class distribution channels, offering innovative and affordable products
and extensive non-financial services to further support their business development.
During the COVID-19 pandemic, our leading digital channels proved to be very useful, allowing us to serve
our clients remotely without any disruptions. As a result, our offloading ratio2 increased even further and
reached 96% in 2020 compared to 93% in 2019. We further reinforced our digital channels by launching a
brand new MSME mobile banking app, as well as fine-tuning our internet banking. As a result, the number of
respective digital MSME users3 reached 34,500 in 2020.
In 2020, our growth was significantly affected by the pandemic and our major focus was to support the
financial stability of our clients. As a result, our MSME gross loan book increased by 9.9% year-on-year on a
constant currency basis and stood at GEL 3,556 million. Over the same period, deposit book increased by
7.5% on a constant currency basis, reaching GEL 1,378 million. More information about the financial perfor-
mance of the MSME segment is provided in the financial review section on pages 131-145.
In terms of customer support, in order to alleviate the negative impacts of the COVID-19 on MSMEs, we
introduced three-month grace periods in two major stages, as well as partnered with the government to
support the most vulnerable businesses. Detailed information on these initiatives are given in our customers
section on pages 74-76.
44
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED
2020 HIGHLIGHTS
59%
OF NEWLY REGISTERED LEGAL ENTITIES CHOSE
TBC BANK1
160,311
CUSTOMERS
23.4%
MSME SHARE IN TOTAL LOAN BOOK
11.0%
MSME SHARE IN TOTAL DEPOSIT PORTFOLIO
96%
OFFLOADING RATIO OF MSME2
DIVERSIFIED MSME PORTFOLIO WITH STRONG PRESENCE IN HOSPITALITY &
LEISURE, AGRICULTURE AND TRADE SECTORS
0.3%
0.4%
0.4%
12.9%
0.1%
Hospitality & Leisure
Automotive
Agriculture
Trade
Construction
Food Industry
Real Estate
Services
Healthcare
Pawn Shops
Transportation
Manufacturing
Individual
Oil & Gas
Financial Services
Energy & Utilities
Metals & Mining
Communication
Other
1.0%
1.0%
1.8%
2.2%
3.2%
3.6%
3.9%
5.2%
5.3%
7.2%
9.2%
1 Data is for FY 2020, source: www.napr.gov.ge, the National Agency of Public Registry
2 Excluding cash transactions
3 Business internet and mobile banking active users, including TBC Business App
15.3%
14.6%
12.4%
45
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR STRATEGIC DIRECTIONS IN 2020
Fine-tuning our digital channels
In the post COVID-19 reality, when the need for remote and digital solutions soared, we managed to bring
banking services even closer to our business customers by introducing a brand new mobile banking app for
businesses. The app, launched both for iOS and Android, offers the same features and capabilities as our in-
ternet banking, while being more flexible, as it gives our clients the ability to use our services on the go. Our
business app has a similar interface to our award-winning retail mobile banking application, which makes it
familiar and easy to use, while it also features specifically created upgrades to meet the needs of business
owners. In addition, the app allows a fast and easy, fully digital on-boarding for newly registered businesses.
Right after registering a new business, the business owner can download the app, register as a TBC client,
set up an account and begin operations without visiting a branch. By the end of 2020, over 30,000 users
have already downloaded the app since its launch in July and the user base is steadily increasing month to
month. Future development of the app will be based upon the customer feedback gained through frequent
interviews and surveys to further polish our exceptional user experience.
As our internet bank for businesses remains the most popular channel of communication with our custom-
ers, we continue to enrich it with new capabilities and this year, we introduced the following features:
Data analytical capabilities, such as breakdown of sales by weekday and time of the day, effect of dis-
counts on sales and customer loyalty analysis. These tools will help clients to conduct business profit-
ability analysis and develop a forward-looking strategy.
An integrated invoice management feature, created by Invoice.ge – an online invoicing platform –which
allows users to manage their invoices easily for an additional small fee.
We are proud to say that our internet bank for businesses was recognized as the Best Corporate/Institutional
Digital Bank in Georgia as well as in Central and Eastern Europe in 2020 and the Most Innovative Corporate/
Institutional Digital Bank in Central and Eastern Europe for 2020 by Global Finance Magazine. In addition, we
were named the Best Online Banking for Business in Georgia by SME Banking Club.
Creating customer value
As a customer-centric company, we are actively following market trends and paying attention to the slight-
est changes in our customers’ behavior. As a result, we are always able to offer our customers the right
products and services. This year, our primary focus revolved around the pandemic. Our goal was to continue
providing services without any disruptions and, at the same time, helping our clients adapt to the new reality.
Our first step in this regard was increasing the number of services offered digitally, which enabled our cus-
tomers to conduct most of their operations remotely, while a visit to the branch has become a rare necessity
or a client’s preference. Meanwhile, in our busiest branches, we introduced business guides - people who
provide thorough information regarding our existing and new products as well as help to select the most
suitable solution for each individual client based on his/her specific needs.
In parallel, we continued to optimize our internal processes to increase customer satisfaction across both
digital and traditional touchpoints:
We have introduced a total quality management approach in the MSME department. The approach in-
cludes receiving regular feedback from our clients as well as continuous analysis of our internal process-
es. As a result, we are able to effectively address any issues our clients may experience and provide them
with a superior service;
We also further fine-tuned our automotive loan approval platform, which was launched last year and al-
lows us to approve loans based on advanced scoring model. This platform processes loan applications
automatically and calculates the credit limits for each customer in a matter of minutes as well as simplifies
and speeds up “time to yes” and “time to money”. In 2020, loans up to GEL 100,000 could be approved fully
automatically using this platform and moving forward, our goal is to increase the limit to GEL 250,000.
46
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED 47
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 SUPPORTING GEORGIAN BUSINESS COMMUNITY
We remain firmly committed to supporting business development in Georgia. In this regard, we offer our
MSME customers a unique full-scale business support programme consisting of educational resources, a
business blog, business support tools, an annual business award and a start-up programme. All these ser-
vices are united on a single platform www.tbcbusiness.ge.
This year, as a result of spread of COVID-19, digitalization became a top priority for most businesses in Geor-
gia. We actively supported our clients on their digitalization journey by offering them various programmes
and partnerships. The projects undertaken in this direction include:
Creation of 200 online shops free of charge in partnership with Visa;
Reduced commission fees for use of our e-commerce ecosystem platform –Vendoo;
Creation of a dedicated online marketplace for startups – MyStartup.ge; and
Design of the digital marketing strategy for 100 MSMEs free of charge in partnership with Georgian cre-
ative agency Windfor’s, and with the support of EFSE.
In order to bring together and develop the Georgian business community, in November 2020 we launched
Business Club, a subscription based platform that offers its members a bundle of various financial services
and non-financial benefits as well as creates a common space for socializing. Business Club was created
based on B-COM, a subscription based service which we introduced in 2019. In addition to the services
previously offered by B-COM, Business Club members can now enjoy various perks to help them further de-
velop their businesses. For instance, club members are able to participate in free individual and Q&A meet-
ings with experts in various fields, as well as receive some of the best offers from our partner companies.
Moreover, Business Club is a platform for entrepreneurs and business owners to socialize and participate
in various discussions and trainings to refine their professional skills and widen their business connections.
Our clients can become Business Club members by subscribing to one of the three available membership
plans for a small monthly fee. By the end of 2020, we already had around 860 Business Club members.
We are keen on educating business owners on various topics that will help them lead their businesses more
effectively. This year, we have offered them a series of online training sessions led by experienced coaches
covering a wide range of subjects. These trainings attracted more than 1,500 attendees during the lockdown
period. In addition, we have enriched our educational resources with a series of short, recorded online lec-
tures for entrepreneurs about managing their businesses and the general principles of financial accounting
and profitability. Interested persons may sign up to attend the trainings or access the resources using our
business support platform www.tbcbusiness.ge free of charge.
To encourage entrepreneurship in Georgia, since 2016 we have been organizing an Annual Business Awards
ceremony in partnership with EFSE. Since its introduction, the contest has attracted up to 2,400 participants
and became the major business of the year, allowing companies to share their success stories with the
whole country and win various attractive prizes. This year, we have enhanced our nomination list to reflect
the effects of the COVID-19 pandemic, by adding a new category “Adapting to the new reality”. As a result,
the participants could enter the following 5 categories:
Product/service of the year;
Adapting to the new reality;
Exceptional corporate social responsibility;
Innovation of the year; and
Startup of the year.
The event attracted 26 million people through the press and social media and a survey conducted by the
independent research agency, ACT, showed that top-of mind awareness of the project reached 74% in 2020.
48
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED ADDITIONAL SUPPORT FOR STARTUPS AND RURAL ENTERPRISES
This year we continued paying special attention to our long-time priority clients – startups and rural enter-
prises - by offering them favourable conditions to develop their businesses.
We remain committed to supporting early-stage businesses as well as fostering entrepreneurship in Geor-
gia. In this regard, since 2017 we have run “Startaperi”, an innovative programme that offers financial and
non-financial support for startups. We offer entrepreneurs general purpose loans, as well as special loans for
restaurants, hotels and agro businesses. In addition, this year we introduced a “Startup enterprise” loan, which
offers favourable terms for loans used to set up local production. Other financial offers include leasing, busi-
ness cards, free internet banking and Digipass registration. As for non-financial services, the programme
offers various educational programmes, events and individual consultations. “Startaperi” also provides cli-
ents with unmatched opportunities to develop their businesses. One such opportunity was “Startaperi APP
challenge”, which brought together 40 teams with brand new ideas. The project, which is supported by FMO
and was held for the second year in a row, helped three winning teams to bring their ideas to life. Since its
launch, the “Startaperi” programme has attracted around 47,000 companies, while the total outstanding
portfolio comprised of 600 loans in the total amount of GEL 185 million as of 31 December 2020.
We also aim to support Georgia’s rural communities by providing local businesses with affordable finance.
In 2020, within the scope of the projects initiated in close partnership with Georgian government schemes –
“Produce in Georgia” and “Preferential Agro Credit” – we have helped around 12,000 borrowers to start or de-
velop local businesses. Within these programmes, borrowers can apply for a subsidy from the government
to lower their interest expense. In 2020, we have disbursed 1,800 such loans in the amount of GEL 191 million.
In total, rural lending amounted to 42% of the total MSME loan book, the largest sectors being hospitality &
leisure, agriculture and trade with respective shares of 15%, 15% and 12%.
49
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 TBC Business Club
brings together
Georgian business
community by
creating a common
space for socializing
combined with
various useful financial
services as well as
non-financial benefits.
50
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 51
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 PAYMENTS BUSINESS
In line with our mission to make life easier for our cus-
tomers, we aspire to provide frictionless payment solutions for
all considerable payment needs of businesses and individuals.
Our payments business is represented in two countries. In Georgia, we are represented by four companies:
TBC Bank - the largest financial institution in the country, TBC Pay - the leading provider of payments gate-
way services, UFC - the largest processing center in the country, as well as invoice.ge - the innovative online
invoice management subscription service. In Uzbekistan, we own the leading payments service provider,
Payme, and just recently launched the banking operations, branded as TBC UZ.
+18.8% YoY
396 mln
NUMBER OF TRANSACTIONS
IN 20201
+7.5% YoY
GEL 118 bln
VOLUME OF TRANSACTIONS
IN 20201
+3.6% YoY
GEL 114 mln
PAYMENTS REVENUE
IN 20201
GEORGIA
We are a leading payments provider in Georgia having the largest market share in e-commerce and POS
transactions. In addition, we are pioneers in introducing the most innovative products on the market such as
stickers, ATM QR withdrawal, contactless cash withdrawal and payment bracelets.
We operate a modern payment infrastructure, which is 100% contactless and consists of our own wide net-
work of ATMs, POS terminals and self-service terminals, as well as a network of eight friendly banks sharing
their payment channels with us. Our payments systems are equipped with strong customer authentication
and security standards ensuring a safe payment environment.
Our payments business consists of the following key areas: card issuing, card acquiring, cash payments and
transactional products.
1
Including TBC Bank’s payment business, TBC Pay, UFC, Invoice.ge (LLC Billing Solution), TBC UZ and Payme figures
52
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED
TBC PAYMENTS MAP
GEORGIA
UZBEKISTAN
First digital bank in Uzbekistan
Payments from local cards & wallets;
Traditional payments - mobile top-
ups, utility, budget, fines payments, loan
repayments, international quick money
transfers;
Innovative payments - card to card transfers,
QR payments, payments using invoice,
request payment; and
Automatic payments.
Payment acceptance online – web, e-mail,
sms, mobile payments;
Payment acceptance in physical store –
using QR;
Innovative payments – using Telegram Bot;
Automatic payments; and
Business payments aggregation service.
RETAIL SEGMENT
Visa/Mastercard/local/digital cards &
wallet payments;
Traditional payments - IBAN transfers,
mobile top-ups, utility, budget, fines
payments, loan repayments, international
quick money transfers, etc.;
Automatic payments – direct debit &
standing orders;
Innovative payments - transfers to mobile
number or ID number, card to card transfers,
QR payments; and
Cash payments - Via TBC Pay self- service
terminals.
BUSINESS SEGMENT
E-commerce & POS acquiring;
Traditional payments – IBAN transfers,
mobile top-ups, utility, budget, fines
payments;
Automatic payments – direct debit &
standing orders;
Cash collection terminals; and
Business payments aggregation service.
53
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 ISSUING BUSINESS
1.6 mln
CARDS ISSUED
92%
OF OUR CARD PAYMENTS ARE CONTACTLESS
When it comes to card payments, we offer our clients a diverse range of products from traditional cards to
stickers, bracelets and digital cards. Clients can also attach their cards to smartphones or smartwatches and
use other payment options such as Apple Pay, TBC wallet or Garmin Pay. In December, we offered our cus-
tomers the significant benefit of paying for public transportation with our cards. Our clients no longer need
to carry a dedicated transportation card and instead can make payments with any TBC card. Furthermore, in
order to help our customers choose the most suitable card for them, this year, we launched a new project to
study customer behavior and proactively offer to replace existing cards with higher-class cards that come
with special benefits. Since the launch in September, 27,000 cards have already been replaced within the
scope of this project.
ACQUIRING BUSINESS
58%
E-COM & POS MARKET SHARE
BY VOLUME OF TRANSACTIONS1
51%
E-COM & POS MARKET SHARE
BY NUMBER OF TRANSACTIONS1
Our acquiring business includes POS and E-commerce services. In 2020, we held #1 position on the market
by the number and volume of POS and e-commerce transactions, with respective market shares standing
at 51% and 58%.
We offer our customers various types of POS terminals, from standalone to integrated and two-in-one POS
+ Teller Machines, and constantly enrich their capabilities with new convenient functions. This year we add-
ed several new features, including leaving a tip on POS payments and transfers to distributors via special
cards for business owners. Other innovative features include QR payments and dynamic currency conver-
sion capabilities.
As for e-commerce, we offer businesses secure, convenient and user-friendly solutions to support their
operations in the digital space. This year we created a new e-commerce platform, TBC Checkout. One of
the benefits of TBC Checkout is that it allows customers to choose between multiple payment methods.
A customer can pay directly with a card or use other innovative payment options like mobile banking QR
payments, Apple Pay or payments by internet banking user. Additionally, TBC Checkout has an easy to use
merchant dashboard to help businesses control and manage transactions seamlessly.
Businesses can access detailed information about all our POS and E-commerce solutions, as well as order
them online at our new online platform www.tbcpayments.ge.
54
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED TRANSACTIONAL PRODUCTS AND CASH PAYMENTS
24/7
INSTANT TRANSFERS
BETWEEN CLIENT ACCOUNTS INSIDE TBC
50%
OF ATM CASH WITHDRAWALS
ARE CONTACTLESS
We offer our business and retail clients a wide range of transactional products comprised of IBAN transfers,
transfers to mobile number, card to card transfers, mobile top-ups, utility payments, budget payments, di-
rect debit and standing orders. We also pride ourselves on having the best utility payments platform show-
ing clients outstanding amounts in real time and having instant payment capability. This year we introduced
several innovations including instant transfers with only a personal ID number, as well as using mobile bank-
ing app offline.
Cash payments represent the important part of our payments business, given that Georgia remains largely
cash based society. We operate a wide network of c. 1,570 ATMs2 and 3,905 self-service terminals all over
the country. In 2020, 21% of the total number of our payment transactions were conducted through ATMs
and self-service terminals.
OUR PAYMENTS SUBSIDIARIES
Our payments ecosystem further expands through our subsidiaries, which offer our clients even more diver-
sified services:
TBC PAY
2020 HIGHLIGHTS
3,905
NUMBER OF ACTIVE SELF-SERVICE TERMINALS
+24.8% YoY GEL 4,034 mln
PAYMENT TRANSACTIONS VOLUME DURING 20203
TBC Pay is one of the leading payment companies in Georgia, which connects consumers and merchants
to conduct digital payment transactions in a simple and seamless way.
The company was founded in 2008 by TBC Bank and is a wholly owned subsidiary of the Bank. TBC Pay
serves more than a million users and processes hundreds of payments per minute.
TBC Pay operates a wide network of self-service terminals all over the country, which allows individuals to
perform payments for various daily services instantly in an interactive mode on a 24-hour basis. Payments
can be made with cash or by TBC’s debit or credit card. TBC Pay also operates a web-platform (www.tbcpay.
ge), which allows customers to conduct their payment operations online by using credit/debit cards from
1 Source: NBG
2
3
transactions
Including partner banks
Including transactions conducted in self-service terminals, internet and mobile banking applications and cash management
55
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Georgian or international banks. In addition, in 2019, we launched TBC Pay mobile app, which was well ac-
cepted by our customers and by the end of 2020 we reached more than 100,000 downloads and achieved
4.9 and 4.8 star ratings respectively on Apple store and Google play.
The company also offers cash management services to companies with a large volume of cash operations.
We have specifically designed Cash Boxes for such transactions, through which customers undergo highly
secured authentication process. Afterwards, they are able to easily deposit money into their accounts as
well as provide respective transaction descriptions. Without leaving the store, money will be instantly trans-
ferred to their bank account.
During 2020, the volume of transactions in self-service terminals increased by 23% year-on-year to reach
GEL 2,719 million, while the number of transactions in self-service terminals decreased by 8% year-on-year
to 41.2 million. The decrease in the number of transactions is related to the fact that more and more custom-
ers are switching to internet and mobile banking applications for their utility payments. As of the year-end,
TBC Pay has 3,905 self-service terminals in operation compared to 3,671 a year ago. Over the same period,
the number of transactions in our web platform and mobile app increased by 61% year-on-year to 1.8 million,
56
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED while the volume of these transactions went up by 63% year-on-year to reach GEL 80 million. In terms of our
cash management business, we observed an increase in the number and volume of transactions per termi-
nal. The volume of cash management transactions amounted to GEL 1,244 million in 2020, up by 26% year
on-year, while the number of such terminals increased by 18% from 454 to 534.
As a result, in 2020, our net revenue reached GEL 36.7 million, up by 5% year-on-year, while our EBITDA
amounted to GEL 21.1 million, up by 15% year-on-year.
On the operational side, we launched the agile transformation project and completely redesigned our IT
and product teams’ structures in order to streamline the internal processes and become more flexible and
prompt in responding to market needs.
GOING FORWARD
Our aspiration is to become the leading fintech company in Georgia by introducing the most innovative
payment offerings, enhancing our existing digital channels as well as strengthening our IT infrastructure
with the latest technological solutions. In addition, we plan to expand our customer base among underpen-
etrated SME and micro businesses, as well as become the largest payment aggregator in Georgia, offering
payment services to banks and other financial institutes on the market.
United Financial Corporation (UFC) is the first and largest card processing center in Georgia, as well as in the
region1. As the leading payment system operator, UFC has a network of 1,200 ATMs, 28,000 POS terminals
and handles more than 500 million transactions and authorizations per year. TBC Bank owns 99.5% of the
company.
UFC processes and manages card transactions across all payment terminals, conducts card personalization
and supports merchants in card related services. Currently UFC serves 10 banks and 14 finance organiza-
tions on the market. UFC offers its clients innovative solutions and technologically advanced products and
services, which are implemented according to latest security standards and recommendations of interna-
tionally recognized payment systems.
Invoice.ge2 is our subsidiary, which has launched an online invoice management subscription service for
MSMEs in September 2020. By the end of the year, the company has attracted around 700 companies. The
platform provides diverse customization options as well as several templates for quick layouts. Furthermore,
to make the invoicing process even faster, users can make entries of their customers and products and
when creating a new invoice, users can simply pick them from the pre-made list. In addition to creating and
sending customized invoices, this platform also allows users to analyze revenues, overdue amounts and
other statistical data with an analytical dashboard by integrating this platform with our internet banking. The
platform is also integrated with Revenue Service (RS.ge) making it even more convenient to use. In order to
access the services of the platform, clients are welcome to start a 14-day trial and later subscribe to one of
the three available options, depending on their needs.
For our payments business in Uzbekistan please refer to our international strategy section on the next pages.
1 Region – Azerbaijan, Armenia, Georgia
2
In December 2019, we acquired a 51% share of the invoice.ge platform (LLC Billing Solutions), for a consideration of GEL 176,000
57
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OVERVIEW OF OUR
INTERNATIONAL STRATEGY
Since 2018, international expansion has become one of
our strategic priorities. Our business model envisages an as-
set-light, gradual capital investment approach and is primarily
focused on digital and partnership-driven channels, aimed at re-
tail and MSME customers.
An important part of our international banking strategy is Space, digital banking platform. Space is a cloud
based digital banking products technology stack that can be remotely deployed in various locations through
integration with the local technology infrastructure. The platform offers Retail and MSME banking product
solutions and a mobile banking app. The Space app was initially launched in Georgia in 2018 and in October
2020 it was successfully introduced in Uzbekistan. The Platform already successfully serves around 247,000
registered customers in the two countries.
Space’s centralized team of more than 100 technology employees is based in Georgia and uses its own
cloud-based IT system, which was built in order to resolve the complexity of integration with traditional
legacy systems. Its flexible IT architecture makes it possible to launch new products much faster than in
traditional banking and makes it easily scalable and replicable in other markets, thus ensuring product stan-
dardization and efficiency.
TBC BANK
FIRST DIGITAL BANK IN UZBEKISTAN
2020 HIGHLIGHTS
13,000
DOWNLOADS OF TBC UZ APP
12,200
REGISTERED CUSTOMERS
Uzbekistan is a very attractive market with a large and growing population of 33 million and is characterized
by low banking penetration with mortgage and consumer loans standing at around 7.0% of GDP1 as of the
end of 2020. The country has been to implementing various market-oriented economic reforms since 2017,
turning it into the attractive country for investment. On average, the economy grew by 5.2%2 from 2017 to
2019 and, according to the World Banks estimates, managed to maintain positive GDP growth of 0.6%2 in
2020, despite the COVID-19 related challenges. Per the same source, the economy is expected to revive in
2021 with estimated growth of 4.3%, supported by future liberalization of the economy.
After obtaining the banking license in April 2020, we launched our banking operations in the country in June
2020. Initially, we operated in pilot mode for “friends and family”, while in October 2020 we successfully
rolled out offerings to broader population. In line with our next-generation banking strategy, we are serving
our customers through our online banking platform, while our smart, next-generation branches are used
58
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED
primarily for client advising and consulting purposes. By the end of the year, we opened two branches and
18 outlets in Tashkent. Our online banking platform is based on the Space, digital banking platform and is
branded as TBC UZ in Uzbekistan. Since October, it has been available on Play Store and the Appstore. In
December, we started active marketing activities. As a result, by the end of the year, the number of down-
loads amounted to 13,000 and the number of registered customers reached 12,200. Currently, we are serving
retail customers, who can perform the following operations: open an account and place deposit, order a
debit card and make payments and transfers. Our service proposition will be gradually enriched by lending
and other products in line with our go-to-market approach.
TBC PLC has already invested US$ 22 million into the charter capital of the Bank and has secured interest
from our potential partners: EBRD, IFC and the Uzbek-Oman Investment Company. Our plans foresee a min-
imum 51% shareholding.
We are also actively developing our payment business in Uzbekistan, through our subsidiary, Payme, which
is the second largest payments provider in the country by number of users3. We acquired 51% stake in Payme
in April 2019 for US$ 5.5 million.
2020 HIGHLIGHTS
+74.5% YoY 66.4 mln
NUMBER OF TRANSACTIONS
+143.7% YoY GEL 2,580.5 mln
VOLUME OF TRANSACTIONS
2.9 mln
REGISTERED CUSTOMERS
Payme supplies high-quality payment solutions to its customers through facilitating utility payments, P2P trans-
fers, loan repayments, mPOS for QR-based payments and e-commerce purchases. This year, we fine-tuned our
Payme mobile application by adding new features, as well as introducing the following new products:
An online wallet;
Payments for international wallets (QIWI, Yandex Money, Web money etc.);
A USSD (Unstructured Supplementary Service Data) Menu;
Uzcard Humo transfers (local processing cards);
My home service, which provides aggregation of utility payments; and
International money transfers of “Zolotaya Korona”.
Despite the pandemic, Payme continued its rapid growth. Over the course of 2020, it increased its revenue
by 95% year-on-year, up to GEL 16.6 million, while net profit amounted to GEL 8.3 million up by 89% year-
on-year. Over the same period, the number of users grew by 63%, up to 2.9 million. Payme will continue to
operate separately from the bank, but the two entities will co-operate closely.
GOING FORWARD
Our aspiration is to establish our presence in Uzbekistan as the most innovative bank in a country and trans-
form the traditional daily banking approach to a seamless digital experience, thus making the lives of our
customers easier.
1 Source: Central Bank of Uzbekistan
2 Source: World Bank Data
3 Based on internal estimates
59
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In 2020, we
successfully
introduced Space
app in Uzbekistan,
which is our digital
banking platform,
that can be remotely
deployed in various
locations through
integration with the
local technology
infrastructure.
60
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
61
MAJOR SUBSIDIARIES
2020 HIGHLIGHTS
37.3%1
NON-HEALTH INSURANCE RETAIL MARKET SHARE
21.1%1
NON-HEALTH INSURANCE MARKET SHARE
260,000+
NUMBER OF CUSTOMERS
GEL 86.4mln
GROSS WRITTEN PREMIUM (GWP)
OVERVIEW
TBC Insurance, a wholly owned subsidiary of TBC Bank, is one of the leading players on the Georgian non-
health insurance market. The company was acquired by the Group back in October 2016 and has grown
significantly since then. It is also the bank’s main bancassurance partner, with respective share of around
42.4% in its total gross written premium (GWP) as of 31 December 2020.
In 2019, we entered the health insurance market, with a strategy to target premium segment by providing
superior customer experience coupled with the most innovative approach to products and services. From
2021, we are planning to expand our value proposition to the mid-premium segment, having accumulated
sufficient market knowledge and claims statistics.
We distinguish ourselves by our own advanced digital channels, which is comprised of aa web-channel,
health insurance mobile app and chat-bot available through Facebook messenger, and the bank’s strong
digital network. Our digital channels are very simple to use and all processes from onboarding to claims
management are straightforward and free from any unnecessary bureaucratic procedures.
TBC Insurance offers a wide-range of insurances products to its retail, MSME and corporate customers.
62
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED TOTAL GWP IN 2020 BY SEGMENTS
TOTAL GWP IN 2020 BY PRODUCTS
16%
10%
23%
61%
18%
6%
35%
Retail
Corporate
MSME
31%
Motor
Life & Personal accident
Health
Other
Property
MARKET OVERVIEW
The insurance market in Georgia is highly underpenetrated compared to the CEE region with total GWP to
GDP ratio2 amounting to 1.3% in 2020. Non-health insurance market represents around 60% of the total market
with a CAGR growth rate of around 17.4% for the 2017—2020 years, while the health insurance market grew
by 10.4% over the same period. Over the course of 2020, the non-health insurance market remained broadly
stable due to low economic activity related to COVID-19 outbreak, while the health insurance market grew by
around 14% year-on-year as a result of increased government spending on health insurance policies.
Regulator
Number of insurance companies
GWP to GDP in Georgia2
GWP to GDP in CEE 3
GWP per capita in Georgia 2
GWP per capita in CEE3
The Insurance State Supervision Service of Georgia
18
1.3%
2.45%
EUR 52.5
EUR 380.0
1 Market share without mandatory border MTPL. With mandatory border MTPL, retail and total non-health insurance market shares were
33.4% and 20.1% respectively. Starting from March 1, 2018 border MTPL has been introduced and GWP was divided evenly between 18
insurance companies, therefore it has decreased our market share. Source: insurance.gov.ge
2 Source: Geostat and insurance.gov.ge
3 Source: https://www.insuranceeurope.eu
63
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GWP OF GEORGIAN INSURANCE MARKET SHARE BY PRODUCTS IN 2020
11%
9%
40%
Health
Motor
Property
Life&Personal Accident
Other
17%
23%
Going forward, we expect the non-health insurance market to grow by 15% over the medium-term on the
back of increasing penetration levels. Additionally, the compulsory motor third party liability insurance (MTPL),
which was expected to come into force in 2021 and was postponed until 2022, is expected to create an ad-
ditional market of GEL 150 million for non-health insurance. We expect the similar growth in health insurance
business of around 15% year-on-year, mainly driven by increasing trend in average monthly premiums.
In terms of non-health insurance market share, we are a number one in retail market, with a share of 37.3%,
followed by Aldagi and GPIH with market shares of 29.0% and 12.9% respectively. After Aldagi we are the
second largest player in total non-health insurance market holding 29.7% and 21.1% share respectively, fol-
lowed by GPIH with a market share of 14.0%.
As for health insurance business, our major competitor is Ardi, as their priority is to provide superior custom-
er experience to the more affluent segment, similar to us. The other players are mainly focused on the mass
retail segment.
MAIN ACHIEVEMENTS AND STRATEGY
Our main focus for 2020 was to strengthen our market position via digital channels to make it easier for our
customers to obtain our products, as well as get reimbursements online with maximum comfort.
Non-health insurance business
In the light of the COVID-19 outbreak, our digital strategy proved to be more relevant than ever and we sig-
nificantly increased the share of our digital sales in retail segment, as well as the share of remote claims in the
motor insurance business. As a result, the digital sales offloading ratio1 reached 68.8% compared to 48.3% a
year ago, while our remote motor claims offloading ratio2 stood at 69.4% in December 2020, up by 18.2 pp on a
year-on-year basis. In addition, we observed a positive trend in the number of digitally renewed motor policies,
which reached 60.1% of the total renewed policies during the year, compared to 26.5% in 2019.
For our MSME clients, we have introduced a fully digital platform Logista, intended for cargo carriers, through
which an insurance policy for goods in transit is issued in less than a minute instead of a standard two-hour
process. In terms of the corporate segment, we attracted several large companies operating in the energy
and construction sectors.
64
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED Health insurance business
Creating a comfortable and seamless digital experience is a key component of our value proposition in the
health insurance business. In addition to our existing webpage, in August 2020, we introduced an insurance
app for health insurance customers, which allows our customers to book appointments with doctors and
also request reimbursements for health claims on the go. Our app was well received by our customers with
the number of registered customers and downloads reaching 3,223 and 6,595 by the end of the year.
Overall, during 2020, we attracted 23 large companies, which resulted in growth of our insured retail custom-
er base by 181.4% to 15,000. We also achieved strong results in terms of increasing the claims reimbursement
offloading3 ratio, which amounted to 74.3% in 2020 compared to 26.6% in 2019.
In addition, in response to COVID-19, we introduced a special health insurance product that covers all costs
related to complicated COVID-19 cases and also created a fund in the amount of GEL 300,000, in order to
help medical staff to fight against the pandemic.
FINANCIAL OVERVIEW
In 2020, the gross written premium of our non-health insurance business remained broadly flat and amount-
ed to GEL 77.7 million, while net earned premium increased by 23.2% year-on-year and stood at GEL 64.0
million. The former is attributable to a slowdown of economic activity related to the COVID-19 pandemic,
while the latter increase is related to structural changes in the reinsurance system. Starting from the July
2019, we stopped re-insuring motor portfolio, which led to decrease in re-insurance costs. On the other
hand, this change led to increase in net claims. Overall, the impact on the net profit was marginally positive
due to our well-diversified portfolio and prudent risk management.
Over the same period, the gross written premium of our health insurance business increased by 148.5%
and stood at GEL 8.7 million, while net earned premium increased and amounted to GEL 7.4 million. The
growth was driven mainly by an increase in our customer base which more than tripled compared to 2019
and reached 15,000.
Over the same period, our total net combined ratio4 stood at 86.8% as of December 2020, up by 4.0 pp year-
on-year, while respective ratio without health insurance business stood at 82.5%, up by 3.4 pp year-on-year.
The latter increase was related to structural changes in the reinsurance system, as mentioned above. Over-
all, our net profit increased by 17.2% and amounted to GEL 10.0 million in 2020. The growth was driven by
drop in motor and health insurance claims during the lock-down period related to the COVID-19 pandemic,
as well as increase in interest income.
GOING FORWARD
Our main goal is to further strengthen our position in the non-health insurance business by providing rele-
vant and innovative digital offerings to our clients, as well as by entering underpenetrated segments includ-
ing voluntary life insurance. In regards to the health insurance business, we aspire to establish ourselves as
a premium health insurance service provider and to increase our client base by providing superior product
offerings with strong focus on digital channels.
1 The number of policies sold via digital channels divided by the total number of voluntary retail policies
2 The number of motor claims regulated distantly (by web & call center) divided by the total number of motor claims
3 The number of health insurance claims regulated distantly (by web & call center) divided by the total number of health insurance claims
4 Net insurance claims plus acquisition costs and administrative expenses divided by net earned premium
65
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2020 HIGHLIGHTS
72%
MARKET SHARE1
2,846
NUMBER OF CUSTOMERS
GEL 280 mln
LEASING PORTFOLIO
TBC Leasing is the leading leasing company in Georgia and a wholly owned subsidiary of TBC Bank, which
was established in 2003. TBC Leasing serves both individuals and legal entities and provides comprehen-
sive leasing solutions and advisory services, including financial leasing, operating leasing, sales and lease-
backs tailored to customers’ needs. Legal entities account for around 88% of the leasing portfolio with
services, construction, health care and production being the largest sectors. We actively cooperate with the
largest vendors in Georgia to facilitate sales and financing of new vehicles and equipment used in transpor-
tation, construction and manufacturing. Our retail portfolio is comprised of new and used cars, with respec-
tive shares of 42% and 58% in total. Retail customers receive service at the company’s service centers, while
it uses TBC bank’s channels to sell leasing products to MSME and corporate customers.
In response to the COVID-19 pandemic, in March 2020 we offered a three-month grace period to all our
customers. In June and December 2020, we further extended the grace periods for another three months
to our vulnerable customers only. In addition, we started actively offering digital services to our customers
and this will remain one of our primary focuses for the next year, enabling our customers to access leasing
services remotely.
In 2020, leasing portfolio growth was moderate due to the pandemic and amounted to GEL 280 million.
We maintained strong positions in the construction, agriculture, medicine and telecommunication sectors.
Our main focus for the year was to ensure sound asset quality and help our clients withstand the COVID-19
related challenges.
TBC Leasing is also engaged in the financing of green, renewable and energy efficient assets. In 2020, the
company has participated in financing of the construction of a solar panel production facility in western
Georgia by AE Solar, which is one of the leading manufacturers in the renewable energy industry globally.
In addition, in September, we obtained a credit facility in the amount of GEL 16.4 million from Green For
Growth Fund (GGF), which will give our SME customers access to green financing in local currency.
In January 2020, TBC Leasing received a “BB-“credit rating from the Fitch credit rating agency and it marked
the highest credit rating among Georgia’s non-banking institutions. Long term credit rating of “BB-“ was
affirmed again by Fitch Ratings in January 2021. This significantly increases the company’s creditworthiness
and will enable it to increase its bond-holder base as well as decrease the cost of funding. During 2020, the
company successfully listed its public GEL bonds on Georgian stock Exchange in the amount of GEL 58.4
million, which was the highest single public placement among Georgian companies.
66
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED GOING FORWARD
Our goal is to further strengthen our leading position on the market, especially among MSME segment, by
diversifying our product offerings with more tailored solutions as well as increasing our presence in TBC
Bank’s digital channels. In addition, we aspire to raise public awareness about benefits of leasing solutions
in the highly underpenetrated Georgian market, whereas leasing to GDP ratio stands at 0.8%1.
1 Based on internal estimates
67
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR ECOSYSTEMS
Since 2018, we have been entering various online market-
place verticals in order to build the first customer-centric digi-
tal ecosystems in Georgia closely integrated with our payments
and financial offerings.
Our ecosystems will help us to strengthen and broaden our relationships with our users by increasing touch-
points with them and integrating our services into their daily lives. In this regard, we have entered the follow-
ing digital ecosystems: payments, housing, e-commerce, auto and leisure, which combine all the key ser-
vices needed by our users on daily basis. Our ecosystems are open platforms enabling our users to choose
for themselves which banking service they prefer to use, whether a loan, insurance or payments method.
Going forward, our goal is to enrich our ecosystems with more innovative products and services, including
lead generations and artificial intelligence tools.
LEISURE
HOUSING
PAYMENTS
TBC PAY
AUTO
PAYMENTS
E-COMMERCE
We are a leading payments provider in Georgia and Uzbekistan, enabling our customers to use a wide range
of payment solutions tailored to their needs. Our value proposition includes traditional channels such as
POS terminals, ATMs, e-commerce and self-service terminals, as well as innovative payment methods com-
prising Apple Pay, QR payments, digital card and e-wallet.
In 2020, despite the implications of the pandemic, our payments business in Georgia demonstrated a re-
silient year-on-year growth of 12% in the number of payments transactions, while the respective volume
increased by 6% year-on-year.
Our Uzbek payments subsidiary, Payme, which is the second largest payment company in the country ac-
cording to number of users1, demonstrated strong growth. The number and volume of transactions grew by
74.5% and 143.7% respectively.
For more information about our payments business please refer to pages 52-57.
68
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DIVISIONAL OVERVIEW CONTINUED
Housing
E-commerce
Our housing ecosystem platform consists of Livo.ge2
and Myhome.ge3, which together hold an estimated
total digital traffic of 36% in the housing market in
Georgia, based on the number of visitors. In December
2020, the number of the unique visitors reached
292,000 for Livo and 402,000 for Myhome.
Livo.ge is a newly established data driven platform,
which offers a wide range of traditional as well as
innovative services. This year, Livo.ge introduced an
AI module for real estate price estimation, as well as
added real estate measuring and registration services.
In addition, the company reached an agreement with
two Georgian banks to conduct real-estate valuation
services for them.
Myhome.ge is a leading classified digital platform in
Georgia for real estate purchase and renting, which
has offered its services since 2011. In 2020, MyHome.
ge launched an online real estate rental services and
added real estate valuation and insurance services to
the platform.
Our aspiration is to further strengthen our position on
the market by offering a complete suite of services
needed for real estate owners or potential buyers.
Our e-commerce ecosystem consists of three
platforms: Vendoo.ge, Myshop.ge3 and Mymarket.ge3.
Vendoo is a newly established online marketplace with
the number of unique visitors reaching 321,000 in
December 2020, while Mymarket and Myshop are well-
established hybrid platforms on the Georgian market,
unifying classified listing services with an online
marketplace. The latters host an estimated total digital
traffic of 28% of comparable e-commerce, based on
the number of visitors, which reached 1,279,500 by the
year end.
This year, our e-commerce platforms focused on
fine-tuning their internal processes and upgrading
their digital capabilities. Mymarket.ge began switching
its focus towards becoming an online marketplace
by integrating online payments for C2C sales, while
Vendoo.ge updated its website and added two
Georgian banks for online installment purposes.
We aspire to create a better customer journey by
adding more sophisticated features to our digital
platforms, as well as enriching our product range.
Automotive
Entertainment
Our automotive ecosystem consists of Myauto.ge3 and
Myparts.ge3, offering new and used cars as well as car
parts. These are the leading platforms in Georgia, with
an estimated total digital traffic of 73% of comparable
e-commerce, based on the number of visitors. In
December 2020, the number of the unique visitors
reached 1,452,000.
This year, Myauto.ge introduced a number of
innovations, including the first online auto auction
in Georgia, which facilitated the sale of around 50
cars during the year and a new mobile app, with the
number of downloads reaching 218,000 by the end of
December 2020.
We plan to further enrich our value proposition with
all necessary auto-related services to offer our clients
maximum comfort.
Our entertainment ecosystem includes Swoop.ge4 and
TKT.ge5.
Swoop.ge is one of the major Georgian couponing
platforms, offering discount coupons for various
activities including sports, hotels, beauty salons and
entertainment centers. In December 2020, the number
of the unique visitors reached 88,000.
TKT.ge is a leading Georgian online ticketing platform,
which allows people to buy tickets for various events
such as cinema, theatre or concerts as well as transport
tickets. It hosts an estimated total digital traffic of 81%
of comparable e-commerce, based on the number
of visitors. In December 2020, the number of unique
visitors reached 25,000.
We expect strong growth in the entertainment industry
following the recovery of the economy and plan to
make the most out of it.
1 based on internal estimates
2
In January 2019, we acquired a 90% share of the real estate platform Allproperty.ge, a local real estate listing company, for US$ 225,000.
This platform was used to launch Livo.ge.
In August 2019, for a consideration of GEL 19.45 million, TBC Bank acquired a 65% stake in LLC My.ge, the leading classified e-com-
merce player in Georgia, trading under the My.ge Group (“My Group”) name. My Group operates in three online marketplace verticals:
automotive & automotive spare parts (Myauto.ge and Myparts.ge), consumer-to-consumer goods (Myshop.ge and Mymarket.ge) and
housing (Myhome.ge).
In August 2018, we acquired Swoop, a well-known Georgian online discount and sales company, for a consideration of US$ 70,000.
In May 2019, we increased our share in our associated company TKT.ge from 26% to 55% for the total sum of GEL 1.7 million.
3
4
5
69
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 STAKEHOLDER ENGAGEMENT
STAKEHOLDER
ENGAGEMENT
OUR CUSTOMERS
Our customers are at the heart of
everything we do and we aspire to
make their lives easier by creating
the most seamless banking expe-
rience for them.
OUR COLLEAGUES
Our colleagues are the driving
force of our success and we strive
to create the best working envi-
ronment for them, which helps
them to realize their potential, feel
motivated, valued and safe.
OUR ENGAGEMENT
We actively interact with our customers in various ways, which in-
clude face-to-face communication in branches and VIP service ar-
eas, as well as via the call center, digital channels and social media.
For a deeper dive, we commission different customer satisfaction
surveys from independent research companies on a regular basis.
The customer feedback is thoroughly analyzed and incorporated
into our future strategic decisions.
We also closely monitor the customer complaints that come through
our customer complaints department and make sure that every case
is addressed properly.
We maintain close communication with our employees in order to
incorporate their perspectives and insights into our decision-mak-
ing, as well as to keep them informed about the company’s achieve-
ments and future goals.
We have various communication channels, which include face-to-
face meetings with the senior management as well as online com-
munication via emails, intranet, Facebook group and Zoom meet-
ings. In addition, we run annual employee feedback surveys.
During 2020, interaction via digital channels substantially increased
and replaced meetings, which were usually held in person. Digi-
tal communication has allowed our senior management to inter-
act more frequently with the wider work-force via “town-hall” style
meetings and ad-hoc digital conferences. This frequent interaction
has received very positive feedback from staff and we expect to
continue to use this digital communication between senior man-
agement and the wider work-force in future.
We have also appointed a designated “staff ambassador”, indepen-
dent non-executive Director, Tsira Kemularia, who is responsible for
facilitating communication with wide range of employees from dif-
ferent departments and capturing their views. She reports her find-
ings to the Board.
By the end of the year, key themes were identified and together with
the CEO and Head of HR, these topics were discussed and the ac-
tion plan was implemented to address them. Afterwards, CEO and
Head of HR communicated the outcome to people involved through
online meetings and shared the key take-aways and action plan to
address the specific matters (e.g. virtual on -boarding, structured
development, strategy and vision sessions).
70
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 As we aim to create value for all our stakeholders, we ac-
tively engage with them in order to incorporate their needs and
expectations into our strategy, purpose and values.
WHAT THEY TOLD US
OUR RESPONSE AND IMPACT ON BOARD DECISIONS
This year, due to the COVID-19 pandemic,
our customers were principally concerned
with their financial well-being and their
ability to service their debts.
In addition, the demand for digital products
and services increased significantly.
The customer surveys conducted at the
end of the year showed high satisfaction
levels across all major customer groups.
In the beginning of the year, our employees
were experiencing increased stress levels
due to the pandemic. They did not feel se-
cure about their jobs and financial well-be-
ing. Some employees also struggled to
get used to remote working practices and
lacked social interaction.
The employee opinion surveys conducted
in the second half of the year demonstrat-
ed strong engagement and high happiness
levels.
In order to support our customers and help them withstand
the crisis, the Board approved several important initiatives,
including offering a three-month grace period to our cus-
tomers on interest and principal payments in two major
stages, and participated in various government support pro-
grammes.
We also ensured that all our banking products and services
were available without any interruption. In addition, we
strengthened our digital presence and provided additional
incentives to our customers for using these channels.
For more information please refer to our customers section
on pages 74-76.
The Board demonstrated strong support to our employees
by announcing from the early days of pandemic that we
would retain all our staff in 2020 and that there would be no
lay-offs. Also, no decrease in fixed salary was implemented
for any employee, while executive Directors and top man-
agement of JSC TBC Bank did not receive any annual bonus
and share awards under long-term incentive plan (LTIP) for
the 2020 performance period.
We were quick to adapt to the new reality by transferring
our back office employees to remote working practices and
equipping our front office with all the necessary protection
measures.
Furthermore, as already mentioned in our engagement sec-
tion, we introduced online meetings with top management
in order to keep our employees up-to-date about the com-
pany’s resilient financial position and results as well as ad-
dress any concerns that they might have.
For more information please refer to our colleagues section
on pages 78-87.
71
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
OUR INVESTORS
We strive to generate long-term
sustainable returns for our diverse
shareholder base, as well as build
long- term, mutually beneficial
relationships with our debt inves-
tors.
OUR COMMUNITY
AND ENVIRONMENT
We aspire to have a positive im-
pact on Georgian society by in-
vesting in areas that will stimulate
sustainable economic growth and
prosperity in our community as
well as preserve the environment
in which we operate.
OUR ENGAGEMENT
We run an extensive investor relations programme to enable inves-
tors to engage with senior management via quarterly financial re-
sults calls and post-results roadshow meetings, regular participation
in investor conferences, an annual Capital Markets Day and hosting
on-site visits.
Due to the pandemic, from March onwards all our investor inter-
action in 2020 took place online. However, the format proved suc-
cessful, and allowed us to maintain investor engagement at normal
levels.
The AGM gives all shareholders the opportunity to engage with Di-
rectors and discuss any issues that they might have as well as pro-
vide feedback concerning the running of their company.
We also have a dedicated investor relations website (www.tbcbank-
group.com), which contains detailed information about the compa-
ny’s strategic objectives, governance, financial position and perfor-
mance as well as environmental and social issues.
We engage with our community in a number of ways, including con-
ducting surveys on regular basis among the Georgian population in
order to improve our understanding about current social conditions,
as well as interact with various public and private organizations re-
garding education, business support, art and culture.
We also maintain active communication with businesses, including
MSMEs and start-ups, in order to better structure our business sup-
port programmes and create maxium value for them. For more infor-
mation, please refer to pages 48-49.
We also cooperate with international financial institutions and lo-
cal companies in order to raise awareness about the importance of
environmental issues and encourage businesses to raise their stan-
dards in this regard.
SECTION 172 STATEMENT BY THE BOARD
As part of the Directors’ responsibilities to promote the success of the Company in accordance with section 172
of the Companies Act, the Board ensures that the Group engages with its stakeholders through many different
channels to understand their needs and concerns, build trusted relationships and make decisions that are fair
and balanced for all stakeholders.
During 2020, the Board continued to undertake a stakeholder impact analysis for each proposal brought to the
Board, identifying the impact on each of the stakeholder groups shown below. This analysis assists the Directors
in performing their duties under section 172 of the Companies Act 2006 and confirms to the Board that the
management is considering the impact of business plans on all stakeholders when developing initiatives for
Board approval.
Throughout most of 2020, the Board has considered the impact of COVID-19 on its operations and on its various
stakeholder groups. A more detailed analysis of the differing impacts on each group is shown in the corporate
governance statement on pages 150-151.
72
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020STAKEHOLDER ENGAGEMENT CONTINUED WHAT THEY TOLD US
OUR RESPONSE AND IMPACT ON BOARD DECISIONS
This year, our investors were mainly con-
cerned with how the country is dealing
with COVID-19 and economic implications
of the pandemic. In terms of the compa-
ny’s performance, the questions mainly re-
volved around our asset quality, capital and
liquidity positions.
Dividends was another important topic, as
a significant majority of our shareholders
inquired about the prospects of resuming
paying dividends for the year 2020 in 2021.
In order to reassure our investors that we are managing the
COVID-19 challenges effectively, the Board engaged pro-
actively with all major investors and the CEO & CFO held
online calls about about the impact of the pandemic on our
business and our response to it.
We also held an extended financial results conference call in
May and, together with the quarterly results, provided an in-
depth analysis of the macroeconomic situation in the coun-
try and our risk management. The call was also attended by
the Vice Governor of the National Bank of Georgia, who pre-
sented a wider perspective on the Georgian economy.
We continue to closely monitor the economic situation in
Georgia and hold active discussions with regulatory bodies
about the possibility of resuming paying dividends.
For the majority of the Georgian population,
the key concern this year was the availabil-
ity of timely medical support in light of the
COVID-19 outbreak as well as maintaining
financial solvency amid the economic lock-
down and strict restrictions.
Many financially vulnerable families also
struggled to ensure proper conditions for
remote education for their children since
they did not have access to internet or the
necessary technical equipment.
Likewise, it was a rather challenging year for
businesses, especially MSMEs, and many
of them found it difficult to stay afloat.
This year, the Board approved the launch of a wide-scale
programme called #TBCforyou to support the Georgian
population, which unites various social programmes and ini-
tiatives in this regard, including supporting the elderly, youth
and businesses.
We also strived to extend financial support to those compa-
nies, that could create positive social impact through their
activities. Please refer to pages 40-41 for some case studies.
In addition, we continued to roll-out our long-lasting proj-
ects aimed at supporting the young generation, art and cul-
ture and MSMEs.
We also obtained an ISO 14001:2015 certificate for our envi-
ronmental management system, which is evidence that our
environmental management system complies with the high-
est international standards.
For more information please refer to our community section
on pages 90-93.
Throughout the year, senior management attended the Group’s Board meetings to present key development
and investment projects. All presentations made to the Board consider both the benefit of the proposal to
shareholders and the impact on other key stakeholders, including employees.
One non-executive Director, Tsira Kemularia has been appointed as a "Staff Ambassador" responsible for staff
engagement on behalf of the Board. Due to the impact of the pandemic, face-to-face meetings have not been
considered appropriate, but various online forums have been put in place. It was intended that this role would be
rotated periodically, and a change from the current incumbent will be actioned during 2021, so that more Board
members can undertake this key and fulfilling role.
Our goal is to develop a strategy which is mutually beneficial to all our stakeholders and helps them achieve
their aspirations. Our senior management’s KPIs are linked to both our corporate objectives and their individual
responsibilities to contribute to the overall Group strategy targets. The Remuneration Committee reviews the
overall remuneration policy of the Group and its application at each level of job category (for more information
about our performance assessment and award system please refer to page 83).
73
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DOING BUSINESS RESPONSIBLY
OUR CUSTOMERS
As customers lie at the heart of everything we do, we are
committed to providing reliable support to our clients to ensure
their financial wellbeing and safety in a Post COVID-19 reality.
POST COVID-19 FINANCIAL SUPPORT
The consequences of COVID-19 pandemic led to economic losses for our clients, as well as a change in
their lifestyles, needs and demands. As the most systematically important bank in Georgia, we strongly
believe that it is our responsibility to help them navigate through these uncertain times, provide effective
financial relief and encourage them to move forward.
Our first step in this regard was the introduction of a three-month grace period on principal and interest
payments for all our individual and MSME customers, as well as for certain corporate customers in March
2020. These procedures were done remotely without customers having to come to the branch. This initia-
tive was conducted in close coordination with the government, the NBG and the banking sector. In May,
we made a decision to extend the grace period for a further three months to the most vulnerable retail and
micro customers based on specific qualification criteria as well as to certain corporate customers on an
individual basis.
GRACE PERIOD TAKE-UP RATES1
77%
59%
24%
29%
32%
5%
Mar - 20
Jun - 20
Corporate
MSME
Retail
Our another initiative was to help businesses that were the most affected by the pandemic. For this purpose,
we partnered with the government to implement the following programmes:
We actively participated in the government’s support programme for hotels, which envisaged subsidies
for 70-80% of interest on loans issued before 1st March 2020 for 12 months, based on certain criteria. By
the end of December, we received subsidies for around 709 loans, with a total outstanding loan amount
of GEL 572 million;
Since December 1st, a 6-month subsidizing programme with similar terms and qualification criteria as the
programme for hotels was launched for restaurants. By the end of 2020, we received subsidies for around
218 loans, with a total outstanding loan amount of GEL 127 million;
From the beginning of July, we started issuing mortgages under government support programme al-
lowing customers to get a 4% interest subsidy or receive a 20% guarantee (in case of a minimum of 10%
participation from the borrower side) for purchasing a new apartment from a real estate developer under
GEL 200,000 for a duration of five years. The programme ended in December. In total, we have disbursed
around 2,272 such loans with a total amount of GEL 235 million.
74
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
POST COVID-19 DIGITAL SUPPORT
In addition to the financial implications, the lifestyle of our clients was also drastically affected by the pan-
demic. Remote and digital channels were no longer just a convenience, as they used to be, but instead
became a necessity. Over the years, we have built a strong digital presence, which enabled us to switch to a
remote service model swiftly and without any disruptions. Our call center operated 24/7 to ensure a seam-
less transition and address all of our clients’ questions and concerns. Furthermore, we provided additional
incentives for our customers to use digital channels, such as waivered commissions on all transactions con-
ducted through internet and mobile banking for three months and increased the limits for FX transactions
with preferential exchange rates. As a result, the number of active digital clients2 increased by 8.7% year-
on-year and stood at around 692,000. For those customers, who still preferred to go the branches, we kept
our branches open, enforcing all safety regulations and recommendations from the Government and WHO.
In order to further enhance our digital banking value proposition, this year, we introduced several new prod-
ucts and services for both individuals and businesses. On retail side, the most important was the launch of
the innovative online lending platforms for mortgages and installments, as well as the introduction of the
first fully digital card in Georgia, which is a digital equivalent of a physical debit card. For our business cus-
tomers, we launched the dedicated business mobile banking app. More information on these products is
given in divisional overview section on pages 28-69.
As a result of strict regulations related to the pandemic, the only option for many MSMEs and startups to
stay in business was to focus on e-commerce and increase their online presence. To assist them with the
digital transition, we have offered our business customers various programmes and offers including setting
up online shops for free and offering special favorable terms to place their products on our multiple e-com-
merce platforms. Detailed information on these projects is given in MSME section on pages 44-49.
CUSTOMER EXPERIENCE AND SATISFACTION
Customers are at the very heart of our business and their satisfaction and well-being has always remained of
utmost importance for us. We make sure that our products and services are simple, transparent and easy to
understand. We also take time to explain to our customers the significant risks, restrictions and limits related
to specific financial products in order to enable them to make informed decisions. When providing advice
or consultation, we take into account the individual needs of our customers and strive to come up with the
solution that serves their best interests.
We regularly request our clients’ feedback and have a department dedicated to addressing customer com-
plaints. Clients have a possibility to address the Bank with a complaint in written form or verbally through
call center, branches, internet bank and an official webpage on www.tbcbank.com.ge. Every complaint is
thoroughly analyzed and acted upon.
In addition, we regularly measure customer satisfaction levels using various surveys conducted by inde-
pendent third parties, which consistently demonstrate the highest results in the Georgian banking sector
as well as the whole retail industry in Georgia. Furthermore, for a deeper dive, we conduct up to 40 internal
assessments of various scope, objectives and frequency. These assessments help us evaluate our customer
service from different perspectives and further increase our customer satisfaction.
Furthermore, we are also eager to collect internal feedback and use it to improve processes that might not
be visible to the customer, but nevertheless play an important role in customer service. In this regard, we
regularly perform a “voice of the internal customer” survey, which enables employees to rate the services
provided by various departments based on a scoring model similar to the one that customers use to rate our
services. As a result of a subsequent analysis, we are able to further fine-tune all the necessary processes for
an impeccable customer experience.
1 Take-up rates are calculated based on the loan amounts
2
Internet and mobile banking active clients, including Space
75
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CUSTOMER PRIVACY AND DATA SECURITY
Securing our customers’ personal information remains our undisputed priority. We are dedicated to protecting
the personal data of our customers and we are constantly improving our cybersecurity ecosystem to prevent
various threats and fraudulent activities. In order to mitigate the risks associated with data protection and en-
sure the security of our clients, we continuously enhance our in-depth security strategy, which covers multiple
preventive and detective controls starting from the data and endpoint computers to edge firewalls.
In addition, we have built a Security Operations Center, which monitors unusual occurrences across the
organization’s network in order to detect potentially negative incidents and respond to them effectively.
Furthermore, the Information Security Steering Committee governs information concerning cyber security to
ensure that relevant risks are within acceptable level and management processes are improved continually.
At least once a year, a full information security and cyber security threat analysis is performed, taking into
consideration the relevant regional and sector specific perspectives, with the involvement of an external
consultant. This analysis gives us a broad review as well as detailed insights, which help us to further en-
hance our information and cyber security systems. In addition, we perform cyber-attack readiness exercises
on a regular basis. These exercises let us evaluate our strengths and weaknesses in this area and provide a
benchmark against international best practices.
We feel that it is our responsibility to develop the safe banking habits of our customers. In this regard, we
send frequent notifications to our clients through our digital platforms, warning them about possible threats,
frequent phishing schemes, tips on how they should act in such situations and remind them to never provide
their personal data to untrustworthy sources.
As our employees play a crucial role in information security, we conduct regular mandatory training sessions
for all employees, which comprise remote learning courses regarding security issues, fraud and phishing
simulations, as well as email notifications about possible threats. In addition, we carry out onboarding train-
ings for new employees. These measures ensure that our employees are fully aware of their responsibilities
and are well-prepared for various security threats.
We are fully committed to safeguarding the confidentiality and integrity of information regarding our cus-
tomers, employees, business partners and other third parties. We only process personal data for specific
business purposes and do so lawfully, fairly and in a transparent manner. We provide data subjects with all
relevant information regarding data processing as well as inform them regarding their rights, which they
may exercise by contacting us using the defined communication channels. Our Privacy Policy is in line with
applicable laws imposed by local government and also meets certain relevant requirements of EU General
Data Protection Regulation (GDPR). The full policy is available on our IR website www.tbcbankgroup.com.
76
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED 77
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR COLLEAGUES
Engaged and happy colleagues are key to our successful
and sustainable development.
68%1
ENPS
91%2
ENGAGEMENT INDEX
85%3
EMPLOYEE HAPPINESS INDEX
CARING COMES FIRST
This year, we were confronted by a lot of challenges due to COVID-19. One such challenge was to ensure
the safety and wellbeing of our employees, while continuing to conduct our business without any disrup-
tion. Thanks to our strong digital capabilities and technical capacity, we were able to set up the necessary
infrastructure for remote working practices in a very short period of time: by the end of March, 95% of our
back-office employees were able to work from the safety of their homes. As for our front-office employees,
we equipped our branches with all the necessary security and infection prevention measures in accordance
with WHO recommendations and introduced shifts to ensure appropriate social distancing.
Equally important was instilling confidence amid high uncertainty and keeping up team spirit, especially
during the early stage of the pandemic. Therefore, top management regularly conducted online meetings
to keep everyone up-to-date on the company’s performance, including solid capital and high liquidity po-
sitions, in order to provide assurance about our financial stability as well as address any concerns that em-
ployees might have. In addition, we developed a new project, called “Open room”, which offers our people
online meetings with the best-in-class speakers from different fields on various pertinent subjects, includ-
ing “the economy and the pandemic”, “time management” and many others.
Our efforts turned out to be very successful, resulting in increased employee motivation and efficiency lev-
els, as measured by various internal surveys. In addition, 87% of all back-office respondents indicated their
willingness to work remotely, partially or permanently. Therefore, going forward we plan to introduce flexible
working practices, allowing our back office employees to work out of the office.
In order to demonstrate our commitment to our employees, despite the COVID-19 related challenges, we
decided to retain all our staff this year, while the executive Directors and top management of JSC TBC Bank
did not receive any annual bonus and share awards under long-term incentive plan (LTIP) for the 2020 per-
formance period.
OUR PROGRESS ON AGILE TRANSFORMATION
Back in 2018, we started our agile journey in order to build a more dynamic, adaptive and customer-cen-
tric culture, which would be able to respond quickly to changes in the market environment. In 2019, we
successfully implemented agile transformation in the Retail, MSME and IT departments. These changes
helped us to eliminate unnecessary processes and bureaucracies, better integrate IT and business, increase
cross company collaboration, achieve operational excellence and reduce time-to-market. Thus, in 2020 we
continued to roll out agile transformation across our corporate department, risk departments as well as
certain parts of the finance department. Overall, we created 93 cross-functional teams with more than 600
employees working in the agile structure. As the agile structure supports the empowerment of employees
and instills an open culture, people in the agile structure were more prepared to work remotely and adapt
to the new reality.
78
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED
In order to increase awareness and share experience about agile working practices and their benefits among
banking sector in the CIS region, we conducted an online conference with senior management from differ-
ent companies from 16 countries. The attendees had the chance to learn from each other and interact with
industry-leading experts.
In 2020, we achieved rather impressive results in our agile transformation project. Our organizational agility
score4 improved by 30% in December 2020, compared to the previous year, while time-to-market and re-
lease frequency5 improved by 1.4 times.
Going forward, our goal is to implement an agile structure in other departments in order to unlock new op-
portunities across the company.
ATTRACTING NEW TALENT
We are committed to attracting, developing and retaining a diverse and inclusive workforce and provid-
ing equal opportunities. We strive to attract the best talent with an extensive selection process, which is
comprised of several steps and is tailored to the specific needs of each position. Selected candidates are
offered attractive employment conditions, which include a fixed salary and a performance based bonus, as
well as a good benefits package.
One of our major recruitment priorities is to strengthen our team with more IT specialists in order to support
our digital transformation. Given that such skills are in short supply, we established the IT Academy in 2019.
The courses offered include front-end and back-end development, Android and IOS mobile development,
as well as user experience research and strategy. The academy is run by our experienced staff members, as
well as leading professionals from the respective fields. This programme is free of charge for selected stu-
dents. This initiative has proved to be very successful and we have received more than 4,500 applications
since 2019, out of which 335 students were selected for studying and 83 were employed at TBC Bank after
successful graduation.
In addition, by the end of 2020, we established the Risk Academy, which offers various courses in risk man-
agement to young professionals. The aim is to equip them with banking sector specific knowledge in risk
management that is not usually taught in universities and better prepare them for their future careers. All
courses are offered free of charge and the best students will be offered employment at TBC Bank.
Since 2011, we have run a wide-scale internship programme for the best students from Georgia’s leading
universities. This programme has been very successful, helping us to identify new talents who are part of
our team today. This year, 98 participants were involved in our internship programme, of whom 28 people
became full-time TBC employees in various departments including finance, risks, corporate, marketing, IT
and data analytics. Overall, since its establishment, we have recruited 371 students under this programme.
Furthermore, we continue to run TBC Camp, a programme that was established in 2019 and envisages the
conduct of a Stock Pitch Competition for fourth year finance students. This competition is integrated in the
syllabus of the university’s’ curriculum and is comprised of intensive online lectures, trainings and prepa-
ration of real investment cases in selected companies, which are presented to a panel of judges. The two
selected teams are awarded a special prize in the form of TBC shares. This year we have involved 10 more
universities, meaning that in total 12 universities are participating in the project. TBC Camp helps to increase
awareness of investment banking among young people, as well as helps us to identify bright talents and
recruit them into the corporate investment banking department.
1 Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank’s employees
2 Engagement Index was measured in October 2020 by an independent consultant for the Bank’s employee’s and measures how much
employees feel involved and committed to TBC Bank
3 Employee Happiness Index was assessed internally based on comprehensive survey prepared with the assistance of the world’s leading
consulting firm and measures whether employees feel happy and satisfied with their job. The index was measured in July 2020 for the
Bank’s employees
4 Based on internal survey, which measures the company’s ability to respond to the fast changing environment
5 Time-to-market measures the time it takes for the product to be launched from the idea origination date to the release date, while
release frequency measures how many times the systems are renewed within the given period of time
79
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 EMPLOYEE ENGAGEMENT AND MOTIVATION
Our colleagues are integral part of our success and our most valuable asset. We are committed to creating
a collaborative working environment, in which our team members feel safe, valued and motivated to realize
their full potential and deliver a high performance.
In this regard, we are carrying out several initiatives:
We encourage internal promotions and under equal circumstances give priority to internal candidates.
During 2020, around 14% of our employees were promoted to more senior positions;
Top management regularity conducts meetings with employees to keep them up-to-date on the Group’s
strategy, performance and recent achievements. The staff has the opportunity to ask questions and share
feedback. These meetings became particularly important during the pandemic, as employees needed
more assurance about the company’s financial position and future prospects. In addition, we conduct an
open dialogue with our staff via Facebook group, in which we regularly share the Group’s achievements,
as well as success stories of individual employees;
As we aim to promote an innovative mindset throughout the company, last year we launched an unpar-
alleled project in Georgia, called Startup-leave. This initiative gives an opportunity to our employees to
start their own startup by taking six months paid leave to develop their business. This project was very
well received by our employees and we were nicely surprised by the number and quality of applications
submitted. This year, out of many interesting and original business ideas, we selected a project that as-
pires to create an online platform that connects people interested in education and self-development
with teachers and lectures;
Since 2009, we have run TBC Fund, a special purpose charity fund that aims to cover the medical expens-
es of our employees and their close relatives in case of severe diseases. Around 83% of our employees
donate up to 2% of their salaries on a monthly basis. The fund has allocated GEL 6,200,200 million and
helped more than 1,700 people since it was established;
Since 2013, we have also run a special club for large families, which aims to provide a one-time gift of GEL
10,000 to all TBC Bank employees upon the birth of their fourth and fifth child and GEL 50,000 upon the
birth of their sixth child or more. Since the establishment of the club, we have granted more than GEL 1.5
million to 69 employees;
To accurately measure our employee satisfaction and engagement levels, we annually run a feedback
survey in partnership with leading international universities and research firms. The results of the survey
are presented to the management board, to be thoroughly discussed, following which relevant actions
are planned.
As a result, in 2020 the staff turnover rate in the Bank was as low as 8.3%, compared to 15% in 2019.
LEARNING AND DEVELOPMENT
The learning and development of our employees remains our key priority and we continually refresh our
courses and add new learning resources to our in-house educational platform TBC Academy, which was es-
tablished in 2011. The academy offers workshops and training in various fields such as financial institutions,
capital markets, ethics and financial fraud management, as well as soft skills including leadership, customer
service, business communication, team building etc. In addition, since 2019, we have run several special
purpose educational programmes that are closely aligned to our strategic directions including an agile and
data analytics academy, as well as a business school for corporate, finance and risk professionals. This year,
due to the pandemic, TBC Academy switched to being online, which helped us to increase coverage, espe-
cially for our employees from different regions of Georgia. Overall, the number of participants increased by
108% from 4,300 in 2019 to 8,966 in 2020.
In addition to our in-house TBC Academy, we also help our people to attend external courses and gain in-
ternational certifications such as CFA, FRM, ACCA, as well as participate in various professional training in
leadership, management, sales, customer service, finance and risks. During 2020, more than 800 employees
received financial support for their professional development. Moreover, we continue to offer TBC Scholar-
ships to our middle managers to co-finance their studies abroad at the world’s leading universities as well
as at top Georgian Universities.
82
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED PERFORMANCE ASSESSMENT AND REWARD
Our performance appraisal system is closely linked with the overall objectives of the Group and is based
on three core principles: clarity, fairness and integrity. We make sure that our colleagues have a clear under-
standing of their role in the company and are actively engaged in setting their personal goals. Employees are
also given appropriate coaching by their supervisors to help them achieve these goals. Regular employee
feedback and a constructive dialogue are an important part of our performance appraisal system.
We use different assessment systems for front and back office staff, depending on the positions held. We
assess our back office staff with the management by-objectives (MBO) system, a personnel management
technique where managers and employees work together to set, record and monitor goals for the finan-
cial year. Goals are written down annually and are continually monitored by managers to check progress,
including semi-annual direct feedback from supervisors. Rewards are based on the achievement of goals.
We have a uniform scoring system for all employees within the MBO, which ensures fairness throughout the
organisation.
For our middle managers, as well as employees who are part of the agile structure, we also run a 360-degree
feedback system that provides each employee with the opportunity to receive performance feedback from
his/ her supervisor, peers and subordinates. The 360-degree feedback allows our employees to understand
how their performance is viewed by others and it helps them to better identify their strengths and weak-
nesses as well as to develop new skills.
For front-office employees we use a target-based performance assessment system, wherein performance is
linked to specific KPIs, including quantitative and qualitative components. Within the target-based system,
employees are assessed monthly, quarterly or annually depending on their positions.
We offer competitive remuneration packages to our employees, which are comprised of fixed salary, perfor-
mance based bonuses and a benefits package, which includes medical insurance, pension contributions,
paid annual and sick leave, as well as six months of fully paid maternity and paternity leave. Additional
benefits include monetary gifts in case of marriage and childbirth and compensation in the case of serious
illness or death.
We operate a deferred share bonus scheme for our middle managers whereby 15%-25% of the total annual
remuneration is paid in the form TBC PLC shares, which are subject to a three year continued employment
condition and holding period: 33% and 33% are awarded on the first and second anniversaries respectively,
and the remaining 34% on the third anniversary. This scheme encourages a long-term commitment to the
company and helps to align middle managers’ interests with those of the shareholders.
This year, due to the negative impact of COVID-19 on the Group’s performance, we reduced the bonuses for
middle management by 50%, while for other back office employees the bonuses were cut by 30%. Also, no
bonuses will be distributed to employees working in the agile structure.
In 2021, the total number of shares awarded as bonus shares, in relation to 2020 peformance, to such em-
ployees amounted to 45,534 (Detailed information regarding the Directors’ remuneration system can be
found in the Remuneration Committee Report on pages 177 to 213.)
EQUALITY AND DIVERSITY
We have created a sustainable and successful business in which all employees are treated equally and
fairly and are supported and coached to succeed. We provide a safe work environment free from any kind
of discrimination where each and every employee is valued, respected and treated equally regardless of
gender, age, marital status, sexual orientation, race, ethnicity, religious and political beliefs or disability. We
take special care of our colleagues with disabilities and strive to improve our workplace to make it more
flexible for them. Furthermore, we support them to have the same access to learning, development and job
opportunities.
We remain committed to having a gender-balanced workforce through a workplace environment and culture
that supports and empowers women. As a result, 64% of employees at TBC Bank are women while the share
of women in senior roles is 33%. We plan to further improve the gender balance across managerial positions.
83
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GENDER DIVERSITY STATISTIC
BOARD OF DIRECTORS
SENIOR MANAGEMENT
7
7
6
6
6
6
2
2
2
1
1
1
2018
2019
2020
2018
2019
2020
MIDDLE MANAGEMENT*
ALL EMPLOYEES
268
276
4,827
4,992
5,325
200
120
146
138
2,425
2,662
2,956
2018
2019
2020
2018
2019
2020
Female
Male
We also have a good mix of people comprised of employees with extensive working experience and young
and bright talents with innovative and fresh ideas who have just graduated from top universities in Georgia
and abroad. We believe that age diversity creates a more dynamic and high-performing team that leads to
better results.
* Direct reports to senior management
84
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED AGE DIVERSITY STATISTICS OF 2020
3%
9%
38%
50%
Under 29 years
30-39 years
40-49 years
Over 50
GENDER PAY GAP
We regularly review our pay levels and make sure that men and women are paid equally for doing the same
type of job.
As shown in Table 1 below, the average gender pay and bonus gaps are in favour of men. This is mainly due
to the higher number of women being employed in junior roles, including customer service positions at
front office, which is related to our business model (as shown in the gender distribution chart below).
We remain committed to achieving a better gender balance and increasing the proportion of women work-
ing in senior roles.
GENDER DISTRIBUTION ACROSS DIFFERENT POSITIONS*
71%
79%
65%
29%
35%
21%
56%
44%
Full Bank
Middle Management
Front Office
Back Office
Female
Male
* The data in the given table is presented for the bank only
85
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GENDER PAY AND BONUS GAP STATISTICS1
Gender pay gap is based on the data from April 1, 2020 to April 30, 2020.
Gender bonus gap is based on the data from April 6, 2019 to April 5, 2020.
TABLE 1
Bank full
mean gender pay gap in hourly pay
median gender pay gap in hourly pay
mean bonus gender pay gap
median bonus gender pay gap
TABLE 2
Middle management
mean gender pay gap in hourly pay
median gender pay gap in hourly pay
mean bonus gender pay gap
median bonus gender pay gap
TABLE 3
Front Office Employees
mean gender pay gap in hourly pay
median gender pay gap in hourly pay
mean bonus gender pay gap
median bonus gender pay gap
TABLE 4
Back Office Employees
mean gender pay gap in hourly pay
median gender pay gap in hourly pay
mean bonus gender pay gap
median bonus gender pay gap
2020
44.0%
33.0%
53.3%
41.7%
2020
10.9%
-9.9%
-6.4%
-89.1%
2020
43.0%
27.2%
64.1%
69.4%
2020
24.7%
17.7%
25.9%
11.3%
2019
44.4%
46.5%
56.6%
57.8%
2019
-7.3%
-14.9%
-40.0%
-82.4%
2019
50.2%
52.5%
66.5%
71.5%
2019
21.8%
19.7%
30.5%
20.5%
1 The data on gender pay gap is presented only for the bank, which accounts for the 80% of the total Group’s employees. Negative gap
indicates a percentage pay gap in favor of women, while positive gap indicates a percentage pay gap in favor of men
86
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED ETHICAL STANDARDS, RESPONSIBLE CONDUCT AND SAFETY AT WORK
TBC Bank is committed to running a business that promotes high ethical standards, values and respect to-
ward human rights, as well as by encouraging our employees to act with integrity and responsibility towards
each other and other stakeholders.
We have in place a set of internal policies and procedures and we closely monitor their execution:
Code of Ethics;
Code of Conduct;
Anti-Bribery, Anti-Corruption and Prevention of the Facilitation of Tax Evasion Policy;
Whistleblowing Policy.
These policies apply to all employees of the Group and can be found on our IR website at www.tbcbank-
group.com.
The Code of Ethics and Code of Conduct outline the ethical principles and standards of professional con-
duct expected from all employees of the Group and set appropriate relationship norms with colleagues,
customers, partners and others stakeholders. TBC Bank’s employees are expected to act with profession-
alism and integrity at all times and to comply with both the spirit and intent of all applicable laws and regu-
lations. Employees are also required to treat all stakeholders with respect and act fairly and responsibly to-
wards them. In dealing with customers, we ensure that our products and services are tailored to their needs,
straightforward and easy to understand. We also make sure that clients do not face unreasonable post-sale
barriers to change products, submit a claim or make a complaint. With regards to suppliers and other busi-
ness partners, the Group engages only in arm’s length transactions. In relation to our employees, we are
committed to fostering a supportive, safe and respectful working environment, which is free of any form of
harassment, discrimination (including race, ancestry, colour, religion, national origin, citizenship, marital sta-
tus, veteran’s status, gender, gender identity, sexual orientation, age or disability) or inappropriate behavior.
Environmental and social issues are also on top of our agenda in all our undertakings.
Due to the shift to the remote working practices for back office employees this year, we have updated our
Code of Conduct policy and included instructions and recommendations regarding remote working norms
in order to ensure proper behavior and adherence to the company’s rules and procedures.
Compliance with the Group’s Code of Ethics and Code of Conduct is closely monitored by the HR Depart-
ment and Compliance Department on a regular basis. The Internal Audit Department also conducts peri-
odic audits in order to identify any breach or misconduct in relation to compliance with these policies. No
material breaches of the Group’s Code of Ethics and Code of Conduct were identified during 2020.
Our Anti-Bribery, Anti-Corruption and Prevention of the Facilitation of Tax Evasion Policy complies with all
relevant local and international laws and regulations, and applies to all employees of the Group. The policy
provides comprehensive guidance on the types of behaviour that may give rise to violations of anti-bribery
and anti-corruption laws and/or Criminal Finance Bill requirements, and reinforces a culture of honesty and
openness among employees.
To ensure employees’ protection and improve working conditions, we have a Whistleblowing Policy in place,
available to all, which aims to identify and respond to potential violations that may jeopardise employees’
work effectiveness. The policy encourages every staff member to report on any suspected violations in
an open manner, without fear of retaliation. In addition, TBC Bank provides channels for anonymous whis-
tleblowing (including hotline, email or letter) for anyone who believes that a violation of internal standards
or legal requirements has taken place but is uncomfortable using the normal reporting lines. Our guidelines
seek to ensure that complaints are recorded and that employees are safeguarded from any potential retali-
ation. This year we received 56 whistleblowing reports, which were reported to the Risk Committee, which
in turn reported them to the Board.
The Compliance Department regularly conducts employee training sessions in order to raise awareness
and highlight the importance of anti-corruption, anti-bribery and ethical issues. Periodic audits are also
conducted by the Internal Audit Department to identify any violations or inappropriate behavior. No such
material instances were identified during 2020.
87
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR SUPPLIERS
As one of the biggest purchasers in Georgia, we believe that
by implementing responsible procurement practices, we can have
a significant impact on the financial stability and development of
our suppliers, as well as on the Georgian economy as a whole.
ENSURING FAIRNESS AND TRANSPARENCY AT ALL STAGES OF OUR PROCURE-
MENT PROCESSES
We have a well-established procurement process, which is governed by the Procurement Policy and Proce-
dures, ensuring fairness and efficiency for both parties.
Our supplier selection process is based on principles of equality, transparency and competitiveness. For this
process, we mostly use electronic procurement services available through one of the most well-known third
party online platforms in Georgia. This platform has multiple advantages, such as enabling us to reach out
to a wide range of suppliers, allowing communication with potential suppliers online, as well as guarantee-
ing transparency of the bidding process, as participants are able to see the total number of bids and their
prices. After receiving the bids, we make a selection based on a transparent and objective selection criteria
and treat all the bidders in an equal and fair manner. In case any potential supplier is unsatisfied with the
evaluation process or outcome of the tender, they may file a complaint according to the rules stated in the
tender documentation. Every complaint is thoroughly analyzed and addressed.
As for the payment process, we try to offer our suppliers flexibility, taking into account their financial situ-
ation. We understand that different suppliers prefer various payment methods and seek to cooperate with
them to settle for the best option for both sides.
In line with our mission of making life easier, we strive to become the reliable and supportive partner to our
suppliers by understanding their needs, as well as their satisfaction levels. To obtain these insights and receive
feedback regarding our procurement processes, we regularly organize various types of meetings with them.
RESPONSIBLE PURCHASING PRACTICES
We understand that as one of the largest purchasers in the country, our procurement choices have a signif-
icant social, economic and environmental impact. Hence, when making purchasing decisions, we manage
the environmental and social risks with high level of responsibility. In order to decrease these risks, we re-
quire all our contractors to sign TBC personal data protection, anti-corruption, environmental and tax avoid-
ance clauses that are an indispensable part of the contract and are mandatory for implementation.
We favour purchasing green, energy-efficient and sustainable products where possible. For this reason, we
have developed Green Procurement Recommendations that provide guidelines regarding purchasing en-
vironmentally friendly goods and services. In addition, we introduced a Responsible Procurement Training
Module to further educate our procurement staff on this topic. Furthermore, we have developed a compul-
sory Environmental and Social Risk Screening questionnaire for our suppliers, which helps us to evaluate
their stance on various environmental and social matters and select only those suppliers who comply with
our standards, or plan to comply with them in the near future.
88
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED
Furthermore, we continually provide assistance to our contractors in managing their environmental and so-
cial risks. During 2020, we conducted a environmental and social risks assessment for around 80 contractor
companies and provided Environmental and Social Action Plans to 14 companies.
In addition, we strive to support small local companies and newly established businesses by purchasing
goods and services from them whenever it is reasonable and rational for the bank. Additionally, our procure-
ment team is always ready to share the experience and knowledge with them to contribute to their emer-
gence and further development in a competitive market.
89
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR COMMUNITY
We aspire to have a positive impact on Georgian society and
give back to the community that we operate in by contributing to
areas that we regard as vital for the future of our country: promoting
entrepreneurship and developing the MSME sector, youth support
and education, maintenance of cultural heritage and promotion
of healthy life styles. Moreover, this year we launched a COVID-19
related programme called #TBCforyou to support our community
throughout the pandemic.
#TBCFORYOU
In order to reduce the damage caused by COVID-19 to the population of Georgia, we created a wide-scale
support programme called #TBCforyou (www.tbcforyou.ge), which combines a number of our projects, in-
cluding, but not limited, to the following:
Purchased 10,000 COVID-19 rapid tests and handed them over to the Ministry of Health;
Helped 1,000 elderly people in need with food, medicine and personal hygiene items;
Cooperated with the business sector, implementing a number of projects in collaboration with them. For
example, in cooperation with “Nikora”, a leading Georgian food producer, 300 socially vulnerable families
were provided with food product baskets;
Helped MSMEs to digitalize their businesses and start offering their products and services online. More
details on this topic are given in the MSME section on pages 44-49;
Set up TBC Special Insurance for physicians and nurses who are treating patients infected with COVID-19.
Such doctors and nurses will receive up to GEL 10,000 from TBC Insurance, if they become infected with
COVID-19.
YOUNG GENERATION
We continuously support talented young people in their professional development and endeavours by im-
plementing various projects and initiatives.
This year brought a lot of changes to the educational system as all educational institutions in Georgia had
to switch to online learning due to the outbreak of COVID-19. This was particularly challenging for students
from vulnerable families, who did not have proper tools and facilities for the online learning. TBC bank sup-
ported these students with the following initiatives:
We purchased laptops for 161 socially vulnerable students at six universities;
With the involvement of TBC staff, laptops were distributed to 100 socially vulnerable senior-grade stu-
dents residing in different regions of Georgia. TBC doubled the amount voluntarily collected by TBC
employees;
In addition, we covered monthly internet fees until the end of the year for the above students.
90
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED
91
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In parallel, we continued to roll out our long-lasting projects, which encompass the following:
Starting from 2016, TBC Bank has been the main partner of the Young Researchers and Innovators Com-
petition Leonardo da Vinci, an annual event that aims to popularize science, technology, engineering and
math (STEM) among the young generation. This is a large-scale event, which is held for high-school stu-
dents all over the country. Participating teams are requested to present an innovative scientific idea that
is supported by comprehensive research and experiments. TBC supports the organization of the event
and provides annual scholarships for the winners. This year, the event was held online due to pandemic;
At the end of 2018, we also introduced a new project called “TBC scholarship”, which aims to support
young, talented people from vulnerable families from all over the Georgia, in different fields including
sport, science and arts. Each year, around 200 Georgian young, talented people receive these scholar-
ships in order to develop their knowledge and skills and become successful professionals.
In addition, we run IT Academy and TBC Camp (for future investment bankers) since 2019 and we also intro-
duced Risk Academy in 2020 in order to provide practical knowledge and skills to talented young people in
those demanding professions, as well as increase their chances for employment at TBC or other organiza-
tions. All courses are offered free of charge and run by experienced staff members. More detailed informa-
tion is given in our colleagues section on pages: 78-87.
ARTS & CULTURE
TBC has always played an important role in preserving Georgian heritage and presenting it to the public in
modern ways, supporting young artists and fueling artistic life in Georgia.
During the COVID-19 pandemic, when it was not permitted to physically visit museums, we concentrated
our efforts on popularization of Georgian history and heritage through digital channels:
Within the scope of our partnership with the National Museum of Georgia, we created a video animation,
telling the history of Georgia through various cultural heritages that are preserved in the Museum. In ad-
dition, we continue to provide financial assistance as well as support the maintenance of digital platforms
and communication channel used by the Museum.
TBC acknowledges the importance of using entertainment for the development of new generations.
Therefore, in connection with the World Children’s Day, we developed an educational museum kit, which
unites several creative games, based on museum collections, enabling kids to study history through en-
tertainment. In addition, the kit is accompanied by a video tutorial and tests for children to understand the
whole story given in the kit games.
During pandemic, the National Museum managed to open two new museums in Vani and Bolnisi, relat-
ed to the antique cultural heritage of Georgia and the prehistoric period. TBC financially supported the
museum in Vani, which contains historical relics of ancient Colchis culture, which span the whole first
millennia BC. Given the current pandemic, TBC created an introductory video, dedicated to Vani Museum
and presented it to the public in an innovative manner.
92
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED In 2020, we started another project started in cooperation with Art Palace of Georgia – Museum of Cul-
tural History, aimed at reviving Georgian heritage. The project’s purpose is to promote historical Georgian
textiles, inspired by various cloth patterns worn by Georgian kings, queens and historical figures. Geor-
gian fashion startups and brands have created ready to wear collections, while TBC created a webpage
www.qsovili.ge and assisted them in product promotion. TBC also contributed financially to the Art Pal-
ace.
In 2020, TBC held the 18th Literary Award, which has run continuously from 2003 and is the most important
literary event in the country. Traditionally, the Saba gala event has been held in various cultural landmarks in
Georgia. This year, due to pandemic, TBC decided to hold the event online. Since its inception, Saba has
awarded more than 170 prizes in different categories, amounting up to GEL 900,000 in total. We also run
www.saba.com.ge, the largest online platform for Georgian electronic and audio books. This website pro-
vides access to 6,000 electronic books and has attracted c. 190,000 readers, both in Georgia and abroad.
SPORTS
Georgian society’s mental and physical health is largely dependent on sport activities and the populariza-
tion of healthy lifestyles. Since 2015, TBC has been the general sponsor of the Georgian Rugby Union. We
chose to support rugby because it is a national sport, which epitomizes positive characteristics for society
and provides an impeccable example of teamwork, goal orientation, respect for opponents and fairness.
TBC has substantially contributed to the popularization of rugby through promotional activities over the last
six years. In 2020, the Georgian rugby team participated in the Autumn Nations Cup and competed with the
world’s best teams.
SUPPORTING SMALL BUSINESSES AND ENTREPRENEURSHIP
TBC distinguishes itself through advocacy and support for young startups and MSME businesses. In order
to address the social and economic challenges in the country, the development of small and medium busi-
nesses is vital. It contributes to the reduction of unemployment and boosts economic growth. We assist
businesses through the provision of both financial and non-financial support, including: easing access to
capital, sharing knowledge and expertise, developing products and services specially customized for busi-
ness needs. Detailed information is given in Our MSME section on pages 44-49 respectively.
93
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 OUR ENVIRONMENTAL
MANAGEMENT SYSTEM
As we acknowledge the importance of social and envi-
ronmental matters for the long-term, sustainable development
of the Group, we strive to positively impact the environment and
play our role in transitioning to a low-carbon economy.
We maintain our focus on environmental and social issues and continue to integrate them in our business as
the need for confronting climate change accelerates. In 2020, we took active measures to manage the direct
and indirect environmental and social risks associated with our activities. We further strengthened our En-
vironmental Management System (EMS) across the Group and successfully completed the ISO 14001:2015
certification audit remotely, despite these challenging times. This certificate serves as testament to our
EMS’s full compliance with international standards. In addition to being a great achievement, it also confers
the responsibility to maintain and further develop our EMS system.
In 2020, we also released the first, full-scale sustainability report prepared in reference to Global Reporting
Initiative (GRI) standards. This report combines comprehensive information about our social, economic and
environmental impacts and describes in detail the measures we have taken to make a positive change in this
regard for the benefit of all our stakeholders.
OUR ENVIRONMENTAL MANAGEMENT SYSTEM (EMS)
Our Environmental Policy governs our EMS within the Group and ensures that we comply with applicable
environmental, health and safety and labour regulations and use sound environmental, health and safety, and
labour practices, as well as take reasonable steps to make sure that our customers also fulfill their environ-
mental and social responsibilities. Our Environmental Policy is fully compliant with Georgian environmental
legislation and follows international best practices (the full policy is available at www.tbcbankgroup.com).
TBC Bank has a dedicated Environmental and Social Risk Management (ESRM) team, which is comprised
of full-time employees. Our ESRM team is responsible for overseeing the implementation and operation of
our EMS across the Group. It provides assistance to our subsidiaries on environmental and social issues and
conducts trainings on a regular basis. It is also accountable for reporting environmental management plans
and results to the Environmental Committee on a quarterly basis. Our ESRM team is part of the SME and
Corporate Business Credit Risk Department, which reports directly to the Chief Risk Officer.
Our Environmental Management System is based on four pillars:
Internal environmental activities;
Environmental and social risk management in lending;
Sustainable finance; and
External communications.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED
We believe that raising our employees’ environmental awareness is vital for effective implementation of our
EMS. For this purpose, we have developed an environmental training programme, which includes introduc-
tory trainings for new employees, regular updates about changes in our environmental activities, as well as
annual mandatory online EMS e-learning course for all staff, followed by a self-evaluation test. In addition,
we conduct specialized trainings about environmental and social risk management in lending for SME and
corporate business analysts and risk managers.
Pillar I - Internal Environmental Activities:
Since banking is not a high-polluting activity, the implementation of an internal environmental management
system to address the Group’s resource consumption is not expected to have a significant impact on the
surrounding environment. However, TBC Bank has reviewed all the operational activities, procured items,
and outsourced services that it can control (present and planned), and has identified all the material environ-
mental aspects relevant to the business. These are sub-categorised into indirect and direct environmental
aspects, analyzed based on a comprehensive scorecard, and managed accordingly.
In order to ensure full compliance with local environmental regulation, TBC Bank conducts an internal envi-
ronmental check on an annual basis. Our environmental register details the specific legal and other require-
ments applicable to TBC Bank. The last update of the environmental check was conducted in September,
2020.
As mentioned above, TBC Bank obtained ISO 14001:2015 for its Environmental Management System, which
serves as testament to our EMS’s full compliance with international standards.
TBC Bank has established a comprehensive internal environmental system to manage and report its GHG
emissions within the Group and is committed to reducing its GHG emissions by closely monitoring its con-
sumption of energy, water and paper. The guidelines for documenting environmental data were developed
and responsible staff was assigned in subsidiary companies to collect and provide the required data. TBC
Bank also commissioned G&L Management LTD, an independent Health, Safety, and Environment (HSE)
consulting company, to verify the measurements of its GHG emissions. In the United Kingdom the Group is
a low energy user and does not consumer more that 40,0000khw of energy.
Data for the FY
2018
2019
2020
2021
Total CO2 Emissions
(tonnes)
KPIs
(reduction per FTE)
Scope1*
Fuel Combustion (heating, vehicles,generators)
Scope2
(Electricity consumption)
Scope3
(International flights)
Total emissions (tCO2)
Total emission per full time employee (FTE) (CO2t/pp)
Water consumption per employee (m3/pp)
Printing paper per person in reams
Revenue (tCO2/US$)
EBTDA (tCO2/US$)
Net Income (tCO2/US$)
*Scope 1:
2,584
3,164
3,272
1,391
1,260
1,614
644
4,619
0.65
13.49
11.20
697
144
5,121
0.69
11.90
11.11
5,030
0.63
9.71
12.14
0.000011
0.000021
0.000027
0.000013 0.000014
0.000022 0.000040
0.000027 0.000049
-6%
-5%
-
-5%
-5%
-5%
-
-
-
-
a) 1,657 CO2e emissions in tonnes (from combustion of fuel (NG) from owned operation and facilities of TBC Bank) in 2020 compared to
1,443 CO2e in 2019 and 1,483 CO2e in 2018.
b) 1,538 CO2e emissions in tonnes (from owned vehicles of TBC Bank) in 2020 compared to 1,631 CO2e in 2019 and 1,013 CO2e in 2018.
c) 77 CO2e emissions in tonnes (from owned generators of TBC Bank) in 2020 compared to 90 CO2e in 2019 and 88 CO2e in 2018.
95
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In 2020, the Group managed to reduce to the total emissions per full time employee due to conduction of
energy efficiency measures according our annual environmental plan 2020. In addition, the remote work-
ing conditions introduced during the year, as well as reduction in business travel due to the pandemic also
helped to reduce the gas emissions.
Scope 1 - This indicator has increased by 3% in 2020 compared to last year due to the increase in heating
consumption related to the expansion of total surface area in line with the growth of the Group, which was
partially offset by the decrease in gas emissions from vehicles related to reduction of total distance trav-
elled during the year.
Scope 2 – Total electricity consumption increased by 28% in 2020 year-on-year, mainly due to the change
of electricity conversion factor from 0.07 CO2 per kWh to 0.094 CO2 per kWh related to update of National
IPCC emission factors for electricity (tCO2*/MWhe). Without the change in the conversion factor, the total
electricity consumption would have decreased by around 9%.
Scope 3 - Due to the COVID-19 pandemic, business flights were decreased dramatically by around 79% in
2020 compared to the previous year.
In 2020, water consumption per employee decreased by 18% year-on-year largely as a result of remote work-
ing practices introduced since March 2020. The average printing paper consumption per employee in-
creased by 9% mainly due to our subsidiary UFC, as a result of changes in business processes.
Calculation Methodology
For the GHG inventory calculation, we took following steps: set the organizational boundaries, established
the operational scope, developed a structured approach for the data collection and calculation of carbon di-
oxide (CO2) equivalent. This report describes all emission sources required under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013 (Scope 1 and 2) and, additionally, the emissions
under Scope 3 that are applicable to the business. In preparing the emissions data, the emissions factors
from the UK Government’s Greenhouse Gas Conversion Factors for Company Reporting 2017 and National
IPCC emission factors for electricity (tCO2*/ MWhe) were used. The required data was collected and a re-
port was developed for the TBC Bank’s main activities, as follows:
Scope 1 (the combustion of fuel and operation of facilities) includes emissions from the combustion of nat-
ural gas, diesel and/or petrol in equipment at TBC Bank’s owned and controlled sites. The combustion of
petrol, diesel fuel, natural gas etc. in TBC Bank’s owned transportation vehicles.
Scope 2 (purchased electricity for own use (lighting, office appliances, cooling, etc.)) includes emissions
from the use of electricity at TBC Bank’s owned and controlled sites. To calculate the emissions, the conver-
sion factor for National IPCC emission factors for electricity (tCO2*/MWhe) was used;
Scope 3 includes emissions from air business travel (short haul, medium haul, long haul and international
haul). It should be noted that information on travel class was considered and an “economy class” conversion
factor was used to calculate emissions, as described in the following link: www.atmosfair.de In order to cal-
culate the GHG emissions from the flights of business trips, the detailed route for each air-travel (including
transfers of the international flights), type of flight class (first, business, and/or economy) and number of
persons being on each business trip was used.
Intensity Ratio - we calculate intensity ratios in line with Streamlined energy and Carbon Reporting (SECR)
guidelines, www.secrhub.co.uk
Pillar II - Environmental and Social Risk Management in lending
For all commercial transaction, TBC Bank endeavours to ensure that customers demonstrate an organized
and systematic approach to environmental and social risk management and comply with local and interna-
tional environmental, health and safety, and labour regulations and standards in order to mitigate the nega-
tive environmental impact of their financed businesses.
For this purpose, TBC Bank has Environmental and Social Risk Management (ESRM) Procedures in place
to ensure that appropriate, risk-based, sector specific, environmental and social risk assessment is applied
to its commercial lending activities. These procedures are fully integrated into the credit risk management
96
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED process in TBC Bank and are applied to all commercial lending. The procedures incorporate appropriate
consideration of IFC’s Performance Standards, EBRD’s Performance Requirements (PRs) and ADB’s Safe-
guard Requirements (SRs).
These procedures include:
Transaction qualification and risk categorization;
Identification and appropriate assessment;
Mitigation and control; and
Monitoring and reporting of environmental and social risks.
In 2020, we further fine-tuned our environmental and social action plans (ESAP) monitoring system for cli-
ents that do not meet our environmental and social standards in order to enhance their environmental per-
formance. All such clients have been monitored and checked.
BUSINESS LOANS PORTFOLIO
E&S RISK CATEGORIES BY LOAN
VOLUME AS 31 DECEMBER 2020
E&S RISK CATEGORIES BY NUMBER OF
LOANS AS OF 31 DECEMBER 2020
0.3%
11.1%
30.0%
0.7%
13.3%
58.6%
20.1%
65.9%
Low
High
Medium
A Category
The latest update of ESRM procedures, in collaboration with our partner IFIs, was conducted and approved
in the third quarter of 2020 and included the development of a clear Environmental and Social (E&S) risk cat-
egorization matrix. In some cases, E&S risk categories differ. When categorizing the transaction according
to E&S risk category, priority is given to the higher risk.
Low Risk - transactions with minimal or no adverse social or environmental impacts, which are not generally
subject to further assessment (beyond their identification as such), except for the requirement for custom-
er’s [assent/certification/disclosure] of compliance/non-compliance with local and national environmental,
health and safety and labour laws and regulations.
Medium Risk – transactions with limited potential for adverse social or environmental impacts that are few
in number, generally site-specific, largely reversible, clearly evident at the time of the assessment, and read-
ily addressed through mitigation measures, which typically require a limited or focused environmental and/
or social assessment, or straight-forward application of environmental sitting, pollution standards, design
criteria, or construction standards.
97
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 High Risk – transactions with potentially highly significant, negative and/or long-term environmental and/
or social impacts, the magnitude of which may be difficult to determine at the loan application stage, which
typically require analysis of environmental and social risks and impacts in the context of the total area of
influence of the customer’s operations. As part of the risk assessment, the client will identify individuals and
groups that may be differentially or disproportionately affected by its operations.
Category A – transactions with potentially significant adverse social or environmental impacts that may be
diverse, irreversible or unprecedented, the assessment of which usually requires inputs from independent
external experts, and may require the involvement of IFI E&S specialists in the due diligence assessment
process.
Pillar III - Sustainable finance:
TBC Bank acknowledges the importance of sustainable lending and is actively involved in developing a
standardized approach to sustainable finance, including energy efficiency, renewable energy and resource
efficiency financing for its private and business clients. For this purpose, we cooperate with the Green for
Growth Fund (GGF) to conduct local market research and develop green lending guidelines. This will help us
to streamline and considerably enhance the existing green lending operations within the company. In 2020,
OUR SUSTAINABILITY PORTFOLIO BREAKDOWN
2.8%
3.2%
10.8%
Renewable energy
Youth support
Woman in business
Energy efficient mortgages, auto & processing
83.2%
Note: Our sustainable finance portfolio includes loans financed by special purpose funds received from IFIs except for the renewable en-
ergy, which includes all hydro power plants finance by the Bank.
we developed a CO2 emissions calculation toolkit, which will be used to define our clients’ green status.
In order to support green financing, this year we supported Georgia Global Utilities (GGU) to issue Georgia’s
first green bonds, in the amount of US$ 250 million, which were listed on the Irish Stock Exchange. TBC
Capital, together with a number of leading international investment banks, acted as a co-manager for of this
transaction.
Pillar IV - External Communications:
Transparency and open communication are an essential part of our daily activities. The feedback and rec-
ommendations received from our stakeholders and other interested parties enable us to continuously im-
prove our performance. In doing so, we have a grievance mechanism to enable interested parties to provide
their complaints with regards to E&S issues. Records of all communication are stored, including responses
according to TBC Bank’s procedure for addressing external E&S queries and concerns. Interested parties
may submit their query on the webpage www.tbcbank.com.ge or to the following e-mail address: E&Srisk@
tbcbank.com.ge.
98
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED During 2020, no such complaints were received with regards to E&S issues.
TBC Bank also takes an active part in supporting the development of E&S regulations in the country. Our
ESRM group is a member of the regular environmental committees organized by American Chamber of
Commerce in Georgia, Business Association of Georgia (BAG) and Business and Economic Centre.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’)
In 2021, we plan to introduce a Task Force for a Climate-related Financial Disclosure (TCFD) framework in
order to demonstrate our commitment towards taking active measures to mitigate climate change.
Governance:
In 2021, in order to advance the quality of disclosures related to the potential effects of climate change, the
Group will take further steps to enhance its environmental, social and governance (ESG) framework:
The Risk Committee will take responsibility for approving and overseeing the ESG strategy. It is also
planned for the Risk Committee to receive regular reporting on ESG matters.
An ESG Committee will be established at the senior executive level, which will take responsibility for im-
plementing the ESG strategy and approving the action plan in relation to the TCFD framework.
The implementation of the ESG strategy will be supported by the various organizational functions re-
sponsible for ESG matters: E&S risk management, the ESG Coordinator and the ESG competence center.
Strategy:
In order to increase our positive direct and indirect impact, the Group strives to integrate ESG consider-
ations, in particular climate change related matters, into its main activities, services and products.
In 2021, the Group aims to:
Implement the recommendations of the Task Force on Climate-related Financial Disclosures;
Increase understanding of the impact of climate change on business activities, the environment and society;
Address climate mitigation and adaptation in its countries of operations;
Develop products, services and approaches that consider its ESG goals, e.g. green loans;
Set up a formal framework for social projects with a (long-term) sustainability impact.
Risk Management
The Group’s existing ESG framework allows for active management of climate change related risks. Please
refer to emerging risks section on pages 111-113.
Furthermore, additional analysis under the TCFD framework will allow for better understanding of climate
risks and sector specific developments, which, if necessary, will contribute to further development of the
E&S risk management system.
Metrics and targets:
In 2021, the Group aims to improve its climate-related annual financial filings, practices and techniques. Im-
proved data analytics in the Group will ultimately support better understanding of the potential implications
of climate change for the organization.
In 2021, the Group will work towards:
identifying material topics related to climate change;
developing data analytics;
integrating additional analytical components in its day-to-day operations;
expanding existing metrics and defining targets; and
developing metrics to capture non-financial outputs.
99
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 NON-FINANCIAL INFORMATION STATEMENT
TBC Bank complies with non-financial reporting requirements contained in sections 414 CA and 414 CB of
Companies Act 2006. The following table summarises the reference to the non-financial matters described
in the Strategic Report.
NON-FINANCIAL INFORMATION
PAGES
The entity’s business model
Business model and strategy, pages 18 to 24
Environmental matters
Employees
Social matters
Human rights
Anti-corruption and anti-bribery
Non-financial key performance indicators
relevant to the entity's business
Description of principal risks and mitigations
Our environmental and social management,
pages 94 to 99
Our colleagues, pages 78 to 87
Our community, pages 90 to 93
Ethical standards, responsible conduct
and safety at work, page 87
Ethical standards, responsible conduct
and safety at work, page 87
Key performance indicators, page 27
Material existing and emerging risks,
pages 102 to 113
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020DOING BUSINESS RESPONSIBLY CONTINUED 101
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 MATERIAL EXISTING AND EMERGING RISKS
MATERIAL EXISTING
AND EMERGING RISKS
The emergence of the COVID-19 pandemic has enhanced the critical importance of risk management to
the Group’s strategy. During the COVID-19 era, it is even more essential to identify emerging risks and un-
certainties that could adversely impact the Group’s performance, financial condition and prospects. This
section analyses the material principal and emerging risks and uncertainties the Group faces. However, we
cannot exclude the possibility of the Group’s performance being affected by risks and uncertainties other
than those listed below. More details regarding risk management practices can be found on pages 114-130.
The Board has undertaken a robust assessment of both the principal and emerging risks facing the Group
and the long-term viability of the Group’s operations, in order to determine whether to adopt the going
concern basis of accounting. For more information, please see the Going Concern and Viability Statements
on pages 159-160.
PRINCIPAL RISKS AND UNCERTAINTIES
1. Credit risk is an integral part of the Group’s business activities
As a provider of banking services, the Group is exposed to the risk of loss due to the failure of a customer
or counterparty to meet their obligations to settle outstanding amounts in accordance with agreed terms.
Risk description
Credit risk is the greatest material risk faced by the Group, given the Group is engaged principally in tradi-
tional lending activities. The Group’s customers include legal entities as well as individual borrowers.
Due to the high level of dollarization of the Georgia’s financial sector, currency-induced credit risk is a com-
ponent of credit risk, which relates to risks arising from foreign currency-denominated loans to unhedged
borrowers in the Group’s portfolio. Credit risk also includes concentration risk, which is the risk related to
credit portfolio quality deterioration as a result of large exposures to single borrowers or groups of connected
borrowers, or loan concentration in certain economic industries. Losses may be further aggravated by unfavor-
able macroeconomic conditions. These risks are described in more detail as a separate principal risk.
COVID-19 has increased uncertainty and caused significant economic disruptions in many sectors, partic-
ularly in the hospitality & leisure, real estate management and development sectors. Such economic dis-
ruptions run the risk of deteriorating the financial standing of borrowers and increase the credit risk for the
Group.
Risk mitigation
A comprehensive credit risk assessment framework is in place with a clear segregation of duties among
the parties involved in the credit analysis and approval process. The credit assessment process is distinct
across segments, and is further differentiated across various product types to reflect the differing natures
of these asset classes. Corporate, SME and larger retail and micro loans are assessed on an individual basis,
whereas the decision-making process for smaller retail and micro loans is largely automated. The rules for
manual and automated underwriting are developed by units within the risk function, which are independent
from the origination and business development units. In the case of corporate and medium-sized business
borrowers, the loan review process is conducted within specific sectoral teams, which accumulate deep
knowledge of the corresponding sectoral developments.
The Group uses a robust monitoring system to react promptly to macro and micro developments, identi-
fy weaknesses in the credit portfolio and outline solutions to make informed risk management decisions.
Monitoring processes are tailored to the specifics of individual segments, as well as encompassing individ-
102
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 ual credit exposures, overall portfolio performance and external trends that may impact on the portfolio’s
risk profile. Additionally, the Group uses a comprehensive portfolio supervision system to identify weakened
credit exposures and take prompt, early remedial actions, when necessary.
The Group’s credit portfolio is structurally highly diversified across customer types, product types and in-
dustry segments, which minimizes credit risk at Group level. As of 31 December 2020, the retail segment
represented 39.2% of the total portfolio, which was split between mortgage and non-mortgage exposures
66.2% and 33.8%, respectively. No single business sector represented more than 9.6% of the total portfolio
at the end of 2020.
Collateral represents the most significant credit risk mitigation tool for the Group, making effective collat-
eral management one of the key risk management components. Collateral on loans extended by the Group
may include, but is not limited to, real estate, cash deposits, vehicles, equipment, inventory, precious metals,
securities and third party guarantees.
The Group has a largely collateralised portfolio in all its segments, with real estate representing a major
share of collateral. As of 31 December 2020, 76.5% of the Group’s portfolio was secured by cash, real estate
or gold. A sound collateral management framework ensures that collateral serves as an adequate mitigating
factor for credit risk management purposes.
As a result of the COVID-19 pandemic, the Group has identified highly vulnerable clients and outlined a strat-
egy for payment holidays, refinancing, or restructuring across all segments. Since the start of the COVID-19
pandemic, the Bank granted payment holidays on principal and interest payments to individual and MSME
customers as well as to corporate borrowers that have been adversely affected by the government lock-
downs. According to the strategy, some clients were given payment holidays only on interest, while other
clients were given payment holidays on both interest and principal amounts. The government expanded
upon a special support programme for the affected sectors - restaurants and small and medium sized hotels
received subsidies in the amount of 70-80% of interest payments. For more information about government
support programmes see our customers section on pages 74-76.
Additionally, the Bank actively performs stress testing and scenario analysis in order to check the resilience
of borrowers under various stress conditions. The stress tests entail assumptions on devaluation of the local
currency, GDP growth, sectoral growth, unemployment, inflation, changes in real estate and commodity
prices, changes in interest rates and loan and deposit portfolio developments. The Bank is carrying out in-
tensive financial monitoring to identify the borrower’s weakened financial and business prospects in order
to offer them a restructuring plan that is tailored to their individual needs.
The Bank revised credit underwriting standards across all segments in light of the COVID-19 pandemic and
tightened them, where applicable. The revision and tightening of the standards, among other measures,
included: changes in the delegation on decision-making and approval particularly for borrowers from vul-
nerable sectors, applied haircuts to the revenues of individual borrowers from affected sectors, and the in-
tegration of the macroeconomic sectoral expectations into the assessment process for business borrowers.
2. The Group faces currency-induced credit risk due to the high share of loans denominated in foreign
currencies in the Group’s portfolio
A potential material GEL depreciation is one of the most significant risks that could negatively impact port-
folio quality, due to the large presence of foreign currencies on the Group’s balance sheet. Unhedged bor-
rowers could suffer from an increased debt burden when their liabilities denominated in foreign currencies
are amplified.
Risk description
A significant share of the Group’s loans (and a large share of the total banking sector loans in Georgia) is
denominated in currencies other than GEL, particularly in US$ and EUR. As of 31 December 2020, 59.4% of
the Group’s total gross loans and advances to customers (before provision for loan impairment) were de-
nominated in foreign currencies.
103
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The income of many customers is directly linked to the foreign currencies via remittances, tourism or ex-
ports. Nevertheless, customers may not be protected against significant fluctuations in the GEL exchange
rate against the currency of the loan. The US$/GEL rate remained volatile throughout 2020 and the aver-
age currency exchange rate of GEL weakened by 10.3% year-on-year. The GEL remains in free float and is
exposed to many internal and external factors that in some circumstances could result in its depreciation.
Risk mitigation
Particular attention is paid to currency-induced credit risk, due to the high share of loans denominated in
foreign currencies in the portfolio. The vulnerability to exchange rate depreciation is monitored in order to
promptly implement an action plan, as and when needed. The ability to withstand certain exchange rate
depreciation is incorporated into the credit underwriting standards, which also include significant currency
devaluation buffers for unhedged borrowers. In addition, the Group holds significant capital against curren-
cy-induced credit risk.
Given the experience and knowledge built throughout the recent currency volatility, the Group is in a good
position to promptly mitigate exchange rate depreciation risks. In January 2019, government authorities
continued their efforts to reduce the economy’s dependence on foreign currency financing by increasing
the cap to GEL 200,000 under which loans must be disbursed in local currency. In addition, the NBG, under
its responsible lending initiative, which came into force on 1 January 2019, introduced significantly more
conservative PTI and LTV thresholds for unhedged retail borrowers, further limiting their exposure to cur-
rency induced credit risk. The NBG eased the above-mentioned regulation from April 2020 for hedged bor-
rowers. For unhedged borrowers, however, PTI and LTV thresholds will stay significantly more conservative.
3. The Group’s performance may be compromised by adverse developments in the economic environ-
ment, particularly due to the COVID-19 pandemic
A further slowdown in economic growth and the delayed recovery in Georgia due to the COVID-19 virus
containment taking longer than expected or the emergence of other shocks, will likely have an additional
adverse impact on the repayment capacity of borrowers, restraining their future investment and expansion
plans. These occurrences would be reflected in the Group’s portfolio quality and profitability, and would also
impede portfolio growth rates. Negative macroeconomic developments could compromise the Group’s
performance through various parameters, such as exchange rate depreciation, a spike in interest rates, rising
unemployment, a decrease in household disposable income, falling property prices, worsening loan collat-
eralization, or falling debt service capabilities of companies as a result of decreasing sales. Potential political
and economic instability in the neighboring countries and main trading/economic partners could negative-
ly impact Georgia’s economic outlook through a worsening current account (e.g. decreased exports, tourism
inflows, remittances and foreign direct investments).
Risk description
According to the preliminary estimates of National Statistics Office of Georgia (Geostat), GDP decreased
by 6.1% in 2020. Going forward, in the baseline scenario, considering the impact of prolonged lockdown as
well as Geostat’s significant downward revision of Q2 and Q3 GDP indicators, based on TBC capital calcu-
lations, economy is estimated to recover by 4.2% in 2021. According to the World Bank’s latest projections1,
Georgian economy is forecasted to grow at 4.0% in 2021 before the growth accelerating to 6.0% in 2022.
The negative impact of the COVID-19 pandemic was also evident on the GEL exchange rate. Throughout
2020, the GEL real effective exchange rate depreciated by 7.4%. The US$ strengthened against the GEL
from 2.87 to 3.28, or by 14.3%.
By the end of 2020, despite a weaker GEL, consumer prices went up by just 2.4%, which can be primarily
explained by the government subsidy programme for household utilities. Throughout 2020, the NBG de-
creased its policy rate from 9% to 8%. Considering moderating inflation, recovery in tourism inflows and
lower pressures on the exchange rate, it is likely that there will be further gradual rate cuts.
In addition to use of the interest rate policy tool, in 2020 the NBG also intervened heavily in the FX market.
In total, the central bank sold US$ 873.2 million. The interventions were primarily financed through external
1 World Bank, Global Economic Prospects, January 2021
104
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020MATERIAL EXISTING AND EMERGING RISKS CONTINUED government borrowing. As a result, fiscal deficit which stood at around 9.1% of GDP in 2020, predominant-
ly financed externally, was a major source of financing for the worsened CA deficit. The fiscal deficit also
significantly supported the overall growth as well as assisting the businesses and households impacted
negatively by the pandemic. According to the budget plan, the fiscal deficit is expected to again be sizeable
in 2021, with a deficit to GDP ratio of 7.6%.
Bank credit growth weakened to 9.1% year-on-year in FX adjusted terms by the end of December 2020, com-
pared to 16.1% year-on-year growth by the end of 2019.
Risk mitigation
To decrease its vulnerability to economic cycles, the Group identifies cyclical industries and proactively
manages its underwriting approach and clients within its risk appetite framework. The Group has in place a
macroeconomic monitoring process that relies on close, recurrent observation of the economic develop-
ments in Georgia, as well as in neighboring countries, to identify early warning signals indicating imminent
economic risks. This system allows the Group to promptly assess significant economic and political oc-
currences and analyze their implications for the Group’s performance. The identified implications are duly
translated into specific action plans with regards to reviewing the underwriting standards, risk appetite met-
rics or limits, including the limits for each of the most vulnerable industries. Additionally, the stress-testing
and scenario analysis applied during the credit review and portfolio monitoring processes enable the Group
to have an advance evaluation of the impact of macroeconomic shocks on its business. The resilience to-
wards a changing macroeconomic environment is incorporated into the Group’s credit underwriting stan-
dards. As such, borrowers are expected to withstand certain adverse economic developments through pru-
dent financials, debt-servicing capabilities and conservative collateral coverage.
Taking into account the impact of the COVID-19 crisis on Georgia’s economy, the Group has adjusted its risk
management framework leveraging its already existing stress testing practices. This included more thor-
ough and frequent monitoring of the portfolio as well as stress testing, to ensure close control of the chang-
es in capital, liquidity, and portfolio quality at times of increased uncertainty.
4. The Group faces the capital risk of not meeting the minimum regulatory requirements under the in-
creasing capital requirement framework, which may compromise growth and strategic targets. Addition-
ally, adverse changes in FX rates may impact the capital adequacy ratios
Risk description
In December 2017, the NBG introduced a new capital adequacy framework. Under the updated regulation,
capital requirements consist of a Pillar 1 minimum requirement, combined buffers (systemic, countercyclical
and conservation buffers) and Pillar 2 buffers.
The regulation includes a phase-in schedule and gradually introduces the buffers over the course of a four
year period. However, in response to the COVID-19 pandemic, the NBG has implemented certain counter-
cyclical measures in relation to capital adequacy requirements, which are as follows:
Postponing the phasing-in of concentration risk and the net General Risk Assessment Programme
(GRAPE) buffer capital requirements on CET1 and Tier 1 capital that was supposed to be introduced in
March 2020;
Allowing banks to use the conservation buffer and 2/3 of currency induced credit risk (CICR) buffer;
Allowing banks to release all the remaining Pillar 2 buffers (remaining 1/3 CICR, concentration risk and Net
Grape buffers) in case of necessity.
Since the introduction of these measures, the Bank has utilized both the conservation and 2/3 CICR buffer,
and is restricted from making any capital distributions.
As a result of these measures, the Bank’s minimum capital requirement, compared to the end of 2019, has
decreased by:
3.0pp for CET1;
3.3pp for Tier 1; and
3.8pp for Total Capital.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 This is compared to the planned increase of:
0.86pp for CET1;
1.02pp for Tier 1; and
0.37pp for Total Capital.
In December 2020, the systemic buffer increased from 1.5% to 2% as previously planned. The Bank’s capital-
ization as of December 2020 stood at:
10.4% for CET1 with updated regulatory minimum requirement of 7.4%;
13.0% for Tier 1 with updated regulatory minimum requirement of 9.2%; and
17.1% for Total Capital with updated regulatory minimum requirement of 13.7%.
The ratios were well above the respective regulatory minimums.
The NBG outlined a new schedule for the gradual introduction of capital requirements under Basel III. Ac-
cording to the new schedule, Concentration risk and the Net GRAPE buffers phase-in will continue from
March 2021 and will be fully introduced by March 2023. The systemic buffer is expected to increase by
0.5pp to 2.5% at the end of 2021. Based on the official announcement by the NBG, the decision for the res-
toration of CICR and Conservation buffers has been postponed for the next Financial Stability Committee
meeting which will be held in June 2021. Once the restoration of the buffers is announced, the Bank will be
given a period of one and two years to fully comply with the CICR and Conservation buffer requirements
respectively. However, in case the Bank wants to pay out dividends, it has to fully restore and comply with
the buffers.
Regardless of the negative impact of the COVID-19 pandemic, GEL volatility has been and remains one of the
significant risks impacting the Bank’s capital adequacy. A 10% GEL depreciation would translate into a 0.8pp,
0.7pp and 0.6 pp drop in the Bank’s CET 1, Tier 1 and Total regulatory capital adequacy ratios, respectively.
Risk mitigation
The Group undertakes stress-testing and sensitivity analysis to quantify extra capital consumption under
different scenarios. Such analyses indicate that the Group holds sufficient capital to meet the current mini-
mum regulatory requirements. Capital forecasts, as well as the results of the stress-testing and what-if sce-
narios, are actively monitored with the involvement of the Bank’s Management Board and Risk Committee
to ensure prudent management and timely actions when needed.
In close co-ordination with the NBG, the Bank created an extra loan loss provision buffer to cover for the po-
tential impact of the COVID-19 pandemic on the Georgian economy. As of 31 March 2020, the Bank booked
additional provisions in accordance with local standards in the amount of c.3.1% of the loan book.
5. The Group is exposed to regulatory and enforcement action risk
The Bank’s activities are highly regulated and thus face regulatory risk. The NBG can increase prudential
requirements across the whole sector as well as for specific institutions within it. Therefore, the Group’s
profitability and performance may be compromised by an increased regulatory burden.
Risk description
The NBG sets lending limits and other economic ratios (including, inter alia, lending, liquidity and invest-
ment ratios) in addition to mandatory capital adequacy ratios.
Under the Georgian banking regulations, the Bank is required, among other things, to comply with mini-
mum reserve requirements and mandatory financial ratios, and to regularly file periodic reports. The Bank is
also regulated by the tax code and other relevant laws in Georgia. Following the Company’s listing on the
London Stock Exchange’s premium segment, the Group became subject to increased regulations from the
UK Financial Conduct Authority. In addition to its banking operations, the Group also offers other regulated
financial services products, including leasing, insurance and brokerage services.
The Bank’s subsidiary was granted a banking license in Uzbekistan and launched operations in 2020. As a
result, the regulatory compliance requirements have increased for the Group.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020MATERIAL EXISTING AND EMERGING RISKS CONTINUED The Group takes all the necessary steps with the intention of ensuring compliance with relevant legislation
and regulations. The Group is also subject to financial covenants in its debt agreements. For more informa-
tion, see page 350 in the Group’s Audited Financial Statements.
Risk mitigation
The Group has established systems and processes to ensure full regulatory compliance, which are embed-
ded in all levels of the Group’s operations. The dedicated compliance department reports directly to the
Chief Executive Officer and has a primary role in the management of regulatory compliance risk. The Group’s
Risk Committee is responsible for regulatory compliance at the Board level. In terms of banking regulations
and Georgia’s taxation system, the Group is closely engaged with the regulator to ensure that new proce-
dures and requirements are discussed in detail before their implementation. Although the decisions made
by regulators are beyond the Group’s control, significant regulatory changes are usually preceded by a con-
sultation period that allows all lending institutions to provide feedback and adjust their business practices.
6. The Group is exposed to concentration risk
Banks operating in developing markets are typically exposed to both single-name and sector concentration
risks. The Group has large individual exposures to single-name borrowers whose potential default would en-
tail increased credit losses and higher impairment charges. The Group’s portfolio is well diversified across
sectors, resulting in only a moderate vulnerability to sector concentration risks. However, should exposure
to common risk drivers increase, the risks are expected to amplify correspondingly.
Risk description
The Group’s loan portfolio is diversified, with maximum exposure to the single largest industry (Hospitality,
Restaurants & Leisure) standing at 9.0% of the loan portfolio as of 31 December 2020. This figure is reason-
able and demonstrates adequate credit portfolio diversification. At the end of 2020, the exposure to the 20
largest borrowers stands at 12.1% of the loan portfolio, which is in line with the Group’s target of alleviating
concentration risk.
Risk mitigation
The Group constantly monitors the concentrations of its exposure to single counterparties, as well as sectors
and common risk drivers, and it introduces limits for risk mitigation. As part of its risk appetite framework,
the Group limits both single-name and sector concentrations. Any considerable change in the economic or
political environment, in Georgia as well as in neighbouring countries, will trigger the Group’s review of the
risk appetite criteria to mitigate the emerging risk of concentration. Stringent monitoring tools are in place
to ensure compliance with the established limits. Due to the increased uncertainty caused by the COVID-19
pandemic, a close monitoring was carried out consistently, based on macro expectations, to estimate the
performance of top 20 corporate borrowers.
In addition, the Bank has dedicated restructuring teams to manage borrowers with financial difficulties.
When it is deemed necessary, clients are transferred to such teams for more efficient handling and, ulti-
mately, to limit any resulting credit risk losses. The NBG’s new capital framework introduced a concentration
buffer under Pillar 2 that helps to ensure that the Group remains adequately capitalised to mitigate concen-
tration risks.
7. Liquidity risk is inherent in the Group’s operations
While the Group currently has sufficient financial resources available to meet its obligations as they fall due,
liquidity risk is inherent in banking operations and can be heightened by numerous factors. These include an
overreliance on, or an inability to access, a particular source of funding, as well as changes in credit ratings
or market-wide phenomena, such as the global financial crisis that took place in 2007. Access to credit for
companies in emerging markets is significantly influenced by the level of investor confidence and, as such,
any factors affecting investor confidence (e.g. a downgrade in credit ratings, central bank or state interven-
tions, or debt restructurings in a relevant industry) could influence the price or the availability of funding for
companies operating in any of these markets.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Risk description
The Group was in compliance with minimum liquidity requirements set by NBG which includes Liquidity
Coverage Ratio(LCR) and Net Stable Funding Ratio (NSFR). As of 31 December 2020, the net loan to deposits
plus international financial institution funding ratio stood at 101.2%, the liquidity coverage ratio at 134.2%, and
the net stable funding ratio at 126.0%. These figures are all comfortably above the NBG’s minimum require-
ments or guidance for such ratios.
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Net loans to deposits + IFI funding
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
31-Dec-20
31-Dec-19
31-Dec-18
100%
126.0%
101.2%
100.0%
n/a
100.0%
134.2%
132.2%
134.9%
100%
126.7%
104.8%
100.0%
75.0%
100.0%
110.1%
83.7%
128.4%
n/a
129.3%1
89.9%
100.0%
75.0%
100.0%
113.9%
102.5%
121.1%
As a result of COVID-19 pandemic, the NBG implemented certain countercyclical measures in relation to
liquidity requirements:
In April 2020, NBG opened US$/GEL FX swap lines with unlimited amounts;
NBG removed GEL LCR (>=75%) for 1 year; and
Business loans could be pledged with NBG for liquidity support.
In addition to above, the NBG announced additional potential countercyclical measures, if necessary, which
include:
Decreasing LCR limits;
Decreasing mandatory reserve requirements in foreign currency; and
Updating criteria for security or repo pledging to support GEL liquidity.
Risk mitigation
To mitigate this risk, the Group holds a solid liquidity position and performs an outflow scenario analysis for
both normal and stress circumstances to make sure that it has adequate liquid assets and cash inflows. The
Group maintains a diversified funding structure to manage the respective liquidity risks. There is adequate
liquidity to withstand significant withdrawals of customer deposits, but the unexpected and rapid with-
drawal of a substantial amount of deposits could have a material adverse impact on the Group’s business,
financial condition, and results of operations and/or prospects.
As part of its liquidity risk management framework, the Group has a liquidity contingency plan in place
outlining the risk indicators for different stress scenarios and respective action plans. The liquidity risk po-
sition and compliance with internal limits are closely monitored by the Assets and Liabilities Management
Committee (ALCO).
To counter the potential negative effect of the government lockdowns related to the COVID-19 pandemic
on the Bank’s liquidity position, in April 2020, the Bank attracted a number of new borrowings which in total
amounted to US$ 153.6 million.
8. Any decline in the Group’s net interest income or net interest margin (NIM) could lead to a reduction
in profitability
Net interest income accounts for the majority of the Group’s total income. Consequently, fluctuations in its
NIM affect the results of operations. The new regulations as well as high competition could drive interest
rates down, compromising the Group’s profitability. At the same time, the cost of funding is largely exoge-
nous to the Group and is derived from both local and international markets.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020MATERIAL EXISTING AND EMERGING RISKS CONTINUED Risk description
The majority of the Group’s total income derives from net interest income. Consequently, the NIM’s fluc-
tuations affect the Group’s results. In 2020, the NIM decreased by 0.9pp year-on-year to 4.7% driven by a
decrease in loan yields, increase in GEL deposit costs, as well as currency depreciation due to the COVID-19
pandemic.
The Bank manages its exposure to interest rate risk, following the NBG IRR regulation introduced from Sep-
tember 2020. As of 31 December 2020, GEL 3,8462 million in assets (18%) and GEL 2,7882 million in liabilities
(14%) were floating in GEL currency, whereas GEL 8,0452 million of assets (37%) and GEL 1,6062 million of
liabilities (8%) were floating, related to the LIBOR/Euribor/FED/ECB rates. The Bank was in compliance with
the EVE (Economic Value of Equity) sensitivity limit set by the NBG at 15% of Tier 1 Capital, with the ratio
standing at 3.5% by 31 December 2020.
Risk mitigation
In 2020, the cost optimization was the main mitigation against margin decline. However, the expected strong
increase in net fee and commission income and other operating income, as well as efficient cost discipline,
helps to safeguard against margin declines and profitability concerns for the Group going forward.
To mitigate the asset-liability maturity mismatch, in cases where loans are extended on fixed rather than
floating terms, the interest rate risk is translated into price premiums, safeguarding against changes in in-
terest rates.
9. The threat posed by cyber-attacks has increased in recent years and it continues to grow. The risk
of potential cyber-attacks, which have become more sophisticated, may lead to significant security
breaches. Such risks change rapidly and require continued focus and investment
Risk description
No major cyber-attack attempts have targeted Georgian commercial banks in recent years. Nonetheless, the
Group’s rising dependency on IT systems increases its exposure to potential cyber-attacks.
Risk mitigation
In order to mitigate risks associated with cyber-attacks and ensure security of clients, the Group continu-
ously updates and enhances its security in-depth strategy, which covers multiple preventive and detective
controls ranging from the data and end-point computers to edge firewalls.
A Security Operations Center has been built, which monitors every possible anomaly that is identified across
the organization’s network in order to detect potential incidents and respond to them effectively.
At least once a year, a full information security and cyber security threat analysis is performed, taking into
consideration the relevant regional and sector specific perspectives. At least once every two years, as part of
this analysis, an external consultant is contracted to assess the efficiency of our capabilities against industry
best practices and real world cyber-attack scenarios. This analysis gives the Group a broad review as well as
a detailed insight, which helps to further enhance the information and cyber security systems. In addition,
cyber-attack readiness exercises are performed on a regular basis. These exercises evaluate the actual posi-
tion of the Group in this area and provide a benchmark against international best practices.
Our employees play a crucial role in information security. As a result, regular mandatory training sessions are
conducted for all employees, which are comprised of remote learning courses on security issues, fraud and
phishing simulations as well as informative emails to further assist our employees with information security
matters. New employees are also given training as part of the onboarding process. These measures ensure
that employees are fully aware of their responsibilities and are prepared for various security threats.
The Information Security Steering Committee governs information and cyber security to ensure that rele-
vant risks are at an acceptable level and that continuous improvement of the management processes are
achieved.
1 Based on internal estimates
2 Standalone figures of the Bank, calculated per NBG standards
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Disaster recovery plans are in place to ensure business continuity in case of contingency.
As a result of the COVID-19 pandemic, the Group activated secure remote working policies, which ensure that
homeworking environments are protected against relevant cyber-threats and security team provides effec-
tive oversight of teleworking channels. Although there has been a noticeable increase in phishing attempts
against employees, there have been no major incidents. The Security Operation Center and Threat Hunting
teams has successfully adopted effective remote collaboration and communication tools and practices.
10. External and internal fraud risks are part of the operational risk inherent in the Group’s business. Con-
sidering the increased complexity and diversification of operations, together with the digitalisation of
the banking sector, fraud risks are evolving. Unless proactively managed, fraud events may materially
impact the Group’s profitability and reputation
Risk description
External fraud events may arise from the actions of third parties against the Group, most frequently involving
events related to banking cards, loans and client phishing. Internal frauds arise from actions committed by
the Group’s employees, and such events happen less frequently. During the reporting period, the Group
faced several instances of fraud, out of which the most considerable case amounted to GEL 2 million. None
of these cases had a material impact on the Group’s profit and loss statement. As a result of the COVID-19
pandemic, the threat of fraud and the rapid growth in digital crime have been exacerbated and fraudsters are
adopting new techniques and approaches to exploit various possibilities to illegally obtain funds. Therefore,
unless properly monitored and managed, the potential impact can become substantial.
Risk mitigation
The Group actively monitors, detects and prevents risks arising from fraud events and permanent monitor-
ing processes are in place to detect unusual activities in a timely manner. The risk and control self-assess-
ment exercise focuses on identifying residual risks in key processes, subject to the respective corrective ac-
tions. Given our continuous efforts to monitor and mitigate fraud risks, together with the high sophistication
of our internal processes, the Group ensures the timely identification and control of fraud-related activities.
11. The Group remains exposed to some reputational risk
Risk Description
There are reputational risks to which the Group may be exposed to, such as risks related to the COVID-19
pandemic, increased calls for additional extension of the grace period on loan payments, and increased
cases of cybercrimes. However, none of the aforementioned risks are unique to the Group, and represent
issues faced by the entire banking sector.
Risk Mitigation
To mitigate possibility of reputational risks, the Bank works continuously to maintain strong brand recog-
nition within its stakeholders. The Bank actively monitors its brand value and media coverage by receiving
feedback from stakeholders on an ongoing basis. The Group tries to identify early warning signs of potential
reputational or brand damage in order to both mitigate and elevate it to the attention of the Board before
escalation. Dedicated internal and external marketing and communications teams are in place, which mon-
itor risks, develop scenarios and create respective action plans.
12. The Group faces the risk that its strategic initiatives do not translate into long-term sustainable value
for its stakeholders
The Group’s business strategy may not adapt to the environment of ever changing customer needs.
Risk Description
The Group may face the risk of developing a business strategy that does not safeguard long-term value
creation in an environment of changing customer needs, competitive environment and regulatory restric-
tions. In addition, the Group may be exposed to the risk that it will not be able to effectively deliver on its
strategic priorities and thereby compromise its capacity for long-term value creation. With the emergence
110
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020MATERIAL EXISTING AND EMERGING RISKS CONTINUED of COVID-19, the Group has strengthened further its focus on the main strategic pillars: customer centricity,
digital capabilities, data analytics, agility and international expansion. As such, given that the strategic re-
view has been a regular exercise in the past the strategic themes have not shifted significantly.
However, increased uncertainty together with the major economic and social disruptions caused by the
COVID-19 pandemic may hamper the Group’s ability to effectively develop and execute its strategic initia-
tives in a timely manner.
Risk Mitigation
The Group conducts annual strategic review sessions involving the Bank’s top and middle management in
order to ensure that it remains on the right track and assess business performance across different perspec-
tives, concentrating analysis on key trends and market practices, both in the regional and global markets. In
addition, the Bank continuously works with the world’s leading consultants in order to enhance its strategy.
Further, the Group conducts quarterly analysis and monitoring of metrics used to measure strategy execu-
tion, and in case of any significant deviations, it ensures the development of corrective or mitigation actions.
13. The Group is exposed to risks related to its ability to attract and retain highly qualified employees
A strong employee base is vital to the success of the Group.
Risk Description
The Group faces the risk of losing of key personnel or the failure to attract, develop and retain skilled or qual-
ified employees. In particular, the strategic decision to transform into a digital company entails increased
demands on high calibre IT professionals across the Group. In addition, in order to adapt to the fast changing
business environment, the Group needs to foster an “Agile” culture and equip employees with the necessary
skills. In addition, the COVID-19 pandemic has created additional HR challenges in relation to safeguarding
employees’ health and wellbeing, maintaining high efficiency levels, strong internal communication and a
strong corporate culture.
Risk Mitigation
The Group pays significant attention to human capital management strategies and policies, which include
approaches to the recruitment, retention and development of talent, and offers competitive reward packag-
es to its employees. The Group has also developed and implemented an “Agile” framework that aims to in-
crease employee engagement and satisfaction. Moreover, the Bank set up an IT and Risk academy to attract
and train young professionals. The best students are offered employment at the Bank. In addition, the Bank
has an in-house academy that provides various courses for the employees in different fields.
In response to the COVID-19 pandemic, the Bank promptly moved back-office employees to a remote work-
ing practice by equipping them with all the necessary IT infrastructure. To ensure the maintenance of an
effective internal communication system, we enhanced different digital channels to engage with our em-
ployees. Regular management meetings are being conducted with staff in order to keep them updated
with the Group’s strategic initiatives and financial position as well as address their concerns during this
highly uncertain period. In order to further promote and enhance our corporate culture, the Bank’s internal
Facebook group has become more active by, for example, posting employee profiles and sharing success
stories. Additionally, the new remote working policy adopted by the Bank gives the possibility to attract new
talent from beyond Georgia.
EMERGING RISKS
Emerging risks are those that have large unknown components and may affect the performance of the
Group over a longer time horizon. We believe the following are risks that have a potential to increase in sig-
nificance overtime and could have the same impact on the Group as the principal risks.
1. The Group is exposed to the risks inherent in international operations
Our subsidiary, TBC Bank in Uzbekistan, obtained a banking license in April 2020 and launched its oper-
ations in Uzbekistan in October 2020 to wider public. We have already invested US$ 22 million into the
charter capital of the Bank and have secured interest from our potential partners: EBRD, IFC and the Uz-
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 bek-Oman Investment Company. Our plans foresee a minimum 51% shareholding. This investment exposes
to the Group to Uzbekistan’s macro-economic, political and regulatory environments, including but not lim-
ited to, exposure to risks arising from credit, market, operational and capital adequacy risks as well as risks
related to COVID-19 pandemic in Uzbekistan.
Currently, the Group’s business activities are mainly concentrated in Georgia, but international activities are
expected to contribute to around 10%-15% of the Group’s loan book over the medium to long-term.
Risk description
The risk posed by the operating environment in Uzbekistan may change the Group’s risk profile.
The Uzbekistani economy is well diversified with no major reliance on a particular industry. It has one of the
lowest public debts as a percentage of GDP in the region and high international reserves, implying macro-
economic stability as well as room for future high growth. The government of Uzbekistan plans to reform
the economy and open it up to foreign investment. While the operational environment in Uzbekistan can
be assessed as attractive, there are important risks that could materially affect the Group’s performance in
the country. These risks include, but are not limited to, political instability, the slow pace of reforms, adverse
developments in inflation and fluctuations in the exchange rate.
According to the latest World Bank’s forecasts, despite the impact of the COVID-19 pandemic, Uzbekistan’s
economy is expected to grow at 0.6% in 2020. For 2021-2022, the World Bank projects the growth to accel-
erate to 4.3% and 4.5%, respectively.
Risk mitigation
The Group’s strategy is to follow an asset-light, limited capital investment approach with a strong focus on
digital channels and to invest in stages, to make sure that we are comfortable with the results and the op-
erating environment before committing additional investment. The Group plans to serve retail and MSME
customers, which will in turn lead to a non-concentrated portfolio and to lower credit risk. The Group will
partner international financial institutions, which intend to take a shareholding in the Uzbek bank in order, to
ensure the funding of our business plan and sufficient flexibility across our operations in Uzbekistan.
Overall, from the Group’s perspective, international expansion will result in diversification of business lines
and revenue streams, balancing the overall risk profile of the Group.
2. The Group is exposed to the risks arising from climate change
Risk description
The risks associated with climate change have both physical impact arising from more frequent and severe
weather changes and transitional impact that may entail extensive policy, legal and technological changes
to reduce the ecological footprint of the households and businesses. For the Group, both of these risks can
materialise through the impairment of asset values and deteriorating creditworthiness of our customers,
which could result in reduction of the Group’s profitability. The Group may also become exposed to rep-
utational risks as a result of its lending to, or other business operations with the customers deemed to be
contributing to climate change.
Risk mitigation
The Group’s objective is to act responsibly and manage the environmental and social risks associated with
its operations in order to minimise negative impacts on the environment. This approach enables us to re-
duce our ecological footprint by using resources efficiently and promoting environmentally friendly mea-
sures in order to mitigate climate change.
The Group has in place an Environmental Policy, which governs its Environmental Management System
(“EMS”) and ensures adherence of the Group’s operations to the applicable environmental, health and safety
and labour regulations and practices. We take all reasonable steps to support our customers in fulfilling their
environmental and social responsibilities. Management of environmental and social risks is embedded in
the Group’s lending process through the application of the EMS. The Group has developed risk manage-
112
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020MATERIAL EXISTING AND EMERGING RISKS CONTINUED ment procedures to identify, assess, manage and monitor environmental and social risks. These procedures
are fully integrated in the Group’s credit risk management process and are applied to all commercial trans-
actions:
Physical risk: The vulnerabilities towards climate change are identified across sectors (e.g. agro), regions
and types of activities. Various physical climate factors (e.g. weather and geographic conditions, vulner-
ability towards climate related events) are assessed and monitored during the credit risk management
process and, especially for the exposures where the counterparties are in industries impacted/to be im-
pacted by climate change risks, they are reflected in the decisions, additional requirements and individual
assessments (where applicable).
Transitional risk: The regulatory impact is assessed prior to credit decisions are made and are monitored
on the later stages. TBC monitors both existing and upcoming regulations and analyses their impact
on both – Group’s and customers’ business activities. The local regulations for businesses towards a
low-carbon economy are developing step by step. Most requirements are requested by IFIs, the Associa-
tion Agreement with European Union and reporting requirements for commercial banks stipulated by the
National Bank of Georgia.
Monitoring: The annual monitoring of E&S risks of the financed projects is conducted which allows iden-
tification of newly emerged risks and timely response. Among other things, the monitoring covers both
physical and transitional climate changes and, if important issues are identified, the respective recom-
mendation and requirements are introduced.
Our Environmental Policy is fully compliant with Georgian environmental legislation and follows internation-
al best practices (the full policy is available at www.tbcbankgroup.com). For the detailed information on the
Environmental Management System, please refer to pages 94-99.
In 2020, the Group released its first full scale sustainability report in reference to Global Reporting Initiative
(GRI) standards. The report covers the period from January 1 to December 31 2019. Prior to the release of
this report, a piecemeal approach had been taken concerning the disclosure of the Group’s activities and its
social, economic and environmental impacts. The Global Reporting Initiative (GRI) helps the private sector
to realize and understand its role and influence on sustainable development issues such as climate change,
human rights and governance. GRI enables companies to take meaningful steps to create and improve
communal social, environmental and economic welfare.
3. The Group’s performance may be affected by Libor discontinuation and transition
Risk description
There are a number of different types of financial instruments on the Group’s balance sheet, each of which
carries interest rates benchmarked to the London Interbank Offered Rate (“LIBOR”). LIBOR is also used by
the Group in its risk measurement, accounting and valuation processes. In 2017, the FCA announced that it
has agreed with LIBOR panel banks to sustain LIBOR until the end of 2021 and called financial sector par-
ticipants to start working towards the transition to other reference rates. The discontinuation of LIBOR and
the process of transition exposes the Group to execution, conduct, financial and operational risks, and may
result in earnings volatility, customer complaints and legal proceedings, or have other adverse impact on the
Group’s business and operations.
Risk mitigation
The Group is in the process of identifying implications of such transition to other reference rates on its risk
profile by analysing its execution, conduct, financial and operational risks and how such risks could be ad-
dressed. The Group is starting its efforts to raise awareness of the transition, both internally and externally,
to ensure that staff has all the necessary knowledge and tools to facilitate the transition and that all of the
Group’s customers are treated fairly. As a first step of the transition process, the Bank started including the
fall-back clauses in the new loan agreements, regulating the transition from LIBOR after its discontinuation.
We actively monitor the international as well as local transition-related developments to regulate and align
the Group’s transition process with the market practice.
113
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 RISK MANAGEMENT
RISK MANAGEMENT
OVERVIEW
The Group operates a strong and independent, business-minded risk management system. Its main objec-
tive is to contribute to the sustainability of risk-adjusted returns through the implementation of an efficient
risk management system. The Group has adopted four primary risk management principles to better ac-
complish its major objectives:
Govern risks transparently to obtain understanding and trust. Consistency and transparency in risk-relat-
ed processes and policies are preconditions for gaining the trust of various stakeholders. Communicat-
ing risk goals and strategic priorities to governing bodies and providing a comprehensive follow-up in an
accountable manner are key priorities for staff responsible for risk management;
Manage risks prudently to promote sustainable growth and resilience. Risk management acts as a back-
stop against excessive risk-taking. Capital adequacy management and strong forward-looking tools and
decision-making ensure the Group’s sustainability and resilience;
Ensure that risk management underpins the implementation of strategy. The staff responsible for risk
management provide assurance on the feasibility of achieving objectives through risk identification and
management. Identifying and adequately pricing risks, as well as taking risk mitigation actions, supports
the generation of desired returns and the achievement of planned targets;
Use risk management to gain a competitive advantage. Comprehensive, transparent and prudent risk
governance facilitates understanding and trust from multiple stakeholders, ensuring the sustainability
and resilience of the business model and the positioning of risk management as the Group’s competitive
advantage and strategic enabler.
Risk management framework
The Group’s risk management framework incorporates all the necessary components for comprehensive
risk governance and is comprised of enterprise risk management, credit, financial and non-financial risk
management, risk reporting and supporting IT infrastructure, cross-risk analytical tools and techniques such
as capital adequacy management and stress testing. The following diagram depicts the risk management
framework:
114
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CAPITAL ADEQUACY MANAGEMENT AND STRESS TESTING
115
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GOVERNANCE
The Group conducts its risk management activities within the framework of its unified risk management
system. The involvement of all governance levels in risk management, the clear segregation of authority and
effective communication between the different entities facilitate clarity regarding the Group’s strategic and
risk objectives, adherence to its established risk appetite and sound risk management. The Group’s gover-
nance structure ensures adequate oversight and accountability, as well as a clear segregation of duties. The
Board and the Supervisory Board have joint overall responsibility to set the tone at the top of the Group and
monitor compliance with the established objectives, while the Management Board governs and directs the
Group’s daily activities.
1
RISK COMMITTEE
1
1
RISK COMMITTEE
The risk governance structure consists of three board levels, including the Board of Directors of TBC Bank
Group PLC, the Supervisory Board of the Group’s main subsidiary, JSC TBC Bank, and the Management
Board of the Bank. All three boards have dedicated risk committees. The Board and the Supervisory Board
each have a Risk Committee that supervises the risk profile and risk governance practices within the Group,
as well as an Audit Committee that is responsible for implementing key accounting policies and facilitat-
ing internal and external auditor activities. The Management Board’s Risk Committee was established to
guide Group-wide risk management activities and monitor major risk trends to ensure that the risk profile
complies with the established risk appetite. The Management Board’s Operational Risk Committee makes
decisions related to operational risk governance, while the Assets and Liabilities Management Commit-
tee (ALCO) is responsible for the implementation of asset-liability management policies. The Board, the
Supervisory Board and the Bank’s senior management govern risk objectives through the Risk Appetite
Statement, which establishes the desired risk profile and risk limits. The statement also sets monitoring and
reporting responsibilities, as well as escalation paths for different trigger events, and limits breaches, which
prompt risk teams to frame and implement established mitigation actions. To effectively incorporate the
Group’s risk appetite into day-to-day operations, Risk Appetite Statement metrics are cascaded into more
granular limits at the business unit level, establishing risk allocation across different segments and activities.
The process of setting and cascading the risk appetite is undertaken in parallel with the business plan-
ning process. The interactive development of business and risk plans aligns the plans by solving risk-return
trade-offs in the process and increases the feasibility of achieving targets. Board level oversight, coupled
with the permanent involvement of senior management in the Group’s risk management and the exercise
1 These terms are defined in the glossary on page 375
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED of top-down risk allocation by the enterprise risk management function, ensures clarity regarding risk ob-
jectives, intense monitoring of the risk profile against the risk appetite, the prompt escalation of risk-related
concerns and the establishment of remediation actions. The daily management of individual risks is based
on the three lines of defence principle. While business lines are the primary owners of risks, risk teams act as
the second line of defence by sanctioning transactions, tools and techniques for risk identification, analysis,
measurement, monitoring and reporting. The committees established at operational levels are charged with
making transaction-level decisions as part of a framework comprised of clear and sophisticated delegations
of authority, based on the “four-eyes” principle. All new products and projects pass through risk teams to
ensure that the risks are comprehensively analysed. These control arrangements guarantee that the Group
makes informed decisions that are adequately priced and that any risks exceeding the Group’s established
targets are not taken. Credit, liquidity, market, operational and other non-financial risks are each managed by
dedicated teams. The Group’s strong and independent risk-management structure enables the fulfilment
of all required risk management functions within the second line of defence by highly skilled professionals,
with a balanced mix of credentials in the banking and real sectors in local and international markets. In ad-
dition to the risk teams subordinated to the Chief Risk Officer, the compliance department reports directly
to the CEO and is specifically in charge of anti-money laundering and compliance risk management. As a
third line of defence, the internal audit department is responsible for providing independent and objective
assurance and recommendations to the Group to promote the further improvement of operations and risk
management.
ENTERPRISE RISK MANAGEMENT
A centralised Enterprise Risk Management (ERM) function is in place to ensure the effective development,
communication and implementation of risk strategy and risk appetite across the Group. The ERM function
facilitates cross-risk activities such as aggregation, analytics and reporting and addresses issues that are not
specific to a single type of risk. Accordingly, the ERM function complements the role of other risk functions
to ensure the coverage of key risk activities and responsibilities and builds capabilities in a centralised team.
The major ERM functions can be summarised as follows:
Risk appetite development, cascading and monitoring are essential elements of the Group’s strategy. A
risk budget is allocated to individual business lines to ensure the achievement of aggregated metrics;
Stress-testing exercises are one of the crucial tools for effective risk identification, measurement and
mitigation. In that regard, the Group continuously advances its stress-testing capabilities and tools. Var-
ious scenario analysis and stress testing methods are conducted by the Bank to ensure that the Bank
maintains adequate capital in order to withstand the given stress scenario and remain in a stable financial
condition;
Long term capital planning and continuous work on capital optimisation and analytics are also key as-
pects of the Bank’s risk management procedures;
Consistency of risk management practices within the Bank is also an important task of the ERM. A risk
management function dedicated to promoting consistency ensures that risks are identified, measured
and governed in an optimal manner within the Bank, and reported and understood on a consolidated
basis;
Generating an adequate return on risk plays a crucial role in the sustainability of the business model. Risk
inputs for pricing are designed in a way to serve as a backdrop against excessive risk taking and guaran-
tee that the Bank takes adequately priced risks;
Estimating expected losses, monitoring and analytics across various segments and products are further
key features of our strategy;
Aggregation and analysis of all risk metrics to assess the Group’s risk profile on a consolidated basis is
also carried out. Regular reports on the Bank’s risk profile are submitted to the Management Board and to
the Supervisory Board’s Risk Committee.
CREDIT RISK MANAGEMENT
As a provider of banking services, the Group is exposed to the risk of losses due to the failure of a customer
or counterparty to meet their obligations to settle outstanding amounts in accordance with agreed terms.
Credit risk is the greatest material risk faced by the Group since it is engaged mainly in traditional lending
activities. Thus, the Group dedicates significant resources to its management.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The major objectives of credit risk management are to put in place a sound credit approval process for in-
formed risk-taking and procedures for effective risk identification, monitoring and measurement. The Group
adopts segment and product-specific approaches for prudent and efficient credit risk management. There-
fore, the corporate, MSME and retail portfolios are managed separately to address the specifics of individual
segments. Corporate and MSME (except micro) borrowers have larger exposures and are managed on an
individual basis, whereas micro and retail borrowers are managed on a portfolio basis. Major credit risk func-
tions can be summarised as follows:
Credit approval
The Group strives to ensure a sound credit-granting process by establishing well defined lending criteria
and building up an efficient process for the assessment of a borrower’s risk profile. A comprehensive credit
risk assessment framework is in place with a clear segregation of duties among parties involved in the credit
analysis and approval process. The credit assessment process is distinct across segments, and is further
differentiated across various product types to reflect the differing natures of these asset classes. Corporate,
SME and larger retail and micro loans are assessed on an individual basis, whereas the decision making pro-
cess for smaller retail and micro loans is largely automated. After a thorough assessment of borrowers’ re-
quirements, credit analysts in the case of corporate and loan officers in the case of SME borrowers prepare a
presentation containing certain key information in relation to the potential borrower and submit it for review
to the business underwriting risk management. An underwriting risk manager ensures that the project anal-
ysis provided by the credit analyst/loan officer is complete, all risks and mitigating factors are identified and
adequately addressed, and the loan is properly structured. Business underwriting risk managers specialise
in a particular sector to be aware of current industry trends and developments.
A multi-tiered system of loan approval committees is in place with different approval levels to consider the
borrower’s overall indebtedness and risk profile. These committees are responsible for reviewing credit ap-
plications and approving exposures, with different committees based on the size and risk of the loan. At the
highest level, the Chief Executive Officer, Corporate Business Director and Chief Risk Officer are involved.
In addition, exposures to the 20 largest borrowers or for amounts exceeding 5% of the Bank’s regulatory
capital would require review and approval by the Board Risk Committee. Loan officers submit the credit
applications for retail and micro exposures to the respective underwriting risk management units. Depend-
ing on the amount of the loan, a loan approval committee will review the loan request based on specified
limits regarding the risk level of the customer. For the underwriting of unsecured loans, point-of-sale loans
and credit cards, the income verification process is performed according to the regulations on responsible
lending. For decision-making, internal scorecard models and ratings provided by the credit bureau are uti-
lized. Different scorecard models are developed based on the type of product and the borrowers’ segment,
taking into consideration various internal and external data. The performance of scorecard models is closely
monitored to ensure that decisions are in line with predefined risk limits.
Currency-induced credit risk
The Group faces currency-induced credit risk, given that a large part of its exposure is denominated in
foreign currency. However, limits have been established within the risk appetite framework to ensure that
the Group continues its efforts toward minimising the share of foreign currencies in the portfolio. Various
management tools and techniques are applied to mitigate the inherent currency-induced credit risk in the
loan book, encompassing all phases of credit risk management. In January 2019, the government continued
its efforts to reduce the economy’s dependence on foreign currency financing by increasing the cap to GEL
200,000, under which loans must be disbursed in local currency. In addition, the NBG, under its responsible
lending initiative, which came into force on 1 January 2019, introduced significantly more conservative PTI
and LTV thresholds for unhedged retail borrowers, further limiting the exposure to currency induced credit
risk. Whilst the PTI and LTV thresholds remain conservative for unhedged borrowers, in April 2020, the NBG
eased the regulations for hedged borrowers.
The Group applies conservative lending standards to unhedged borrowers with exposures denominated in
foreign currencies to ensure that they can withstand a certain amount of forex depreciation without credit
quality deterioration. In addition to the measures in place throughout the underwriting process, the Group
actively monitors and assesses the quality of loans denominated in foreign currencies through stress-test-
ing exercises and holds sufficient capital buffers against unexpected losses. In the event of a material cur-
rency depreciation, the Group has tools in place to accelerate its monitoring efforts, identify customers with
potential weaknesses and introduce prompt mitigation.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED Credit concentration risk
The Group is exposed to concentration risk, defined as the potential deterioration in portfolio quality due to
large exposures or individual industries. It has established a set of tools to efficiently manage concentration
risk and, in particular, concentrations of single names and sectors in the portfolio. The Group is subject to
concentration limits on single names and the largest 20 borrowers, and is focused on optimising the structure
and quality of the latter portfolio. In addition, the Group imposes limits on individual sectors with more con-
servative caps applied for high-risk sectors, which are defined based on comprehensive analysis of industry
cycles and outlook. Credit concentrations are monitored monthly. Trends in the risk positions are analysed in
detail and corrective actions are recommended, should new sources of risk or positive developments emerge.
Along with managing concentration levels in the portfolio, the Group estimates unexpected losses and the
respective economic capital for concentrations of both single name borrowers and sectors using the Herfind-
ahl-Hirschman Index, thus ensuring that sufficient capital is held against concentration risk.
Collateral management policy
Collateral represents the most significant credit risk mitigation tool for the Group, making effective collat-
eral management one of the key risk management components. Collateral on loans extended by the Group
may include, but is not limited to, real estate, cash deposits, vehicles, equipment, inventory, precious metals,
securities and third-party guarantees. The collateral accepted against a loan depends on the type of credit
product and the borrower’s credit risk. The Group has a largely collateralised portfolio in all its segments,
with real estate representing a major share of collateral. A centralised unit for collateral management gov-
erns the Group’s view and strategy in relation to collateral management, and ensures that collateral serves
as an adequate mitigating factor for credit risk management. The collateral management framework con-
sists of a policy-making process, a sound independent valuation process, a haircut system throughout the
underwriting process, collateral monitoring (including revaluations and statistical analysis) and collateral
portfolio analysis.
The Collateral Management and Appraisal Department (CMAD) defines Collateral Management Policy
& Collateral Management Procedures (approved by the Board), purchases an appraisal service that must
be in line with International Valuation Standards (IVS), acting NBG regulations and internal rules (policy/
procedures and etc.), authorizes appraisal reports, and manages the collateral monitoring process (assets
with high FV are revaluated annually, while statistical monitoring is used for collaterals with low value). The
CMAD uses a mixed quality check scheme for valuation: appraisal reports are reviewed internally by its staff
and separately by an external company. Almost all activities under collateral management are automated
through an in-house web application. The collateral management function uses market research conducted
under the Real Estate Market laboratory (REM lab) project.
Credit monitoring
The Group’s risk management policies and processes are designed to identify and analyse risk in a timely
manner and to monitor adherence to predefined limits by means of reliable and timely data. The Group
dedicates considerable resources to gain a clear and accurate understanding of the credit risk faced across
various business segments. The Group uses a robust monitoring system to react promptly to macro and
micro developments, identify weaknesses in the credit portfolio and outline solutions to make informed risk
management decisions. Monitoring processes are tailored to the specifics of individual segments, as well
as encompassing individual credit exposure, overall portfolio performance and external trends that may
impact on the portfolio’s risk profile. The Risk Committee reviews reports relating to the credit quality of the
loan portfolio quarterly. By comparing current data with historical figures and analysing forecasts, the man-
agement believes that it can identify risks and respond to them by amending its policies in a timely manner.
Restructuring and collections
The Group uses a comprehensive portfolio supervision system to identify weakened credit exposures and
take prompt, early remedial actions when necessary. The collection and recovery processes are initiated
when the borrower does not meet the agreed payments or the borrower’s financial standing is weakened,
potentially jeopardizing the repayment of the credit. Dedicated restructuring and recovery units manage
weakened borrowers across all business segments, with collection and recovery strategies tailored for busi-
ness segments and individual exposure categories. The restructuring unit’s primary goal is to rehabilitate
119
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 the borrower and transfer the exposure back to the performing category. The sophistication and complexity
of the rehabilitation process differs based on the type and size of the exposure. Corporate and SME bor-
rowers are transferred to the recovery unit when there is a strong probability that a material portion of the
principal amount will not be paid, and the main stream of recovery is no longer the borrower’s cash flow.
Loan recovery plans may include all available sources of loan recovery, such as selling the borrower’s assets,
realising collateral or payments under guarantees.
The Group’s goal in the recovery process is to negotiate a loan recovery strategy with the borrower and
secure cash recoveries to the extent possible, or to negotiate repayment through the sale or repossession
of collateral. Collection functions for retail and micro loans support customers who are experiencing dif-
ficulties in fulfilling their obligations. Such customers may miss payments or notify the Group about their
difficulty with loan repayments. A centralised team monitors retail borrowers in delinquency which, coupled
with branches’ efforts, aims to maximise collection. Special software from FICO is used for early collection
management purposes.
Collection strategies are defined based on the size and type of exposure. Specific strategies are tailored
to different subgroups of customers, reflecting their respective risk levels, so that greater effort is dedicat-
ed to customers with a higher risk profile. Retail and micro loans are generally transferred to the recovery
unit at 60 - 90 days past due. Collateralised loans are transferred to the internal recovery unit, whereas the
Group collaborates with external collection agencies for unsecured loans. To recover collateralised loans,
a recovery plan is outlined that considers the individual borrower’s specifics and may involve loan repay-
ments under revised schedules or the sale of collateral. Collection agencies generally negotiate with the
borrowers so that the full repayment of the loan or loans can be rescheduled and repaid accordingly. Once
the exposure is transferred to the recovery unit, if the Group is unable to negotiate acceptable terms with
the borrower, the Group may initiate collateral repossession, which is usually a standard process with limited
legal complications, and may include court, arbitration or notary procedures. Qualified incumbent lawyers
support the restructuring and recovery units to ensure that litigation and repossession processes are carried
out efficiently.
Measurement of Expected Credit Losses
From January 2018, the Group moved to a new provisioning methodology in line with IFRS 9 requirements.
The updated methodology makes it possible to assess loan-loss provisions and allowances accurately with
the incorporation of forward-looking information. In addition, a new IT tool for provisioning was implement-
ed along with the methodology development.
The project was undertaken with the support of Deloitte and representatives of the Group’s risk, finance
and IT departments were responsible for the methodology and IT tool implementation. The new mod-
els are more complex and make it possible to incorporate expectations of macro developments based on
predefined scenarios. The expected credit loss (ECL) measurement is based on four components used by
the Group: (i) probability of default (PD); (ii) exposure at default (EAD); (iii) loss given default (LGD); and (iv)
discount rate. The Group uses a three-stage model for the ECL measurement and classifies its borrowers
across three stages:
Stage I – the Group classifies its exposures as Stage I if no significant deterioration in credit quality
has occurred since the initial recognition and the instrument was not credit-impaired when initially rec-
ognised;
Stage II – the exposure is classified as Stage II if any significant deterioration in credit quality has been
identified since the initial recognition but the financial instrument is not considered credit-impaired; and
Stage III – the exposures for which the credit-impaired indicators have been identified are classified as
Stage III instruments.
The ECL amount differs depending on exposure allocation to one of the three stages:
Stage I instruments – the ECL represents that portion of the lifetime ECL that can be attributed to default
events occurring within the subsequent 12 months from the reporting date;
Stage II instruments – the ECL represents the lifetime ECL, i.e. credit losses that can be attributed to pos-
sible default events during the whole lifetime of a financial instrument. Generally, lifetime is set equal to
the remaining contractual maturity of the financial instrument. Factors such as the existence of contractu-
al repayment schedules, options for the extension of repayment maturity and monitoring processes held
by the Group affect the lifetime determination;
120
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED Stage III instruments – a default event has already occurred and the lifetime ECL is estimated based on
the expected recoveries. The Group actively reviews and monitors the results produced from IFRS 9 mod-
els to ensure that respective results adequately capture the expected losses.
The Group actively reviews and monitors the results produced from IFRS 9 models to ensure that the re-
spective results adequately capture the expected losses.
COVID-19 Response
In response to the COVID-19 pandemic, the Group has identified its highly vulnerable clients and outlined
a strategy for payment holidays, refinancing or restructuring across all segments. Since the outbreak of the
pandemic, the Bank has granted payment holidays on both principal and interest payments to individual and
MSME customers as well as to corporate borrowers that have been adversely affected by the government
lockdowns. According to the strategy, some clients were given payment holidays only on interest, while
other clients received them on both interest and principal amounts. The government elaborated a special
support programme for the affected sectors: restaurants and small and medium sized hotels received sub-
sidies in the amount of 70-80% of interest payments. For more information about the government support
programme please refer to our customers section on pages 74-76.
Additionally, the Bank actively performed stress testing and scenario analysis in order to check the resilience
of borrowers under various stress conditions. The stress tests entail assumptions on the depreciation of the
local currency, GDP growth, sectoral growth, unemployment, inflation, changes in real estate and commod-
ity prices, changes in interest rates and loan and deposit portfolio developments. The Bank is carrying out
intensive financial monitoring to identify the borrower’s weakened financial and business prospects in order
to offer them a restructuring plan that is tailored to their individual needs.
The Bank revised credit underwriting standards across all segments in light of the COVID-19 pandemic and
tightened them, where applicable. The revision and tightening of the standards, among other measures,
included: changes in the delegation on decision-making and approval particularly for borrowers from vul-
nerable sectors, applied haircuts to the revenues of individual borrowers from affected sectors, and the
integration of macroeconomic sectoral expectations into the assessment process for business borrowers.
FINANCIAL RISK MANAGEMENT
Liquidity risk management
Liquidity risk is the risk that the Group either may not have sufficient financial resources available to meet
all its obligations and commitments as they fall due, or may only be able to access those resources at a
high cost. Both funding and market liquidity risks can emerge from a number of factors that are beyond the
Group’s control. Due to financial market instability, factors such as a downgrade in credit ratings or other
negative developments may affect the price or the ability to access the funding necessary to make pay-
ments in respect of the Group’s future indebtedness.
Liquidity risk is managed by the Financial Risk Management and Treasury departments and is monitored by
the Management Board’s Risk Committee and the Assets and Liabilities Management Committee (ALCO)
within their predefined functions.
The principal objectives of the Group’s Liquidity Risk Management Policy are to:
ensure the availability of funds to meet claims arising from total liabilities and off-balance sheet commit-
ments, both actual and contingent, at an economic price;
recognise any structural mismatch existing within the Group’s statement of financial position and set
monitoring ratios to manage funding in line with the Group’s well-balanced growth; and
monitor liquidity and funding on an ongoing basis to ensure that approved business targets are met with-
out compromising the Group’s risk profile.
The Management Board reviews the Liquidity Risk Management Policy, which is then presented to the
Board and the Supervisory Board for approval.
Liquidity risk is categorised into two risk types: funding liquidity risk and market liquidity risk.
Funding liquidity risk is the risk that the Group will not be able to efficiently meet both expected and un-
expected current and future cash flows without affecting either its daily operations or its financial condition
121
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 under both normal conditions and during a crisis. Liquidity risk is measured by the Bank in accordance with
NBG requirements. Additionally, the Group applies, in accordance with best practice, stress tests and “what if”
scenario analyses and monitors the various liquidity risk parameters that the Group has developed internally.
To manage funding liquidity risk, in accordance with NBG requirements, the Bank currently monitors the
following Basel III based parameters:
for Short-term Liquidity Risk Management, the Bank applies the Liquidity Coverage Ratio (LCR); and
for Long-term Liquidity Risk Management, the Bank applies the Net Stable Funding Ratio (NSFR).
In 2017, the NBG introduced its own LCR for liquidity risk management purposes. In addition to the Basel III
guidelines, the ratio applies conservative approaches to the deposit withdrawal rates depending on the cli-
ent group’s concentration. Since September 2017, the Bank has also monitored compliance with the NBG’s
LCR limits. In addition to the total LCR limit, the NBG has also defined limits per currency for the GEL and
foreign currencies (FC). The LCR is calculated by reference to the qualified liquid assets divided by 30-day
cash net outflows. It is used to help manage short-term liquidity risks. To promote larization in the country
of Georgia, the NBG defines a lower limit for the GEL LCR than that for the FC LCR. From October 2019, FC
Mandatory Reserves are considered at 100% within high quality liquid assets for NBG LCR purposes. In ad-
dition, in the same period, NBG lowered FC mandatory reserves requirements from 30% to 25%.
In September 2019, the NBG introduced a Net Stable Funding Ratio (NBG NSFR) for funding liquidity risk
management purposes. The NSFR is calculated by dividing the available stable funding by the required
stable funding. It is used for long-term liquidity risk management to promote resilience over a longer time
horizon by creating additional incentives for the Bank to rely on more stable sources of funding on a con-
tinuing basis. On a monthly basis the Bank monitors compliance with the set limit for the NBG NSFR. As of
31 December 2020, the ratios were well above the prudential limits set by the NBG, as follows:
Net stable funding ratio, as defined by the NBG
Minimum net stable funding ratio, as defined by the NBG
Total Liquidity Coverage Ratio,as defined by the NBG
Minimum total Liquidity Coverage Ratio,as defined by the NBG
LCR in GEL, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
2020
2019
2018
126.0%
100%
134.2%
100%
132.2%
n/a
134.9%
100%
126.7%
129.3%1
100%
n/a
110.1%
113.9%
100%
83.7%
75%
128.4%
100%
102.5%
75%
121.1%
100%
100%
Market liquidity risk is the risk that the Group cannot easily offset or eliminate a position at the then-current
market price because of inadequate market depth or market disruption.
To manage market liquidity risk, the Group follows the Basel III guidelines on high-quality liquidity asset
eligibility to ensure that the Group’s high-quality liquid assets can be sold without causing a significant
movement in price and with minimum loss of value. In addition, the Group has a liquidity contingency plan,
which forms part of the overall prudential liquidity policy. The plan is designed to ensure that the Group can
meet its funding and liquidity requirements and maintain its core business operations in any deteriorating
liquidity conditions that could arise outside the ordinary course of its business.
As a result of the COVID-19 pandemic, the NBG implemented certain countercyclical measures in relation
to liquidity requirements:
In April 2020, NBG opened US$/GEL FX swap lines with unlimited amounts;
NBG removed GEL LCR (>=75%) for 1 year; and
Business loans could be pledged with NBG for liquidity support.
In addition to above, the NBG announced additional potential countercyclical measures, if necessary, which
include:
Decreasing LCR limits;
Decreasing mandatory reserve requirements in foreign currency; and
Updating criteria for security or repo pledging to support GEL liquidity.
1 Based on internal estimates
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED Funding and maturity analysis
The Group’s principal sources of liquidity include customer deposits and accounts, borrowings from local
and international banks and financial institutions, subordinated loans from international financial institution
investors, local interbank short-duration term deposits and loans, proceeds from sales of investment secu-
rities, principal repayments on loans, interest income and fee and commission income. The Board believes
that a strong and diversified funding structure is one of the Group’s differentiators. The Group relies on
relatively stable deposits from Georgia as the main source of funding. The Group also monitors deposit con-
centration for large deposits and sets limits for deposits of non-Georgian residents in its deposit portfolio.
To maintain and further enhance its liability structure, the Group sets targets for deposits and funds re-
ceived from international financial institution investors in its risk appetite via the respective ratios. The loan
to deposit and IFI funding ratio (defined as the total value of net loans divided by the sum of total value of
deposits and funds received from international financial institutions) stood at 101.2%, 104.8% and 89.9%, as
at 31 December 2020, 2019 and 2018, respectively.
In order to assess the possible outflow of the bank’s customer accounts, management applied value-at-risk
analysis. Value-at-risk (VAR) as of December 2020 equaled 7.6% (2019: 8.4%; 2018: 10.9%). The statistical data
was used on the basis of a holding period of one month for a look-back period of five years with a confi-
dence level of 99%. The value at risk analysis was performed for the following maturity gaps: 0-1 months, 0-3
months, 0-6 months and 0-12 months, based on which the maximum percentage of deposits’ outflow was
calculated.
Management believes that, in spite of a substantial portion of customers’ accounts being on demand, diver-
sification of these deposits by number and type of depositors, coupled with the Group’s past experience,
would indicate that these customer accounts provide a long-term and stable source of funding for the
Group. Moreover, the Group’s liquidity risk management includes the estimation of maturities for its current
deposits. The estimate is based on statistical methods applied to historic information on the fluctuations of
customer account balances.
Market risk
The Group follows the Basel Committee’s definition of market risk as the risk of losses in on- and off-bal-
ance sheet positions arising from movements in market prices. These risks are principally: (a) risks pertaining
to interest rate related instruments and equities in the “trading book” (financial instruments or commodities
held for trading purposes); and (b) foreign exchange risk and commodities risk throughout the Group.
The Group’s strategy is not to be involved in trading financial instruments or investments in commodities.
Accordingly, the Group’s only exposure to market risk is foreign exchange risk in its “structural book”, com-
prising its regular commercial banking activities which have no trading, arbitrage or speculative intent.
Foreign exchange risk
The NBG requires the Bank to monitor both balance sheet and total aggregate balance (including off-bal-
ance sheet) open currency positions and to maintain the latter within 20% of the Bank’s regulatory capital.
For the year ended 31 December 2020, the Bank maintained an aggregate balance open currency position
of 3.4%.
In addition, the Supervisory Board sets further limits on open currency positions. The ALCO has set limits
on the level of exposure by currency and for total aggregate position that are more conservative than those
set by the NBG and the Supervisory Board. The heads of the treasury and financial risk management depart-
ments separately monitor the Bank’s compliance with these limits daily.
Compliance with these limits is also reported daily to the Management Board and periodically to the Super-
visory Board and its Risk Committee. On a Group-wide level, foreign-exchange risk is monitored and report-
ed monthly. To assess the currency risk, the Bank performs a VAR sensitivity analysis on a quarterly basis.
The analysis calculates the effect on the Group’s income determined by the worst possible movements of
currency rates against the Georgian Lari, with all other variables held constant. During the years ended 31
December 2020, 2019 and 2018, the sensitivity analysis did not reveal any significant potential effect on the
Group’s equity:
In thousands of GEL
As of 31 December 2020
As of 31 December 2019
As of 31 December 2018
Maximum loss (VAR, 99% confidence level)
Maximum loss (VAR, 95% confidence level)
(6,158)
(4,493)
(2,291)
(1,584)
(8,890)
(6,162)
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Interest rate risk management
Interest rate risk arises from potential changes in market interest rates that can adversely affect the value of
the Group’s financial assets and liabilities. This risk can arise from maturity mismatches of assets and liabil-
ities, as well as from the re-pricing characteristics of such assets and liabilities. The deposits, and a part of
the loans offered by the Group, are at fixed interest rates, while a portion of the Group’s borrowing is based
on a floating interest rate. The Group’s floating rate borrowings are, to a certain extent, hedged because the
NBG pays a floating interest rate on the minimum reserves that the Bank holds with it. Furthermore, many
of the Bank’s loans to customers contain a clause allowing it to adjust the interest rate on the loan in case
of adverse interest rate movements, thereby limiting exposure to interest rate risk. The management also
believes that the Bank’s interest rate margins provide a reasonable buffer to mitigate the effect of a possible
adverse interest rate movement. The Bank also applies for interest rate risk hedging instruments in order to
mitigate interest rate risk.
The Group employs an advanced framework for the management of interest rate risk by establishing ap-
propriate Risk Appetite limits, monitoring compliance with them and preparing forecasts. From September
2020, the NBG introduced a regulation on interest rate risk and set the limit for Economic Value of Equity
(EVE) sensitivity at 15% of NBG Tier 1 Capital. The main principles and assumptions of the NBG’s IRR meth-
odology are in line with the Basel standards and EBA guidelines developed for IRR management purposes.
As of 31 December 2020, the Bank was in compliance with the regulatory requirement with EVE at 3.5%.
According to NBG guidelines, Net Interest Income sensitivity under parallel shifts of interest rate scenarios
are maintained for monitoring purposes, while EVE sensitivity is calculated under six predefined stress sce-
narios of interest rate changes. The limit is then applied to the worst case scenario result. Interest rate risk
is managed by the financial risk management department and is monitored by the ALCO, which decides
on actions that are necessary for effective interest rate risk management and follows up on their implemen-
tation. The major aspects of interest rate risk management development and the respective reporting are
periodically provided to the Management Board, the Supervisory Board and the Risk Committee.
The Group measures four types of interest-rate risk based on the source of the risk: (i) re-pricing risk; (ii) yield
curve risk; (iii) basis risk; and (iv) optionality (embedded option) risk.
The Group considers numerous stress scenarios, including different yield curve shifts and behavioural ad-
justments to cash flows (such as deposit withdrawals or loan prepayments), to calculate the impact on one
year profitability and enterprise value. Appropriate limits are set by the Supervisory Board and the Manage-
ment Board’s Risk Committee.
Counterparty risk
Through performing banking services, such as lending in the interbank money market, settling a transaction
in the interbank foreign exchange market, entering into interbank transactions related to trade finance or
investing in securities, the Bank is exposed to the risk of losses due to the failure of a counterparty bank to
meet its obligations.
To manage counterparty risk, the Bank defines limits on an individual basis for each counterparty, while on
a portfolio basis it limits the expected loss from both treasury and trade finance exposures. As of 31 Decem-
ber 2020, the Bank’s interbank exposure was concentrated with banks that external agencies, such as Fitch,
Moody’s and Standard and Poor’s, have assigned high A-grade credit ratings.
CAPITAL RISK MANAGEMENT
Capital risk is the risk that the Group may not have a sufficient level of capital to maintain its normal business
activities, and to meet its regulatory capital requirements under normal or stressed operating conditions.
The management’s objectives in terms of capital management are to maintain appropriate levels of capital
to support the business strategy, meet regulatory and stress testing-related requirements and safeguard the
Group’s ability to continue as a going concern. The Group undertakes stress-testing and sensitivity analysis
to quantify extra capital consumption under different scenarios. Capital forecasts, as well as the results of
the stress-testing and what-if scenarios, are actively monitored with the involvement of the Bank’s Manage-
ment Board and Risk Committee to ensure prudent capital management and timely actions when needed.
In 2020, the Group and the Bank complied with all regulatory capital requirements.
124
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy require-
ments. The changes include amendments to the regulation on capital adequacy requirements for com-
mercial banks, and the introduction of new requirements (i) on additional capital buffer requirements for
commercial banks within Pillar 2; (ii) on the determination of the countercyclical buffer rate; and (iii) on the
identification of systematically important banks and determining systemic buffer requirements. The pur-
pose of these amendments is to improve the quality of banks’ regulatory capital and achieve better compli-
ance with the Basel III framework.
Pillar 1 minimum requirements plus combined buffer requirements. The amendments to the regulation on
capital adequacy requirements for commercial banks have made Pillar 1 minimum requirements in Georgia
compatible with the framework established by the Basel Committee of Banking Supervision. The amend-
ments included:
the separation of the 2.5% conservation buffer, which was previously merged with minimum capital re-
quirements. The updated minimum regulatory capital requirements are 4.5%, 6.0% and 8.0% for Common
Equity Tier 1 Capital, Tier 1 Capital and Total Regulatory Capital, respectively;
the introduction of a requirement that banks hold an additional combined buffer through Common Equity
Tier 1 Capital, consisting of conservation, countercyclical and systemic buffers.
The rate for the conservation buffer has been set at 2.5% of RWAs, while a 0% rate has been set for the coun-
tercyclical buffer. The countercyclical buffer can vary within the range of 0% to 2.5% and will be reviewed
periodically based on the prevailing financial and macroeconomic environment. In addition, the NBG des-
ignated certain commercial banks in Georgia as domestic systemically important banks (DSIBs) for which
individual systemic buffers have been introduced, which means that the DSIBs will be required to set aside
more Common Equity Tier 1 Capital relative to RWAs, with the requirements being phased in from the end of
2018 to the end of 2021. In particular, the following systemic buffers and compliance timeframes have been
set by the NBG in relation to the Bank: 1.0% for the period from 31 December 2018 to 31 December 2019, 1.5%
for the period from 31 December 2019 to 31 December 2020, 2.0% for the period from 31 December 2020 to
31 December 2021, and 2.5% from 31 December 2021 onwards.
Pillar 2 requirements. In accordance with the Basel III framework, the NBG also introduced additional capital
buffer requirements for commercial banks within Pillar 2 that are based on a supervisory review and assess-
ment process and deal with bank-specific risks that are not sufficiently covered under Pillar 1, including
an unhedged currency induced credit risk buffer and a net General Risk Assessment Programme (GRAPE)
buffer. The NBG has also introduced a credit portfolio concentration buffer and a net stress test buffer. The
credit portfolio concentration buffer became effective from 1 April 2018, and the need for the net stress
buffer will be assessed based on the regulatory stress testing results. Under the NBG regulation, 56% of the
capital required under Pillar 2 should be held through Common Equity Tier 1 Capital, while 75% of the cap-
ital should be held through Tier 1 Capital and 100% of the capital should be held through Total Regulatory
Capital.
Temporary Measures
With the intention of reducing the negative effects caused by the COVID-19 pandemic, the NBG has de-
veloped a temporary supervisory plan. According to the plan, the capital requirements will be relieved by:
Postponing the phasing in of concentration risk and the net General Risk Assessment Programme
(GRAPE) buffer capital requirements on CET1 and Tier 1 capital that was supposed to be introduced in
March 2020;
Allowing banks to use the conservation buffer and 2/3 of the currency induced credit risk (CICR) buffer;
Allowing banks to release all the remaining Pillar 2 buffers (remaining 1/3 CICR, concentration risk and Net
Grape buffers) in case of necessity.
During the COVID-19 pandemic, the Bank has utilised both the conservation and 2/3 of CICR buffer and is
restricted from making any capital distribution.
The NBG outlined a new schedule for the gradual introduction of capital requirements under Basel III. Ac-
cording to the new schedule, concentration risk and the Net GRAPE buffers phase-in will continue from
March 2021 and will be fully integrated by March 2023. The systemic buffer is expected to increase by 0.5pp
to 2.5% at the end of 2021. Based on the official announcement by the NBG, the decision for the restoration
of CICR and Conservation buffers has been postponed for the next Financial Stability Committee meeting
125
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 which will be held in June 2021. Once the restoration of the buffers is announced, the Bank will be given a
period of one and two years to fully comply with the CICR and Conservation buffer requirements respective-
ly. However, in case the Bank wants to pay out dividends, it has to fully restore and comply with the buffers.
As of December 2020, the Bank’s updated Pillar 2 requirement is 0.9%, 1.2% and 3.7% for Common Equity
Tier 1, Tier 1 and Total Regulatory Capital, respectively.
Both, Tier 1 and Total Regulatory Capital adequacy ratios are calculated based on the Basel III methodology
introduced by the NBG. The following table presents the capital adequacy ratios and minimum require-
ments set by the NBG:
In thousands of GEL
CET 1 Capital
Tier 1 Capital
Tier 2 Capital
Total regulatory capital
Risk-weighted Exposures
Credit Risk Weighted Exposures
Risk Weighted Exposures for Market Risk
Risk Weighted Exposures for Operational Risk
Total Risk-weighted Exposures
Minimum CET 1 ratio
CET 1 Capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 Capital adequacy ratio
Minimum total capital adequacy ratio
Total Capital adequacy ratio
2020
1,911,233
2,385,181
752,731
3,137,912
16,322,524
106,379
1,872,574
18,301,477
7.4%
10.4%
9.2%
13.0%
13.7%
17.1%
2019
1,871,892
2,281,706
692,323
2,974,029
13,825,677
15,429
1,749,821
15,590,927
10.4%
12.0%
12.5%
14.6%
17.5%
19.1%
2018
1,629,594
1,678,716
672,553
2,351,269
11,458,497
179,381
1,516,993
13,154,871
9.7%
12.4%
11.8%
12.8%
16.7%
17.9%
NON-FINANCIAL RISK MANAGEMENT
Operational risk management
One of the main risks that the Group faces is operational risk, which is the risk of loss resulting from internal
and external fraud events, inadequate process or products, business disruptions and system failures, human
error or damages of assets. Operational risk also implies losses driven by legal, reputational, compliance or
cybersecurity risks.
The Group is exposed to many types of operational risk, including: fraudulent and other internal and external
criminal activities; breakdowns in processes, controls or procedures; and system failures or cyber-attacks
from an external party with the intention of making the Group’s services or supporting infrastructure unavail-
able to its intended users, which in turn may jeopardize sensitive information and the financial transactions
of the Group, its clients, counterparties or customers.
Moreover, the Group is subject to risks that cause disruption to systems performing critical functions or
business disruption arising from events wholly or partially beyond its control, such as natural disasters,
transport or utility failures etc., which may result in losses or reductions in service to customers and/or eco-
nomic losses to the Group.
The operational risks discussed above are also applicable where the Group relies on outsourcing services
from third parties. Considering the dynamic environment and sophistication of both banking services and
possible fraudsters, the importance of constantly improving processes, controls, procedures and systems is
heightened to ensure risk prevention and reduce the risk of loss to the Group.
To oversee and mitigate operational risk, the Group maintains an operational risk management framework,
which is an overarching document that outlines the general principles for effective operational risk manage-
ment and defines the roles and responsibilities of the various parties involved in the process. Policies and
procedures enabling the effective management of operational risks complement the framework. The Man-
agement Board ensures a strong internal control culture within the Group, where control activities are an
integral part of operations. The Board sets the operational risk appetite and the Operational Risk Committee
126
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED oversees compliance with the limits. The Operational Risk Committee discusses the Group’s operational
risk profile and risk mitigation recommendations on a regular basis.
The operational risk management department acts as a second line of defence. It is responsible for imple-
menting the framework and appropriate policies and procedures to enable the Group to manage opera-
tional risks, as well as monitoring operational risk events, risk exposures against risk appetite and material
control issues. The department is also responsible for the day-to-day management of operational risks,
using various techniques. These include, but are not limited to:
running risk and control self-assessments (RCSA), which are aimed at detecting possible gaps in opera-
tions and processes with the purpose of suggesting appropriate corrective actions;
collecting internal risk events and conducting root-cause analyses for further risk mitigation purposes;
forming a unified operational loss database for further quantitative and qualitative analysis; analyzing
internal fraud events and monitoring key risk indicators;
performing new risk assessment and validating the launch of new products, services or procedures;
providing business advisory services regarding non-standard cases;
monitoring IT incident occurrence and overseeing activities targeted at solving identified problems; and
obtaining insurance policies to transfer the risk of losses from operational risk events.
The operational risk management department has reinforced its risk assessment teams and methodolo-
gies to further fine-tune the existing control environment. The same applies to the set of actions directed
to homogenise operational risk management processes throughout the Group’s member companies. The
operational risk management department reports to the Chief Risk Officer. Various policies, processes and
procedures are in place to control and mitigate operational risks, including, but not limited to:
the New Risk Assessment Policy, which enables thorough risk evaluation prior to the adoption of new
products, services, or procedures;
the Outsourcing Risk Management Policy, which enables the Group to control outsourcing (vendor) risk
arising from adverse events and risk concentrations due to failures in vendor selection, insufficient con-
trols and oversight over a vendor and/or services provided by a vendor and other impacts to the vendor;
the Risk and Control Self-Assessment (RCSA) Policy, which enables the Group to continuously evaluate
existing and potential risks, establish risk mitigation strategies and systematically monitor the progress of
risk mitigation plans;
the Operational Risk Event Identification Policy, which enables the Group to promptly report on opera-
tional risk events, perform systematic root-cause analysis of such events and take corrective measures to
prevent the reoccurrence of significant losses; and
the Special Operational Risk Awareness Programme, which provides regular training to the Group’s em-
ployees and strengthens the Group’s internal risk culture.
During the reporting period, one of the key operational risk management focus areas was the Risk and
Control Self-Assessment (RCSA) exercise, under which the Bank’s top priority processes were reviewed and
areas of improvement were identified.
The Operational Risk Management Framework and its complementing policies were updated to ensure
effective execution of the operational risk management programme.
Additionally, the Bank has developed a bank-wide operational risk registry.
Compliance
The compliance department is the key body executing the Bank’s compliance function; it has a formal sta-
tus and is independent from operating structural units and business lines. The compliance function role is
executed by compliance officers, who act as compliance advisers and coordinators, addressing compliance
issues in structural units or business lines. The Chief Compliance Officer reports quarterly to the Risk Com-
mittee, with a disciplinary reporting line to the CEO. The department is responsible for the Group’s compli-
ance and reputational risk management. It implements and monitors the fulfillment of requirements of the
following policies: the Anti-Money Laundering and Counter-Terrorist Financing Policy; the Sanctions Policy;
the Anti-Bribery, Anti-Corruption and Anti-Facilitation of Tax Evasion Policy; the Related-Party Transaction
Policy; the Share Dealing Policy; the Code of Ethics; the Change Management Policy; and the Whistleblow-
ing Policy.
127
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The compliance department manages regulatory risk by:
ensuring that applicable changes in laws and regulations are implemented by the process owners in a
timely manner;
participating in the new product/process risk approval process;
conducting analysis of customer complaints, the operational risk event database, internal audit findings
and litigation cases to proactively reveal process weaknesses; and
conducting annual RCSA of the internal processes.
Based on the outcomes of the above-mentioned analysis and processes, the Compliance Department ini-
tiates changes to internal instructions or gives recommendations to the Bank’s structural units on relevant
process amendments. Compliance officers have the role of educators and advisers on compliance issues.
The compliance department establishes training programmes that cover AML/CFT laws, regulations, and
the Group’s policies and procedures used to mitigate financial crime risks and delivers training to all exist-
ing staff members and newcomers. Due to the COVID-19 pandemic, in 2020 the compliance department
delivered training courses via distance-learning sessions to existing staff members and newcomers, and
promoted a compliance culture within the Group. The distance-learning programme included both formal
training courses and ongoing communications that served to educate employees and maintain their con-
tinuous awareness of regulatory requirements.
Anti-money laundering (AML)
The Group is committed to high standards both of anti-money laundering and counter-terrorist financing
(AML/CTF) and requires all Group member companies, management and employees to adhere to these
standards in order to prevent the use of the Bank’s products and services for money laundering/terrorist
financing purposes. The Group’s AML/CTF programme is based on the applicable legal and regulatory re-
quirements, which are in line with FATF recommendations, EU regulations and best practices.
The Group’s AML/CTF compliance programme, as implemented, comprises written policies, procedures,
internal controls and systems including, but not limited to: policies and procedures to ensure compliance
with AML laws and regulations; KYC and customer due diligence procedures; customer acceptance policy;
customer screening against a global list of terrorists and specially designated nationalities relevant financial
and other sanctions lists; regular staff training and awareness raising; and procedures for monitoring and
reporting suspicious activities of the Bank’s customers.
As part of the second line of defence, the AML unit ensures that risks are managed in accordance with the
risk appetite defined by the Group and promotes a strong risk culture throughout the organization.
The Group has a sophisticated AML solution in place that enables the AML unit to comply with the Sanc-
tions Policy, monitor clients’ transactions and identify suspicious behavior. The AML unit works on the con-
stant improvement of software to increase operational efficiency and decrease false-positive alerts.
Following regulatory changes, the Group developed and approved a new AML policy in 2020. The new
regulation expanded the definition of a politically exposed person (PEP), introduced a new list of reportable
transactions, and imposed additional Know Your Client (KYC) requirements for one-time clients. Following
a gap analysis conducted by the Group, the compliance department introduced a number of changes to its
internal processes and procedures.
In order to enhance the efficiency and effectiveness of the transaction monitoring system and mitigate reg-
ulatory risk, the Bank launched a new advanced analytics and artificial intelligence (AI) project for the pur-
pose of identifying suspicious transactions. An AI-equipped solution will be applied in the first half of 2021.
On October 30 2019, the Government of Georgia approved the first Money Laundering and Terrorism Fi-
nancing National Risk Assessment (NRA). The NRA assessed money laundering and terrorism financing on
national and sectoral levels. At the national level, the banking sector’s risk level of money laundering was
assessed as medium, while the risk level of terrorism financing was assessed as low.
The Bank developed a sophisticated methodology of Enterprise-Wide AML Risk Assessment and performed
a risk assessment exercise for the year 2019, in line with this methodology. The assessment results showed that
no control area fell under the red zone; however, several underperforming controls were identified and an ac-
tion plan was developed to address those gaps. Overall group-wide residual risks were assessed as medium.
128
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED Information Security
In order to manage the risks associated with cyber-attacks and ensure the security of clients, the Group
continuously updates and enhances its in-depth security strategy, which covers multiple preventive and
detective controls ranging from the data and end-point computers to edge firewalls.
A newly built Security Operations Center monitors any anomaly that is identified across the organization’s
network in order to detect potential incidents and respond to them effectively.
At least once a year, a full information security and cyber security threat analysis is performed, taking into
consideration the relevant regional and sector specific perspectives. At least once every two years, as part of
this analysis, an external consultant is contracted to assess the efficiency of our capabilities against industry
best practices and real world cyber-attack scenarios. This analysis gives the Group a detailed review and
insight, which helps to further enhance the information and cyber security systems. In addition, cyber-attack
readiness exercises are performed on a regular basis. These exercises evaluate the actual position of the
Group in this area and provide a benchmark against international best practices.
An Information Security Steering Committee has been established and charged with continuously improv-
ing information security and business continuity management processes and minimising information secu-
rity risks. The committee has been formed to centralise the information security function, including physical
security, HR security, data security, IT security and business continuity.
The Group invests in effective information security risk management, incident management and aware-
ness programmes, which are enhanced with automated tools that ensure acceptable levels of information
security risk within the organisation. Whenever preventive controls are not applicable, comprehensive busi-
ness continuity and incident response plans ensure the Group’s ability to operate on an ongoing basis and
limit losses in the event of a severe business disruption. Since employees play a crucial role in information
security, regular mandatory training sessions are conducted for all employees, comprised of remote learn-
ing courses on security issues, fraud and phishing simulations and informative emails to further assist our
employees with information security matters. New employees are also given this training as part of the
induction process. These measures ensure that employees are fully aware of their responsibilities and are
prepared for various security threats.
Legal
The Bank’s legal department manages all legal and related matters concerning the activities of the Bank
and the Group. In accomplishing its mission to ensure that such activities fully conform with all applicable
laws and regulations, the legal team delivers a wide array of professional legal services: it (i) interacts with
internal and external clients, outside counsel, government and regulatory entities; (ii) issues memos and
opinions; (iii) drafts standardized and individual contracts; (iv) prepares corporate resolutions; (v) provides
regulatory updates; and (vi) represents the Bank in courts, other dispute resolution venues and before other
third parties. The legal team, which comprises lawyers with diverse backgrounds and experience, consists
of the following key divisions: regulatory and legal compliance, corporate, dispute resolution, legal support
and corporate governance teams. Each division functions within its clear and distinct job descriptions cor-
responding to relevant knowledge, skill and capabilities of its members. As part of the Bank’s agile trans-
formation effort, several lawyers are working within and/or in close cooperation with the teams in charge of
specific commercial projects. The department ensures effective execution of its duties through different
processes and procedures.
The Bank’s General Counsel manages the legal department. S/he determines key business objectives for
all legal teams, introduces policies and vision, and ensures the effective performance of their duties. The
General Counsel reports directly to the Management Board and the Supervisory Board and their respective
committees on existing legal risks, their mitigation strategies and the vision for their effective management
in the future.
Conduct risk
Conduct risk is defined as the risk to the delivery of fair outcomes for customers and other stakeholders.
The Group’s Code of Ethics serves as a moral compass for all staff and sets high ethical standards that each
employee is required to uphold.
129
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The Group’s employees undertake and perform their responsibilities with honesty and integrity. They are
critical to maintaining trust and confidence in its operations and upholding important values of trust, loyalty,
prudence and care.
Additionally, the Group’s management understands that it bears responsibility to a diversified group of do-
mestic and international investors and needs to embrace the rules and mechanisms of protecting custom-
ers and maintaining the confidence of investors and financial markets. The Group’s Directors strive to estab-
lish the “tone from the top,” which sets out the messages describing and illustrating the core components
of good conduct.
In managing conduct risk, the Group entrusts different departments and divisions with carrying out the task
of managing, mitigating and eliminating conduct risk across all of the Group’s operations with clients and
other stakeholders. The compliance and operational risk departments cooperate to create a unified con-
duct risk management framework and assist business lines and departments in the following:
1. developing and maintaining policies and procedures to ensure that the respective departments and
individual employees comply with the provisions set out by regulatory provisions, best practice and the
Code of Conduct and the Code of Ethics;
2. maintaining liaison with the compliance department regarding the administration of policies and pro-
cedures and the investigation of complaints regarding the conduct of the department, its manager and/
or its employees;
3. ensuring that the product information provided to clients by front-line employees is accurate and com-
plete, and is conveyed (both in written and oral form) in a simple and understandable way, regardless of
the level of sophistication of a given client;
4. maintaining records of client conversations and emails that contain sensitive and sales-related infor-
mation, including information pertaining to the acquisition of new clients and making complex product
offers to existing and prospective clients;
5. delivering timely, on-going training for new employees regarding proper conduct and ensuring that all
employees stay up to date on evolving compliance standards within the Group through periodic training;
6. developing an open culture that encourages employees to speak up without fear of punishment. Spe-
cifically, this means setting up processes for the prevention and detection of conflicts of interest, cre-
ating ethical incentives and bonus formulas, and aligning incentives and disciplinary practices to the
Group’s risk appetite; and
7. employing qualified staff and sufficient human and technological resources to investigate, analyse, imple-
ment and monitor sales and after-sales activities. This approach ensures that the management of conduct
risk is not limited to risk management units, including the compliance department, but is fully embraced
by front-line departments and that the proper conduct is fully integrated into required job skills.
VIABILITY STATEMENT
The assessment of principal risks underpins the Viability Statement in the Directors’ Report for 2020 (see
pages 159 to 160). The assessment involved consideration of the Group’s current financial position over three
years of coverage ending 1 January 2024, which is relevant to the strategic considerations of the Group.
130
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK MANAGEMENT CONTINUED FINANCIAL REVIEW
OVERVIEW
TBC Bank Group PLC’s financial results are prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and international financial reporting stan-
dards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Changes in accounting policies, IAS 16
In 2Q 2020, the accounting policy in relation to subsequent measurement of land, buildings and construc-
tion in progress was changed from the revaluation model to the cost model. This led to the restatement of
appropriate balance sheet amounts in 2019, while no material impact was recorded in the income statement.
TAX STRATEGY
TBC is committed to complying with all applicable tax laws in all jurisdictions where TBC Group operates,
including in the UK. In particular, we aim to pay the correct amount of tax within applicable time limits.
Our objectives are built around the following key principles:
transparency;
responsibility; and
effective interaction with tax authorities.
We ensure that the management of tax risk and proper governance around our tax operations is supported
by appropriately trained personnel who have clear responsibilities to identify, analyse, assess and manage
tax risks. For more details, please view our tax strategy on our website at www.tbcbankgroup.com under the
“about us” section.
FINANCIAL HIGHLIGHTS
FY 2020 P&L Highlights
Profit for the period amounted to GEL 322.5 million (FY 2019: GEL 540.3 million)
Return on average equity (ROE) stood at 11.7% (FY 2019: 22.9%1)
ROE before expected credit loss allowances2 stood at 24.7% (FY 2019: 26.8%1)
Return on average assets (ROA) stood at 1.6% (FY 2019: 3.2%1)
Cost to income of TBC Bank Group PLC stood at 38.4% (FY 2019: 39.9%)
Standalone cost to income ratio of the Bank3 was 32.9% (FY 2019: 35.9%)
Cost of risk stood at 2.4% (FY 2019: 0.7%)
Net interest margin (NIM) stood at 4.7% (FY 2019: 5.6%)
Basic earnings per share stood at GEL 5.84 (FY 2019: GEL 9.83)
Diluted earnings per share stood at GEL 5.76 (FY 2019: GEL 9.76)
Balance Sheet Highlights as of 31 December 2020
Total assets amounted to GEL 22,577.8 million, up by 23.0% YoY
Gross loans and advances to customers stood at GEL 15,200.5 million, up by 20.0% YoY or at 8.7% on a
constant currency basis
Net loans to deposits + IFI funding4 stood at 101.2%, down by 3.6 pp YoY, and Regulatory Net Stable Fund-
ing Ratio (NSFR), effective from 30 September 2019, stood at 126.0%
NPLs to gross loans were 4.7%, up by 2.0 pp YoY
NPLs coverage ratios stood at 85.6%, or 189.1% with collateral, on 31 December 2020 compared to 91.1% or
194.2% with collateral, as of 31 December 2019
Total customer deposits amounted to GEL 12,572.7 million, up by 25.1% YoY or at 13.8% on constant cur-
rency basis
The Bank’s Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 10.4%,
13.0%, and 17.1%, respectively, while minimum eased regulatory requirements amounted to of 7.4%, 9.2%,
and 13.7%, respectively
1 Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood
at 22.4%, while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in for the FY 2019.
2 Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all
credit loss allowance, but after net modification losses divided by the monthly average of total shareholders ‘equity attributable to the
PLC’s equity holders for the same period, for more information please refer to Annex 1 on page 145.
3 For the ratio calculation, all relevant group recurring costs are allocated to the Bank
4
International Financial Institutions
131
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Market Shares as of December 20205
Market share by total assets reached 38.2%, remaining the same YoY
Market share by total loans was 39.0%, down by 0.5 pp YoY
Market share of total deposits reached 37.2%, down by 1.8 pp YoY
Income statement highlights
In thousands of GEL
Net interest income
Net fee and commission income
Other operating non-interest income6
Credit loss allowance
Operating profit after expected credit losses
Losses from modifications of financial instrument
Operating expenses
Profit before tax
Income tax credit/(expense)
Profit for the period
Balance Sheet and Capital Highlights
In thousands of GEL
Total Assets
Gross Loans and advances to customers
Customer Deposits
Total Equity
Regulatory Common Equity Tier I Capital (Basel III)
Regulatory Tier I Capital (Basel III)
Regulatory Total Capital (Basel III)
FY'20
FY'19
Change YoY
835,433
182,767
137,391
(351,847)
803,744
(41,015)
801,539
187,290
139,414
(91,992)
1,036,251
-
(443,623)
(450,726)
319,106
3,383
322,489
585,525
(45,184)
540,341
4.2%
-2.4%
-1.5%
NMF
-22.4%
NMF
-1.6%
-45.5%
NMF
-40.3%
31-Dec-20
31-Dec-19
Change YoY
22,577,805
18,359,266*
15,200,520
12,661,955
12,572,728
10,049,324
2,935,934
2,599,090*
1,911,233
2,385,181
3,137,912
1,871,892
2,281,706
2,974,029
23.0%
20.0%
25.1%
13.0%
2.1%
4.5%
5.5%
Regulatory Risk Weighted Assets (Basel III)
18,301,477
15,590,927
17.4%
* Certain amounts do not correspond to the 2019 consolidated financial statement as they reflect the change in accounting policy for PPE (prop-
erty, plant and equipment) from the revaluation model to the cost method in 2Q 2020 in thousands of GEL
Key Ratios
ROE
ROE before expected credit loss allowances2
ROA
NIM
Cost to income
Standalone cost to income of the Bank3
Cost of risk
NPL to gross loans
NPLs coverage ratio exc. collateral
CET 1 CAR (Basel III)
Regulatory Tier 1 CAR (Basel III)
Regulatory Total CAR (Basel III)
Leverage (Times)
FY'20
11.7%
24.7%
1.6%
4.7%
38.4%
32.9%
2.4%
4.7%
85.6%
10.4%
13.0%
17.1%
7.7x
FY'19
Change YoY
22.9%*
26.8%*
3.2%*
5.6%
39.9%
35.9%
0.7%
2.7%
91.1%
12.0%
14.6%
19.1%
7.1x**
-11.2 pp
-2.1 pp
-1.6 pp
-0.9 pp
-1.5 pp
-3.0 pp
1.7 pp
2.0 pp
-5.5 pp
-1.6 pp
-1.6 pp
-2.0 pp
0.6x
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method ROE stood at
22.4%, while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in FY 2019
** Prior to the change in PPE (property, plant and equipment) accounting policy from revaluation model to cost method, leverage stood at 7.0x
for FY 2019.
5 Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.
6 Other operating non-interest income includes net insurance premium earned after claims and acquisition costs.
132
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED Net Interest Income
In FY 2020, we generated GEL 835.4 million net interest income, up by 4.2% YoY.
The YoY increase in interest income of GEL 231.2 million, or 16.1%, was mainly supported by an increase in in-
terest income from loans, which was driven by an increase in the respective portfolio by GEL 2,538.6 million,
or 20.0%. This effect was partially offset by a 0.9pp drop in loan yields across all segments, mainly related to
a decrease in the Libor rate, currency devaluation, a change in the segment mix towards corporate, as well
as the slowdown of lending activities due to the pandemic. Furthermore, growth was supported by interest
income from investment securities, on the back of an increase in the respective portfolio of 613.3 million, or
30.5%, as well as by the increased share of new securities acquired in 2020 with higher interest rates due to
the increased average refinance rate.
Our interest expense increased by GEL 189.7 million, or 28.6%, which was mainly related to an increase in
interest expense from deposits and other borrowed funds. The former increase was attributable to a growth
in the respective portfolio of GEL 2,523.4 million, or 25.1%, which was further supported by an increase in
yields due to an increase in the average refinance rate, as well as currency depreciation. The latter increase
was mainly driven by growth in the NBG loan balances, which further supported the growth in the respective
yield by 0.1pp (the GEL yield went up by 0.9pp on the back of the higher average refinance rate, while the FC
yield declined by 1.3pp due to the decrease in the Libor rate). Another contributor was the growth in debt
securities in issue related to an increase in interest expense from the Senior and AT1 Bonds issued in June
and July 2019, respectively, in the amount of US$ 425 million.
In FY 2020, our NIM stood at 4.7%, down by 0.9pp YoY.
In thousands of GEL
Interest income
Interest expense
Net gains from currency swaps
Net interest income
NIM
FY'20
FY'19
Change YoY
1,667,999
1,436,843
(853,516)
(663,860)
20,950
835,433
4.7%
28,556
801,539
5.6%
16.1%
28.6%
-26.6%
4.2%
-0.9 pp
Net fee and commission income
In FY 2020, net fee and commission income totalled GEL 182.8 million, down by 2.4% YoY.
The slight decrease on a YoY basis is caused by card operations and other fee and commission income on
the back of reduced economic activity due to the COVID-19 pandemic. This effect was positively impacted
by an increase in fees from guarantees issued and settlement transactions. The former increase was driven
by the increase in the respective portfolio, while the latter growth was related to the fee income from the
payments transactions of our Uzbek subsidiary Payme (Inspired LLC), which was acquired in mid-2019.
In thousands of GEL
Net fee and commission income
Card operations
Settlement transactions
Guarantees issued and letters of credit
Other
FY'20
FY'19
Change YoY
45,147
86,284
37,909
13,427
56,037
73,228
30,289
27,736
Total net fee and commission income
182,767
187,290
-19.4%
17.8%
25.2%
-51.6%
-2.4%
133
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Other Non-Interest Income
Total other non-interest income decreased slightly YoY and amounted to GEL 137.4 million in FY 2020. The
decline of GEL 2,023.0, or 1.5%, was mainly driven by the reduction in foreign currency operations on the back
of slower economic activity in 2020 compared to the previous period, because of the COVID-19 pandemic.
In thousands of GEL
Other non-interest income
Net income from foreign currency operations
Net insurance premium earned after claims and acquisition costs1
Other operating income
Total other non-interest income
FY'20
FY'19
Change YoY
98,010
19,485
19,896
101,467
18,510
19,437
137,391
139,414
-3.4%
5.3%
2.4%
-1.5%
Credit Loss Allowance
Total credit loss allowance in 2020 amounted to GEL 351.8 million. This year, we booked additional COVID-19
related provisions, which resulted in significant growth in provision charges. As a result, our CoR for the full
year 2020 stood at 2.4%.
In thousands of GEL
Credit loss allowance
Credit loss allowance for loan to customers
Credit loss allowance for other transactions
Total credit loss allowance
Operating profit after expected credit losses
Cost of risk
NMF – no meaningful figures
FY'20
FY'19
Change YoY
(330,811)
(21,036)
(351,847)
(82,030)
(9,962)
(91,992)
803,744
1,036,251
2.4%
0.7%
NMF
NMF
NMF
-22.4%
1.7 pp
Operating Expenses
In FY 2020, our total operating expenses decreased by 1.6% YoY, thanks to our effective cost control measures.
The decrease in administrative & other operating expenses was driven by a reduction in consultation ser-
vices and business trip expenses, as well as the impact of renegotiated rent expenses per IFRS 16 in the
amount of GEL 4.2 million.
Thus, in FY 2020 our cost to income ratio stood at 38.4%, down by 1.5pp YoY, while our standalone cost to
income was 32.9%, down by 3.0pp over the same period.
In thousands of GEL
Operating expenses
Staff costs
Provisions for liabilities and charges
Depreciation and amortization
Administrative & other operating expenses
Total operating expenses
Cost to income
Standalone cost to income*
* For the ratio calculation all relevant group recurring costs are allocated to the bank
FY'20
FY'19
Change YoY
(244,043)
(2,706)
(68,392)
(128,482)
(247,803)
(1,264)
(59,478)
(142,181)
(443,623)
(450,726)
38.4%
32.9%
39.9%
35.9%
-1.5%
NMF
15.0%
-9.6%
-1.6%
-1.5 pp
-3.0 pp
1 Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit as follows: net
insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and
commission income and net interest income.
134
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED Net Income
In FY 2020 we managed to maintain resilient profitability, driven by the increase in net interest income and
effective cost management. Over the same period, we also recorded losses from modifications of financial
instruments, in the amount of GEL 41.0 million to reflect the decrease in the present value of cash-flows
resulting from the loan repayment grace periods granted to the borrowers. As a result, our ROE before ex-
pected credit loss allowances stood at 24.7%, down by 2.1pp.
Over the same period, credit loss allowances increased significantly to cover the potential impact of the
COVID-19 pandemic on our borrowers reducing our ROE to 11.7%.
In thousands of GEL
FY'20
FY'19
Change YoY
Losses from modifications of financial instruments
Profit before tax
Income tax credit/(expense)
Profit for the period
ROE
ROE before expected credit loss allowances
ROA
(41,015)
319,106
3,383
322,489
11.7%
24.7%
1.6%
-
585,525
(45,184)
540,341
22.9%*
26.8%*
3.2%*
NMF
-45.5%
NMF
-40.3%
-11.2 pp
-2.1 pp
-1.6 pp
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at
22.4% while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in FY 2019
Funding and Liquidity
As of 31 December 2020, the total liquidity coverage ratio, as defined by the NBG, was 134.2 %, above the
100% limit, while the LCR in GEL and FC stood at 132.2% and 134.9%, respectively, above the respective limits
of 75% and 100%.
However, in light of the COVID-19 pandemic, starting from May 2020, the NBG removed the minimum re-
quirement on GEL LCR of 75%, for a one-year period. Despite the easing of the requirement, we continue to
operate with high liquidity buffers.
As of 31 December 2020, NSFR stood at 126.0%, compared to the regulatory limit of 100%, effective from
September 2019.
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Net loans to deposits + IFI funding
Leverage (Times)
Minimum liquidity ratio, as defined by the NBG
Liquidity ratio, as defined by the NBG
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
31-Dec-20
31-Dec-19
100%
126.0%
101.2%
7.7x
30.0%
33.3%
100.0%
n/a
100.0%
134.2%
132.2%
134.9%
100%
126.7%
104.8%
7.1x*
30.0%
32.2%
100.0%
75.0%
100.0%
110.1%
83.7%
128.4%
Change
0.0 pp
-0.7 pp
-3.6 pp
0.6x
0.0 pp
1.1 pp
0.0 pp
NMF
0.0 pp
24.1 pp
48.5 pp
6.5 pp
*Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, Leverage stood
at 7.0x as of 31 December 2019
Regulatory Capital
As of 31 December 2020, CET1 Capital increased by 2.1% YoY, mainly due to net income generation, while
Tier1 and Total Capital grew by 4.5% and 5.5% respectively, further supported by an increase in FX denomi-
nated AT1 bonds and subordinated loans due to GEL depreciation.
The YoY increase in risk-weighted assets was mainly driven by the GEL depreciation and portfolio growth.
135
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CET1 and Tier 1 CAR ratios decreased by 1.6pp YoY. The decrease was mainly attributable to the effect of
COVID-19 on the Bank`s net income and the depreciation of GEL on a YoY basis. The total CAR ratio de-
creased by 2.0% YoY, which was due to the additional amortization of sub-debt instruments.
As a result, the Bank’s CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0% and 17.1%, respectively, and re-
mained comfortably above the eased minimum regulatory requirements by 3.0%, 3.8% and 3.4%, accordingly.
In thousands of GEL
CET 1 Capital
Tier 1 Capital
Total Capital
Total Risk-weighted Exposures
Minimum CET 1 ratio
CET 1 Capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 Capital adequacy ratio
Minimum total capital adequacy ratio
Total Capital adequacy ratio
31-Dec-20
31-Dec-19
Change YoY
1,911,233
1,871,892
2,385,181
2,281,706
3,137,912
18,301,477
7.4%
2,974,029
15,590,927
10.4%
10.4%
9.2%
13.0%
13.7%
17.1%
12.0%
12.5%
14.6%
17.5%
19.1%
2.1%
4.5%
5.5%
17.4%
-3.0 pp
-1.6 pp
-3.3 pp
-1.6 pp
-3.8 pp
-2.0 pp
Loan Portfolio
As of 31 December 2020, the gross loan advances to customers portfolio reached GEL 15,200.5 million, up
by 20.0% YoY or up by 8.7% on a constant currency basis. The YoY increase was spread across all segments.
The proportion of gross loans denominated in foreign currency increased by 0.7pp YoY and accounted for
59.4% of total loans, while on a constant currency basis the proportion of gross loans denominated in for-
eign currency decreased by 3.5pp and stood at 55.2%.
As of 31 December 2020, our market share in total loans stood at 39.0%, down by 0.5pp YoY, while our loan
market share in legal entities was 38.6%, down by 0.3pp over the same period, and our loan market share in
individuals stood at 39.4%, down by 0.6pp YoY.
In thousands of GEL
Retail
Retail loans GEL
Retail loans FC
Corporate
Corporate loans GEL
Corporate loans FC
MSME
MSME loans GEL
MSME loans FC
Total loans and advances to customers
Loan yields
Loan yields GEL
Loan yields FC
Retail Loan Yields
Retail loan yields GEL
Retail loan yields FC
Corporate Loan Yields
Corporate loan yields GEL
Corporate loan yields FC
MSME Loan Yields
MSME loan yields GEL
MSME loan yields FC
136
31-Dec-20
31-Dec-19
Change
5,953,687
5,053,203
2,996,854
2,386,750
2,956,833
2,666,453
5,690,749
1,576,778
4,660,473
1,424,309
4,113,971
3,236,164
3,556,084
1,592,836
2,948,279
1,419,804
1,963,248
1,528,475
15,200,520
12,661,955
17.8%
25.6%
10.9%
22.1%
10.7%
27.1%
20.6%
12.2%
28.4%
20.0%
FY’20
10.1%
15.3%
6.7%
11.3%
16.4%
6.6%
8.7%
13.2%
7.1%
10.3%
15.1%
6.3%
FY’19
Change YoY
11.0%
15.7%
7.8%
12.1%
18.0%
7.3%
9.3%
11.6%
8.4%
11.4%
15.4%
7.7%
-0.9 pp
-0.4 pp
-1.1 pp
-0.8 pp
-1.6 pp
-0.7 pp
-0.6 pp
1.6 pp
-1.3 pp
-1.1 pp
-0.3 pp
-1.4 pp
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED Loan Portfolio Quality
Total par 30 increased by 0.9pp YoY and stood at 2.6%, driven by all segments. The increase in the retail and
MSME segments was related to the overall deterioration in the quality of the respective portfolios due to
COVID-19, while the increase in the corporate segment was mainly due to one corporate borrower. However,
the outlook for that client is positive and the exposure is expected to be settled in 1Q 2021.
The NPL ratio increased YoY, as the COVID-19 impact began to materialize and amounted to 4.7% at the
end of 2020, compared to 2.7% at the end of 2019. The increase in the retail segment was mainly due to the
COVID-19 related restructurings offered to our customers on an individual basis, while the increase in the
MSME segment was due to negative impact of COVID-19 on several SME borrowers, which were classified
as NPLs after the monitoring process of the vulnerable borrowers. In addition, the growth in the corporate
segment was mainly due to one corporate borrower, as mentioned above.
Par 30
Retail
Corporate
MSME
Total Loans
31-Dec-20
31-Dec-19
Change YoY
3.4%
1.1%
3.8%
2.6%
2.1%
0.5%
2.8%
1.7%
1.3 pp
0.6 pp
1.0 pp
0.9 pp
Non-performing Loans
31-Dec-20
31-Dec-19
Change YoY
Retail
Corporate
MSME
Total Loans
5.6%
2.5%
6.6%
4.7%
3.0%
1.8%
3.8%
2.7%
2.6 pp
0.7 pp
2.8 pp
2.0 pp
NPL Coverage
31-Dec-20
31-Dec-19
Retail
Corporate
MSME
Total
Exc. Collateral
Incl. Collateral
Exc. Collateral
Incl. Collateral
101.3%
76.4%
68.6%
85.6%
178.5%
230.1%
179.2%
189.1%
97.1%
111.1%
59.7%
91.1%
241.4%
182.9%
173.7%
194.2%
Cost of risk
The total cost of risk for FY 2020 stood at 2.4%, up by 1.7pp. The YoY increase was spread across all segments
and was driven by the extra credit loss allowances booked in 2020 in relation to COVID-19 expected losses.
Cost of Risk
Retail
Corporate
MSME
Total
FY'20*
3.7%
0.6%
3.1%
2.4%
FY'19
Change YoY
1.6%
-0.1%
0.3%
0.7%
2.1 pp
0.7 pp
2.8 pp
1.7 pp
137
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Deposit Portfolio
The total deposits portfolio increased by 25.1% YoY and amounted to GEL 12,572.7 million, while on a con-
stant currency basis the total deposit portfolio increased by 13.8% over the same period. The proportion
of deposits denominated in foreign currency increased by 0.4pp YoY and accounted for 66.3% of total de-
posits, while on a constant currency basis the proportion of deposits denominated in foreign currency de-
creased by 3.0pp YoY and stood at 62.9%.
As of 31 December 2020, our market share in deposits amounted to 37.2%, down by 1.8pp YoY, and our mar-
ket share in deposits to legal entities stood at 34.5%, down by 6.1pp over the same period. Our market share
in deposits to individuals stood at 39.5%, up by 1.6% YoY.
31-Dec-20
31-Dec-19
Change YoY
7,255,020
5,673,917
1,330,942
1,098,681
5,924,078
4,575,236
3,939,501
2,240,287
3,187,319
1,735,746
1,699,214
1,451,573
1,378,207
671,658
706,549
1,188,088
594,388
593,700
12,572,728
10,049,324
27.9%
21.1%
29.5%
23.6%
29.1%
17.1%
16.0%
13.0%
19.0%
25.1%
FY'20
3.6%
6.5%
2.0%
2.9%
5.6%
2.3%
5.5%
8.2%
1.5%
1.0%
1.6%
0.3%
FY'19
Change YoY
3.3%
5.8%
2.0%
2.8%
5.0%
2.3%
4.9%
7.4%
1.7%
0.9%
1.5%
0.3%
0.3 pp
0.7 pp
0.0 pp
0.1 pp
0.6 pp
0.0 pp
0.6 pp
0.8 pp
-0.2 pp
0.1 pp
0.1 pp
0.0 pp
In thousands of GEL
Retail
Retail deposits GEL
Retail deposits FC
Corporate
Corporate deposits GEL
Corporate deposits FC
MSME
MSME deposits GEL
MSME deposits FC
Total Customer Accounts
Deposit rates
Deposit rates GEL
Deposit rates FC
Retail Deposit Yields
Retail deposit rates GEL
Retail deposit rates FC
Corporate Deposit Yields
Corporate deposit rates GEL
Corporate deposit rates FC
MSME Deposit Yields
MSME deposit rates GEL
MSME deposit rates FC
138
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED SEGMENT DEFINITION AND INCOME STATEMENT
Business Segments
The segment definitions are as follows:
Corporate – a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or
which have been granted facilities with more than GEL 5.0 million. Some other business customers may
also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;
Retail – non-business individual customers; all individual customers are included in retail deposits;
MSME – business customers who are not included in the corporate segment; or legal entities which have
been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and
Corporate centre and other operations – comprises the Treasury, other support and back office functions,
and non-banking subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Income Statement by Segments
FY'20 (in thousands of GEL)
Interest income
Interest expense
Net gains from currency swaps
Net transfer pricing
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net insurance premium earned after claims and acquisition
costs
Net gains from derivatives, foreign currency operations and
translation
Gains less Losses from Disposal of Investment Securities
Measured at Fair Value through Other Comprehensive
Income
Other operating income
Share of profit of associates
Retail
MSME
Corporate
Corp.Centre
Total
617,124
335,161
462,383
253,331 1,667,999
(184,990)
-
(59,379)
372,755
214,377
(109,822)
(12,100)
-
(125,599)
197,462
26,405
(10,896)
(203,390)
-
34,455
293,448
57,197
(8,575)
(453,036)
20,950
150,523
(28,232)
16,198
(2,117)
(853,516)
20,950
-
835,433
314,177
(131,410)
104,555
15,509
48,622
14,081
182,767
-
-
-
19,485
19,485
31,561
27,187
51,443
(12,173)
98,018
-
6,901
-
-
429
-
-
(624)
(624)
1,856
11,326
20,512
-
-
-
Other operating non-interest income and insurance profit
38,462
27,616
53,299
18,014
137,391
Credit loss allowance for loans to customers
(201,652)
(100,070)
(29,089)
Credit loss allowance for performance guarantees and
credit related commitments
Credit loss allowance for investments in finance lease
Credit loss allowance for other financial assets
Credit loss allowance for financial assets measured at fair
value through other comprehensive income
-
-
(330,811)
3,238
(241)
(67)
3,546
-
(1,476)
-
-
-
-
-
(8,398)
(8,398)
(5,600)
(6,991)
(14,067)
(875)
(934)
(1,809)
Profit/(loss) before G&A expenses and income taxes
312,403
140,450
363,351
(12,460)
803,744
Losses from modifications of financial instruments
(23,633)
(7,153)
(6,345)
(3,884)
(41,015)
Staff costs
Depreciation and amortization
Provision for liabilities and charges
(110,988)
(48,631)
(35,580)
(48,844)
(244,043)
(45,256)
(11,187)
(4,296)
(7,653)
(68,392)
(2,200)
-
(400)
(106)
(2,706)
Administrative and other operating expenses
(66,987)
(22,186)
(13,649)
(25,660)
(128,482)
Operating expenses
Profit/(loss) before tax
Income tax credit/(expense)
Profit/(loss) for the year
(225,431)
(82,004)
(53,925)
(82,263)
(443,623)
63,339
21,360
51,293
303,081
(98,607)
319,106
3,568
(18,695)
(2,850)
3,383
84,699
54,861
284,386
(101,457)
322,489
139
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CONSOLIDATED FINANCIAL STATEMENTS OF TBC BANK GROUP PLC
Consolidated Balance Sheet
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other comprehensive income
Bonds carried at amortised cost
Net investments in lease
Investment properties
Current income tax prepayment
Deferred income tax asset
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
Investments in associates
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provisions for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Shares held by trust
Share premium
Retained earnings
Group reorganisation reserve
Share based payment reserve
Fair value reserve
Cumulative currency translation reserve
Net assets attributable to owners
Non-controlling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
31-Dec-20
31-Dec-19
1,635,405
1,003,583
50,805
33,605
2,098,506
1,591,829
14,594,274
12,349,399
1,527,268
1,089,801
271,660
68,689
69,888
2,787
171,302
266,960
372,956
53,927
239,523
59,964
4,090
985,293
1,022,684
256,660
72,667
25,695
2,173
133,736
255,712
334,728*
59,693*
167,597
61,558
2,654
22,577,805
18,359,266*
4,486,373
3,593,901
12,572,728
10,049,324
227,432
853
13,088
113,608
1,634
18,888*
1,496,497
1,213,598
25,335
87,842
58,983
672,740
23,128
95,162
59,898
591,035
19,641,871
15,760,176
1,682
(33,413)
848,459
2,281,428
(162,167)
(20,568)
11,158
(2,124)
1,682
(27,516)
848,459
1,961,231*
(162,167)
(17,803)
(6,476)
(6,850)
2,924,455
2,590,560*
11,479
8,530*
2,935,934
2,599,090*
22,577,805
18,359,266*
* Figures calculated due to the changed PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method
in 2Q 2020
140
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED Consolidated Statement of Profit or Loss and Other Comprehensive Income
in thousands of GEL
Interest income
Interest expense
Net gains from currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net insurance premiums earned
Net insurance claims incurred and agents’ commissions
Insurance profit
Net gains from currency derivatives, foreign currency operations and translation
Net (losses)/gains from disposal of investment securities measured at fair value through other
comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Credit loss allowance for loans to customers
(Credit loss allowance)/Credit loss allowance reversal for investments in leases
Credit loss allowance reversal /(Credit loss allowance) for performance guarantees and credit
related commitments
Credit loss allowance for other financial assets
Credit loss allowance for financial assets measured at fair value through other comprehensive
income
Operating income after expected credit losses
Losses from modifications of financial instruments
Staff costs
Depreciation and amortization
Provision for of liabilities and charges
Administrative and other operating expenses
Operating expenses
Profit before tax
Income tax credit/(expense)
Profit for the year
Other comprehensive income/(expense for the year)
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve
Exchange differences on translation to presentation currency
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
Profit is attributable to:
- Shareholders of TBCG
- Non-controlling interest
Profit for the year
Total comprehensive income is attributable to:
- Shareholders of TBCG
- Non-controlling interest
Total comprehensive income for the year
FY'20
FY'19
1,667,999
1,436,843
(853,516)
(663,860)
20,950
835,433
314,177
28,556
801,539
293,431
(131,410)
(106,141)
182,767
53,359
(33,874)
19,485
98,018
(624)
20,512
-
117,906
(330,811)
(8,398)
3,238
(14,067)
(1,809)
187,290
38,199
(19,689)
18,510
101,187
169
18,916
632
120,904
(82,030)
582
(2,156)
(8,098)
(290)
803,744
(41,015)
1,036,251
-
(244,043)
(247,803)
(68,392)
(2,706)
(59,478)
(1,264)
(128,482)
(142,181)
(443,623)
(450,726)
319,106
3,383
322,489
585,525
(45,184)
540,341
17,633
4,707
22,340
344,829
(15,156)
85
(15,071)
525,270
317,752
537,895
4,737
2,446
322,489
540,341
340,092
522,843
4,737
2,427
344,829
525,270
141
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Consolidated Statements of Cash Flows
In thousands of GEL
Cash flows from (used in) operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Insurance and reinsurance received
Insurance claims paid
(Expense)/income from trading in foreign currencies
Other operating income received
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Cash flows from operating activities before changes in operating assets and liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Net investments in leases
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from/(used in) operating activities (as reclassified)
Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income
Proceeds from disposal of investment securities measured at fair value through other
comprehensive income
Proceeds from redemption at maturity of investment securities measured at fair value
through other comprehensive income
Dividends received
Acquisition of subsidiaries, net of cash acquired
Acquisition of bonds carried at amortised cost
Proceeds from redemption of bonds carried at amortised cost
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
Proceeds from disposal of investment properties
Net cash used in investing activities
Cash flows from (used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Redemption of subordinated debt
Acquisition of treasury shares
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Net cash flows from financing activities (as reclassified)
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
FY’20
FY’19
1,462,815
20,950
(839,258)
297,024
(133,385)
86,447
(27,139)
(92,191)
48,402
(238,577)
(134,348)
(46,268)
404,472
(353,975)
(1,059,684)
(2,902)
(41,774)
33,109
(32,294)
1,432,051
115,370
(8,153)
486,220
1,360,296
28,556
(647,427)
282,715
(106,526)
76,101
(21,787)
79,287
44,248
(216,465)
(169,582)
(70,413)
639,003
(22,009)
(2,013,577)
(43,719)
47,128
1,577
(1,938)
272,023
(8,267)
5,816
(1,123,963)
(763,531)
(1,781,816)
287,917
240,603
165,632
1,598,536
694
-
(668,477)
413,038
(164,379)
3,627
13,513
(711,966)
4,036,810
(3,324,230)
(13,251)
-
(25,493)
104,838
-
(1,344)
777,330
80,238
631,822
1,003,583
1,635,405
-
(36,301)
(613,383)
216,871
(120,333)
13,225
13,338
(469,260)
1,819,899
(1,392,897)
(6,453)
(104,079)
(27,516)
1,176,049
(14,296)
(91,928)
1,358,779
71,116
(163,328)
1,166,911
1,003,583
142
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED KEY RATIOS
Average Balances
The average balances included in this document are calculated as the average of the relevant monthly
balances as of each month-end. Balances have been extracted from TBC’s unaudited and consolidated
management accounts, which were prepared from TBC’s accounting records. These were used by the man-
agement for monitoring and control purposes.
Key Ratios
Ratios (based on monthly averages, where applicable)
FY'20
FY'19
Profitability ratios:
ROE1
ROA2
ROE before expected credit loss allowances3
Cost to income4
NIM5
Loan yields6
Deposit rates7
Yields on interest earning assets8
Cost of funding9
Spread10
Asset quality and portfolio concentration:
Cost of risk11
PAR 90 to Gross Loans12
NPLs to Gross Loans13
NPLs coverage exc. collateral14
NPLs coverage with collateral15
Credit loss level to Gross Loans16
Related Party Loans to Gross Loans17
Top 10 Borrowers to Total Portfolio18
Top 20 Borrowers to Total Portfolio19
Capital optimisation:
Net Loans to Deposits plus IFI Funding20
Net Stable Funding Ratio21
Liquidity Coverage Ratio22
Leverage23
CET 1 CAR (Basel III)24
Regulatory Tier 1 CAR (Basel III)25
Regulatory Total 1 CAR (Basel III)26
11.7%
1.6%
24.7%
38.4%
4.7%
10.1%
3.6%
9.5%
4.9%
4.6%
2.4%
1.5%
4.7%
85.6%
189.1%
4.0%
0.0%
7.9%
12.1%
101.2%
126.0%
134.2%
7.7x
10.4%
13.0%
17.1%
22.9%*
3.2%*
26.8%*
39.9%
5.6%
11.0%
3.3%
10.0%
4.7%
5.3%
0.7%
1.1%
2.7%
91.1%
194.2%
2.5%
0.1%
8.3%
12.3%
104.8%
126.7%
110.1%
7.1x**
12.0%
14.6%
19.1%
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method ROE stood at 22.4%,
while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in FY 2019
** Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, Leverage stood at
7.0x as of 31 December 2019
143
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Ratio definitions
1.
Return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total
shareholders’ equity attributable to the PLC’s equity holders for the same period; annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the
same period; annualised where applicable.
3. Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners
excluding all credit loss allowance, but after net modification losses divided by the monthly average of total shareholders
‘equity attributable to the PLC’s equity holders for the same period.
4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period.
(Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where
applicable. Interest-earning assets include investment securities (excluding corporate shares), net investment in finance
lease, net loans, and amounts due from credit institutions.
Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and ad-
vances to customers; annualised where applicable.
6.
7. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annu-
alised where applicable.
8. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annual-
ised where applicable.
9. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where
applicable.
10. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities
and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).
11. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to
customers; annualised where applicable.
12. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided
by the gross loan portfolio for the same period.
13. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined
weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross
loan portfolio for the same period.
14. NPLs coverage ratio exc. collateral equals total credit loss allowance for loans to customers calculated per IFRS 9 divided
by the NPL loans.
15. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral
amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by
the NPL loans.
16. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for
the same period.
17. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
18. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
19. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
20. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from in-
ternational financial institutions.
21. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding
as defined by NBG in line with Basel III guidelines.
22. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
23. Leverage equals total assets to total equity.
24. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the
Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for
TBC Bank stand-alone, based on local standards.
25. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the
Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for
TBC Bank stand-alone, based on local standards.
26. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the
Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for
TBC Bank stand-alone, based on local standards.
Ratio definitions
To calculate the YoY growth without the currency exchange rate effect, we used the US$/GEL exchange rate of 2.8677 as of
31 December 2019. As of 31 December 2020, the US$/GEL exchange rate equalled 3.2766. For P&L items growth calculations
without currency effect, we used the average US$/GEL exchange rate for the following periods: FY 2020 3.1097, FY 2019 2.8192.
144
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020FINANCIAL REVIEW CONTINUED ANNEX 1
Reconciliation of Return on equity (ROE) with ROE before expected credit loss allowances
# Income Statement Highlights
1
2
3
in thousands of GEL
Net interest income
Net fee and commission income
4 Other operating non-interest
income and insurance profit
5 Credit loss allowance
6 Operating profit after
expected credit losses
Losses from modifications
of financial instrument
7.
8. Operating expenses
9.
Profit before tax
Income tax credit/(expense)
10.
11. Profit for the period
12. Profit for the period less
Non-controlling interest
13. Profit before Credit loss
4Q'20
231,325
52,199
3Q'20
211,784
47,499
4Q'19
209,318
54,844
FY'20
835,433
182,767
FY'19
801,539
187,290
38,573
33,913
40,075
137,391
139,414
-79,370
-13,426
224
-351,847
-91,992
242,727
279,770
304,461
803,744
1,036,251
-5,082
-1,763
-
-41,015
-
-127,950
-113,513
-127,124
-443,623
-450,726
109,695
-8,994
100,701
164,494
-11,906
152,588
177,337
-17,313
160,024
319,106
3,383
322,489
585,525
-45,184
540,341
99,371
150,755
159,416
317,752
537,895
allowances less
Non-controlling interest (12 - 5)
178,741
164,181
159,192
669,599
629,887
# in thousands of GEL
4Q'20
3Q'20
4Q'19
FY'20
FY'19
14 Average equity attributable to the
PLC's equity holders
15 Return on equity (ROE) (12÷14)*
16 Return on equity (ROE) before
expected credit loss allowances
(13÷14)*
*annualised where applicable
2,888,145
2,731,868
2,507,930
2,713,030
2,348,165
13.7%
24.6%
22.0%
23.9%
25.2%
11.7%
22.9%
25.2%
24.7%
26.8%
145
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DIRECTORS’ GOVERNANCE STATEMENT
CHAIRMAN’S GOVERNANCE OVERVIEW
Dear shareholders,
As the recently appointed Chairman of the Board, I am pleased to present our corporate governance review
for 2020. This report sets out our approach to governance in practice and the work of the Board in this area
during 2020. Throughout the year, we remained focused on protecting the health and wellbeing of our col-
leagues and other stakeholders, while recognizing the importance of fulfilling the Group’s responsibilities
and duties to shareholders and all other stakeholders.
Our approach is to ensure that our governance structure is both fit for purpose and in line with best practice.
The Board’s primary responsibility is to ensure that the Group applies the highest principles of corporate
governance and that such principles are embedded into the culture and operations of our business. An
overview of the range of matters that the Board considered this year is provided on page 150 and details of
how the Board took into account shareholder and wider stakeholder interests in its discussions and decision
making are set out on page 150-151.
How we have maintained governance across the group in response to pandemic
Throughout the global pandemic, management has been focused on protecting the health and wellbeing
of our workforce. Appropriate protections have been put in place for those staff that had to continue deal-
ing with our customers in person, and arrangements were made to allow other staff to work from home.
The Board monitored these actions and supported management where appropriate. In addition to this, the
Board has reviewed the actions taken by management to support the financial wellbeing of clients, along
with other stakeholders. The Board, supported by the Chief Risk Officer and the Risk Committee, has en-
sured that the Group remained stable both financially and operationally. In addition, the Board has taken the
significant decisions to suspend both variable pay for executives for performance period 2020 and the pay-
ment of dividends to shareholders in relation to the financial year 2019. Both of these actions were planned
so that the Group’s capital adequacy positions could be maintained.
The Board has been unable to meet in person since February 2020 and since then all Board and Board Com-
mittee meetings have been held via video conference. Despite this, the Board has maintained a close dia-
logue throughout this period, through additional calls on issues as they arose. The Board has also remained
in close contact with the executive management of key subsidiaries, with a greater focus on JSC TBC Bank.
146
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Changes to the Board in 2021
Following the publication of certain amendments to the National Bank of Georgia's Corporate Governance
Code (the “NBG Code”) on 9 February 2021, which introduced requirements that, as a regulated entity in
Georgia, JSC TBC Bank was required to adopt, the Board re-confirmed its decision to maintain its “Mirror
Boards” governance structure introduced on 13 August 2019. Under this structure, key aspects of the TBC
Bank Group PLC (“TBC PLC”) Board and the Supervisory Board of its main subsidiary TBC Bank JSC (the
“Bank”) are aligned. The Board continues to hold the view that this structure is the most appropriate ap-
proach to ensure the efficient and effective governance of the Group. Under the structure:
The Board of TBC PLC and the Supervisory Board of the Bank have the same non-executive members;
The Chairman of the TBC PLC Board also serves as the chairman of the Supervisory Board of the Bank;
The Senior Independent Director ("SID") of TBC PLC also serves as the SID of the Supervisory Board of
the Bank; and
The Committee chairs of TBC PLC Board also serve as the equivalent Committee chairs of the Supervi-
sory Board.
The amendments to the NBG Code will also affect the current composition of the Supervisory Board of the
Bank as:
The chairman of the Supervisory Board must be independent; and
The period of time after which the Chairman or a member of the Supervisory Board shall be deemed to
cease being independent has been reduced from 9 years to 7 years. That period should be calculated
from the date of the relevant member's initial appointment to the Supervisory Board.
Following the amendments introduced to the NBG Code, and Board-level discussions relating to certain as-
pects of the Group’s governance (including the Board’s decision to maintain the "Mirror Boards" governance
structure), a number of changes were made to TBC PLC's Board and the Supervisory Board of the Bank.
Nikoloz Enukidze stepped down from his position as Chairman of the Board of TBC PLC and Chairman of
the Supervisory Board on 1 March 2021 and I replaced him in both positions, having relinquished my role as
Senior Independent Director.
Nikoloz Enukidze has also stepped down from the membership of the Remuneration Committee of the
Board TBC PLC and the Supervisory Board of TBC Bank and I have replaced him as a member of the Re-
muneration Committee of the Board and the Supervisory Board. Nikoloz Enukidze continues to serve as a
non-executive Director of the Board of TBC PLC and a member of the Supervisory Board of the Bank.
I have also stepped down from both membership of the Audit Committee and as Chairman of the Risk Com-
mittee of the Board and the Supervisory Board of the Bank. Abhijit Akerkar has been appointed as interim
Risk Committee Chair.
Tsira Kemularia has been appointed as an interim Senior Independent Director for both the TBC PLC Board
and the Supervisory Board of the Bank.
Nicholas Haag stepped down from his role as Chairman of both the Audit Committee of the Board and the
Supervisory Board on 12 February 2021. He continues as a member of the Audit Committee of both TBC PLC
and TBC Bank JSC.
Maria Luisa Cicognani has been appointed as interim chair of the Audit Committee of the Board and the
Supervisory Board of the Bank with immediate effect.
On 28 February 2021 each of Nikoloz Enukidze, Nicholas Dominic Haag and Eric Rajendra notified the Board
that they did not intend to seek re-election at the Annual General Meeting. However, on 16 April 2021 Nikoloz
Enukidze, Nicholas Dominic Haag and Eric Rajendra withdrew their previous notices and confirmed in writ-
ing to the Board that they intend to stand for re-election at the Annual General Meeting. As announced on
16 April 2021, the other non-executive Directors (including myself, Maria Luisa Cicognani, Abhijit Akerkar and
Tsira Kemularia) have determined to continue implementing previously-agreed commitments with the NBG
regarding an orderly and effective succession plan and nominate members of the Board who will meet the
new independence requirements from the NBG, as implemented in the revised NBG Corporate Governance
Code. As such, the majority of the Board does not support the re-appointment of Nikoloz Enukidze, Nicholas
Dominic Haag and Eric Rajendra and expects to recommend that shareholders vote against resolutions in
respect of their re-appointment at the upcoming Annual General Meeting. Further information regarding
the Board’s views concerning the proposed re-election of Nikoloz Enukidze, Nicholas Dominic Haag and
Eric Rajendra will be set out in the Notice of AGM.
147
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In accordance with the UK Corporate Governance Code (the “Code”), it is anticipated that all Directors will
be offering themselves for re-election, or in the case of Mr Akerkar election, as Directors at the forthcoming
Annual General Meeting.
The Board’s Nomination and Governance Committee is undertaking a search process to find candidates
to complement the current range of skills on the Board through the recruitment of additional independent
non-executive Directors. Following the conclusion of the recruitment exercise, the Committee will reconsider
roles and memberships of the Board Committees and make appropriate recommendations to the Board.
How has the Board Remained Effective
The Board developed an extensive training programme during the year, with Directors being made aware
of, and taking part in a number of online seminars. The Secretariat have monitored attendance at these
sessions throughout the year. As normal, a Board effectiveness evaluation has been undertaken again, con-
ducted by the Company Secretary. Full details of the 2020 outcome and the implementation of the 2019 plan
during 2020 are given on pages 151-152, but the Board’s focus in 2021 will remain on refining its strategy and
continuing its focus on risk management.
CORPORATE GOVERNANCE STATEMENT
HOW WE OPERATE
Arne Berggren
Chairman
26 April 2021
Corporate governance framework
The Group’s corporate governance statement provides shareholders with: an explanation of how the Com-
pany has applied the main principles of the UK Corporate Governance Code (“Code”); the Group’s approach
to governance in practice; and the work of the Board and its Committees.
Compliance Statement
As a premium-listed company on the London Stock Exchange, the Company complies fully with the Code.
At the date of this report, the Company has applied the principles and complied with the provisions set out
in the Code issued by the Financial Reporting Council (“FRC”) in full throughout 2020. The Code can be
found on the FRC website www.frc.org.uk.
HOW THE BOARD LEADS THE GROUP
The Board is the principal decision-making body of the Group and is collectively responsible for promot-
ing the Group’s purpose, culture, values and long term success strategy. The Board ensures the delivery of
sustainable value to stakeholders by establishing and overseeing the strategic direction of the Company
and its business. The Board’s role is to provide leadership through effective oversight and review of Group’s
operations. It sets the Group’s risk appetite, monitors operational and financial performance and reporting,
ensures the Group is adequately resourced with effective controls and remuneration policies, and that there
are appropriate succession planning arrangements in place. The Directors are aware of their duties under
section 172 of the Companies Act 2006 and further insight into how the Board takes account of the views
and interests of our stakeholders can be found on pages 150-151.
The Board is led by the Chairman and provides constructive challenge, oversight and advice to ensure the
Company’s success. The Chairman ensures that there is constructive debate in the boardroom in order to
create and maintain an environment where the Board remains open to different viewpoints and ideas.
Moreover, the Chairman takes responsibility to ensure that the Board is updated in a timely manner about
the Company’s performance, to enable it to make proper decisions. The Chairman ensures information ex-
changes between the Board, the Committees and executives. If there is a need for independent advice, the
Board can seek it directly at the Company’s expense.
148
DIRECTORS’ GOVERNANCE STATEMENT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Board operations
During the year the Board met 39 times of which only one of those meetings was in person. As the Board was
unable to meet in person the Board held meetings by video conference and this led to a change in working
pattern. In 2019, the Board had scheduled review meetings and a designated strategy review session, only
meeting on an ad-hoc basis for urgent approvals. This year the Board used the flexibility of video conferenc-
ing to hold not only the regular review meetings but also ad hoc discussions around business development
issues, and “deep dives” into core strategic developments. Further details of the range of topics discussed
and the number of meetings held are on pages 150 and 154 respectively.
There is a formal schedule of matters reserved for the Board’s approval in place to ensure that the Board re-
tains control over key decisions. The matters exclusively reserved for the Board’s approval include, among oth-
er things, approval of the Group’s strategy, long-term objectives, risk appetite, the annual operating and capital
expenditure budgets, changes to the Group’s capital, share buy-backs, major acquisitions and/or mergers,
annual reports and accounts. The full document is available on the website at www.tbcbankgroup.com.
All Board meetings, irrespective of the type of discussion follow a tailored agenda agreed in advance by
the Chairman, Chief Executive Officer and Group Company Secretary. In addition the Board has a detailed
schedule of work which plans the Board’s workload throughout the year, in line with the schedule of matters
reserved for the Board.
The Board recognises the need to prioritise time to focus on material strategic and business matters, while
ensuring monitoring and oversight of all other key matters within its remit.
The Board and Committees rely on the management to raise relevant items for approval. The processes of
agenda setting and reporting to the Board are reviewed as part of the Board performance evaluation.
All Directors are expected to attend each Board meeting and the meetings of Board Committees of which
they are a member.
Board Composition
In accordance with the Code, the majority of the Board are independent non-executive Directors. At the
date of this report, the Board is comprised of a Chairman (Arne Berggren), one executive Director (Vakhtang
Butskhrikidze ) and five independent non-executive Directors Tsira Kemularia (interim Senior Independent
Director), Maria Luisa Cicognani, Nicholas Haag, Abhijit Akerkar and Eric Rajendra. Nikoloz Enukidze, the for-
mer Chairman, is a non-executive Director who is not considered as independent under the Code.
The Board has considered the independence of the Company’s non-executive Directors as against the fac-
tors described in the Code and has determined that all non-executive Directors, apart from Nikoloz Enukid-
ze, are independent.
Each non-executive Director has an ongoing obligation to inform the Board of any circumstances that could
impair their independence.
Details of the individual Directors and their biographies are set out on pages 162 -165.
Division of Responsibilities
There is a clear division of responsibilities between the Chairman, the Chief Executive Officer and the Senior
Independent Director. As Chairman, Arne Berggren is responsible for leading the Board to ensure that the
Board as a whole performs a full and constructive role in the development and determination of the Group’s
strategy and overall commercial objectives. He also oversees the Board’s decision-making processes. The
Chief Executive Officer, Vakhtang Butskhrikidze, is responsible for the Company’s day-to-day management
and has the principal responsibility of running the Group’s business. He is responsible for proposing, de-
veloping and implementing the Group’s strategy and overall commercial objectives, which is done in close
consultation with the Chairman and the Board. In addition, the Board has appointed, in line with the require-
ments of the Code, Tsira Kemularia as interim Senior Independent Director, who provides a sounding board
for the Chairman. This separation of responsibilities between the Chairman and the Chief Executive Officer
ensures that no one individual has unfettered powers of decision-making. The full document detailing the
division of responsibilities between the Chairman, the Chief Executive Officer and the Senior Independent
Director is available on our website at www.tbcbankgroup.com.
149
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 WHAT DID BOARD DISCUSS IN 2020
During the year ended 31 December 2020, the Board considered a wide range of matters, including:
Reviews of the Group’s performance against budget and monitoring of Key Performance Indicators;
Consideration and approval of the 2019 financial statements, including approval of the going concern
basis of preparation and the Group’s viability statement;
Approval of the 2020 interim and quarterly results announcements;
The businesses’ response to the Covid-19 pandemic, including:
• A review of the Group’s risk appetite as a result and an updated stress test;
• An amended rolling budget for the year;
• Cancellation of senior management variable pay for 2020; and
• Cancellation of dividend payments for the financial year 2019.
Changes to the Board including the appointment of a new independent non-executive Director and the
appointment of a new CFO to JSC TBC Bank;
Strategic reviews of the Group including in depth reviews of:
• The Group’s international expansion plans;
• The Group’s corporate and investment banking operations;
• The Group’s Ecosystem businesses and their development;
• The IT transformation strategy;
• The Space business; and
• TBC Insurance.
Review and consideration of the Groups investment to develop a business in Uzbekistan, including ap-
proval of an appropriate business plan and delegation of authority to management.
Approval of various Group wide policies including:
• An environmental policy;
• An operational risk framework and associated IRR Policy;
• The Group’s Code of Conduct;
• A Model Risk Management policy.
A review of the findings of the internally facilitated Board evaluation exercise and the action plans result-
ing there from.
What were the principal decisions made in 2020
The principal decisions made by the Board during 2020, and the impact that these had on various stakehold-
ers are detailed below:
Decision:
2021 Business Plan and Budget
Context
Stakeholder
considerations
Strategic Actions
Supported by the Board
The Business Plan and Budget sets the annual targets and the costs of the necessary resources
to achieve these targets. It is developed in line with the overall strategy of the Group and takes
into account any specific challenges faced by the business. This includes any stakeholder relat-
ed considerations. The Chief Executive Officer, supported by key members of the management
team, presents the Business Plan and Budget for the Board’s challenge and approval. Key senior
management responsible for the key business units attend and present their budget to the Board.
In reviewing the Business Plan and Budget, the Board considered the potential impact that
each operation and project might have on its stakeholders (employees, local communities,
government and regulators, contractors & suppliers, shareholders and customers) and the en-
vironment.
The strategic actions of the Business Plan and Budget supported by the Board to generate
value for stakeholders are:
continued geographic expansion into other jurisdictions in the region;
further system and process enhancements based on the agile system to increase efficiency
and improve control;
wider use of digital banking technology to benefit customers;
continuing high standards of corporate governance and adherence to regulations; and
approval of investment plans, generating new products and businesses that provide addi-
tional employment opportunities, enhanced customer services and supplier opportunities.
150
DIRECTORS’ GOVERNANCE STATEMENT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Impact of these
actions on the long-
term success of the
Company
The Business Plan and Budget creates a balance between current operating performance and
considerations that matter to all stakeholders in the short and long-term such as health & safety,
environmental performance and community relations. In addition a wider range of client prod-
ucts will become available to customers in Georgia and other jurisdictions across the region.
Outcome
In December 2020 the Board discussed and approved the Budget for 2021 and discussed the
main strategic priorities for 2021 to enhance the existing Business Plan.
Decision:
Cancellation of dividend payments and senior management variable pay
Context
In light of the global pandemic and its impact on the Georgian economy, the Board considered
whether it was appropriate either to make dividend payments for the financial year 2019 or pay
senior management annual bonus and share awards under long-term incentive plan (LTIP) for
the 2020 performance period. It concluded that it was not appropriate and that funds should
be retained in the group to strengthen capital positions.
Stakeholder
Considerations
The Board considered that the retention of funds within the Group was a benefit to sharehold-
ers, customers and employees.
Strategic Actions
Supported by the Board
The dividend payments were duly suspended for 2019, and senior management (executive
Directors and top management of JSC TBC Bank) did not receive variable compensation for
performance period 2020.
Impact of these
actions on the long-
term success of the
Company
Cash retained in the business (for more information please see pages 124-126).
Decision:
Investment in Uzbekistan
Context
In support of the Group’s strategy to widen it operations across the region, the Company has
continued to build a business in Uzbekistan.
Stakeholder
Considerations
The Board considers that diversification of the Group’s activities into other jurisdictions in the
region is of benefit to shareholders; will build its customer base and provide modern banking
services for Uzbekistan customers; and provide more career development for existing employ-
ees along with providing further job opportunities in the region.
Strategic Actions
Supported by the Board
Roll out of the Group Space digital banking platform into Uzbekistan, as soon as banking li-
cense awarded.
Impact of these
actions on the long-
term success of the
Company
In April 2020 the Group received its banking license for operations in Uzbekistan, and in Oc-
tober launched its services, centered on the Group’s digital banking platform, Space. By the
end of January 2021 the business had 26,520 users, delivered 12,002 debit cards, gained 1,857
deposit customers and launched its initial lending value proposition. The business operates
around 20 outlets, which are used for customer onboarding and assisted service support. This
supports the initial predictions that the Group could expand its operations into other jurisdic-
tions for the benefit of shareholders, customer and employees.
HOW DOES THE BOARD MONITOR ITS PERFORMANCE
In 2020 the Board undertook an internal evaluation of its performance conducted by the Company Secre-
tary under the supervision of the Corporate Governance and Nomination Committee (CGN). The format fol-
lowed was similar to that used in 2019, and the individual Directors completed a questionnaire seeking their
views on how the Board had operated and how they assessed its performance; and that of the various Board
Committees. Once completed the consolidated questionnaires were considered at three levels: (i) at a CGN
Committee; (ii) between the Chairman of the CGN Committee and the Chairman of the Board; (iii) and at a
full Board meeting. Overall Board and Committee performance was deemed to be satisfactory.
At a meeting in February 2021 the Board agreed an action plan, which included the following items detailed
on the table below:
151
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Action plan following 2020 Board Evaluation
Summary of comments
1. Strategy and business issues
1.1. Continuing focus on further enhancing the strategy.
2. Risk Management and Internal Control
2.1. Existing risk management and internal control processes need to be
widened across group wide business.
Planned Action
Enhance the links between strategy
development roadmap and KPIs associated
with that plan.
Identify a responsible individual within key
business units that will be charged with
implementing the roll out across group wide
businesses.
3. Board effectiveness
3.1. Current demands on Board members are high and meeting load
high despite improvement put in place by Secretariat, further
development of process is needed.
Need to focus Board on key issues.
3.2. Level of challenge needs to be increased at times and clear
understanding of division of responsibilities between the INED and
executive teams needs to be further improved.
Ongoing discussion with INEDs and the
management team.
4. Board Composition, Succession and Skills
4.1. Succession planning needs continued review.
CGN continues to refine the process.
Arising from the items identified in the 2019 review, with relation to increased focus on strategy and succes-
sion planning, the Board as indicated above still considers that more emphasis is needed on these areas.
The review undertaken concluded, however, that Board Committees had over the year become more effec-
tive and better structured.
The review of individual Board Committees highlighted that all committees were effective and performance
had improved throughout 2020. The individual Committee reports all give a summary of their individual
performance plan for the forthcoming year.
Due to the Board restructuring recently undertaken no individual Director’s feedback session have been un-
dertaken, and due to the change in the Chairman announced in February 2021 no review of his performance
has been undertaken.
As required by the Code, during 2021, an externally conducted Board evaluation will be undertaken. The last
externally evaluated review was undertaken by Independent Audit Limited in 2018 (IAL).
HOW DOES THE BOARD MONITOR CULTURE AND ENGAGE WITH STAFF
The Group’s strategic review on pages 82 to 87 details the Group’s policies with regard to ensuring that all
colleagues are supported by the business so that they have satisfying and appropriate careers with the or-
ganization. The Board regularly reviews progress in this area to ensure that progress and processes that are
in place are in line with the Group’s culture. The Board receives frequent updates from the head of Human
Resources. In addition the Board’s Remuneration Committee reviews the pay and benefits structure across
the whole Group to ensure that pay levels are appropriate.
The Board has appointed one non-executive Director to act as an employee ambassador responsible for
staff engagement. During 2020 several review forums were held with staff by Tsira Kemularia, the appointed
Director who fed back the outcome of her discussions to the Board. In 2020, inevitably these discussion had
to be held by video conference, but the process continued throughout the year.
Throughout 2020 the Board has been kept fully informed of management’s response to the COVID-19 pan-
demic and has supported management in decisions to guarantee no job losses as a consequence and with
its plan to facilitate working from home wherever possible.
152
DIRECTORS’ GOVERNANCE STATEMENT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 HOW THE PRINCIPAL RISKS ARE MONITORED AND CONSIDERED BY THE BOARD
The Board has considered an appropriate risk appetite for the Group, and an associated risk management
framework. As explained on page 160, effectiveness of the Group’s risk management framework, practice
and internal control mechanisms, the Risk Committee monitors this on behalf of the Board and reports any
areas of concern.
HOW THE BOARD COMMITTEES SUPPORT THE BOARD
The Board discharges some of its responsibilities through, and is supported by, it’s Committees which pro-
vide oversight and make recommendations on the matters delegated to them by the Board. The Board has
established four principal Board Committees: Corporate Governance and Nomination Committee, Audit
Committee, Risk Committee and Remuneration Committee.
Board Committee membership and attendance at meetings is set out below. Each Committee is led by the
Chair and membership consists solely of non-executive Directors. The Chairs of each Board Committee
provide a report on Committee business at each Board meeting, including the matters being recommended
by a Committee for Board approval. The process for setting a Committee agenda and running a Committee
meeting mirrors that of the Board. Terms of References for each principal Board Committee is available on
our website (www.tbcbankgroup.com).
Membership
Membership of Board Committees as at the 26 April 2021 is as follows:
Audit
Committee
Remuneration
Committee
Corporate Governance
and Nomination Committee
Risk
Committee
Outside Directors
Arne Berggren
Tsira Kemularia (SID)
Maria Luisa Cicognani
Abhijit Akerkar
Nicholas Haag
Nikoloz Enukidze
Eric Rajendra
Member
Chairperson
DIRECTORS
Board and Committee attendance
In 2020, in response to the global pandemic the Board significantly changed how it operated. In prior years
the Board had met for two day review sessions, consisting of both Board and Committees meetings. After
February 2020 the Board was unable to meet in person and operated by video conference call throughout
the rest of that year and in 2021. This has resulted in a change of emphasis for Board meetings, where the
normal review meetings have been supplemented by deep dives on topics of strategic interest, and matters
requiring swift approval have been discussed in short calls.
In line with the Mirror Board structure utilized by the Board, where non-executive Directors of the Company are
also members of the Supervisory Board of the Bank, all meetings are joint meetings of the Company and the
Bank, apart from 29 meetings which were held in relation to actions that needed to be taken by the Bank alone.
153
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Attendance at the various Board meetings in 2020 have been as follows:
Scheduled
review meet-
ings
Meetings held
in response to
COVID-19
Deep Dive on
strategy topics
Board
approval for Financial
statements and Board
changes
Policy approvals
and miscellanous
Investment into
Uzbekistan
5
5
5
5
5
5
5
5
4
4
4
4
4
4
4
4
8
6
8
8
8
8
8
8
11
10
11
11
11
11
11
11
8
8
8
8
8
8
8
8
3
3
3
3
3
3
3
3
2/2
0/0
7/7
4/4
5/5
1/1
Number of meetings (39)
Arne Berggren
Vakhtang Butskhrikidze
Nicholas Haag
Maria Luisa Cicognani
Tsira Kemularia
Nikoloz Enukidze
Eric Rajendra
Abhijit Akerkar (maximum
possible number follow-
ing appointment - 19)
The three calls that Mr Berggren was unable to attend, were prior to his appointment as Chairman, they were
called at short notice and conflicted with his other business engagements.
Attendance at the Board Committee was as follows:
Audit
Committee
Remuneration
Committee
Corporate Governance
and Nomination Committee
Risk
Committee
Number of meetings
Arne Berggren
Nicholas Haag
Maria Luisa Cicognani
Tsira Kemularia
Nikoloz Enukidze
Eric Rajendra
Abhijit Akerkar
N/M – non-member
9
9
9
9
9
N/M
N/M
N/M
11
N/M
11
11
N/M
11
11
N/M
11
N/M
11
N/M
11
11
11
N/M
14
14
14
14
14
N/M
N/M
N/M
Mr Akerkar was not formally a member of any of the Board Committees during 2020, but as part of his induc-
tion process attended most meetings as an observer.
Induction And Training
A formal induction is arranged for newly appointed Directors based on the individual’s needs, skills and
experience. Typically, these included a series of meetings with the Chairman and other Directors and senior
executives, as well as local site visits to provide familiarity with the business. During the year, there was one
new appointment to the Board. The induction process for Abhijit Akerkar included an on-line business in-
troduction, followed by discussions with executives and key business unit managers and an introduction to
the operations, risks, and governance environment of the Group. In addition, Mr Akerkar received training
on his duties as Directors of a listed company, with Baker McKenzie LLP, the Company’s external counsel.
Members of the Board are required to complete a self-assessment process at the end of the year, where the
members of the Board can identify a relevant development programme.
Diversity Policy
The Board recognises the importance of ensuring diversity and sees significant benefits to our business in
having a Board and management team that is drawn from a diverse range of backgrounds, since this brings
the required expertise, cultural diversity and different perspectives to the Board discussions and helps to
improve the quality of decision making.
Detailed information on the Board’s diversity policy can be found in the Corporate Governance and Nomi-
nation Committee report on pages 169-172 and at www.tbcbankgroup.com
154
DIRECTORS’ GOVERNANCE STATEMENT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Directors’ Commitments
The Directors are required to disclose to the Board their external appointments or other significant com-
mitments prior to their appointment. Should these appointments change during their tenure, the Director is
required to disclose those changes and conflicts that might arise. They will then be considered and approved
by the Board.
Each non–executive Director is required to devote such time as is necessary for the effective discharge of
their duties. Whilst the non-executive Directors hold external directorships or other external positions, the
Board believes in all cases they still have sufficient time to devote to their duties as a Director of the Com-
pany and that the other external directorships/positions held provide the Directors with valuable expertise
which enhances their ability to act as a non-executive Director of the Company. No significant changes to
the commitments of the Chairman or non- executive Directors were identified during the year 2020.
Re-election Of Directors
All Directors of the Company will seek re-election at the next AGM and further information regarding the
contribution of each Director to the Board and their re-election will be set out in the Notice of AGM. Bi-
ographical details of the Directors are included on pages 162-165.
REMUNERATION COMMITTEE
Information on the Remuneration Committee is included in the Directors’ Remuneration report on pages
177-213.
ENGAGEMENT WITH SHAREHOLDERS
Effective communication with shareholders is given high priority by the Board. The Chief Executive Officer
and the Chief Financial Officer maintain close engagement with the Company’s major shareholders. During
2020, they proactively engaged with market participants to provide a comprehensive analysis of the impact
of COVID-19 on the Group’s business, participated in quarterly roadshows, one-to-one investor conferences
organized by brokers, and conducted investor calls upon request. Since March 2020, all meetings have been
held virtually due to the pandemic.
The Company has a dedicated investor relations team, which is the first port of call for investors and an-
alysts. The team answers queries in a timely manner and prepares comprehensive IR materials, including
results presentations and annual reports that are available on our IR website: www.tbcbankgroup.com. The
website also contains information about all announcements issued to the LSE.
Moreover, existing shareholders, potential investors and analysts are able to ask questions about the Group
through the Company’s permanent representative in London, who is always available for investor meet-
ings and updates relating to investor relations and international media on behalf of the senior management
team. The Chief Executive Officer, Chairman and Senior Independent Director are also available to discuss
the concerns of shareholders at any point during the year. All Committee chairmen are available to answer
shareholder questions at the Annual General Meeting of the Company or anytime during the year.
Details on our engagement with the shareholders can be found on pages 70-73.
ANNUAL GENERAL MEETING
The last Annual General Meeting (“AGM”) of the Company was held on its registered office at Elder House,
St Georges Business Park, 207 Brooklands Road, Weybridge, Surrey, KT13 0TS, United Kingdom on 10 June
2020. 71.43% of total voting rights were exercised by shareholders. All resolutions put to shareholders were
passed with votes in favour ranging from 85.62% to 100.0% of the votes cast.
The 2021 AGM Notice will be circulated to all the shareholders at least 21 working days before the AGM and
it will also be made available on our investor relations website: www.tbcbankgroup.com. The voting on the
resolutions will be announced via the Regulatory News Service and made available on our investor relations
website www.tbcbankgroup.com.
155
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Directors present their Annual Report together with the audited consolidated accounts for the year
ended 31 December 2020, which can be found on pages 225 to 372.
The Strategic Report on pages 4 to 145 was approved by the Board on 26 April 2021 and signed on its behalf
by Vakhtang Butskhrikidze, the Company’s Chief Executive Officer.
The Management Report together with the Strategic Report on pages 4 to 145 form the Management Re-
port for the purposes of DTR 4.1.5. R.
Other information that is relevant to the Directors’ Report and incorporated by reference into this report can
be located as follows:
Contents
Directors’ Governance Statement
Corporate Governance and Nomination Committee report
Risk Committee report
Audit Committee report
Remuneration Committee report
Viability statement
Going concern statement
Greenhouse gas emissions
Risk management
Material existing and emerging risks
Board of Directors
Employee matters
Environmental matters
Share capital
Future developments in the business
Section 172 Statement
Employee engagement
Stakeholder engagement on key decisions
Disclosures required under Listing Rule 9.8.4:
Details of long-term incentive schemes
Agreements with controlling shareholders
Information on the Group’s financial risk management and its exposure to credit risk,
liquidity risk, interest rate risk and foreign currency risk
Events after reporting period
Page
146
169
173
214
177
159
159
95
114
102
162
78
94
318
20
70
70
70
204
157
336
372
DIRECTORS’ CONFLICTS OF INTERESTS
The Company, in accordance with the requirements of the Companies Act 2006 and the Company’s articles
of association (the “Articles of Association”), requires Directors to declare actual or potential conflicts of in-
terest that could interfere with the interests of the Company. The Directors are required, prior to the Board
meetings, to declare any conflict of interest they may have in relation to the matters under consideration
and, if so, abstain from voting and decision-making, in relation to the matter in question.
Directors have a continuing duty to notify the Chairman and Company Secretary as soon as they become
aware of any potential or actual conflicts.
156
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 DIRECTORS’ INDEMNITIES AND INSURANCE
The Group maintains Directors’ and officers’ liability insurance, which gives appropriate cover for legal ac-
tion brought against its Directors. The Company has also granted indemnities to each of its Directors to the
extent permitted by law. Neither the indemnity nor insurance cover provides cover in the event that a Direc-
tor, officer or Company Secretary is proved to have acted fraudulently or dishonestly. The above referred
liability insurance and indemnities were in force during the course of the financial year ended 31 December
2020 and remain in force as at the date of this report.
POLITICAL DONATIONS
The Group did not make any political donations or incur any political expenditure during 2020.
RELATIONSHIP AGREEMENT
On 31 May 2016, the Company entered into a relationship agreement with certain major shareholders (the
“Relationship Agreement”). The Company understands that those major shareholders no longer control, in
aggregate, 20% or more of the Company’s voting rights, and so the Relationship Agreement is no longer in
full force and effect.
SHARE CAPITAL
As of 26 April 2021, the Company’s issued ordinary share capital comprised 55,155,896 ordinary shares with a
nominal amount of £0.01 each and carrying one vote per ordinary share at general meetings of the Company.
There were no shares held in treasury. The Company has in issue one class of ordinary shares, all of which
are fully paid up, and it does not have preference shares in issue. The rights and obligations attaching to the
Company’s ordinary shares are set out in the Articles of Association. There are no voting restrictions on the
issued ordinary shares and each ordinary share carries one vote.
Details of the movements in share capital during the year are provided in Note 26 to the consolidated finan-
cial statements on page 318 of this Annual Report.
PROFIT AND DIVIDENDS
The profit for the financial year ending 31 December 2020 attributable to the Company’s shareholders, after
taxation, amounts to GEL 317,752,000. The Board is not recommending dividend payment for the financial
year 2020 at the 2021 AGM.
POWERS OF DIRECTORS
The Directors may exercise all powers of the Company subject to applicable laws and regulations and the
Articles of Association.
SPECIAL RIGHTS AND TRANSFER RESTRICTIONS
None of the ordinary shares in the capital of the Company carry special rights with regard to the control of
the Company. There are no specific restrictions on transfers of shares in the Company, which is governed
by its Articles of Association and prevailing legislation, other than:
certain restrictions which may from time to time be imposed by laws or regulations such as those relating
to insider dealing;
pursuant to the Group’s Share Dealing Code, whereby the Directors and designated employees require
approval to deal in the Company’s shares;
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; and
pursuant to the Group’s Senior Management Compensation System, whereby Participants (as defined
therein) may be granted restricted share awards, which vest subject to continuous employment and ma-
lus and clawback provisions over three years from the award date.
157
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 All employees (including Directors) that are deemed by the Company to be insiders have complied with the
Group’s Share Dealing Code. There are no restrictions on exercising voting rights save 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 obliga-
tion 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.
MAJOR SHAREHOLDERS
As at 31 December 2020, the Company had been notified under Rule 5 of the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority (the “DTRs”) of the following interests in its total
voting rights of 3% or more.
As of 31 December 2020
Shareholder
Mamuka Khazaradze
Badri Japaridze
European Bank for Reconstruction and Development
Dunross & Co.
JPMorgan Asset Management
Allan Gray Investment Management
Creation Investments Capital Management
Schroder Investment Management
BlackRock
% of voting rights
# of voting rights
8.64%
6.00%
5.05%
7.42%
4.56%
4.26%
3.22%
3.12%
3.02%
4,763,048
3,308,616
2,786,406
4,093,634
2,513,488
2,346,972
1,773,471
1,721,176
1,665,300
POWERS OF DIRECTORS TO ISSUE AND/OR BUY BACK COMPANY SHARES
The Companies Act 2006 and the Articles of Association determine the powers of Directors, in relation to
share issues and buy backs of shares in the Company. The Directors are authorised to issue and allot shares
subject to approval at a general meeting of shareholders. Such authorities were granted to the Directors by
shareholders at the Annual General Meeting of the Company, held on 14 June 2020, authorising the Direc-
tors to allot ordinary shares in the capital of the Company up to an aggregate nominal value of £183,853.
This authority will apply until the conclusion of the 2020 AGM. Shareholders will be requested to renew
these authorities at the 2021 AGM.
APPOINTMENT / REPLACEMENT OF DIRECTORS AND AMENDMENT OF
ARTICLES OF ASSOCIATION
The appointment and retirement of Directors is governed by the Articles of Association, the Code and the
Companies Act 2016 and related legislation.
Shareholders are authorised to appoint/replace the Directors and make amendments to the Articles of As-
sociation by resolution at a general meeting of the Company with the latter being required to be passed as
a special resolution.
All Directors of the Company will seek re-election at the next AGM. As already mentioned, Abhijit Akerkar was
appointed to the Board as a non-executive Director in 2020 and will stand for election by the shareholders at
the Annual General Meeting. Vakhtang Butskhrikidze has service contract with the Company, which came into
effect on 10 August 2016 and will continue until terminated by either party to such contracts, giving the other
not less than seven months written notice. Biographical details and reasons for the reappointment for the Di-
rectors are given in the Notice of AGM.
158
DIRECTORS’ REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
CHANGE OF CONTROL
There are no significant agreements to which the Company is a party of that take effect, alter or terminate
upon a change of control of the Company. In addition, there are no agreements between the Company and
its employees and the Directors that contain compensation clauses for loss of office or employment that
occurs because of a takeover bid, resulting in a case of change of control.
EMPLOYEE DISCLOSURES
The Company’s disclosures relating to the employee engagement and policies, as well as human rights, are
included in the “Our Colleagues” section on pages 78-87 of this Annual Report.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors, who held office at the date of approval of this Annual Report, confirm that, so far as they are
aware, there is no relevant audit information of which the Group’s auditors are unaware, and that each Direc-
tor has taken all steps that he/she reasonably should have taken as a Director in order to make him/herself
aware of any relevant audit information and to establish that the Company’s statutory auditors are aware of
such information. This confirmation is given and should be interpreted in accordance with the provisions of
section 418 of the Companies Act 2006.
GOING CONCERN STATEMENT
The Board has fully reviewed the available information pertaining to the principal risks, strategy, financial
health, liquidity and solvency of the Group, and determined that the Group’s business remains a going con-
cern. The Directors have not identified any material uncertainties that could threaten the going concern
assumption and have a reasonable expectation that the Company and the Group have adequate resources
to remain operational and solvent for the foreseeable future (which is, for this purpose, a period of 12 months
from the date of approval of these financial statements).
In reaching this assessment, the Directors have specifically considered the implications of the COVID-19
pandemic upon the Group’s performance, projected funding and capital position, and they have also taken
into account the impact of further stress scenarios. Accordingly, the accompanying financial statements are
prepared in line with the going concern basis of accounting.
VIABILITY STATEMENT
In compliance with the Code, the Directors assessed the prospects of the Group and its viability over a
three-year period beginning on 1 January 2021. The Directors determined the three-year period ending on 1
January 2024 to be appropriate, as it is consistent with the Group’s planning cycle, covering financial fore-
casts and the strategic considerations of the Group. While assessing the viability of the Group and its oper-
ations, the Directors carried out a robust and thorough assessment of the Group’s risk profile, including ma-
terial existing and emerging risks that could cause a deviation in the Group’s financial condition, operations
and prospects from the expectations over the period of assessment. The Directors specifically assessed the
impact of the COVID-19 pandemic on the Group’s viability and concluded that its potential negative effects
are sufficiently addressed. As part of their strategic planning, the Directors looked beyond this period and
took into consideration, as far as possible, information from a variety of sources relating to local, regional
and other, broader macro-economic, political, technological, social and environmental changes that could
impact the Group’s business and development. At this point, the Directors have no reason to believe that the
Group will not stay viable over the longer-term.
In addition, the Directors analyzed the Group’s ability to meet all regulatory requirements. The Directors’
assessment considered all of the principal and emerging risks of the Group and the effectiveness of current
and proposed mitigating actions. The key areas of focus were:
the impact of the COVID-19 pandemic;
the risk of economic and political instability and its impact on the Group’s future performance;
the risk of not meeting regulatory requirements, with a key focus on minimum capital adequacy;
159
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
foreign exchange rate risk, which is significant due to the high dollarization of the Group’s portfolio; and
the risk of decreasing net interest income and net interest margin as a result of new regulations, increased
competition and changing funding structure.
A summary of all of the material existing and emerging risks to which the Group is exposed and the mitigat-
ing actions taken by the Group are set out on pages 102 to 113.
The Group’s strategic plans
While reviewing and analysing the Group’s strategic plans, the Directors assessed all potential risks related to
the strategic plans and the achievement of the Group’s strategic objective, and ensured that those risks were
properly managed. Considering each in the context of the COVID-19 pandemic, the key focus areas were:
the current business position and future prospects of the Group;
the capital, funding and liquidity profile of the Group; and
the availability and efficient use of respective human and technical resources.
Effectiveness of the Group’s risk management framework, practice and internal control mechanisms
The Directors ensure that the Group’s governance structure enables adequate oversight and accountability,
as well as a clear segregation of duties including in relation to the financial reporting process. The involve-
ment of all governance levels in risk management, the clear segregation of authority, and effective com-
munications between different entities facilitate clarity regarding the Group’s strategic and risk objectives,
adherence to the established risk appetite, risk budget and sound risk management. The centralised ERM
function ensures effective development, communication and implementation of the risk strategy and risk
appetite across the Group. The Directors have determined that the Group’s risk management framework
is adequate for managing the principal and emerging risks set out in the Annual Report and reducing their
likelihood and impact, wherever possible. Having reviewed and analysed the information presented in this
Annual Report, the Directors can confirm that they have a reasonable expectation that the Group will remain
viable over the next three years up to 1 January 2024, and that the Group will be able to continue its opera-
tions and meet its liabilities as they fall due over the three-year period from 1 January 2021 to 1 January 2024.
Stress testing
In 2020, the Bank enhanced its regular stress-testing framework and performed a number of additional
stress tests as part of its response to the COVID-19 pandemic. The primary purpose of the stress testing was
to assess the vulnerability of the Bank’s capital adequacy and portfolio quality to different macro scenarios.
The stress scenarios covered the negative effects of the prolonged COVID-19 pandemic as a result of the
slower than expected vaccine roll out, which encompasses a longer period of uncertainty. The assumptions
included: further GEL depreciation, a slower recovery of GDP and sectoral growth in Georgia, a further in-
crease in unemployment, and significantly unfavorable changes in real estate and commodity prices, in-
terest rates and loan and deposit portfolio developments. The results of the stress test show that the Bank
remains viable and is able to meet the updated capital regulatory requirements. See pages 124-126 summa-
rizing countercyclical measures introduced by the NBG in relation to the capital adequacy requirements.
In addition, as part of the Recovery Plan development, the management also performed a reverse test ex-
ercise, to identify potential extreme conditions that would make our business model nonviable. Examples
include far more severe assumptions on GDP growth, GEL depreciation, unemployment, remittances and
real estate prices.
Given that the Directors consider the stress scenarios and the associated results to be appropriate, no ur-
gent mitigation has therefore been required. The Bank will continue to use stress-testing exercises as one
of the key tools in its risk management framework.
DIRECTORS’ RESPONSIBILITIES
The following statement, which should be read together with the Auditors’ report set out on pages 225-372,
is required by the Companies Act 2006 (the “Act”).
The Directors are required to prepare the Company’s and the Group’s financial statements for each financial
year. Under the Act, the Group’s financial statements shall be prepared in accordance with the International
160
DIRECTORS’ REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Financial Reporting Standards (the “IFRS”) as adopted by the European Union, and the Directors have elect-
ed to prepare the Company’s financial statements on the same basis.
The financial statements are required by the Act and the IFRS to present fairly the financial position and
performance of the Company and the Group for that period. The Directors must not approve the financial
statements, unless they are satisfied that they give a true and fair view of the state of affairs and the profit or
loss of the Company and the Group for that period.
The Directors consider that in preparing the financial statements they have used appropriate accounting
policies, supported by reasonable judgments and estimates, and that all accounting standards which they
consider to be applicable have been followed. The Directors also believe that the financial statements have
been prepared on the going concern basis. Please see further the “Going concern statement” on page 159
of this Annual Report.
In addition, the Group has an effective internal control system in place in order to ensure accurate and
reliable financial reporting. The Group has a well-defined framework of accountability and delegation of
authority, as well as policies and procedures that include financial planning and reporting; preparation of
monthly management accounts; project governance; information security; and review of the disclosures
within the annual report and accounts from the respective leads, to appropriately disclose all relevant devel-
opments within the Group in the year and to meet the requirements of a true and fair presentation.
The Directors have a responsibility that the Company and the Group keep accounting records, which dis-
close with reasonable accuracy the financial position of the Company and the Group and enable the Direc-
tors to ensure that the accounts comply with the Act.
The Directors are also responsible for safeguarding the assets of the Company and the Group and for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, the Directors are responsible for the maintenance and integrity of the Company’s website. Leg-
islation in the UK, governing the preparation and dissemination of financial statements, may differ from
legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors, whose names and functions are listed on pages 162 to 165 of this Annual Report, con-
firms that to the best of their knowledge:
the Group’s financial statements, which have been prepared in accordance with the IFRS standards, give
a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
the Strategic Report and Director’s Report contained in this Annual Report include a fair review of the
development and performance of the business and the position of the Company and the Group, together
with a description of the principal risks and uncertainties that they face; and
the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable, and
provide the information necessary for the shareholders to assess the Company’s position and perfor-
mance, business and strategy.
This responsibility statement was approved by the Board and is signed on its behalf by:
Arne Berggren
Chairman
26 April 2021
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
BOARD BIOGRAPHIES
ARNE BERGGREN
Chairman
TSIRA
KEMULARIA
Senior Independent
Non-Executive Director
162
In March, 2021 Arne Berggren, was appointed as the Chairman of the Board and
Chairman of the Supervisory Board.
Mr Berggren has studied at a number of renowned academic institutions such
as the Swedish Institute of Management, New York University Graduate School
of Business, University of Geneva, University of Amsterdam and the University of
Uppsala.
Arne Berggren currently serves as a member of the board of Bank of Cyprus and
Piraeus Bank. Prior to his current roles, Mr Berggren served as a board member
of Turkish asset management company, LBT Varlik Yonetim and Slovenian bank
asset management company, DUBT Ltd. He also has held a number of senior
leadership and advisory roles at prominent financial intuitions including the IMF,
World Bank, Swedbank, Carnegie Investment Bank AB and the Swedish Ministry
of Finance and Bank Support Authority. During the Swedish banking crisis in 1991-
1993, Mr Berggren developed a strategic framework and a process for handling
systemic banking crises and introduced a more effective tool for restructuring and
portfolio management of complex NPLs. During the Asian crisis he assisted FRA
in Thailand and FSC/KAMCO in Korea to handle problem assets.
Mr Berggren was appointed to the Bank’s Supervisory Board in July 2019 and to
the Board as an independent non-executive Director in August 2019.
In March, 2021, Tsira Kemularia was elected as an interim Senior Independent Di-
rector for both the Board and the Supervisory Board. She continues her current
role as chair of Corporate Governance and Nomination Committee.
Tsira Kemularia graduated from the Louisiana State University with a degree in
International Trade and Finance & Economics in 1999. Ms Kemularia has 21 years of
international experience in financial services and risk management.
From 1999 to 2005, she held various market risk management roles both In Dynegy
Inc. in USA and UK and at Shell International Trading & Shipping Ltd (STASCO) in
London. From 2005 to 2008, she was Manager, M&A and Commercial Finance, in
Group Treasury and Corporate Finance, at Shell International. From 2008 to 2011,
she served as a Commercial Finance Manager, M&A in Group Treasury & Cor-
porate finance, at Shell Exploration and Production Services (B.V) in Moscow, RF.
Thereafter, she served as Finance Manager and a Country Controller at Shell West-
ern Supply and Trading LTD in Barbados, West Indies from 2011 to 2016. From 2016
to 2019, Ms Kemularia was the Head of Group Pensions Strategy and Standards
at Shell International Ltd based in London. Since 2019, Ms. Kemularia is responsi-
ble for managing Internal Audit of Shell’s global Trading and Supply organization,
which is the world’s biggest commodity trading and supply business.
From 2006 to 2010, Ms Kemularia was a a board member of the British- Georgian
Society. She was a chairwoman of the Georgian Community in the UK from 2004-
2009. In 2011, she joined the board of Shell Western Supply and Trading Ltd. From
2016 to 2018 she served as a board member of British Gas General Partner Ltd and
since 2016 she is a company nominated Trustee of the British Gas Trustee Solu-
tions Ltd, a pension fund managed by Shell Group Treasury as a result of British
Gas acquisition by Shell. Tsira Kemularia is a member of the Institute of Directors
in London, UK, and is currently a pursuing chartered director programme.
Ms Kemularia was appointed to the Board as an independent non-executive Di-
rector of TBC Bank Group PLC and as a member of the Supervisory Board of JSC
TBC Bank in September 2018. She also serves as a Board’s designated employee
ambassador responsible for staff engagement.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In February, 2021 in addition to her current role as the Chairman of Remuneration
Committee, Maria Luisa Cicognani has been appointed as the interim chair of the
Audit Committee of the Board and the Supervisory Board.
Maria Luisa Cicognani graduated from Bocconi University in 1987 with a degree
in Business Administration. She holds a master degree from the Int’l University of
Japan in Japanese Economy and Business.
Ms Cicognani has extensive experience in the field of banking, financial institu-
tions and corporate governance. She worked at the European Bank for Recon-
struction and Development (London, UK) between 1993 and 2005. Subsequently,
she was a director of Financial Institutions at Merrill Lynch and Head of Financial
Institutions at Renaissance Capital in London and Moscow as well as a Manag-
ing Director of Mediobanca (London Branch). During 2014-2016, she served as a
non-executive member of the board at Azimut Global Counseling Srl (Italy) and
Azimut International Holding SA (Luxemburg). She has been Chairperson of Mo-
neta Money Bank (listed on the Prague Stock Exchange) and NED of Arafa Holding
(listed in Cairo Stock Exchange), and until recently member of the Board of UBI
Banca (Italy) including as member of the Risk and of the Control Committees. She
is currently Chairperson of Mobius Investment Trust, listed on LSE.
Ms Cicognani was appointed to the Board as an independent non-executive Di-
rector of TBC Bank Group PLC and as a member of the Supervisory Board of JSC
TBC Bank in September 2018. Maria Luisa Cicognani has the recent and relevant
financial experience required by the UK Corporate Governance Code to fulfil her
responsibilities as a designated financial expert on the Audit Committee of TBC
Bank Group PLC.
In March, 2021 Abhijit Akerkar was appointed as an interim Risk Committee Chair.
Abhijit Akerkar graduated from the University of Pune, India with a degree in engi-
neering. He holds an MBA from London Business School.
Mr Akerkar is an influential thought leader in Artificial Intelligence, in banking and
has 25 years of cross-disciplinary global experience operating at a strategic level
at the forefront of technology. He has gained advisory experience at McKinsey by
engaging with leaders in taking strategic, operational, organisational, and invest-
ment decisions.
During 1993 - 2003, Abhijit held various management positions in Malaysia and
India. He served at Maybank, the largest banking group in Malaysia, to digitally
transform mortgage and trade finance. From 2003 to 2007, as the Director of Busi-
ness Process Services in HCL Technologies, he launched a new line of business
working directly with the Founder Chairman and the board. As an Associate Part-
ner & Service Line Leader in Mckinsey & Co, between 2008-2016, Mr Akerkar was
responsible for strategic and operational projects. He served companies around
the world at the board and executive-committee levels across a diverse set of in-
dustries on corporate strategy, digital ventures, organisational restructuring, regu-
latory strategy, sustainability, and M&A value enhancement.
Most recently, until his appointment in July 2020, he was the Head of Applied
Sciences Business Integration in the Group Transformation programme at Lloyds
Banking Group. To gain efficiency, capital optimisation and growth across Retail,
Commercial, and Insurance, he drove safe scaling and adoption of machine in-
telligence, aligned ways of working, and conquered the last mile by embedding
analytics into decision-making processes.
Mr Akerkar has joined the Board of TBC Bank Group PLC as an independent
non-executive Director and as a member of supervisory board of JSC TBC Bank
in July, 2020.
163
MARIA
LUISA CICOGNANI
Independent
Non-Executive Director
ABHIJIT
AKERKAR
Independent
Non-Executive Director
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Nicholas Haag earned an M.A. from the University of Oxford with a degree in Mod-
ern Studies (Geography) in 1980.
Mr Haag has 40 years of working experience in the financial services industry, with
a significant emphasis on equity capital markets, corporate finance and technolo-
gy banking. From 1980 to 1999 he held various capital markets and project finance
roles at Barclays and Paribas Capital Markets. Between 1999 and 2001 he served
at ING Barings as a managing director and global head of technology banking
group. From 2001 to 2007 he served at ABN AMRO (London) as the global head
of technology banking, member of Global TMT Management Committee, senior
managing director and member of the Senior Credit Committee; and from 2008
to 2012 he held positions of managing director, head of London equity capital mar-
kets and member of the Global Equities Origination Management Committee at
the the Royal Bank of Scotland.
Since 2012, he was a senior independent adviser to the chairman of the manage-
ment board and, from 2013 until November 2016, a member of the supervisory
board of Credit Bank of Moscow. He also serves as a Non-Executive Chairman of
Bayport Management Limited (pan-African and Latin American consumer lender)
and since 2016 as a director of AS Citadele Banka in Riga. From 2012, he has acted
as sole director of his own consulting company, Nicdom Limited.
Mr Haag was appointed to the Bank’s Supervisory Board in 2013 and to the Board as
an independent non-executive Director in May 2016. Nicholas Haag has the recent
and relevant financial experience required by the UK Corporate Governance Code
to fulfil his responsibilities as a designated financial expert on the Audit Committee
of TBC Bank Group PLC. Until February, 2021 he held the position of the Senior Inde-
pendent Director of the Board and the Chair of the Audit Committee.
Nikoloz Enukidze graduated from Tbilisi State University with a degree in physics
in 1993 and obtained an MBA from the University of Maryland in 1996.
In 2006 – 2010 Nikoloz Enukidze served as the Chairman (and prior to that as
Vice-Chairman) of the Supervisory Board of Bank of Georgia and was one of the
key people leading the bank in its successful IPO on the London Stock Exchange,
the first ever IPO in London from the Caucasus region. He also serves as a mem-
ber of the board of Yelo Bank in Azerbaijan. Prior to his roles at Bank of Georgia,
Nikoloz worked at ABN AMRO Corporate Finance in Moscow and London, Con-
corde Capital in Kyiv and Global One Communications in Reston, Virginia.
Nikoloz Enukidze served as the Chairman of TBC Bank Group PLC and JSC TBC
Bank since July 2019 and August 2019 respectively, until his resignation in March,
2021. Previous to that, Nikoloz was appointed as the independent member of the
Supervisory Board of JSC TBC Bank in 2013 and as Senior Independent Director
of the Board in 2016.
NICHOLAS DOMINIC
HAAG
Independent
Non-Executive Director
NIKOLOZ
ENUKIDZE
Non-Executive Director
164
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020BOARD BIOGRAPHIES CONTINUED Eric Rajendra graduated from Brandeis University, earned his M.A.L.D. at The
Fletcher School in 1982 (Tufts University, in cooperation with Harvard University)
and conducted postgraduate research at INSEAD Business School in the areas of
financial markets and institutions.
Mr. Rajendra is also a graduate of the Australian Institute of Company Directors
and was formerly an Adjunct Professor of Strategy at INSEAD. During 2005-2014,
he held the position of Senior Advisor to the IFC and served as a board director or
consulting adviser on selected emerging markets financial institutions where the
World Bank Group had an equity interest, as well as leading strategic initiatives for
the firm. Prior to joining the IFC, he was a Vice President at Capgemini (Paris HQ)
and a Vice President at Electronic Data Systems (Plano, Texas); in both institutions,
he was a key leader of the financial services practice.
During 2006-2014, he was a member of the Board of Directors of Locko Bank,
where he was also the chairman of the Audit and Risk Committee. From 2010 to
2012, he was a member of the Board of Directors at Orient Express Bank and earlier
was a member of the Board of Directors of ACLEDA Bank in Cambodia. He started
his career as a commercial and investment banker at JP Morgan Chase Bank in
1982 and later became a partner at McKinsey & Company based in various offices
in North America, Europe and Asia. Mr. Rajendra was first appointed to the Bank’s
Supervisory Board in 2010 and to the Board as an independent non-executive Di-
rector in May 2016.
Vakhtang Butskhrikidze joined TBC Bank as a Senior Manager of the Credit De-
partment in 1993 and was elected as Deputy Chairman of the Management Board
in 1994. He became Chairman of the Management Board in 1996. Since 1998, he
has held the position of CEO of TBC Bank and has headed a number of TBC’s
committees.
Mr Butskhrikidze was appointed as a CEO of the Company in May 2016. He also
served as a member of the Supervisory Board from September 2016 till April 2018.
He is also a member of the supervisory board of the Association of Banks of Geor-
gia and is chairman of the financial committee of the Business Association of
Georgia. In 2016, Mr Butskhrikidze joined the Visa Central & Eastern Europe, Mid-
dle East and Africa (CEMEA) Business Council.
Mr Butskhrikidze has been honoured with several prestigious awards, including
“Best Businessman of the Year” award by Georgian Times Magazine and in 2001,
“Best Banker 2011” by GUAM – Organization for Democracy and Economic De-
velopment award, CEO of the Year 2014 in Central and Eastern Europe and the
CIS by EMEA Finance magazine. In March 2019 he won the Special Award for Re-
sponsible Capitalism in Adversity from the prestigious FIRST organisation - a mul-
tidisciplinary international affairs organization, which aims to enhance dialogue
between leaders in industry, finance and government.
Mr Butskhrikidze obtained an MBA from the European School of Management in
Tbilisi in 2001. He graduated from Tbilisi State University in 1992 with a degree in
Economics and holds postgraduate qualifications from the Institute of Economics,
Academy of Sciences of Georgia.
ERIC
RAJENDRA
Independent
Non-Executive Director
VAKHTANG
BUTSKHRIKIDZE
CEO
165
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 THE BANK’S MANAGEMENT BOARD BIOGRAPHIES
(EXCEPT FOR CEO’S BIOGRAPHY, WHICH IS PRESENTED ON PAGE 165)
Giorgi Megrelishvili joined TBC Bank as a Deputy CFO starting from March 2020.
Mr Megrelishvili became member of JSC TBC Bank’s Management Board in Oc-
tober 2020, occupying the position of a Deputy CEO/CFO of the Bank.
Before joining TBC Bank, Giorgi was Director, Head of Capital Risk and Stress
Testing at Natwest Markets N.V. in Amsterdam, Netherlands. Prior to that, Mr Me-
grelishvili held various senior positions at Barclays Bank in London between 2008
and 2019. From 2008 to 2010, he was part of MBA Global Leaders Programme
with rotations as a Head of Strategic Planning for Barclaycard UK and as an As-
sociate Director for Barclays Corporate International Credit Risk, Business Sup-
port & Recoveries. From 2010 to 2014 he worked at Barclays Treasury as a Vice
President of Capital Management and Later as a Director, Head of Internal Large
Exposure. From 2014 to 2016 he served as a Director, Head of Central Planning
at Barclays Finance. From 2016 to 2019 Mr Megrelishvili was Barclays Bank PLC
Solo Capital and Leverage Management Lead at Barclays International Treasury.
In his earlier career, starting from 1998 to 2007, Mr Megrelishvli held various se-
nior managerial positions including CFO of several Georgian organisations.
Mr Megrelishvili obtained an MBA from the University of Cambridge Judge
Business School in 2008 and graduated with honours. He completed the under-
graduate degree at European School of Management, ESM-Tbilisi with a degree
in Business Administrations.
Following the structural changes in management board, starting from January
2021, George assumed responsibility for Wealth Management business and TBC
Leasing.
George joined TBC Bank in 2014 as Deputy CEO in charge of Risk Management.
Following acquisition of Bank Republic and creation of Corporate and Invest-
ment Banking (CIB) unit at the Bank in November 2016, George overtook the re-
sponsibility for the CIB. George has more than 15 years of experience in financial
services.
Prior to joining TBC Bank, George worked for Barclays Investment Bank, where
he held the position of vice president in the Financial Institutions Group (FIG),
EMEA since June 2011. From September 2009 he was an associate director in
Barclays debt finance and restructuring teams. During his career with Barclays in
London, George worked on and executed multiple M&A, debt and capital mar-
kets transactions with European financial institutions.
In his earlier career in Georgia, George held various managerial positions at
ALDAGI insurance company during 2000- 2007, where he also served as chief
executive officer. George graduated from the London Business School with an
MBA degree (2009). He also holds Master of Laws degree (LL.M) in International
Commercial Law from the University of Nottingham (2002) and graduate diplo-
ma in Law from Tbilisi State University (2000).
GIORGI
MEGRELISHVILI
Deputy CEO, Chief
Financial Officer
GEORGE
TKHELIDZE
Deputy CEO, Corporate
and Investment Banking
166
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Following the structural changes in the management board, starting from Jan-
uary 2021, Nikoloz has been appointed as the chairman of TBC UZ and Payme
and transferred his duties as lead of MSME Banking to Tornike Gogichaishvili.
Nikoloz remains a Deputy CEO of the Bank and continues to lead marketing, pay-
ments and Space as well as assumed responsibility for international expansion.
Nikoloz joined TBC Bank in 2014 as a Deputy CEO in charge of Microbanking and
CEO of Bank Constanta. After the merger with Bank Constanta in 2015, he be-
came lead of Marketing and MSME banking. In addition, since 2018 Nikoloz has
been leading the digital banking platform Space. In 2020 his duties were further
expanded to include the payments business.
Nikoloz has more than fifteen years of experience in the banking industry which
includes five years at UniCredit Group in Austria, Turkey and Kazakhstan. Imme-
diately before joining TBC Bank in 2014, Nikoloz was managing director at Kaspi
Bank, a leading retail bank in Kazakhstan.
Earlier in his career, he served as head of the retail banking division of Bank Re-
public Georgia, Société Générale Group, and also held several positions at Bank
of Georgia between 2003 and 2006. He has expertise in post-acquisition inte-
gration and restructuring, as well as retail and SME banking. Between 2008 and
2010, Nikoloz held the position of senior sales support expert at the CEE retail
division of Bank Austria, UniCredit Group, responsible for Turkey, Kazakhstan,
Ukraine and Serbia. Between 2010 and 2013, he was head of the retail division of
ATF Bank, UniCredit Group in Kazakhstan.
Nikoloz obtained his MBA degree from IE Business School in 2007. He also holds
an MSc degree in International Economics from the Georgian Technical Univer-
sity and completed BBA studies at Ruhr University Bochum in Germany and the
Caucasus School of Business.
Following the structural changes in the management board, starting from Janu-
ary 2021, in addition to his current responsibilities, Tornike assumed the duties of
the lead of MSME banking business from Nikoloz Kurdiani.
Tornike joined TBC Bank in 2018 as Chief Operating Officer and deputy CEO
following 20 years of financial services and operations management experience.
In 2020, Tornike was appointed to lead the retail banking business of the Bank.
Prior to joining TBC, he has served as a Deputy CEO, Chief Operation Officer at
Bank of Georgia since 2016. Between 2010 and 2016 Tornike served as director
of operations’ department at Bank of Georgia. He also served as head of interna-
tional banking at Bank of Georgia Group. Between 2008-2010 Tornike held the
position of CFO at BG Bank Ukraine (the subsidiary of Bank of Georgia).
Between 2006 and 2008 he held the position of CEO at Insurance Company
Aldagi. He also served as chief financial officer of UEDC PA consulting and held
various managerial positions at BCI Insurance Company from 1998 to 2004.
Tornike graduated from the Faculty of Law at Tbilisi State University and holds
an MBA from Caucasus School of Business and an executive diploma from Said
Business School, Oxford.
NIKOLOZ
KURDIANI
Deputy CEO, MSME Banking,
Marketing, Payments and Space
TORNIKE
GOGICHAISHVILI
Deputy CEO, Retail Banking
167
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Nino joined TBC Bank in 2000 as a manager in the planning and control depart-
ment and became head of that department in 2002.
Between 2004 and 2005, she acted as head of the sales department and re-
tail bank coordinator. In 2006 Nino was appointed as a deputy CEO and was in
charge of retail banking until 2008. In addition, from 2008 to 2016 she assumed
responsibility for MSME banking. Between 2016 and 2020 she served as a lead of
retail banking. In 2020, Nino was appointed as the Chief Risk Officer of the Bank.
Between 2006 and 2008, Nino was the chairman of the supervisory board of
UFC. During 2011-2015 she also held a position of a member of the supervisory
board of Bank Constanta until its full merger with TBC Bank. During 2011- 2016,
Nino has been a member of the supervisory board of TBC Kredit. During 2016-
2020, Nino served as a member of the supervisory board of TBC Pay.
In her earlier career, she held the positions of credit account manager, credit offi-
cer, financial analyst (financial department) and head of the financial analysis and
forecasting department at JSC TbilCom Bank between 1995 and 2000. Between
1998 and 2000, she also held the position of accountant at the Barents Group.
Nino graduated from Tbilisi State University in 1996 with a degree in Economics
and obtained an MBA degree from the European School of Management in Tbilisi.
NINO MASURASHVILI
Deputy CEO,
Chief Risk Officer
168
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020THE BANK’S MANAGEMENT BOARD BIOGRAPHIES CONTINUED(EXCEPT FOR CEO’S BIOGRAPHY, WHICH IS PRESENTED ON PAGE 165) CORPORATE GOVERNANCE & NOMINIATION COMMITTE REPORT
CHAIRPERSON’S LETTER
Dear Shareholders,
I am pleased to introduce the Corporate Governance and Nomination Committee report for 2020.
The key task of the Committee during 2020 was succession planning across the Group. The benefits of
maintaining effective succession planning policies were apparent to us this year, following the resignation
of our Chief Financial Officer. The Committee was able to recommend Giorgi Megrelishvili (previously dep-
uty CFO) to be appointed as successor from a list that included several internal senior management nomi-
nees, alongside external candidates. Also, in January 2020, the committee recommended Nino Masurashvili,
deputy CEO (previously head of retail banking) to be appointed as Chief Risk Officer (CRO) following the
departure of the previous CRO, David Chkonia, at the end of his contractual term. Nino Masurashvili has
been with the Bank for more than 20 years and understands business extremely well which is critical for the
CRO role.
Following a review of skills currently represented by board members, the Committee, at the request of the
Board, undertook a search to recruit a non-executive Director who could bring additional expertise to the
Board in the fields of Fintech and digital banking. The Committee engaged with its shareholders, and ex-
plored its own wide range of contacts, to identify suitable candidates. As a consequence the Board appoint-
ed Mr Abhijit Akerkar as an independent non-executive Director on 27 July 2020.
The Committee believes that diversity of gender, ethnicity and personal strengths and social backgrounds
is an essential element in maintaining a competitive advantage and effective governance, both at the Board
level as well as at the senior management level. At the same time the Board strongly believes that all ap-
pointments should be based on merit against objective criteria in the context of the skills and experience
required. The Committee will consider candidates in regard to the benefits of diversity when identifying
suitable candidates for appointment to the Board.
The Committee notes the recommendations of the Hampton Alexander review and makes a firm commit-
ment that by the end of 2021 the Company will meet the gender diversity target set in that report of 33%
female representation at Board level.
I am particularly pleased to report that there are a number of talented women in key positions, who report di-
rectly to the CEO and other members of the management board within the Group. As at 31 December 2020,
14% of Group’s top management and 33% of Group’s middle management roles were performed by women.
Across the Group 64% of the workforce are female.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The Board is currently in line with Parker Review Committee Report recommendations into the Ethnic Diver-
sity of UK Boards, as two members of the Board represent ethnically diverse backgrounds.
The Committee also supervised the annual board evaluation exercise, which was conducted by the Compa-
ny Secretary during the year. The results of the evaluation are reported in the individual Committee Reports,
by their respective Chairs, and the outcome of the Board evaluation is detailed on pages 151-152 of the Cor-
porate Governance Statement.
Tsira Kemularia
Chairperson
26 April 2021
WHO IS ON THE COMMITTEE
The following were members of the Committee throughout the year: Tsira Kemularia, (Chairperson), Nicho-
las Haag, Eric Rajendra, Nikoloz Enukidze. Abhijit Akerkar was appointed a member of the Committee on 15
February 2021.
As of date of this report, the Committee is composed of the five members, detailed above, four of whom are
independent non-executive Directors. Mr Enukidze, who was previously the non-executive Chairman of the
Board is also a member, but is not considered to be independent for the purposes of the UK Corporate Gov-
ernance Code. Biographies of the Committee members can be found on pages 162 to 165.
Only members of the Committee have the right to attend meetings, but the Committee may invite other inde-
pendent Board members, including the Chief Executive Officer, the Head of Human Resources and external
advisors, to attend all or part of any meeting if it thinks it is appropriate or necessary. The Committee meets
on a quarterly basis and schedules additional meetings when appropriate. The Company Secretary attends all
meetings of the Committee.
The attendance of members at the Committee meetings during the year is set out on page 154.
WHAT IS THE COMMITTEE’S ROLE?
The Committee’s role and responsibilities are set out in its terms of reference, available on the Group’s web-
site: www. tbcbankgroup.com. The Committee’s Terms of Reference is reviewed on an annual basis.
The main responsibilities of the Committee, in relation to the development and functioning of corporate
governance within the Group, are:
advising the Board periodically with respect to significant developments in the law and practice of cor-
porate governance;
approving changes to corporate governance guidelines, monitoring the Group’s compliance with such
guidelines and applicable legal and regulatory requirements and recommending to the Board such
changes or additional action as it deems necessary;
reviewing the independence standards for Board members;
monitoring and evaluating the process for assessing the performance and effectiveness of the Board and
its committees (including the annual Effectiveness Self-Review of this Committee); and
reviewing the structures and procedures of the Board and its relationship with management to ensure it
can function independently.
The main responsibilities of the Committee, in relation to nominations, are:
Regularly reviewing the structure, size and composition of the Board, including evaluating the current
balance of skills, experience, independence and knowledge on the Board, including considering diversity
and gender balance;
identifying suitable candidates from a wide range of backgrounds, with use of open advertising and ser-
vices of external advisers;
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CORPORATE GOVERNANCE & NOMINIATION COMMITTE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
considering and making recommendations to the Board on the composition of the Board;
advising the Board on succession planning for the roles of Chairman, Senior Independent Director, Chief
Executive Officer and for all other Board appointments;
in conjunction with human resources, setting diversity objectives and strategies for the Company as a
whole and monitoring the impact and outcome of diversity initiatives;
considering and making recommendations, as necessary, on the removal and resignation of Board members;
assisting the Chairman of the Board and the Senior Independent Director with the implementation of
an annual evaluation process to assess the overall and individual performance and effectiveness of the
Board and its committees; and
making recommendations to the Board on succession planning for the Board over the longer term
WHAT THE COMMITTEE DID IN 2020
During the year under review the Corporate Governance and Nomination Committee considered the fol-
lowing matters:
Key area of review
Committee Action and Outcome
Recruitment of
independent non-
executive Directors
Succession planning
Diversity including
gender balance across
the workforce
Board evaluation
The Committee undertook two recruitment searches for independent Directors during 2020.
Following a review of skills currently represented by board members, the Committee with the
support of the Board, undertook a search to recruit a non-executive Director who could bring
additional expertise to the Board of Fintech and digital banking. The Committee engaged
with its shareholders, and explored its own wide range of contacts, to identify suitable candi-
dates.
As a consequence the Board appointed Mr Abhijit Akerkar as an independent non-executive
Director on 27 July 2020, Mr Akerkar’s biography is detailed on page 163.
In addition the Committee, appointed Russell Reynolds to assist in searching for an addition-
al independent non-director although as of yet no appointment has been finalised. Russell
Reynolds have no other contractual arrangement with the Company.
The Committee has reviewed succession plans across the Group, this exercise is co-ordinat-
ed by HR and reviewed in detail by the Committee.
The Committee was pleased to note that following the resignation of the former Chief Fi-
nancial Officer from the Company, a strong list of internal candidates was available for review
alongside external candidates and consideration, resulting in the appointment of Giorgi Me-
grelishvili, as Chief Financial Officer of the Group .
The Committee has considered diversity issues across the Board and amongst the employ-
ees of the Group.
The Committee remains confident that by the end of 2021 it will achieve the target set out in
the Hampton Alexander Report for gender diversity on the Board.
The Board already meets the ethnic diversity recommendations detailed in the Parker Review.
The Committee noted strong levels of gender diversity across both the management with a
number of senior female management reporting to the CEO and in other key management
positions.
In considering ethnic diversity, the Committee noted the high levels of ethnic homogeny
across the country and did not consider that it was a major business issue at present.
As in past years, the Committee reviewed the board evaluation process prepared on its behalf
by the Company Secretary. This included considering the questions to be answered by Board
members, and reviewing the initial outcome before approval of a development plan by the
Board. Details of the resultant plan are shown on pages 151-152.
In line with the Code requirements, in 2021 the Committee will oversee an evaluation under-
taken by an external evaluator.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Key area of review
Committee Action and Outcome
Executive Committee
The Committee considered terms of reference for an Executive Committee of the Company,
and recommended the terms to the Board for approval.
The Executive Committee’s role is to formulate plans and recommendations for Group wide
issues, that are not under the remit of the Management Board of the Bank.
Delegation of
authority
The Committee reviewed and recommended to the Board a revised delegation of authority
from the PLC to the Chief Executive Officer, and his direct reports.
The delegation included delegations to the both the Bank and other Group Subsidiary Com-
panies.
Independence of
Directors
The Committee reviewed the current non-executive Directors and considered whether they
continued to meet the independence criteria specified in the Code.
It also considered whether the Independent non-executive Directors were able to commit
sufficient time to the role, and ensured that they did not serve on to many boards.
Finally it was able to propose to the Board as to whether the Board was able to recommend
to shareholders the re-appointment or election of the individual Directors at the forthcoming
Annual General Meeting.
WAS THE COMMITTEE EFFECTIVE?
The Committee undertook an internal assessment of its performance as part of the overall Board Evalua-
tion process, detailed on pages 151-152. This assessment was led by the Company Secretary and collated
responses from Committee members to an internally developed questionnaire. The outcome of the process
indicated the need for the Committee to consider in 2021 the following:
Instigate a clear training programme for senior management to ensure the succession plan can be fol-
lowed when needed; and
Consider Governance issues across the Group as the expansion away from core activities develops.
The Committee has in place a schedule of work that details all the planned tasks for the year. Before each
meeting the Company Secretary discusses the agenda with the Committee chair, and combines planned
tasks from the schedule of work with any other matters that have arisen. All papers are circulated to Com-
mittee members for review a week prior to the meeting.
The Committee undertakes an assessment at the end of each financial year to ensure that it has covered all
the required items detailed in the Committee’s terms of reference.
WHAT ARE THE PRIORITIES FOR 2021?
In addition to the regular duties detailed in the responsibilities section on pages 170-171, as a result of the
revised Corporate Governance Code issued by the National Bank of Georgia and referred to in the Chair-
man’s introduction to the Governance Report on pages 147-148, the Committee will, in 2021, be focusing on
recruiting new independent non-executive Directors to join the Board.
In identifying suitable candidates to help develop the Group further, apart from the individuals’ expertise
and experiences, their fit to the board as a collective and their ability to work in a team will both be important
considerations. The Committee will be looking for the individual to be able to dedicate sufficient time for
both the key committee and board workload. The first priority will be to identify and appoint a suitable can-
didates able to chair the Audit and Risk Committees respectively and a detailed job description has already
been prepared for this role. The next task is to identify another two candidates with risk and remuneration
experience and among new independent Directors we will have at least one female, The objective is to
appoint at least the Audit and Risk Committee chairs before the 2021 AGM, whilst others before the end of
the year.
In addition the Committee will be considering a suitable external evaluator to complete the 2021 board
evaluation.
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CORPORATE GOVERNANCE & NOMINIATION COMMITTE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
RISK COMMITTEE REPORT
CHAIRMAN’S LETTER
Dear shareholders,
I am pleased to present the Risk Committee report for the year ending 31 December 2020 having taken over
as an interim Chair of the Risk Committee on 1 March 2021.
2020 was a particularly challenging year for risk management, as the COVID-19 pandemic introduced new
risks to the Group. The Risk Committee continued to take a proactive approach to risk management by
closely monitoring developments relating to the pandemic, frequently discussing both the internal and ex-
ternal challenges to the Group and assessing the risk management strategies proposed by the manage-
ment. While the situation stabilised to some extent in the second half of the year, the economic and market
situation remains challenging, and the Committee continues to work with management to increase the
Group’s resilience.
In addition to closely monitoring the risks related to capital, liquidity and credit portfolio quality in the con-
text of COVID-19, the Risk Committee focused on strengthening the critical aspects of risk management,
namely:
Review and enhancement of the Risk Appetite Framework (RA) and respective risk limits;
Enhancement of the Bank’s operational risk management; and
Monitoring and review of the development and implementation of the Bank’s Recovery Plan, an internal
document guiding our crisis management process.
Nino Masurashvili, Deputy CEO, who was previously in charge of developing TBC Bank’s retail banking
operations, was appointed as the new Chief Risk Officer in January 2020. The Group has further improved
its risk management practices under her leadership as she leverages both her detailed knowledge of the
Group’s business and the skills that brought significant success in her previous role.
I would also like to thank Arne Berggren for his chairmanship of the Committee, particularly during this un-
precedented year.
In 2021, the Committee will continue to focus on the impact of the external environment on the Group’s risk
profile, particularly the ongoing impact of the COVID-19 pandemic, and further strengthening risk manage-
ment practices.
Abhijit Akerkar
Chairman of Risk Committee
26 April 2021
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
COMMITTEE RESPONSIBILITIES
The Risk Committee’s primary function is to assist the Board in its oversight of all matters related to the risk
management and compliance of the Company and the Group, together with implementation of the highest
standards of business ethics and compliance with all of the legal requirements to which the Group is sub-
ject.
The Risk Committee is responsible for recommending the Group’s risk appetite limits to the Board and
monitoring the risk profile to make sure that it complies with the established limits. It is also responsible for
reviewing, assessing and recommending any actions for the Board to take regarding the Group’s overall risk
management strategy, as well as the risk management system and internal control framework. In addition,
it determines the nature and extent of the principal risks the Group is willing to take in order to achieve its
long-term strategic objectives.
The Risk Committee advises the Board on strategic transactions, focusing on risk aspects and implications
for the risk appetite and tolerance of the Group.
The Risk Committee reviews and approves the statement concerning internal risk management and the
Group’s viability statement included in this annual report. It ensures robust assessment of the emerging and
principal risks faced by the Group, including those that would threaten the business model, future perfor-
mance, solvency and liquidity.
The Risk Committee is also responsible for overseeing the Group’s compliance activities to ensure that it
complies with all applicable laws and regulations and maintains the highest standards of ethical behavior.
The Risk Committee supports the fostering of an ethical culture within the Group, based on the principles
of honesty, integrity, fairness and transparency. The Risk Committee’s Terms of Reference are available on
the Group’s website: www.tbcbankgroup.com.
COMMITTEE MEMBERS AND MEETINGS
Throughout the year 2020 Arne Berggren chaired the Risk Committee. In March 2021, he was appointed as
the Chairman of the Board and the Supervisory Board and Abhijit Akerkar was appointed as a Risk Com-
mittee Chair on an interim basis. He joined the Board as an independent non-executive Director in July
2020. For more information please refer to the Corporate Governance and Nomination Committee report,
on pages 169-172.
As of date of this report, the Risk Committee consists of four independent, non-executive Directors: Abhijit
Akerkar (interim Chairman), Nicholas Haag, Maria Luisa Cicognani and Tsira Kemularia. Biographies of the
Risk Committee members can be found on pages 162 to 165.
The Risk Committee typically meets in person at least on a quarterly basis. However, in 2020 and going
forward, the committee chose to hold meetings more frequently in response to the increased importance
of risk management practices, driven by COVID-19 pandemic. Due to the various travel restrictions, most
of the meetings held in 2020 were online, rather than in person. Each quarter, committee members review
a thorough report on the previous quarter’s risk management results as well as updates on compliance and
other areas within its remit. The Chief Executive Officer, CRO, head of compliance and key members of the
Group’s risk and compliance teams normally attend the meetings. Members’ attendance at the Risk Com-
mittee’s meetings during the year, at the Company and the Bank levels, are set out in the Directors’ Gover-
nance statement on page 154.
RISK COMMITTEE ACTIVITIES DURING 2020
During 2020, in addition to taking the measures necessary in response to the Covid-19 pandemic, the Risk
Committee continued to concentrate on its key responsibilities: monitoring the Group’s risk management
processes, promoting progress in risk management tools and techniques, and implementing mitigation
actions against prevailing risks.
Moreover, in February 2020, the Risk Committee’s Terms of Reference were updated and approved. Minor
changes were recommended by the Company Secretary, with input from the company’s lawyers, in order
to bring the terms of reference up to date to reflect recent developments in the UK Corporate Governance
Code and better to align our mission with the Terms of Reference for other Committees. This document
is available on TBC’s website at www.tbcbankgroup.com. The Risk Committee’s Terms of Reference were
reviewed again in December 2020, particularly in the context of the COVID-19 pandemic, and no additional
changes were recommended.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK COMMITTEE REPORT CONTINUED Risk appetite
The Risk Committee received and reviewed the risk appetite compliance reports at quarterly meetings,
during which the Committee’s members discussed the Group’s risk profile and respective outlook with
the management. At the beginning of 2020, some of the risk metrics were updated due to the increased
uncertainty caused by the COVID-19 pandemic. Key updates made were in relation to capital adequacy and
portfolio growth.
In addition, the Risk Committee, after extensive discussions and a detailed assessment, recommended that
the Board approve the updated, bank-wide Risk Appetite (RA) Framework. The RA Framework is an exhaus-
tive document covering all material financial and non-financial risks faced by the Bank, defining the gov-
erning principles that set the tone for the Bank’s risk management, and introducing additional risk metrics
together with the qualitative risk tolerance statements.
Moreover, the Risk Committee approved the plan proposed by the management for the year 2021, to further
enhance the RA Framework for other material subsidiaries and the Group overall, as well as cascading the
Bank’s RA down to its business segments.
Credit risk
The Risk Committee actively monitored the performance of the Group’s credit portfolio throughout the
year, including the effects of the pandemic-related lockdowns on the credit risk and the overall portfolio
quality, and received regular updates on the changes in non-performing loans and the cost of risk.
The Risk Committee assessed the proposed credit risk management strategies in response to COVID-19,
including the payment holidays, restructuring, changes in underwriting across the segments performed
throughout the year, and recommended potential actions to the management to be taken in order to man-
age the increased risk in the portfolio. In addition, the Risk Committee regularly reviewed the monitoring
results of the Group’s top 20 corporate borrowers. The Risk Committee reviewed and scrutinized several
stress test results conducted by the management in response to COVID-19.
Operational risk
The Risk Committee reviewed and approved the long-term plan developed by the Operational Risk Man-
agement team aimed at further enhancing the risk management practices and deploying advance technol-
ogies to deal with fraud and other operational risk threats. Throughout the year, the Risk Committee closely
monitored the progress in the implementation of this revised strategic plan.
In addition, the Risk Committee continued to closely monitor the Risk and Control Self-Assessment (RCSA)
results, together with progress on the mitigation action plan developed as a result of the RCSA process.
Financial risks
The Risk Committee continued monitoring the Bank’s financial risk position, including monitoring and as-
sessing the Bank’s strategy, to counter any potential negative impacts from COVID-19 in conjunction with
the measures implemented by the NBG in relation to liquidity risk. For more details, please see pages 121-124.
The Risk Committee held several discussions on the Bank’s financial risk appetite, leading to certain chang-
es to the proposed risk appetite limits, before recommending them to the Board for approval.
Capital management
The Risk Committee continued to closely monitor the Bank’s capital position, including reviewing the stress
test results conducted by the management to assess the negative impact of COVID-19 on the Bank’s capital
adequacy. In addition, certain changes were applied to the Bank’s capital risk appetite metrics under stress
conditions. Moreover, the Committee discussed the changes introduced by the NBG to the capital require-
ments in response to COVID-19. For more details, please see pages 124-126.
Throughout the year, the Risk Committee also held discussions on the Bank’s capital adequacy risk appetite
metrics under ordinary business conditions, prior to approval by the Board. In addition, the Risk Committee
assessed the Bank’s long-term capital adequacy position based on its four-year financial plan to ensure
that the Bank holds sufficient capital to stay within the risk appetite limit, which adds a considerable buffer
above the increasing regulatory requirements. For more details, please see pages 124-126.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Compliance
Throughout the year, the Risk Committee received regular updates on significant pieces of legislation that
were introduced in 2020. The Risk Committee assessed and approved updated group-wide compliance
policies such as the AML Policy, Whistleblowing Policy, Financial Crime Risk Appetite and other documents
subject to annual update.
The Risk Committee discussed and approved an enterprise-wide Anti-money Laundering Risk Assessment
Methodology in accordance with a new regulatory obligation. Additionally, the Risk Committee examined
the Group’s related parties list and the transaction tracker for the purposes of the UK Listing Rules and Dis-
closure Guidance and Transparency Rules, as well as related party transactions for NBG purposes. Together
with regulatory matters, the Risk Committee discussed other compliance topics in detail during quarterly
meetings.
Recovery Plan
The Risk Committee reviewed and recommended that the Board approve the Bank’s first version of the
recovery plan, supporting the Bank in maintaining its critical functions during stress conditions. The plan
was prepared in accordance with the NBG’s respective requirement and with the assistance of experienced
external consultant.
The Committee also reviewed the timeline for further enhancement of the recovery plan and gave specific
recommendations in relation to the recovery options developed by the management.
Information Security
The Risk Committee continued monitoring the Group’s cyber security risks, including the execution of the
action plan developed by the Information Security department for the purpose of identifying cyber threats
and performing real world cyber-attack simulations.
Model Risk Management
In 2020, the Model Risk Management (MRM) department was created to govern the risks associated with mod-
els employed across the Group. The Risk Committee reviewed, approved, and recommended that the Board ap-
prove the MRM policy, which aims to define the full lifecycle of the models, the responsibilities of the associated
parties, and the governance and control procedures for the models. The Group’s MRM policy is in compliance
with the newly issued regulatory guidance from the NBG regarding the management of model risk.
THE COMMITTEE’S EFFECTIVENESS REVIEW
The Board and the Risk Committee members conduct a review of the Risk Committee’s effectiveness every
year. In 2020, the Risk Committee was found to be effective in overseeing the Group’s risk management,
compliance activities and ethical standards.
LOOKING AHEAD TO 2021
Going forward, the Risk Committee will continue to focus on its key responsibilities: assessing risk results
and compliance with the Bank’s risk appetite, providing sign-off on transactions with the largest exposures,
and facilitating progress in risk management tools and techniques. Moreover, the Risk Committee will con-
tinue to closely monitor developments related to the COVID-19 pandemic and its implications on the Bank’s
portfolio quality, operations and financial conditions, including profitability, capital adequacy, liquidity, and
funding positions.
The Risk Committee will continue to closely monitor the impact that recent and upcoming regulatory
changes may have on the Bank’s financial standing and the respective implications for its risk management
processes. The Risk Committee will also monitor the RCSA process, the further enhancement of the RA
framework for other material subsidiaries and for the Group overall, as well as the process of cascading the
RA limits down to business segments. In addition, close attention will be paid to the development of the
subsequent versions of the recovery plan and the enhancement of the risk culture within the Group. The
Risk Committee will closely follow the Group’s international expansion activities so that it can ensure that
risks are managed properly across the Group. The Risk Committee will continue to focus on the proper
management of risks that may arise from remote-working practices established in the Group in response to
the COVID-19 pandemic and the further digitalization of the Bank’s services.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020RISK COMMITTEE REPORT CONTINUED REMUNERATION COMMITTEE REPORT
CHAIRPERSON’S LETTER
Dear shareholders,
As Chair of the Board Remuneration Committee (the “Committee”), I am pleased to present the Directors’
Remuneration Report for the year ending 31 December 2020.
The Committee response to COVID-19
The extraordinary events of 2020 and the impact of the pandemic have led the Committee to closely work
with management to ensure that all remuneration outcomes would reflect the experiences of our stake-
holders and shareholders. The need for restraint in executive Directors and top management of JSC TBC
Bank compensation has been reflected in no fixed salary increases in 2020 and 2021. In addition, executive
Directors and top management of JSC TBC Bank did not receive any annual bonus and share awards under
long-term incentive plan (LTIP) for the 2020 performance period.
As Georgia’s economy enters into its recovery phase the Committee recognises more than ever the need to
incentivise and retain critical talent while maintaining alignment with shareholders and responding to the
challenges that economic changes are bringing to our way of working.
All our employees have continued to be paid in full during the year and we have preserved work positions
even when employees needed to care at home for sick family members and take extra time off. We decided
that to maintain motivation in these difficult times, a 50% and 30% reduced variable compensation to mid
and lower level employees respectively, would be paid for 2020. As profitability improves in 2021 we should
be able to enhance our compensation recognition to executive management and the wider workforce for
their hard and committed work which continues to be the pillar of the Group’s success.
New proposed Remuneration Policy
The Committee continues to ensure that the Remuneration Policy is closely aligned with the strategic prior-
ities of the Group (as defined below), provides fair rewards and meets appropriate regulatory requirements
and best practice standards as well as takes into consideration the views of all stakeholders.
The current Director’s Remuneration Policy (the "Policy") was approved at the 2018 AGM, has applied since 1
January 2019 and is due to expire at the end of 2021. Over the past year the Committee has conducted a full
review of the Policy and proposes several changes, which are summarised below. In setting the new Policy,
the Committee engaged with shareholders and external, independent, consultants to ensure that the remu-
neration structure was appropriate, whilst at the same time allowing us to attract and retain the best talent.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Also, no Director should be involved in deciding their own remuneration outcome. The new Policy will be
subject to a binding vote at the 2021 AGM. It is anticipated that it will be applied from 1 January 2022 and will
apply for three years to 31 December 2024.
In 2019, the National Bank of Georgia (the “NBG”), the regulator of JSC TBC Bank, has introduced a new Cor-
porate Governance Code (the “NBG CG Code”) for Commercial Banks. Some of the requirements set by the
NBG Code come into effect on 1 January 2022 and in particular, effective from 1 January 2022, the NBG CG
Code sets the ratio of fixed to variable pay at a maximum of 1:1 which can be increased with approval from
shareholders to 1:2. This will apply to JSC TBC Bank. In accordance with the NBG CG Code we are seeking
TBC Bank plc shareholder approval for a fixed to variable ratio of 1:2 at the 2021 AGM.
Alongside the triannual review of the Policy, the Committee annually reviews both executive and non-execu-
tive Directors’ compensation and benchmarks them to ensure that they are aligned with best market practice.
Summary of updates to the Policy
A summary of the significant revisions made to the previous Policy is set out below to align with the new
regulatory requirements above:
To ensure that all salary can be treated as fixed pay for the Fixed to Variable Pay Ratio introduced as part
of the NBGCG Code, the requirement for continuing employment for the salary which is delivered in
shares has been removed together with the malus and clawback conditions.
The limit on executive Director pension contributions from the Company will be reduced from up to 3%
of salary to up to 2% of salary in a defined contribution plan to align with the majority of the workforce.
The maximum limits of annual bonus and LTIP award remain unchanged as a precentage of salary, with
reference to a monetary amount removed.
Bonus conditions have been amended to introduce a minimum of 60% of the bonus to be determined by
reference to financial KPIs. Target performance under the current Policy (as amended last year to meet
the NBG requirements) provides 63% of the maximum bonus award; the new Policy will set a limit of 50%
of the maximum bonus award for target performance.
At least 60% of variable remuneration will be delivered as LTIP for any year. With this context, the annual
bonus will continue to be delivered in shares and subject to a one year holding period for 50% of shares
and to a two-year holding period for the remaining 50% of shares with the annual deferred bonus shares
no longer be subject to a continuing employment requirement. However, it remains subject to malus and
clawback and forfeiture in case the participant is being deemed a bad leaver.
From 2022, LTIP grants will be based on an assessment of the previous year performance and subject to
three-year forward-looking assessment of the LTIP performance conditions, followed by a two year vest-
ing in line with the requirements under the NBG CG Code.
Where threshold performance conditions are achieved for the LTIP, vesting will be limited to 25% of the
maximum in line with best practice, reduced from 47% of the maximum.
Malus and clawback trigger events are extended in line with the requirements of NBG CG Code.
Fixed to variable remuneration ratio
Effective from 1 January 2022, the NBG CG Code sets the ratio of fixed to variable pay at a maximum of 1:1
which can be increased with approval from shareholders to 1:2. This will apply to JSC TBC Bank. In accor-
dance with the NBG CG Code we are proposing to seek TBC Bank PLC shareholders’ approval for a fixed to
variable ratio of 1:2 at the 2021 AGM.
NBG CG Code requires shareholders’ approval not only in relation to our CEO but all members of executive
management board of JSC TBC Bank. The CEO’s maximum variable remuneration limit under the current
TBC Policy exceeds this ratio but, to comply with the NBG Code, the actual payments will be required to be
within this ratio.
We believe that it is appropriate to have a Fixed to Variable Pay Ratio of 1:2 to maintain our competitive
positioning in an international market where we are hiring from and losing talent to banks which operate
a 1:2 Fixed to Variable Pay Ratio, FinTech companies which do not have a variable compensation cap, and
general technology companies. This also helps us to manage our fixed costs giving us flexibility to reward
performance within agreed risk parameters.
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The proposed changes to our Remuneration Policy bring further alignment with best practice and reflect
new regulatory provisions. We believe that the Policy continues to serve the Group strategy of remunerat-
ing sustainable performance especially in difficult and uncertain times. In particular, the increase of LTIP
proportion of overall variable compensation strengthens the need to assess performance over the medi-
um-term and the new risk-related KPI for the LTIP’s award will provide incentives while containing excessive
risk taking and capital absorption.
Principles of remuneration
The following principles have been considered when determining executive Directors’ remuneration:
Clarity and simplicity - the Remuneration Committee strives to ensure that performance measures are
clear and straightforward. Executive Directors’ performance is measured against their KPIs (both financial
and non-financial).
Risk - the Remuneration Committee has the discretion to reduce an executive Director’s variable remu-
neration if specific KPIs have not been met and every element of executive Directors’ variable compen-
sation is subject to the relevant malus and clawback provisions. Malus applies before vesting of awards
and clawback applies for up to 3 years after the vesting of awards. Triggers include, material misstate-
ment, material downturn in financial performance and misconduct that causes serious reputational harm.
Further, the Remuneration Committee has the discretion under the LTIP and deferred annual bonus to
reduce awards if it considers that either the underlying financial performance of the Company or the per-
formance of the individual is such that the level of vesting cannot be justified. The Company proposes to
further extend its malus and clawback triggers under its new Remuneration Policy.
Predictability - the maximum possible value of the executive Directors’ remuneration has been detailed
in the new Remuneration Policy and in operating the 1:2 fixed to variable remuneration cap.
Proportionality/alignment with culture – the Remuneration Committee strives to ensure that perfor-
mance measures are aligned with the corporate culture of the Group to foster the right behaviour and
deliver remuneration that is proportionate in the circumstances, by measuring executive Directors’ remu-
neration against a mix of financial, non-financial and personal KPIs. Further, by delivering a large propor-
tion of executive Directors’ salary into shares, this intrinsically aligns the executive Directors’ pay to the
long-term success of the Group and fosters a culture of sustainable long-term growth.
2020: resilient financial performance
In 2020, our operating income amounted to GEL 1,156 million, up by 2.4% year-on-year basis driven by in-
crease in net interest income. Over the same period, our income generation was supported by effective
cost management. During the year, we also recorded a net modification loss of financial instruments in the
amount of GEL 41.0 million to reflect the decrease in the present value of cash flows resulting from the loan
repayment grace periods granted to borrowers. As a result, our pre-provision ROE amounted to 24.7% com-
pared to 26.8% a year ago. For the full year 2020, our net interest margin was 4.7%, while the cost to income
ratio for the group amounted to 38.4%, an improvement of 1.5pp year-on-year, and 32.9% for the standalone
bank. In 2020, our provision charges increased significantly to cover the potential impact of the COVID-19
pandemic on our borrowers, which resulted in a total cost of risk for the full year of 2.4% compared to 0.7%
in 2019. As a result, we recorded consolidated net profit of GEL 322.5 million for 2020, while our return on
equity and return on assets stood at 11.7% and 1.6%, respectively.
Our loan book increased by 8.7% year-on-year in constant currency terms, which translated into a 39.0%
market share. Over the same period, our deposits increased by 13.8% on constant currency terms. As a result,
our market share in total deposits amounted to 37.2% as of 31 December 2020.
Our liquidity and capital positions remain strong. As of 31 December 2020, our net stable funding (NSFR)
and liquidity coverage ratios (LCR) stood at 126.0% and 134.2%, respectively. Our capital ratios improved
quarter-on-quarter as a result of net profit generation (no extra COVID-19 related provisions were booked in
the fourth quarter, per NBG provisioning rules). Our CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0%
and 17.1%, respectively, and remained comfortably above the eased minimum regulatory requirements by
3.0%, 3.8% and 3.4%, accordingly.
The Group has also in place Environmental Policy, which ensures that we conduct own business in an en-
vironmentally and socially responsible manner (to view the full policy, please refer to www.tbcbankgroup.
com). In 2020, we also published our first Sustainability Report (which can be found at the following link:
179
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 www.tbcbankgroup.com). These documents are a starting point for the development of an integrated Group
ESG Framework, which will align the Group’s strategic objectives in the medium and long term with our ESG
targets. TBC already monitors a number of ESG performance indicators which track our greenhouse gas
emissions, our environmental impact and the work we do to support and kindle the work-life balance of our
employees (please refer to doing business responsibly section on pages 74-100). The Committee intends
to review and select the relevant indicators and connect them to management strategic KPIs to ensure full
commitment to constant improvements.
Executive Director changes
On 28 October 2020, Giorgi Shagidze stepped down from his positions as deputy CEO of the Bank and
Group CFO and as a member of the TBC PLC Board. To ensure a smooth transition, he stayed with TBC
Bank until 31 December 2020 in an advisory role. On 28 October 2020, Giorgi Megrelishvili was appointed
as a CFO of JSC TBC Bank. He is not a member of the TBC PLC Board, he is a member of the management
board of its main subsidiary, JSC TBC Bank ("TBC Bank").
The Committee exercised its discretion and determined that Mr. Shagidze was classed as a Good Leaver in
relation to his outstanding share awards, which included his salary paid in shares, deferred bonus shares and
LTIP award. In making its decision the Committee recognised that the awards that Mr Shagidze would retain
relate to the periods in which he had already provided valuable service. The Committee further considered
that Mr. Shagidze, who was stepping down from these roles to further other pursuits, had made a significant
contribution to TBC throughout his service over the course of the previous ten years, including on key proj-
ects on which Mr. Shagidze has been instrumental such as TBC’s IPO and foreign expansion projects, and
had provided valuable assistance in ensuring a smooth transition out of his role. It was also acknowledged
that he would not be due any additional severance payment, and that he did not receive any entitlement
to any variable compensation in respect of 2020. As such the Committee considered it appropriate for Mr.
Shagdize to retain all his Awards in accordance with their original terms, pro-rated to reflect his period of
service where appropriate. In particular:
His salary delivered as shares for the period of the year served until 28 October 2020 was paid as for other
members of management in 2021. The value of this will be US$ 212,500 converted into shares (9,816 TBCG
shares) using the average share price for the period of 7-16 February 2021 (GBP 12.43 converted into US$
using the cross rate of the official exchange rates published by the NBG of 3.30 for GEL/ US$ and of 4.55
for GEL/GBP over the same period)
Mr Shagidze will retain his outstanding salary delivered as shares and pre-2020 annual share bonus
awards that would otherwise be subject to continuing employment.
Part of the outstanding LTIP award granted in 2019 will vest on the original vesting date on a pro-rata basis
for services performed up to 28 October 2020. The portion of award being retained remains subject to
performance conditions until the end of 2021.
Mr Shagidze will remain subject to the Minimum Shareholding Requirement for two years post cessation.
Mr Shagidze's salary delivered as shares, pre-2020 annual share bonus and outstanding LTIP award remain
subject to their original holding periods and malus and clawback provisions.
Executive Director remuneration decisions
The executive Directors’ remuneration for 2020 comprised:
Salary delivered in cash and shares; and
taxable benefits.
As reported last year, given the COVID-19 pandemic, the executive Directors and top management of JSC
TBC Bank did not receive any variable compensation (usually representing majority of total compensation)
in relation to 2020.
As a result, no annual bonus in respect of 2020 performance was awarded to the executive Directors and
top management of JSC TBC Bank, and there was no LTIP award for the 3-year performance period 2020-
2022. The Committee debated and agreed on the decision to review executive Directors’ and JSC TBC Bank’s
top management 2020 KPIs after the declaration of the COVID-19 pandemic by WHO and Georgia as well as
other countries entered into lock-down. Given the economic scenario brought by the new global crisis the
Committee considered that having attainable but challenging KPI targets have further fostered motivation
180
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
among the executive Directors and the top management team for 2020. The decision did not affect the exec-
utive Directors’ and top management’s variable remuneration since as agreed KPI revision was not considered
in YE performance assessment.
An award of 161% of salary will be granted to Vakhtang Butskhrikidze in 2021 under the LTIP to align him with
the long-term success of the Group. The award to be granted in 2021 will be subject to a 3-year performance
period and a subsequent 3 years holding period. Shares granted under the LTIP, therefore, will be subject to
a 6-year performance and holding period.
Performance conditions and targets together with corresponding weightings for the CEO for LTIP awards to
to be granted in 2021 in respect of forward-looking performance period 2021-2023 are as follows:
Total shareholder return (TSR) for a period of 3
years (2021-2023)
Average ROE for 3 years (2021-2023)
Loan market share at the end of (2021-2023)
40%
40%
20%
15%- 17%
15%-18%
34%- 36%
17-20%
Above 20%
18-21%
Above 21%
36-40%
Above 40%
KPI weight
Threshold
Target (inclusive)
Above Target
In February 2021, the Remuneration Committee considered whether any of the events set out in the Malus or
Clawback provisions had occurred. It was satisfied that in 2020 none of the trigger events occurred and so the
Remuneration Committee has not used its powers under the Policy to reduce or clawback any Share Awards.
No Remuneration Committee discretion was exercised in the year other than to determine good leaver sta-
tus for Mr Shagidze as set out above.
Non-executive Director remuneration
The non-executive Directors’ receive fees based on best practice against comparable FTSE 250 financial
companies and other regional peers’ board membership fees. Non-executive Directors do not receive any
form of variable remuneration from the Group nor other benefits except for reimbursement of documented
expenses. No changes are proposed for 2021.
Engagement with the workforce
The Group Remuneration Policy is grounded on the principle of fairness across all categories of employees.
Each year our human resources department has oversight on the application of our internal policy by
each department and each of our colleagues is evaluated against achievements and contribution to the
success of our strategy and business objectives. Regularly and on-rotation middle and senior managers’
performance is also reviewed by applying a 360-methodology to obtain a comprehensive feedback
including from their subordinates. Our remuneration policy allows higher performing employees to obtain a
higher compensation via their variable remuneration. During a difficult 2020, we did not have any layoff and
we maintained the fixed compensation of our workforce. The variable compensation of the wider workforce
was reduced by 50% for middle management and 30% for lower level employees. Our executive Directors
and top management of JSC TBC Bank did not receive any variable compensation usually delivered as
deferred shares bonus and LTIP grants, something which our employees have appreciated and which is
aligned with what the Board requires from its leadership team in difficult economic times.
The Remuneration Committee reviewed ratios of gender and pay gaps and our human resources team
always monitors trends in the local Georgian market to ensure that the Group remuneration structure
remains competitive to support and retain talent. The Remuneration Committee was pleased to see that
on local benchmarking basis our remuneration structure remains very competitive and provides the right
balance to give our employees motivation and stability. For more information about gender pay gap please
refer to page 86.
Our Staff Ambassador, Tsira Kemularia, regularly meets with employees and obtains feedback about
their views on their Group and collects feedback about a wide variety of issues. Employees cherish the
opportunities, which TBC Group provides them for personal career and talent development and we intend
to invest resources to ensure this continues to be widely available to all levels as we consider it a strategic
factor to retain and motivate best talent.
181
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Looking ahead
In light of the on-going COVID-19 pandemic, the Committee will continue to closely monitor developments
and consider, if necessary, adjustments to maintain alignment between performance and executive pay. As
the medium and long-term effects of the current events remain highly uncertain the Committee will con-
tinuously review both the quantitative and the qualitative factors which are components of the year-end
executive performance assessment.
The alignment of compensation with our shareholders’ interest remains an important objective for the Re-
muneration Committee and our work will continue to adapt to changing markets. I very much hope that you
will support the resolutions to approve the Directors’ Remuneration Policy, the Annual Report on Remuner-
ation and the 1:2 Fixed to Variable Pay Ratio at the forthcoming AGM. We firmly believe that our approach is
appropriate and will motivate and incentivise our leadership team to deliver on behalf of the shareholders
and communities we serve.
Maria Luisa Cicognani
Chair of the Remuneration Committee
26 April 2021
1. REMUNERATION COMMITTEE
The Company’s Remuneration Committee is responsible for establishing and overseeing the Group’s
Remuneration Policy principles and considering and approving remuneration arrangements of executive
Directors. Full details of the Remuneration Committee’s responsibilities are set out in the Remuneration
Committee terms of reference, which are available on our website at www.tbcbankgroup.com. Terms of
reference for the TBC Bank Group PLC (hereinafter referred as “the Company”) were reviewed and approved
on 19 February 2020.
The following were members of the Committee throughout the year: Maria Luisa Cicognani (Chair), Eric
Rajendra, Nicholas Haag and Nikoloz Enukidze (who stepped down from the membership of the Committee
on 6 April 2021).
As of date of this report, the members of the Remuneration Committee are: Maria Luisa Cicognani (Chair),
Arne Berggren (current Chairman of the Board, who was considered independent on appointment), Eric Ra-
jendra and Nicholas Haag. The meetings of the Remuneration Committee are always open to other non-ex-
ecutive Directors who wish to attend. Biographies of the Remuneration Committee members can be found
on pages 162 to 165.
The attendance of members at the Remuneration Committee meetings during the year at the Company and
the Bank levels are set out in the Directors’ Governance Statement on page 154.
1.1 Advisors to the Remuneration Committee
Members of the Remuneration Committee provide valuable input in updating the Remuneration Commit-
tee on the recent developments in the area of remuneration. However, when there is a need, the Remunera-
tion Committee receives external advisory services.
TBC Bank undertook a review of non-executive Directors’ (NEDs) fees in early 2020 using benchmarking data
provided by Deloitte. The externally conducted benchmarking exercise was required to objectively compare
the changes in the non-executive Directors’ remuneration policy with market practice and ensure that the
non-executive board members are compensated for their time commitment and responsibilities in an ever
increasing complex operational and regulatory environment in UK, Georgia and abroad. Further details of the
benchmarking exercise are presented in section 2.6 of the Remuneration Committee Report 2019.
As disclosed in the 2019 annual report and accounts, Deloitte was selected by the Remuneration Commit-
tee as a result of a tender among a short list of three companies, all with internationally recognized gov-
ernance and compensation practices and track record in similar assignments. The amount of fees for the
benchmarking advice provided by Deloitte in late 2019/early 2020 was £25,000, net of taxes. The fees were
charged on a time and materials basis, which was capped at the amount mentioned above.
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The Board is satisfied that Deloitte’s advice was objective and independent and that the Deloitte team
which rendered advice did not have any connections with the Group that may impair its independence. The
Board reviewed the potential for conflicts of interest and decided that Deloitte had appropriate safeguards
in place. Deloitte also provided other services during 2020 to the Group, including advice in relation to CFC
(Controlled Foreign Companies) and advice in relation to recovery and resolution planning.
Also, during 2020, Aon (McLagan) provided advice on benchmarking for the executive Directors and re-
muneration policy with fees of £43,400. The fees were charged on a time and materials basis, which was
capped at the amount mentioned above. In addtion, the Committee received additional advice on compli-
ance from Baker & McKenzie LLP, the Group’s legal advisors. The Committee is of the view that the advice
received from Baker & McKenzie LLP is objective and independent.
The Board is satisfied that Aon’s advice was objective and independent and that Aon’s team which rendered
advice did not have any connections with the Group that may impair its independence. Aon was selected by
the Remuneration Committee amongst four firms invited to submit both a technical and a financial proposal
and it was considered that it had the best offer for the scope of work which the Committee had agreed and
was seeking to be completed within set deadlines. The Board reviewed the potential for conflicts of interest
and decided that Aon had appropriate safeguards in place. Aon does not provide any other services to the
Company.
1.2 Statement of voting at Annual General Meeting
The current Remuneration Policy was presented and approved at the 2018 AGM by 99.95% of the votes cast,
with 0.05% votes against, while 1,538,484 votes were withheld.
Last year’s Remuneration Report was presented and approved at the AGM on 10 June 2020. The results were
as follows:
No
1
Resolution
To approve
the Directors'
remuneration
Report
Votes
For
% of votes
cast For
Votes
Against
% of votes
cast Against
Total
votes
% of issued
share capital
voted
Votes
Withheld
33,341,857
87.19%
4,899,502
12.81% 38,241,359
69.33%
1,538,484
2. SINGLE TOTAL FIGURE OF REMUNERATION
The table below summarize the total remuneration earned by each Director of the Company, in respect of
their employment with the Company’s Group for the financial years ended 31 December 2020 and 31 De-
cember 2019.
2.1 Single total figure for executive Directors (audited)
Vakhtang Butskhrikidze
Giorgi Shagidze1
2020
US$’000
2019
2020
2019
US$’000
US$’000
US$’000
Salary including:
Salary delivered in cash
Salary delivered in shares2
Taxable benefits (gross amount)
Pension
Total fixed pay
Deferred share bonus award3
LTIP4
Total variable pay
Total remuneration5
964
454
510
18
-
982
0
0
0
982
964
454
510
21
-
985
902
0
902
1,887
402
189
213
2
-
404
0
0
0
404
482
227
255
3
-
485
428
0
428
913
183
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Notes to table:
2.
1. Giorgi Shagidze stepped down from his positions as deputy CEO of the Bank, Group CFO and as a member of the TBC PLC Board on
28 October 2020. He remained at the Company in an advisory role until 31 December 2020. Payments in relation to his role as a consul-
tant are set out later in this report in the section "Payments to Past Directors”.
In case of CEO, this amount includes US$ 103,301 (2019: US$ 106,167) of taxes paid by the company on behalf of Vakhtang Butskhrikidze
in respect of the salary delivered in shares of US$ 406,699 (2019: US$ 403,833), which is made up of the number of deferred shares
granted in the period, multiplied by the value of the shares disclosed in the following table. In case of CFO, this amount includes US$
44,419 (2019: US$ 51,415) of taxes paid by the company on behalf of Giorgi Shagidze in respect of the salary delivered in shares of US$
168,081 (2019: US$ 203,585), which is made up of the number of deferred shares granted in the period, multiplied by the value of the
shares disclosed in the following table.
3. As reported last year, executive Directors would not receive any bonus for 2020, therefore there was no deferred share bonus for 2020.
In case of CEO, this amount includes US$ nil (2019: US$ 187,756) of taxes paid by the company on behalf of the Director in respect of the
deferred share bonus of US$ nil (2019: US$ 714,178), which is made up of the number of deferred shares granted in the period, multiplied
by the value of the shares disclosed in the following table. In case of CFO, this amount includes US$ nil (2019: US$ 86,240) of taxes paid
by the company on behalf of the Director in respect of the deferred share bonus of US$ nil (2019: US$ 341,481), which is made up of the
number of deferred shares granted in the period, multiplied by the value of the shares disclosed in the following table.
4. The first LTIP award was granted in 2019 but has not yet vested and so it is not included in this table to date. As reported last year,
5.
executive Directors would not receive any LTIP award for 2020.
Directors did not receive any remuneration other than those disclosed in the table. Further details of the pay shown in the above single
figure table are set out in the notes table below.
Approach to executive Director remuneration for 2020
Description
Salary
delivered in
cash
Salary paid in year to executive Directors
No additional fees were paid to executive Directors
d
e
x
i
F
Salary
delivered in
shares
Salary delivered in shares comprised of TBCG shares granted in respect of service in the
relevant year
2020
2019
The number of TBCG shares awarded as
deferred share salary under the remuneration
policy, effective from 1 January 2019, is linked
to the salary and its level is US$ 510,000 for
Mr. Vakhtang Butskhrikidze and US$ 255,000
(US$ 213,000 pro-rated to his period of
service in 2020) for Mr. Giorgi Shagidze.
Grants of deferred shares in relation to
2020 were approved in principle by the
Committee on 24 March 2021 and this level
was determined at 23,752 TBCG shares for
Mr. Vakhtang Butskhrikidze and 9,816 TBCG
shares for Mr. Giorgi Shagidze.
Deferred share salaries are subject to a
condition of continuous employment for 2
years and malus and clawback provisions.
The continuous employment condition is
lifted as follows: 50% of the award on the
first anniversary from the award date and the
other 50% on the second anniversary from
the award date.
The 2020 award has been valued using the
average share price for the period of 7-16
February 2021 (GBP 12.43 converted into US$
using the cross rate of the official exchange
rates published by the NBG of 3.30 for GEL/
US$ and of 4.55 for GEL/GBP over the same
period).
The number of TBCG shares awarded
as deferred share salary under the new
remuneration policy, effective from 1 January
2019, is linked to the base salary and its level
is fixed at the maximum amount of US$
510,000 for Mr. Vakhtang Butskhrikidze and
US$ 255,000 for Mr. Giorgi Shagidze.
Deferred shares in relation to 2019 were
awarded on 19 February 2020 determined
at 24,072 TBCG shares for Mr. Vakhtang
Butskhrikidze and 12,135 TBCG shares for Mr.
Giorgi Shagidze.
Deferred share salaries are subject to a
condition of continuous employment for 2
years and malus and clawback provisions.
The continuous employment condition is
lifted as follows: 50% of the award on the
first anniversary from the award date and the
other 50% on the second anniversary from
the award date.
The 2019 award has been valued using the
average share price for the period of 9-18
February 2020 (GBP 12.93 converted into US$
using the cross rate of the official exchange
rates published by the NBG of 2.87 for GEL/
US$ and of 3.72 for GEL/GBP over the same
period).
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 A deferred share bonus award may be granted as a result of the achievement of performance
measures for the relevant financial year.
2020
2019
l
e
b
a
i
r
a
V
Deferred
share bonus
The award is 100% deferred in shares and is
subject to continuous employment and malus
and clawback provisions. The continuous
employment condition is lifted as follows:
50% of the award on the first anniversary from
the award date and the other 50% on the
second anniversary from the award date.
Executive Directors and top management of
JSC TBC Bank did not receive any bonus for
2020, therefore there was no deferred share
bonus.
The award is 100% deferred in shares and
is subject to continuous employment
and malus and clawback provisions. The
continuous employment condition is lifted
as follows: 50% of the award on the first
anniversary from the award date and the
other 50% on the second anniversary from
the award date.
Deferred shares in relation to 2019 were
awarded on 19 February 2020 and its level
was determined at 42,571 TBCG shares for
Mr. Vakhtang Butskhrikidze and 20,355 TBCG
shares for Mr. Giorgi Shagidze.
The 2019 award has been valued using the
average share price for the period of 9-18
February 2020 (GBP 12.93 converted into US$
using the cross rate of the official exchange
rates published by the NBG of 2.87 for GEL/
US$ and of 3.72 for GEL/GBP over the same
period).
The value of the award is determined in
line with the achievement of performance
measures, as explained in detail in the 2019
Annual Report.
d
n
a
n
o
i
s
n
e
P
s
t
fi
e
n
e
B
Taxable
benefits
Taxable benefits comprise medical insurance, and in the case of our CEO, security allowances
as well.
Pension
The Group did not pay pension contributions for the executive Directors. Neither of the
executive Directors has a prospective entitlement to a defined benefit pension. Both CEO and
CFO opted out the state pension scheme (since at 6 August 2018 they were above 40 years of
age. www.pensions.ge) which came into force starting from January 2019 in Georgia.
2.2 Basis for determining executive Directors’ deferred share bonus awards (audited)
As reported last year, the executive Directors and top management of JSC TBC Bank would not receive any
entitlement to deferred share bonuses in 2020 and therefore no award in respect of 2020 had been made.
The 2020 deferred share bonus awards that would have been made to executive Directors reflect the Re-
muneration Committee’s assessment of the extent to which corporate financial, non-financial and personal
KPIs were achieved. Such objectives were set by the Remuneration and agreed by the board at the begin-
ning of the year.
The compensation is structured by reference to a set of stretch targets for each of the KPIs that is reviewed
by the Remuneration committee and approved by the Board. Each KPI has three thresholds: threshold, target
and maximum and is evaluated as follows:
If the achievement is below the threshold level 0% is awarded;
If the achievement is at the threshold level 60% is awarded;
If the achievement is on target, 100% is awarded;
If the achievement is at or above the maximum level, 140% is awarded.
185
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
The final evaluation score for the executive Director is made up of the weighted sum of the scores of all
the KPIs. As a result, the awards for the executive Director is capped at 140%. If all KPIs targets are achieved
the executive Director will receive 100% of the target bonus. The maximum bonus will be 140% of his target
bonus.
While one KPI can be achieved at maximum level, achieving maximum level across all KPIs is extremely dif-
ficult. To date, it has never been achieved and the maximum bonus has never been paid. The Remuneration
Committee will continue to monitor and implement challenging goals for its executives on an annual basis.
2020 deferred share bonus performance measures and corresponding weightings are set out in the table
below:
Corporate Financial Measures
ROE
Cost to income
NIM
Gap with Bank of Georgia in Retail, Micro & SME loans for Q4 2020
Cost of risk
Corporate Non-Financial Measures
Agile transformation
– Increase Employee Happiness from the current level
– Improve time-to-market and release frequency (increase X times)
– Improve organizational Agility score (by certain percentage)
Customer Experience
– “The Best Service Company in Georgia” (Retail)
– Customer Centricity Survey
Personal KPIs
– Financial
– Non-Financial
CEO
73%
17%
17%
15%
12%
12%
17%
9%
5%
2%
2%
8%
4%
4%
10%
0%
10%
CFO
53%
11%
15%
10%
8%
9%
17%
9%
5%
2%
2%
8%
4%
4%
30%
16%
14%
The below table sets out the performance against the corporate financial and corporate non-financial mea-
sures. The selected financial performance measures are vital for the long-term financial sustainability of the
Group and are also closely monitored by investors. Non-financial measures including agile transformation
and customer experience are closely linked to our strategic priorities as described in our business model
and strategy section. In light of the COVID-19 pandemic the performance measures and respective weights
were amended during the year, for example there was more weighting place on the corporate financial mea-
sures, than disclosed in the 2019 remuneration committee report in relation to 2020. However, as explained
above, executive Directors and top management of JSC TBC Bank did not receive deferred share bonuses
in 2020; therefore, although the performance outcome is set out below, there will be no award in respect of
2020 made.
186
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 l
a
i
i
c
n
a
n
F
e
t
a
r
o
p
r
o
C
s
e
r
u
s
a
e
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s
e
r
u
s
a
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M
i
l
a
i
c
n
a
n
F
-
n
o
N
e
t
a
r
o
p
r
o
C
Performance measure
ROE2
Cost to income3
NIM4
Gap with Bank of Georgia
in Retail, Micro & SME loans
for Q4 20205
Cost of Risk6
Agile transformation7:
Increase Employee
Happiness from
the current level
Improve time-to-market
and release frequency
(increase X times)
Improve organizational
Agility score (by certain
percentage)
Customer Experience8:
Minimum
(60%)
9.4%-10.1%
41.77%-40.36%
4.36%-4.74%
Target
(100%)
10.1%-10.8%
40.36%-39.04%
4.74%-4.88%
Maximum
(140%)
>10.8%
<39.04%
>4.88%
Actual
performance
11.7%
38.4%
4.7%
KPI
evaluation1
140%
140%
60%
GEL 340-440 mln GEL 440-540 mln
> GEL 540 mln GEL 570 mln
140%
>2.7% - <=3.2%
2.2 - 2.7%
< 2.2%
2.4%
100%
-3%-0%
0%-3%
>3%
7%
140%
x1.1-x1.5
x1.5-x2
>x2
1.4x9
60%
0%-3%
3%-6%
>6%
30%
140%
“The Best Service Company
in Georgia” (Retail)
Customer Centricity Survey
To be #1,
whereas the Gap
with #2 is up to 5%
60% - 65%
Gap with #2 >5%
Gap with #2
>10%
Gap with #2
2.9%
60%
65% - 75%
> 75 %
80%
140%
Notes to table:
1.
Each KPI is evaluated at: 60% where achievement falls into the minimum range, 100% where achievement falls into the target range and
140% where achievement falls into the maximum range.
2. The target range for ROE was decreased from 20.28%-21.40% in 2019 to 10.1%-10.8% due to slowdown in business activities and higher
provision charges related to COVID-19.
3. The target range for cost to income ratio (C/I) remained broadly unchanged in 2020 compared to 2019, due to the Group’s high focus
on efficiency measures.
4. The target range for NIM was decreased from 5.63%-5.80% in 2019 to 4.74%-4.88% in 2020, mainly due to the negative impacts of the
pandemic, which resulted in decrease in loan yields, increase in GEL deposits costs as well as currency depreciation.
5. A new KPI was introduced in 2020 in order to reinforce the importance of our leading position in regard to retail and MSME loan book.
Since Bank of Georgia’s Q4 2020 figures were not available at the Committee’s decision date of 17 February 2021, the figures for Q3
2020 were used.
6. The target range for the cost of risk (CoR) was increased from 1.08%-0.95% in 2019 to 2.2 - 2.7% in 2020 due to significant provision
charges expected to cover potential impact of the COVID-19 pandemic on the borrowers.
7. The importance of agile transformation is explained in our strategy section on pages 20-24. Based on the best practice shared by the
consultants that TBC has been working with in Agile implementation, the selected KPIs are used to measure agile implementation
efficiency. Improved time-to-market and release frequency are direct results of a good agile programme. In addition, employee happi-
ness and improved organizational agility score are additional important benefits of the cultural change. TBC has agreed to embark on
ambitious targets across all these impact areas and agreed to set appropriate KPIs for each of them.
• Time-to-market measures the time it takes for the product to be launched from the idea origination date to the release date, while
release frequency measures how many times the systems are renewed within the given period of time.
• Organizational agility score is measured based on internal predefined survey, which is based on the best practice examples.
• Employee happiness is measured based on internal predefined survey among the Bank’s total employees, which is based on the
best practice example prepared by external consultants.
8.
Agile transformation has involved more than 600 employees during 2020.
In line with our aspiration to be the best service provider in Georgia, two measures were evaluated:
• To conduct survey among mass retail customers to identify “Best Service Company in Georgia in Retail” in the following industries:
banking, telecom, insurance and pharmacy, based on surveys conducted by independent research company IPM in December 2020.
• To measure customer-centricity of our team, based on an ainternal survey among the Bank’s employees in December 2020.
9. Release frequency: 1.4-2.4 times improvement for in-house systems, 2.8-4.9 times improvement for vendor systems, time-to-market: 1.4
times improvement for majority of systems.
187
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
The tables below set out respective performance against personal KPIs for the CEO and CFO respectively
Vakhtang Butskhrikidze
Performance measure
Leadership1
Weighting
10%
Minimum (60%)
A-
Target (100%) Maximum (140%) Actual performance KPI evaluation
100%
A+
A
A
Notes to table:
1.
The Board assessed the CEO leadership skills and confirmed performance at Target. The Board in general was satisfied that the CEO continued to have active en-
gagement with staff and led the Group with commitment during a very unsettling year. Support will continue to be provided to ensure that at executive Directors’
level talent development is fostered and an articulated succession planning is constantly updated.
Giorgi Shagidze
Performance measure
Weighting
Minimum (60%)
Target (100%) Maximum (140%) Actual performance KPI evaluation
Financial:
– Treasury - FX &
16%
liquidity income
target (GEL 165.5
mln)1
– TBC Bank UZ - loan
book target (US$ 8.1
mln)
Non-financial:
– Investor Relations:
– Increase average
14%
daily trading volume
in 2020
– Diversify sharehold-
er register by add-
ing new investors to
the register
– Leadership2
Notes to table:
8%
95%-98% of the
budget
98%-103% of
the budget
>103% of the
budget
GEL 160.1 mln
60%
8%
90% -95% of the
target
95% -105% of
the target
> 105% of the
target
US$ 0.4 mln
0%
8%
4%
4%
6%
GBP 1.1 mln -1.4
mln
GBP 1.4 mln -1.7
mln
>GBP 1.7 mln
>GBP 1.7 mln
140%
2-3 (must be at
least 1 UK)
4 (must be at
least 2 UK)
4+
7 (3 UK based)
140%
A-
A
A+
N/A
N/A
1. The figures are based on the bank’s IFRS standalone numbers and envisages meeting certain level of income from foreign exchange
operations and liquidity management.
2. Leadership skills of Giorgi Shagidze were not assessed by the Board given the fact that he resigned from his positions as deputy CEO
of the Bank and Group CFO and as a member of the TBC PLC Board in October 2020 and no bonuses were paid in relation to 2020 per-
formance.
2.3 Share interests granted in 2020 (audited)
As reported last year, the executive Directors and top management of JSC TBC Bank would not receive an
LTIP award in 2020 and therefore no grants have been made.
188
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Further details of fixed and discretionary share compensation granted during 2020 in respect of 2019
(audited)
Date of
award
Award
Type
Face value
(% of base
salary)1
Face
value2
Percentage
of award
receivable
if minimum
performance
achieved
19
February
2020
Salary
delivered
as shares
Not
applicable
US$
510,000
Not
applicable
Basis
on which
award
was made
As
described
in section
2.1 above
Performance
measures
None – Fixed
pay
19
February
2020
Deferred
share
bonus
94%
US$
901,934
Not
applicable
As
described
in section
2.1 above
See section
2.2 of 2019
Remuneration
report
19
February
2020
Salary
delivered
as shares
Not
applicable
US$
255,000
Not
applicable
As
described
in section
2.1 above
None – Fixed
pay
19
February
2020
Deferred
share
bonus
107%
US$
427,721
Not
applicable
As
described
in section
2.1 above
See section
2.2 of 2019
Remuneration
Report
i
e
z
d
k
i
r
h
k
s
t
u
B
g
n
a
t
h
k
a
V
i
e
z
d
g
a
h
S
i
g
r
o
G
i
Continued em-
ployment
condition
31 Dec 2019.
Subject to
continued
employment
condition until
19 February
2022.
31 Dec 2019.
Subject to
continued
employment
condition until
19 February
2022.
31 Dec 2019.
Subject to
continued
employment
condition until
19 February
2022.
31 Dec 2019.
Subject to
continued
employment
condition until
19 February
2022.
End of
the vesting/
holding
period3
19 February 2022.
The holding
period for 50%
of the shares is
lifted on 19
February 2021.
19 February 2022.
The holding
period for 50%
of the shares is
lifted on 19
February 2021.
19 February 2022.
The holding
period for 50%
of the shares is
lifted on 19
February 2021.
19 February 2022.
The holding
period for 50%
of the shares
is lifted on 19
February 2021.
Notes to table:
For the purpose of this calculation, the fixed salary paid in 2020 has been used.
1.
2. The face value of share awards has been valued using the average share price for the period of 9-18 February 2020 (GBP 12.93 converted
into US$ using the cross rate of the official exchange rates published by the NBG of 2.87 for GEL/US$ and of 3.72 for GEL/GBP over the
same period) plus taxes as stated in details in table 2.1.
3. The salary delivered in shares and deferred share bonus subject to a two-year continued employment and holding period, lifted on a
phased basis: 50% on first anniversary of grant and 50% on second anniversary of grant. Both salary delivered in shares and deferred share
bonus are eligible for dividends during the holding period.
2.4 LTIP award to be granted in 2021
The Remuneration Committee has determined that share awards of 161% of salary will be granted to Vakhtang
Butskhrikidze in 2021 under the LTIP to further align him with the long-term success of the Group. The share
awards to be granted in 2021 will be subject to a 3-year performance period and a subsequent 3 years period
of holding. Share awards under LTIP are eligible for dividends during the holding period.
189
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Performance conditions and targets together with corresponding weightings for CEO for LTIP awards to be
granted in 2021 in respect of forward-looking performance period 2021-2023 are as follows:
Total shareholder return (TSR) for a period
of 3 years (2021-2023)
Average ROE for 3 years (2021-2023)
Loan market share at the end of (2021-2023)
KPI weight
Below Target
Target (inclusive)
Above Target
40%
40%
20%
15%- 17%
15%-18%
34%- 36%
17-20%
Above 20%
18-21%
Above 21%
36-40%
Above 40%
2.5 Directors’ outstanding incentive scheme interests (audited)
The tables below summarise the outstanding awards made to executive Directors:
Salary in shares
Vakhtang
Butskhrikidze
Giorgi Shagidze
Notes to table:
Interest at
31/12/2019
Granted
in year
n/a
17,622
15,860
14,098
47,580
n/a
8,811
7,930
7,049
23,790
24,072
-
-
-
24,072
12,135
-
-
-
12,135
Vested
in year
-
1,762
1,762
14,098
17,622
-
881
881
7,049
8,811
20201
20192
20182
20172
Total
20201
20192
20182
20172
Total
Interest at
31/12/2020
Grant
date
Share price
at grant GBP
24,072
15,860
14,098
0
54,030
12,135
7,930
7,049
0
27,114
19/02/2020
21/03/2019
09/03/2018
28/03/2017
19/02/2020
21/03/2019
09/03/2018
28/03/2017
£12.93
£16.00
£18.40
£15.00
£12.93
£16.00
£18.40
£15.00
Vesting
date1,2
19/02/2022
21/03/2022
09/03/2021
28/03/2020
19/02/2022
21/03/2022
09/03/2021
28/03/2020
1. Subject to a condition of continuous employment for 2 years and malus and clawback provisions. The continuous employment condition
is lifted as follows: 50% of the award on the first anniversary from the award date and the other 50% on the second anniversary from the
award date.
2. Subject to continuous employment and malus and clawback provisions. The continuous employment condition is lifted as follows: 10%
of the award on the first anniversary from the award date, a further 10% on the second anniversary from the award date and the final 80%
of the on the third anniversary from the award date.
Bonus deferral
Vakhtang
Butskhrikidze
Giorgi Shagidze
Notes to table:
Interest at
31/12/2019
n/a
89,421
84,013
71,489
244,923
n/a
46,674
40,103
36,349
123,126
Granted
in year
42,571
-
-
-
42,571
20,355
-
-
-
20,355
Vested
in year
-
8,942
9,335
71,489
89,766
-
4,667
4,456
36,349
45,472
20201
20192
20182
20172
Total
20201
20192
20182
20172
Total
Interest at
31/12/2020
42,571
80,479
74,678
0
Grant
date
19/02/2020
21/03/2019
09/03/2018
28/03/2017
Share price
at grant GBP
£12.93
£16.00
£18.40
£15.00
Vesting
date1,2
19/02/2022
21/03/2022
09/03/2021
28/03/2020
197,728
20,355
42,007
35,647
0
98,009
19/02/2020
21/03/2019
09/03/2018
28/03/2017
£12.93
£16.00
£18.40
£15.00
19/02/2022
21/03/2022
09/03/2021
28/03/2020
1. Subject to a condition of continuous employment for 2 years and malus and clawback provisions. The continuous employment condition
is lifted as follows: 50% of the award on the first anniversary from the award date and the other 50% on the second anniversary from the
award date.
2. Subject to continuous employment and malus and clawback provisions. The continuous employment condition is lifted as follows: 10%
of the award on the first anniversary from the award date, a further 10% on the second anniversary from the award date and the final 80%
of the on the third anniversary from the award date.
190
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 LTIP
Interest at
31/12/2019
Granted
in year
Vested
in year
Lapsed
in year
Exercised
in year
Interest at
31/12/20201
Grant
date
Share
price
at grant
GBP
End of
performance
period
Vesting
date
Holding
date
Vakhtang
Butskhrikidze
Giorgi
Shagidze
2019
Total
2019
Total
79,217
79,217
39,609
39,609
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,217 03/03/2019
£14.92
31/12/2021
19/02/2022
19/02/2024
79,217
39,609 03/03/2019
£14.92
31/12/2021
19/02/2022
19/02/2024
39,609
Notes to table:
1. These figures represent the maximum number of share awards, out of which 79% will be granted at target peformance and and which will
be assessed and awarded in Q1 2022 subject to performance.
Performance conditions and targets together with corresponding weightings for CEO and CFO for share
awards granted under LTIP in 2019 in respect of performance period 2019-2021 are as follows:
Total shareholder return (TSR) for a period of 3 years (2019-2021)
Average ROE for 3 years (2019-2021)
Loan market share at the end of 2021
KPI weight Below Target Target (inclusive) Above Target
Above 20%
Above 21%
36-40% Above 40%
15-17%
15-18%
34-36%
40%
40%
20%
17-20%
18-21%
2.6 Single figure for non-executive Directors (audited)
The table below sets out the remuneration earned by each non-executive Director for the years ended 31
December 2019 and 31 December 2020. The independent non-executive Directors are remunerated based
on the number of committees they serve on and chair.
Director
Nikoloz Enukidze1
Nicholas Haag
Eric Rajendra2
Tsira Kemularia
Maria Luisa Cicognani
Arne Berggren3
Abhijit Muralidhar Akerkar4
Total amounts
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Fees
US$’000
350
248
175
157
142
68
157
144
154
149
148
51
54
-
1,180
817
Taxable benefits
US$’000
0
0
0
0
0
0
0
0
0
0
0
0
0
-
0
0
Total remuneration
US$’0005
350
248
175
157
142
68
157
144
154
149
148
51
54
-
1,180
817
Notes to table:
1. Nikoloz Enukidze was appointed to serve as the Chairman of the Board on 25 July 2019 following the resignation of Mamuka Khazaradze.
2. Eric Rajendra was re-appointed as Independent non-executive Director on 17 September 2019 following his resignation on 15 March 2019
due to health reasons. He was appointed as a member of JSC TBC Bank Supervisory Board on 9 October 2019.
3. Arne Berggren joined the Board as an independent non-executive Director on 13 August 2019 and was appointed as a member of JSC
TBC Bank Supervisory Board on 18 July 2019.
4. Abhijit Muralidhar Akerkar joined the Board as an independent non-executive Director on 27 July 2020 and was appointed as a member
of JSC TBC Bank Supervisory Board on the same date.
5. Non-executive Directors have not received any other payments from the Group in 2020 and 2019. Non-executive Directors do not receive
annual bonus or LTIP awards.
191
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 As detailed in the 2019 report, the Board underwent a restructuring and the fees for the remaining non-exec-
utive Directors (including the new Chairman) have been amended several times during the year to comply
with the principles of the NBG’s Corporate Goveranance Code for Commercial Banks. Fees are now struc-
tured as follows:
2020 NED fee policy
Chairman (eligible for committee fees)
Non-executive Director (other than Chairman)
Senior Independent Director
Committee Chairmanship
Committee membership
Employee engagement designated independent board member role
US$’000
338
130
15
12
6
3
2.7 Change in Director remuneration compared to other employees
In the table below, as per the requirements of the Companies (Directors’ Remuneration Policy and Directors’
Remuneration Report) Regulations 2019, changes to the base pay (or fees), taxable benefits and annual bo-
nus of Directors are compared to employees over the same period (2019 to 2020).
Executive Directors
Vakhtang Butskhrikidze
Giorgi Shagidze1
Non-executive Directors
Nikoloz Enukidze2
Nicholas Haag
Eric Rajendra3
Tsira Kemularia
Arne Berggren4
Abhijit Muralidhar Akerkar5
Maria Luisa Cicognani
Average employee6
Notes to table:
Salary/fees
Taxable Benefits
Deferred Share Bonus
Change in 2020 against 2019 (%)
0%
-17%
41%
11%
109%
9%
190%
-
3%
18%
-14%
-33%
-
-
-
-
-
-
-
-100%
-100%
-
-
-
-
-
-
-
-25%
-61%
1. Giorgi Shagidze stepped down from his positions as deputy CEO of the Bank and Group CFO and as a member of the TBC PLC Board on
28 October 2020. He remained at the Company in an advisory role until 31 December 2020.
2. Nikoloz Enukidze was appointed to serve as the Chairman of the Board on 25 July 2019.
3. Eric Rajendra was re-appointed as Independent non-executive Director on 17 September 2019 following his resignation on 15 March 2019
due to health reasons. He was appointed as a member of JSC TBC Bank Supervisory Board on 9 October 2019.
4. Arne Berggren joined the Board as an independent non-executive Director on 13 August 2019 and was appointed as a member of JSC
TBC Bank Supervisory Board on 18 July 2019.
5. Abhijit Muralidhar Akerkar joined the Board as an independent non-executive Director on 27 July 2020 and was appointed as a member
of JSC TBC Bank Supervisory Board on the same date.
6. These numbers include employees of the Group, except for the executive and non-executive Directors’ remuneration provided in the
given table since at Company level there is only one employee.
192
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 3. PAYMENTS TO PAST DIRECTORS (AUDITED)
Giorgi Shagidze stepped down from his positions as deputy CEO of the Bank and Group CFO and as a
member of the TBC PLC Board on 28 October 2020. He remained at the Company in an advisory role until
31 December 2020. He received a total of US$80,334 for providing these services. No other payments have
been made to Mr Shagidze.
4. PAYMENTS FOR LOSS OF OFFICE (AUDITED)
Giorgi Shagidze will receive his salary delivered as shares for the period of the year served until 28 October
2020. This will be paid along with the salary delivered as shares as for other members of management in
2021. The value of this will be US$ 212,500 converted into shares (9,816 TBCG shares) using the average share
price for the period of 7-16 February 2021 (GBP 12.43 converted into US$ using the cross rate of the official
exchange rates published by the NBG of 3.30 for GEL/ US$ and of 4.55 for GEL/GBP over the same period).
The Committee exercised its discretion and determined that Mr. Shagidze was classed as a Good Leaver.
In making its decision the Committee recognised that the awards that Mr Shagidze would retain relate to
the periods in which he had already provided valuable service. The Committee further considered that Mr.
Shagidze, who was stepping down from these roles to further other pursuits, had made a significant contri-
bution to TBC throughout his service over the course of the previous ten years, including on key projects on
which Mr. Shagidze has been instrumental such as TBC’s IPO and foreign expansion projects, and had pro-
vided valuable assistance in ensuring a smooth transition out of his role. It was also acknowledged that he
would not be due any additional severance payment, and that he did not receive any variable compensation
in respect of 2020. As such the Committee considered it appropriate for Mr. Shagdize to retain all his Awards
in accordance with their original employment holding period. Mr. Shagidze will retain the outstanding salary
delivered as shares and deferred bonus awards relating to 2019.
Part of the outstanding LTIP award granted to Mr Shagidze in 2019 will vest on the original vesting date on a
pro-rata basis for services performed up to 28 October 2020. The portion of award being retained remains
subject to performance conditions until the end of 2021.
The deferred share salary, deferred bonus awards and pro-rated LTIP will continue to vest in accordance
with their original schedule and remain subject to the terms of the relevant share plan, including the malus
and clawback provisions. The LTIP award will remain subject to the post-vesting holding period.
5. STATEMENT OF DIRECTORS' SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The application of our remuneration structure naturally results in our executive Directors holding a signif-
icant number of shares that are subject to continued employment conditions. In addition, as described
in section 9 below, the Company has implemented a Minimum Shareholding Requirement for executive
Directors. The executive Director has met the Minimum Shareholding Requirement. Deferred shares paid
in relation to salary and annual bonus, which count towards the Minimum Shareholding Requirement, are
subject to continuous employment and malus and clawback requirements but are not subject to any further
performance conditions.
The following table sets out a summary of each Director’s shareholdings and share interests in the Company
as at 31 December 2020. Although not a Company requirement, one NED has chosen to become a shareholder.
Share ownership requirement
Mr. Butskhrikidze's shareholding of 1767% of 2020 salary at 31 December 2020 exceeds the share ownership
requirement of 200% of salary.
Mr. Shagidze’s post cessation shareholding requirement is 100% of salary for two years and his shareholding
of 797% of his 2020 salary at 31 December 2020 exceeds this requirement. Mr. Shagidze stepped down on
28 October 2020.
193
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Shareholding
at 31 Dec 2020
not subject to
either continu-
ing employment
requirements
or performance
conditions1
(A)
Shareholding
guidelines
(% of salary)
Shareholding
at 31 Dec 2020
subject to
continuing
employment
requirements2
(B)
Total
number of
shares held
(C = A+B)
Shares
(C as a
percentage
of 2020
salary3
(D)
Number of
shares
subject to the
performance
conditions in
relation to
LTIP 4 (E)
Total
interests in
shares still
subject to
conditions
(B+E)
Total
interests
in shares
(A+B+E)
200%
750,754
251,757
1,002,511
1767%
79,217
330,974 1,081,728
100%
63,440
125,123
188,563
797%
39,609
164,732
228,172
10,000
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000
-
-
-
-
-
-
Vakhtang
Butskhrikidze5
(executive
Director)
Giorgi
Shagidze5
(stepped down
on 28 October
2020)
Nikoloz
Enukidze6
Nicholas Haag
Eric Rajendra
Maria Luisa
Cicognani
Tsira Kemularia
Arne Berggren
Abhijit Akerkar
Notes to table:
1. This figure includes all shares held which are no longer subject to any conditions or transfer restrictions. Some of these shares may still
be subject to clawback requirements.
2. This figure includes shares that are still subject to conditions, including transfer restrictions, a continuous employment condition
and malus and clawback provision. The figure includes shares granted as deferred share compensation each year as a result of the
achievement of performance measures for the relevant financial year and deferred share salary. Details of these interests are described
at sections 2.1 and 2.2.
3. The shares as a percentage of 2020 salary has been calculated based on a share price of GBP 12.50 as of 31 December 2020 converted
into US$ using the cross rate of the official exchange rates published by the NBG of 3.28 for GEL/US$ and of 4.45 for GEL/GBP for the
same date.
4. This figure includes share awards granted, but not vested, under the LTIP that are subject to performance conditions. Details of these
interest are described at section 2.1 and 2.4.
5. On 24 March 2021, the Committee approved the amount of deferred shares to be awarded to Mr. Butskhrikidze and Mr. Shagidze, in respect
of the year ended 31 December 2020, as part of their fixed salary. Mr Butskhrikidze has been granted 23,752 shares and Mr. Shagidze
has been granted 9,816 shares. These shares are subject to two years continued employment and malus and clawback provisions. The
continued employment condition is lifted as follows: 50% of the award on the first anniversary from the award date and the other 50% on
the second anniversary form the award date. These have not been included in the above table. All figures in the table reflect the position
as at 31 December 2020. As at 26 April 2021, Mr Butskhrikidze held 142,708 shares and Mr. Shagidze held 70,450 shares that were subject
to continued employment conditions. In addition, during the first four month of 2021, Mr.Shagidze sold 12,000 shares. Except for the ones
described above, no other changes have taken place between the end of 2020 and 26 April 2021.
6. Nikoloz Enukidze acquired his shares before premium listing in August 2016.
6. PERFORMANCE: TOTAL SHAREHOLDER RETURN
The following graph compares the total shareholder return (TSR) of the Company for the period from the
date when shares were listed on the premium segment of the London Stock Exchange (10 August 2016) to 31
December 2020, with the performance of the FTSE All-Share Index and FTSE 250 Index over the same time
period. These market indexes were selected because they are most comparable to the Company in terms of
listing and relevant governance and transparency standards. Further, the Company is included in the FTSE
All-Share Index and FTSE 250 Index.
194
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
10-Aug-16
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
31-Dec-20
TBC Bank TSR
FTSE All-Share TSR
FTSE 250 TSR
Set out below is a table that contains details of Company CEO, Vakhtang Butskhrikidze’s remuneration for
each financial year in the relevant period:
Financial year
Single total figure of
remuneration (US$’000)1
Deferred share bonus
as a percentage of
maximum opportunity (%)2
LTIP vesting as a percentage of
the maximum number of shares that
could have been achieved (%)3
2020
2019
2018
2017
2016
2015
Notes to table:
9823
1,887
3,356
4,084
3,017
1,809
N/A
69%
85%
88%
85%
87%
N/A
N/A
N/A
N/A
N/A
N/A
1. Total remuneration includes salary delivered in cash, salary delivered in shares, deferred share bonus award and taxable benefits as de-
scribed in section 2.1, but excludes LTIP, as no LTIP awards vested in 2020. Total remuneration paid in 2020 is down compared to 2019 due
to not receiving a deferred share bonus.
2. Executive Directors and top management of JSC TBC Bank did not receive a deferred share bonuses in respect of 2020.
3. The first LTIP awards were granted in 2019 and are not yet vested, and so no LTIP awards vested in 2020. More details about the LTIP is
given in section 2.3.
195
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 7. RELATIVE IMPORTANCE OF SPEND ON PAY
The following table illustrates the difference in spend on pay for all employees of the Group and the differ-
ence in dividend paid to the shareholders between 2020 and 2019.
Total spend on Pay (staff costs in US$000)1
Dividends paid to shareholders (in US$000)2
Notes to table:
2020
78,478
0
2019
87,900
38,145
% change
-11%
-100%
1. Total spend on pay includes total staff costs per Group’s IFRS consolidated financial statements and is converted into US$ using average
US$/GEL exchange rate of 3.11 for 2020 and of 2.82 for 2019 respectively.
2. Dividend paid to shareholders in 2019 were gross amounts converted into US$ using official exchange rate prevailing at the date of
payment of the dividends, GEL 2.85. The dividend amount included both cash and scrip dividend. No dividends were distributed in 2020. .
8. POLICY IMPLEMENTATION IN 2021
Remuneration policy for the executive Director
The Remuneration Policy was developed with support of external consultants and KPMG and was approved
by the shareholders on 21 May 2018 at the 2018 Annual General Meeting (AGM). The Policy is applicable
starting from 1 January 2019 until the end of 2021.
In 2021, the Remuneration Committee intends to continue to provide remuneration in accordance with the
Policy as set out in the tables below and as approved by shareholders at the 2018 AGM. Fees and salaries
may be adjusted but in all cases will not exceed the maximum levels stated in the relevant Policy, as ap-
proved by shareholders at the 2018 AGM.
Base
salary
(cash
and
shares)
Annual
bonus
This is set at levels, which the Remuneration Committee reviews periodically and benchmarks against
main competitors in the region and other listed financial services groups to retain executive Directors
with the calibre needed to develop and deliver the Group’s strategic priorities. It reflects the role of the
individual and takes into accounts responsibilities and experience. To further increase alignment of per-
formance with the Group’s short term objectives a substantial portion of the fixed salary is delivered in
shares and delivery of these shares is deferred till the first quarter following the year of entitlement.
The cash and share salaries are set out in the policy approved by the shareholders at 2018 AGM. The
Remuneration Committee reserves the right to agree changes to the base salary with the executive Di-
rectors but no change will exceed the maximum levels stated in the Policy approved by shareholders at
the 2018 AGM. The Remuneration Committee’s discretion will be exercised fairly and reasonably and with
regard to appropriate comparable market practice and business strategy. For 2021, the base salary has
been set the same as it was in 2019, that is US$ 963,994 for CEO.
This is used to incentivise and reward the achievements of annual targets both at a Group level and at a
personal level. The Group annual targets are set by the Board each year within the context of the Group
medium-term strategy and sustainability goals as described in our strategy section on pages 20-24, while
individual KPIs reflect the Director’s personal responsibility on specific strategic targets which need to be
delivered during the period and the achievement of which is crucial for the delivery of the medium-term
strategy of the Group. This component is delivered entirely in deferred shares as described in section 2.1.
Performance measures and weightings:
Performance measures for 2021 with appropriate stretching targets will be set on the basis of the Com-
pany’s strategy and sustainability goals, and will include corporate financial KPIs, corporate non-financial
KPIs as well as personal KPIs. The overall weighting and structure of the KPIs will follow the structure
below:
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Financial KPIs weighting 60%:
In line with the Group strategy KPIs for 2021 will reflect the following objectives:
• maintaining a well-diversified profitable business model;
•
•
•
reaching sustainable returns over the medium and long term;
respecting target internal risk parameters;
achieving target profitability.
Targets are set on a consolidated basis to capture the Group’s expansion in Uzbekistan.
Strategic non-financial weighting 30%:
The objectives of the Group are to increase its financial services offering and digitalisation. At the
same time a series of important projects to strengthen internal control systems and processes are
underway and expected to result in increased efficiency and effectiveness of operations. In addition,
specific critical projects in IT transformation remain under the direct responsibility of the CEO.
Annual
bonus
The Group is in the process of defining Group ESG strategy. The first CSR report was produced in 2020
and strategic objectives related to ESG will be set.
Personal Leadership weighting 10%:
• Leadership is evaluated as a composite of a number of parameters to include scoring on organi-
sational, people, cultural and individual objectives. This is directly linked to the need to implement
strategic goals over the medium term across the group.
Given the uncertainties of the current economic environment in Georgia and other relevant countries, the
final quantitative KPIs will be set after this report has been sent to print. Emerging from the national lock-
down and a return to normal operations is dependent on a number of domestic macro policy decisions
which are affecting the Group’s activities and which should be clear by the end of next quarter. The Re-
muneration Committee will specifically ensure that such KPIs will remain appropriately stretching, having
regard to all relevant factors at that time.
Performance targets: Specific performance targets are considered commercially sensitive as they may
give our competitors information about our budget and strategy. The targets will be disclosed in the
Group’s 2021 annual report
This long-term variable component delivered entirely in deferred shares aligns executive management
incentives and behaviours to the Group strategy of delivering superior and sustainable returns as de-
scribed in our strategy section on pages 20-24. This is considered important by the Board as it incentiv-
ises stewardship over a longer time horizon and promotes good governance by aligning shareholders’
interests and executive compensation. The LTIP represents the largest percentage of the total variable
compensation of executive Directors as the Board considers necessary to maintain a long-term view in
producing shareholders’ returns.
The Remuneration Committee has determined that an award of 161% of salary will be granted to Mr.
Vakhtang Butskhrikidze in 2021 under the LTIP to further align him with the long-term success of the
Group. The award to be granted in 2021 will be subject to a 3-year performance period and a subsequent
3 years period of holding.
Performance conditions and targets together with corresponding weightings for the award are as follows:
Long
term
incentive
plan
(LTIP)
Total shareholder return (TSR) for a
period of 3 years (2021-2023)
Average ROE for 3 years (2021-2023)
Loan market share at the end of 2023
KPI weight
Threshold
On target
Maximum
40%
40%
20%
15%-17%
17-20%
Above 20%
15%-18%
34%- 36%
18-21%
36-40%
Above 21%
Above 40%
197
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Remuneration policy for the non-executive Directors
As reported last year, the Remuneration Committee revised the compensation for the non-executive
Directors from 25 September 2019. No changes are proposed for 2021:
Chairman (eligible for committee fees)
Non-executive Director (other than Chairman)
Senior Independent Director
Committee Chairmanship
Committee membership
Employee engagement designated independent board member role
US$’000
338
130
15
12
6
3
9. DIRECTORS REMUNERATION POLICY
Introduction
This Directors' Remuneration Policy provides an overview of the proposed Company policy on Directors'
pay. It is anticipated that it will be applied from 1 January 2022 and will apply for three years to 31 December
2024. Provisions of the current policy will continue to apply until 31 December 2021. Full details of this can
be found in the 2017 Annual Report, which is available at our website at www.tbcbankgroup.com.
In accordance with the requirements of the Companies Act 2006 and the Large and Medium-sized Com-
panies and Groups (Accounts and Reports) Regulations 2008 (as amended) (the “Regulations”), the policy
contained in this part will be subject to a binding vote at the 2021 AGM.
In 2018, the National Bank of Georgia (NBG), the regulator of JSC TBC Bank, introduced a new Corporate
Governance Code for Commercial Banks. This included certain requirements in relation to executives’ re-
muneration that came into force from 2019 and a Fixed to Variable Pay Ratio which will be effective from
2022. The new policy takes account these amendments. It aims to enhance our existing remuneration struc-
ture and ensure that it is more closely aligned with all stakeholder expectations, as well as to offer compet-
itive compensation to Directors.
The key objective of the Policy is to maintain a competitive remuneration incentive towards performance
aligned with the Group’s strategic targets. In particular, the variable compensation maximum opportunity
will be capped by the proposed 2:1 variable to fixed ratio while certain thresholds of vesting are being re-
duced. As the global economic environment remains uncertain and volatile we consider essential to main-
tain a remuneration policy that provides the flexibility to contain fixed costs while rewarding exceptional
sustainable performance.
Significant revisions made to the previous policy
To ensure that all salary can be treated as fixed pay for the Fixed To Variable Pay Ratio introduced as part
of the NBG Corporate Governance code for Commercial Banks, the requirement for continuing employ-
ment for the salary which is delivered in shares has been removed together with the deferral and malus
and clawback conditions.
The limit on executive Director pension contributions from the Company will be reduced from up to 3%
of salary to up to 2% of salary in a defined contribution plan to align with the majority of the workforce.
The maximum limits of annual bonus and LTIP award remain unchanged as a percentage of salary, with
reference to monetary amount removed.
Bonus conditions have been amended to introduce a minimum of 60% of the bonus to be determined by
reference to financial KPIs. Target performance under current Policy (as amended last year to meet NBG
requirements) provides 63% of the maximum bonus award; the new Policy will provide 50% of the maxi-
mum bonus award for target performance.
At least 60% of variable remuneration will be delivered as LTIP for any year. With this context, Annual
performance bonus will continue to be subject to one year holding period for 50% of shares delivered
as annual bonus and for two years of holding period for remaining 50% of shares but the annual deferred
bonus shares will no longer be subject to a continuing employment requirement. However, it remains
subject to malus and clawback and forfeiture in case the participant is being deemed a bad leaver.
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 From 2022, LTIP grants will be based on an assessment of the previous year performance and subject to
three-year LTIP future assessment of the LTIP performance conditions, followed by a two-years of vesting
in line with the requirements under the NBG Code.
Where threshold performance conditions are achieved for the LTIP, vesting will be limited to 25% of the
maximum in line with best practice, reduced from 47% of the maximum.
Malus and Clawback trigger events are extended in line with the requirements of NBG CG Code.
Full details are disclosed in the policy table.
Fixed to Variable Pay Ratio
Effective from 2022, the NBG Code sets the ratio of fixed to variable pay at a maximum of 1:1 which can be
increased by shareholders to 1:2. This will apply to JSC TBC Bank. In accordance with the NBG Code we are
proposing to seek shareholder approval for a fixed to variable ratio of 1:2 at the 2021 AGM.
NBG Code requires shareholders’ approval not only in relation to our CEO but all members of executive
management board of JSC TBC Bank. The CEO’s maximum variable remuneration limit under the current
TBC Policy exceeds this ratio but, to comply with the NBG Code, the actual payments will be required to be
within this ratio.
We believe that it is appropriate to have a Fixed to Variable Pay Ratio of 1:2 to maintain our competitive po-
sitioning in an international market where we are hiring from and losing talent to banks which operate a 1:2
Fixed To Variable Pay Ratio, fintech companies which do not have variable compensation cap, and general
technology companies. This also helps us to manage our fixed costs giving us flexibility to reward perfor-
mance within agreed risk parameters.
Consideration of shareholder views
The Remuneration Committee remains mindful of shareholder views when evaluating and setting ongoing
remuneration strategy and considers feedback from shareholders received at each AGM. The proposed
policy was discussed with the NBG and we engaged with a number of our large shareholders and proxy
bodies. This engagement has been key to designing the remuneration policy as described in this report, and
we aim to continue this dialogue as we implement to proposed policy.
Our Remuneration Policy is composed of fixed and variable components with each component closely
linked to what the Group’s objectives are in the short, medium and long terms. Strategically the Group
considers important to balance a competitive fixed salary with strong incentives to perform beyond
the approved strategic targets. As a consequence, variable remuneration represents over 60% of total
compensation of executive Directors and is linked for 40% to annual targets and 60% to medium-long term
strategic targets. Such emphasis on deferred shares compensation (including in the portion of a deferred
share salary component) and heavy weight on variable rather than fixed compensation is considered by the
Committee and the Board the optimal structure to ensure full alignment of executive Directors with the
Group’s objectives.
199
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Policy table: executive Directors
FIXED PAY
Salary – delivered as cash and shares
Salaries are determined based on market practice and provide each executive Director with a
competitive fixed income to efficiently retain and reward the Director and are based upon each
Director's roles and responsibilities within the Group and relative skills and experience.
Purposes and link
to the strategy of
the Group
Salary in cash
The cash part of the salary is aimed to provide fixed cash remuneration.
Salary in shares
Part of the salary is delivered in the form of shares to align executive Directors' and shareholders'
interests.
An executive Director may be paid separate salaries for roles and responsibilities at different en-
tities within the TBC Group as set out in a separate service contract with any relevant entity. Cur-
rently the executive Director receives a salary from JSC TBC Bank and TBC Bank Group PLC. The
aggregate is disclosed in the Remuneration Report.
Salaries are reviewed annually by the Remuneration Committee. Salaries will be reviewed against
relevant bank peers and other companies of a similar size and complexity.
Operation
Delivery of shares
Shares are usually delivered during the first quarter of the second year (i.e. the year after the work
is performed) and the exact date is determined by the Remuneration Committee.
All shares must be held for one year and 50% of the shares must be held for a second year. They
are registered in the trustees name as nominee for the participants. The participants are entitled
to receive dividends and have voting rights from the delivery date.
Salary is set and reviewed annually to ensure that the Directors receive a fair compensation which
is competitive for the role the individual is asked to play within the Group and is commensurate
with experience. Salary for the executive Director is determined by the Remuneration Committee,
taking account his skills, performance and experience.
No salary increase is proposed for 2021 nor it was awarded in 2020, as salary has remained at the
same level as approved by the Policy in 2018. The maximum salary level will be determined by the
Board in line with the principles outlined. Whilst there is absolute no maximum salary level, any
increase will normally be in line with those awarded to the workforce. Where an increase is to be
awarded above those granted to the workforce, we will engage with our shareholders and main-
tain the objective that the total reward potentially available is not excessive from the standpoint
of relevant employment data. Any changes to salary must be recommended by the Remuneration
Committee and approved by the Board.
For the element of salary paid in shares, the number of shares is calculated based on the average
share price of the last 10 days preceding the Remuneration Committee decision date. However,
the maximum value is fixed by reference to a cash amount on that date.
Maximum
opportunity
Performance
measures
Not performance based
Malus / clawback
Malus and clawback provisions are not applicable to salary delivered in cash or shares.
Amendments to
previous policy
Removal of deferral (with a requirement for continued employment), malus and clawback on sal-
ary delivered in shares. This is to ensure salary delivered in shares is treated as fixed pay for reg-
ulatory purposes.
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REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Pension
Purposes and link
to the strategy of
the Group
Operation
Maximum
opportunity
Performance
measures
To assist our employees in providing for their retirement and to maintain a market competitive
benefits package to attract and retain executive Directors.
The Georgian government has a mandatory pension scheme, under this scheme 2% of total em-
ployee compensation is to be contributed to a national pension fund.
In line with the workforce, the maximum employer contribution will not exceed 2% of total com-
pensation.
No performance measures apply to the contribution level.
Malus/ clawback
Malus and clawback provisions are not applicable.
Amendments to
previous policy
Reduction of maximum employer contribution from 3% to 2% to align pension with workforce
pension arrangements.
Benefits
Purposes and link
to the strategy of
the Group
Operation
Benefits are in line with Georgian market practice and are designed to be sufficient to attract and
retain high calibre talent.
Benefits available to executive Directors consist of insurance (such as medical, life and disability
insurance), physical examinations, Directors’ and officers’ liability insurance, a car service, person-
al security arrangements and assistance with filling out tax returns, where required. The Remuner-
ation Committee retains the discretion to provide additional benefits, where necessary or relevant
in the context of the Director’s location.
Executive Directors are reimbursed for reasonable business expenses incurred in the course of
carrying out duties under their service contracts, on provision of valid receipts.
The maximum amount payable depends on the cost of providing the benefits that the Remu-
neration Committee is willing to provide to an employee in the location at which the executive
Director is based.
Maximum
opportunity
Shareholders should note that the cost of providing comparable benefits in different jurisdictions
may vary widely.
Disclosure of amounts paid will be provided in the implementation report and will be explained
where the cost of benefits is significant.
Performance
measures
Not performance based
Malus / clawback
Malus and clawback provisions are not applicable.
Amendments to
previous policy
VARIABLE PAY
No changes proposed
Annual bonus delivered in shares
Purposes and link
to the strategy of
the Group
To provide a strong motivational tool to achieve the annual KPIs and to provide rewards to the
extent those KPIs are achieved.
The annual KPIs are chosen to align our executive Directors’ interests with the short terms strate-
gic objectives of the Group.
201
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Operation
Determination of annual bonus
KPIs are set at the beginning of each year in relation to that year (see more detail below).
The nature of the KPIs will be disclosed in the annual report published in the performance year.
The precise weightings and targets may be considered by the Remuneration Committee to be
commercially sensitive and in that case will be disclosed retrospectively, which is generally ex-
pected to be in the following annual report.
Delivery structure
Annual bonus is delivered entirely in shares, which are subject to a holding period. Once shares
are delivered, 50% of the shares will be subject to a holding period for 1 year and the other 50% for
2 years from the delivery date. The shares are registered in the trustees’ name as the nominee for
the participants and the participants are entitled to receive dividends.
Shares are usually delivered during the first quarter of the second year (i.e. the year after the work
is performed) and the exact date is determined by the Remuneration Committee.
Administration
Key discretions the Remuneration Committee has with respect to the plan are summarised further
on in this Remuneration Policy.
The maximum value of the annual bonus for the Chief Executive Officer, under the annual short-
term incentive arrangements, is 135% of fixed salary.
Maximum
opportunity
For achieving target performance, no more than 50% of the maximum bonus opportunity is pay-
able. For threshold performance, no annual bonus is paid.
The number of shares is calculated based on the average share price of the last 10 days preceding
the Remuneration Committee decision date.
Performance
measures
The KPIs consist of corporate and individual performance measures.
Corporate KPIs include financial measures, and non-financial measures with long term focus.
At least 60% of annual bonus will be earned against a challenging set of financial KPIs with the
targets set with reference to the bank's planning for the year.
Individual performance measures may include individual strategic objectives which vary per per-
son.
The performance period is one year.
To the extent that the KPIs are achieved, the Remuneration Committee may decide whether an
award may be made and the amount of such award.
The Remuneration Committee may also adjust KPIs during the year to take account of material
events, such as (without limitation): material corporate events, changes in responsibilities of an
individual and/or currency exchange rates.
202
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Awards are subject to the operation of malus at any time before the end of the holding period and
clawback at any time before the third anniversary of the end of the holding period. The precise
powers of the Remuneration Committee to operate malus and clawback are set out in the terms
and conditions governing the awards. In summary, for awards granted whilst this Policy is in effect,
if the Board determines (based on the recommendation of the Remuneration Committee) that:
the Director deliberately mislead the Company or the Bank in relation to financial performance;
there has been a material misstatement or material error in the financial statements of the
Company or the Bank;
the Director participated in or was responsible for conduct which resulted in significant losses
to the Company or the Bank;
the Director failed to meet the relevant fit and proper criteria set by the NBG;
there is evidence of misconduct or serious errors by the Director, including (without limitation)
a breach of any code of ethics or any other material breach of internal company rules;
the Company, the Bank and/or a relevant business unit suffers a significant downturn in its
financial performance (e.g. specific business indicators) (for malus purposes), or the Director
has caused the Company, the Bank and/or a business unit to suffer a significant downturn in its
financial performance (for clawback purposes);
the Company, the Bank and/or a business unit in which the Director works suffers a significant
failure of risk management (for malus purposes), or the Director has caused the Company, the
Bank and/or the business unit in which the Director works to suffer a significant failure of risk
management (for clawback purposes);
there is significant increase in the Company’s and or Bank’s or relevant business unit’s eco-
nomic or regulatory capital base (for malus purposes), or the Director’s participation caused
significant increase in the Company’s and or Bank’s or relevant business unit’s economic or
regulatory capital base (for clawback purposes); or
the conduct of the Director contributed to the imposition of regulatory sanctions on the Com-
pany or the Bank.
the Board has the right to cause some or all of the award for that year or any subsequent financial
year that is unvested (or unpaid) to lapse (or not be paid) (i.e., operate malus), and/or to require
the return of shares and/or cash value received by the Director pursuant to the award (i.e., oper-
ate clawback), may be as determined by the Board in its absolute discretion. Further, malus may
be operated if it is considered that the underlying financial performance of the Company or the
performance of the Director during the holding period is such that the number of shares cannot
be justified.
For awards granted prior to the effective date of this Policy, the awards are subject to the Compa-
ny’s previous malus and clawback policy as summarised in the Policy in effect from 1 January 2019.
Move to basing maximum award on a percentage of salary rather than a monetary amount.
Removal of continuing employment requirement for the annual bonus.
Introduction of a minimum of 60% of annual bonus determined by financial KPIs.
Setting target performance to provide 50% of maximum bonus opportunity compared to 63% per
current policy.
Extension of malus and clawback trigger events in line with the requirements of NBG CG Code.
Malus / clawback
Amendments to
previous policy
203
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Long Term Incentive Plan (LTIP)
Purposes and link
to the strategy of
the Group
To provide a strong motivational tool to achieve long-term performance conditions and to pro-
vide rewards to the extent those performance conditions are achieved.
Performance conditions are chosen to align our executive Directors' interests with strategic ob-
jectives of the Group over multi-year periods and encourage a long-term view.
Determination of award
Awards are discretionary and are granted if the Remuneration Committee considers that there has
been satisfactory performance over the prior base year.
Delivery structure
Awards may be granted in the form of conditional share awards, options or restricted share awards.
Awards are structured so that when combined with the annual bonus no less than 60% of variable
pay is delivered as LTIP in any one year.
For each award, forward-looking performance conditions are set by the Remuneration Commit-
tee for a period of 3-years (see more detail below). The Remuneration Committee determines
the level of award at the end of the performance period, based on the extent to which the perfor-
mance conditions have been met.
The performance conditions and respective targets will be disclosed in the annual report pub-
lished in the year of the award.
Timing of receipt
Operation
For the shares to be delivered, the performance conditions need to be met over the 3-year per-
formance period.
To the extent that performance conditions have been met, the LTIP awards remain subject to
2 years vesting period and continued employment requirements before vesting at the end of 5
years.
No dividend equivalents will be paid on any awards (or part thereof) that lapse on or before vest-
ing.
Dilution
For newly issued and treasury shares, the LTIP is limited to using 10% in 10 years for employee
plans and 5% in 10 years for discretionary plans.
These limits will exclude shares under awards that have been renounced, forfeited, released,
lapsed or cancelled or awards that were granted prior to the Company’s IPO or awards that the
Remuneration Committee decide will be satisfied by existing shares.
Administration
The plan will be administered by the Remuneration Committee. Key discretions the Remuneration
Committee has with respect to the plan are summarised further on in this Remuneration Policy.
204
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Maximum
opportunity
The maximum value of the award for the Chief Executive Officer in any given year, under the long-
term incentive arrangements, to be awarded is 161% of salary. The number of shares is calculated
based on the average share price during the 10 days after the preliminary annual results of the year
preceding the year of each grant is announced.
Forward-looking performance measures will be based on financial performance, appropriate risk
taking, and other long-term strategic measures are approved by the Board and set by the Remu-
neration Committee each year.
Measures and weightings will be set out in advance of each grant to reflect the Company's strat-
egy.
At threshold level of performance, for each measure, 25% of the award opportunity for that mea-
sure will vest, 100% of the award will vest for achieving the maximum performance set for each
measure and a target award will be calculated on a straight line basis.
Performance
measures
The Remuneration Committee has the discretion, any time after an award has been granted, to
reduce (including to zero) an award if the Remuneration Committee considers that either the un-
derlying financial performance of the Company or the performance of the individual is such that
the level of vesting cannot be justified.
The performance period is a continuous period of three years, commencing no earlier than the
beginning of the financial year during which the Award is granted.
The Remuneration Committee may adjust performance conditions during the performance pe-
riod to take account of an event which causes the Remuneration Committee to reasonably con-
sider that it would be appropriate to amend them, such as (without limitation) material corporate
events, changes in responsibilities of an individual and/or currency exchange rates, provided that
the altered KPIs will, in the reasonable opinion of the Remuneration Committee (acting fairly and
reasonably), be not materially less difficult to satisfy.
Awards are subject to the operation of malus until two years after the shares have been delivered
and to clawback until three years after the shares have been vested. The precise powers of the
Remuneration Committee to operate malus and clawback are set out in the terms and conditions
governing the awards. In summary, for awards granted whilst this Policy is in effect, if the Board
determines (based on the recommendation of the Remuneration Committee) that:
the Director deliberately mislead the Company or the Bank in relation to financial performance;
there has been a material misstatement or material error in the financial statements of the
Company or the Bank;
the Director participated in or was responsible for conduct which resulted in significant losses
to the Company or the Bank;
the Director failed to meet the relevant standards of fitness and propriety set by the NBG;
there is evidence of misconduct or serious errors by the Director, including (without limitation)
a breach of any code of ethics or any other material breach of internal company rules;
the Company, the Bank and/or a relevant business unit suffers a significant downturn in its
financial performance (e.g. specific business indicators) (for malus purposes), or the Director
has caused the Company, the Bank and/or a business unit to suffer a significant downturn in its
financial performance (for clawback purposes);
the Company, the Bank and/or a business unit in which the Director works suffers a significant
failure of risk management (for malus purposes), or the Director has caused the Company, the
Bank and/or the business unit in which the Director works to suffer a significant failure of risk
management (for clawback purposes);
there is significant increase in the Company’s and or Bank’s or relevant business unit’s eco-
nomic or regulatory capital base (for malus purposes), or the Director’s participation caused
significant increase in the Company’s and or Bank’s or relevant business unit’s economic or
regulatory capital base (for clawback purposes); or
the conduct of the Director contributed to the imposition of regulatory sanctions on the Com-
pany or the Bank.
Malus / clawback
205
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
Malus / clawback
the Board has the right to cause some or all of the award for that year or any subsequent financial
year that is unvested (or unpaid) to lapse (or not be paid) (i.e., operate malus), and/or to require the
return of shares and/or cash value received by the Director pursuant to the award (i.e., operate
clawback), as determined by the Board in its absolute discretion. Further, the Board has the dis-
cretion to operate malus if it considers that the underlying financial performance of the Company/
Group or the performance of the Director during the performance period is such that the number
of shares cannot be justified. In addition, if it is discovered during the three years after cessation
of employment that a good leaver is in fact a bad leaver according to the rules of the plan, the
provisions of the plan applicable to bad leavers will apply and the individual will be required to
return all shares acquired pursuant to awards that vested on or after the cessation of employment.
For awards granted prior to the effective date of this Policy, the awards are subject to the Group’s
previous malus and clawback policy as summarised in the Policy in effect from 1 January 2019.
Amendments to
previous policy
In line with NBG requirements, introduction of Remuneration Committee assessment that there
has been satisfactory performance over the prior year before grant.
Move to basing maximum award on a percentage of salary rather than a monetary amount.
Reduction of the threshold LTIP to 25% of maximum award.
Extension of malus and clawback trigger events in line with the requirements of NBG CG Code.
Shareholding requirement
Purposes and link
to the strategy of
the Group
To further enhance the alignment of shareholders’ and executive Directors’ interests in long-term
value creation and sustainability of results.
The Company has a minimum shareholding requirement of 200% base salary, built up within five
years of appointment. Until it is met, executive Directors are expected to retain 50% of shares (net
of tax).
Operation
Shares counted for this purpose include any deferred annual bonus and any vested awards from
the LTIP (notwithstanding that holding / continued employemnt conditions may still apply). Un-
vested awards from the LTIP will not be counted.
After employment the lower of the executive Director's shareholding at termination or 50% of the
minimum shareholding requirement are required to be held for two years post-cessation.
Maximum
opportunity
Performance
measures
Amendments to
previous policy
Minimum shareholding requirement of 200% of base salary to be built up within five years of
appointment.
For two years post-cessation, the lower of the executive Director's shareholding at termination or
50% of the minimum shareholding requirement
Not performance based
Introduction of a timeframe within which to build minimum shareholding requirement.
206
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Pre-existing obligations
It is a provision of this Policy that the Group will uphold all pre-existing obligations and commitments that
were agreed prior to this Policy taking effect. The terms of those pre-existing obligations and commitments
may differ from the terms set out in the Policy and may include (without limitation) obligations and com-
mitments under service contracts, deferred share compensation schemes and pension and benefit plans.
We believe, the new policy meets the best and regional practices, is competitive and aligns executives'
long-term interests with those of the Group and its shareholders.
Performance measures and targets
Annual bonus
Annual share bonuses are awarded to reward past performance over the year. At the end of the performance
year, the shares will be delivered to the extent that annual KPIs have been met (as determined by the Re-
muneration Committee). Once shares are delivered, the shares will be subject to a 2-year post performance
holding period (with 50% released each year).
The Remuneration Committee’s goal for each KPI is to establish a level of performance that is not certain
to be attained, so that achieving or exceeding the targets requires diligent efforts by the executive Director.
KPIs for the annual share bonus, consist of corporate, financial (such as ROE, cost to income ratio, CoR) and
non-financial KPIs (such as strategic, people and customer satisfaction levels) and individual KPIs (such
as leadership and/or performance of specific function) and are chosen to reflect the executive Directors'
required contribution to the Group's overall key strategic and financial objectives for that financial year. At
least 60% of the annual bonus will be determined by financial performance KPIs. The actual weighting on
financial performance may exceed this.
The nature of the KPIs will be disclosed in the annual report published in the performance year. Specific
weightings and targets for each KPI may be considered by the Remuneration Committee to be commercial-
ly sensitive as a measure to the Group’s business; in that case, these details will be disclosed retrospectively,
which is generally expected to be in the following annual report.
Each KPI will have a threshold, target and maximum level and conditions to meet these levels. Targets for
each corporate KPI will be determined by the Remuneration Committee and will be approved by the Board.
Individual KPIs will be approved by the Remuneration Committee, based on the recommendations of the
CEO. Target annual bonus will not exceed 50% of the maximum policy limit.
LTIP
The award grant will be based on an assessment of the base i.e. prior year performance (i.e. for the LTIPs
grant in early 2022, the base year is 2021). Awards granted will then be subject to 3-year LTIP forward-looking
performance conditions. After three years, the shares will be delivered to the extent the performance condi-
tions have been met (as determined by the Remuneration Committee). Once shares are delivered, the shares
will be subject to - 2 years of vesting period subject to continued employment and Malus and Clawback.
The Remuneration Committee’s goal for each performance condition is to establish a level of performance
that is not certain to be attained, so that achieving or exceeding the targets requires diligent efforts by our
executive Directors. The Remuneration Committee’s current view is that performance condition will include
three categories of objectives:
Maintain a strong value creation incentive (such as absolute TSR);
Focus on long-term sustainability (ratios such as ROE, NIM, Cost/Income; individually or in combination); and
Appropriate risk framework (such as Non-Performing Loans (NPL) ratio, Common Equity Tier 1 (CET1) ratio,
Loan Loss Provision (LLP) ratio, individually or in combination).
One of the LTIP KPIs will continue to be the absolute TSR. The Committee considered that it is difficult
to find a peer group against which to benchmark TBC TSR relative performance. The Group is listed on
a major stock exchange (LSE) which reflects in its high standard of governance, it is a systemic bank in
Georgia with a diversified business model, it is rapidly expanding its digital offering while continuing to
offer traditional banking services and it is expanding in a high growth country. Finding a suitable peer group
has been considered sub-optimal with the above considerations.
207
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Any measure selected, will be closely aligned with the Group strategy at the time of grant.
The performance conditions for each three-year performance period will be set at the start of each perfor-
mance period. The performance conditions and targets will be disclosed in the annual report published in
the year of the award.
The Remuneration Committee has discretion to amend the agreed performance conditions in exceptional
circumstances if, in the opinion of the Remuneration Committee, an event occurs which causes the Remu-
neration Committee to consider that the original performance conditions are no longer appropriate; pro-
vided that the amended conditions will, in the reasonable opinion of the Remuneration Committee, be not
materially less difficult to satisfy. Performance conditions are not capable of being re-tested.
Each performance condition will have a threshold, target and maximum level and conditions to meet these
levels. Targets for each corporate performance condition are determined by the Remuneration Committee
and are approved by the Board.
Illustration of application of Remuneration Policy
The following charts illustrate how the total value of remuneration and its composition would vary under
different performance scenarios for the current executive Director under the proposed Policy.
)
s
0
0
0
$
S
U
(
n
o
i
t
a
r
e
n
u
m
e
R
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
US$3,835
US$4,611
50%
US$2,603
40%
37%
25%
38%
US$982
100%
34%
28%
26%
22%
Minimum
Target
Maximum
Max +50% growth
Chief Executive Officer
Fixed pay
Deferred share bonus
Long-term inccentives
The following assumptions have been made:
Fixed pay
2021 cash and share salary
2020 benefits, as provided in the single figure table in section 2.1
Deferred share
bonus
Minimum
No bonus is paid
LTIP
No LTIP vesting
Target
Payout at 50% of the
maximum
LTIP award vests at 62.5%
of maximum (mid-way
between threshold (25% of
the award) and maximum
(100% of the award))
Maximum
Maximum payout (135%
of salary)
Maximum with
share price growth
As per maximum
LTIP award vests at
maximum (161% of
salary)
As per maximum
assuming 50% share price
increase over three years
208
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020
10. REMUNERATION THROUGHOUT THE GROUP
Remuneration of other top management members of JSC TBC Bank is similar to that of the executive mem-
bers of the Company. Other senior and middle management across the Group including material risk takers,
employees who are part of the agile structure, as well as some other key employees receive their entire
salary in cash and are also eligible for cash and share bonus variable compensation. The share bonuses
granted are subject to 3 years of continued employment condition and holding period gradually lifting the
conditions. The long-term incentive plan applies only to executive Directors.
All other employees within the Group receive cash salaries and may be eligible to receive cash bonuses.
Executive Director and employee pay is reviewed based on role and experience and determined through the
application of appropriate market data, as well as internal and external relativities, usually with input from a
compensation consultant.
All employees receive a competitive benefit package in line with Georgian market practice and participate
in the mandatory state pension scheme effective from 1 January 2019. According to the scheme, the com-
pany pays 2% of the employee’s total remuneration as pension contribution to the State.
Discretions retained by the Committee
The Committee operates the Company’s incentive plans according to their respective rules and (where
applicable) in accordance with relevant legislation. In order to ensure efficient administration of these plans,
certain operational discretions are reserved to the Committee.
These include but are not limited to:
determining who may participate in the plans;
determining the timing of grants of awards and/or payments under the plans;
determining the quantum of any awards and/or payments (within the limits set out in the policy table
above);
determining the performance measures and targets applicable to an award (in accordance with the state-
ments made in the policy table below);
discretion to override formulaic outcomes;
where a participant ceases to be employed by the Company, determining whether ‘good leaver’ status
shall apply;
determining the extent of vesting or payment of an award based on assessment of the performance con-
ditions and the overall performance of the Company, including discretion as to the basis on which perfor-
mance is to be measured if an award vests in advance of normal timetable (on cessation of employment
as a ‘good leaver’ or on the occurrence of corporate events);
whether, and to what extent, pro-ratio shall apply in the event of cessation of employment as a ‘good
leaver’ or on the occurrence of corporate events;
discretion to vary shareholding and post-cessation holding requirements in exceptional circumstances;
whether malus and/or clawback shall be applied to any award and, if so, the extent to which they shall
apply;
making appropriate adjustments to awards on account of certain events, such as major changes in the
Company’s capital structure.
11. POLICY TABLE: NON-EXECUTIVE DIRECTORS
In the same way as the executives, the non-executive Directors receive their compensation both from the
Company and the main subsidiary, JSC TBC Bank, proportionate to the time spent working on the respec-
tive entity’s Boards and committees.
209
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Fees
Purposes and link to the strategy
of the Group
To provide appropriate compensation for a non-executive Director of the Group, suf-
ficient to attract, retain and motivate high calibre individuals with the relevant skills,
knowledge and experience to further the Group’s strategy.
Operation
Maximum opportunity
The Group pays fees to non-executive Directors. The fees are determined by the Board.
The Chairman is paid an all-inclusive fee for all Board responsibilities. The other non-ex-
ecutive Directors receive a basic Board fee, with additional fees where individuals serve
as the Senior Independent Director, member or Chairman of a Committee of the Board.
The Board (excluding the non-executive Directors) reserves the right to structure the
non-executive Directors’ fees differently in its absolute discretion. The Board's (exclud-
ing the non-executive Directors) discretion will be exercised fairly and reasonably and
with regard to appropriate comparable market practice and business strategy.
Fees are generally paid monthly in cash. However, the Board reserves the right to pay
the fees on a different basis.
Fees are periodically reviewed and adjusted by the Board, having regard to external
comparators such as the Group's peer group, the chair or committee roles and respon-
sibilities and other market factors.
The Board will review the amount of each component of fees periodically to assess
whether, individually and in aggregate, they remain competitive and appropriate in
light of changes in roles, responsibilities and/or time commitment of the non-execu-
tive Directors, and to ensure that individuals of the appropriate calibre are retained or
appointed. Current fee levels are set out in the Annual Report of Remuneration.
Performance measures
Not performance based.
Malus / clawback
Malus and clawback provisions are not applicable.
Amendments to previous policy
N/A
Benefits and expenses
Purposes and link to the
strategy of the Group
Operation
Maximum opportunity
To compensate non-executive Directors for expenses incurred in connection with the
performance of their non-executive Director duties and to ensure the Group has the
appropriate non-executive Director input as and when required.
The Group may reimburse non-executive Directors for their expenses incurred in con-
nection with the performance of their duties including attending Board and committee
meetings (such as, for example, travel, accommodation, other subsistence expenses
and personal security arrangements), Board/committee dinners and functions, Board
training sessions, Director’s and officers’ liability insurance, advice in respect of pro-
fessional duties and corporate hospitality events (or the Group may pay such expenses
directly).
The maximum amount payable depends on the cost of providing such expenses in the
location at which the non-executive Director is based.
Shareholders should note that the cost of providing comparable expenses in different
jurisdictions may vary widely.
Performance measures
Malus / clawback
N/A
N/A
Amendments to previous policy
N/A
Non-executive Directors are not employees do not receive performance-related compensation or benefits.
The non-executive Directors are not eligible for performance-based share awards. Awards with performance
conditions are not part of the non-executive remuneration package as we do not wish the non-executive
Directors to be driven by short-term Group performance so as to maintain their independence accountable
for oversight of the Group.
The non-executive Directors are entitled to broad indemnification by the Group pursuant to a deed of in-
demnity entered into with each Director and are covered by the Group’s Directors & Officers’ Liability Insur-
ance Policy.
210
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 12. RECRUITMENT POLICY
The Remuneration Committee intends that the components of remuneration set out in the above policy
tables, and the approach to those components as set out in the policy tables, will (subject to the remainder
of this recruitment policy) be equally applicable to the annual package provided to new recruits, i.e. for exec-
utive Directors, salary (with cash and share components), discretionary deferred share bonuses (up to 135%
of salary), LTIP (up to 161% of salary), pension (up to 2% of salary) and employee benefits; for non-executive
Directors, fees and relevant expenses and benefits.
For an internal appointment of an executive or non-executive Director, any pay element awarded in respect
of the prior role may either continue on its original terms or be adjusted to reflect the new appointment, as
appropriate. In the year of promotion for an internal appointment, additional awards pro-rated for the time
served in the new role may be made to the individual within the maximums set out in the policy tables above.
The Remuneration Committee has a preference not to provide a “buy out” arrangement and/or to establish
additional or particular arrangements specifically to facilitate the recruitment of the individual. However,
where an individual would be forfeiting remuneration or employment terms in order to join the Group, the
Remuneration Committee may award appropriate compensation. The Remuneration Committee would re-
quire reasonable evidence of the nature and value of any forfeited arrangements and would, to the extent
practicable, ensure any compensation was of comparable commercial value and capped as appropriate, tak-
ing into account the terms of the previous arrangement being forfeited (for example the form and structure
of award, timeframe, performance criteria and likelihood of vesting). Where appropriate, the Remuneration
Committee would have a preference for buy-outs to be delivered in the form of shares in the Company. All
such awards will be appropriately discounted to ensure that the Group does not, in the view of the Remuner-
ation Committee, over-pay. The Remuneration Committee will also consider the application of performance
conditions and/or clawback provisions, as appropriate. Details of any “buy out” awards will be appropriately
disclosed, and any arrangements would be made within the context of minimising the cost to the Group.
In any case, total value of “buy out” award, should not exceed 100% of the salary (including cash and share
salary) paid for the comparable executive position the year immediately preceding to the recruitment.
The Group may make a contribution towards legal fees in connection with agreeing employment terms. The
Group may also agree to pay certain expenses and taxes should an executive Director be asked to relocate
to a different country, such that the executive Director pays no more than would have been required in the
home location.
13. POLICY ON PAYMENTS FOR LOSS OF OFFICE
The following paragraphs describe the Group's general policy on payments for loss of office.
Any compensation payable in the event that the employment of an executive Director is terminated will be
determined in accordance with the terms of any service contract between the Group and the executive, as
well as the relevant rules governing outstanding deferred bonus share awards, awards under the LTIP and
this Policy.
The Remuneration Committee will take all relevant factors into account when considering whether or not
the Director is a good leaver (as set out in their service contract or other applicable plan document). The
Remuneration Committee will exercise its absolute discretion to determine whether such terms should be
included in any new service contract.
In addition to any payment referred to above, the Remuneration Committee reserves discretion as it con-
siders appropriate to continue benefits beyond the date of termination, pay for relocation to previous loca-
tion, where applicable, make payments in lieu of notice, accelerate the vesting of equity awards, and/or pay
for out placement services and/or legal fees. In certain circumstances, the Committee may approve new
contractual arrangements with departing executive Directors, potentially including (but not limited to) set-
tlement, confidentiality, restrictive covenants and/or consultancy arrangements; these arrangements would
only be entered into where the Committee believes that it is in the best interests of the Company and its
shareholders to do so.
Generally, the Group would require a non-compete and confidentiality agreement from the departing exec-
utive Director to protect the interests of the Group.
211
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Vesting and lapse of awards
If an executive Director ceases to be employed by any Group company at his/her sole decision before the
service contract expires or if the executive Director leaves for a bad leaver reason, the executive Director
must return all bonus shares awarded for which applicable holding period requirement has not been met
(or as directed by the Company) and/or any nil cost options awarded will lapse and any unvested awards
under the LTIP will lapse. Depending on the circumstances, the Remuneration Committee may, at its sole
discretion and with regard to any recommendation made by the CEO of the Company (as applicable), allow
the executive Director to partially or fully retain such bonus shares and/or LTIP awards.
If the executive Director is determined by the Remuneration Committee to be a good leaver, the executive
Director is entitled to receive an award of deferred salary and deferred bonus shares pro-rated for both
time and performance during the performance year. All outstanding awards of deferred salary and deferred
bonus will continue to vest on their initial terms. Subject to the achievement of the relevant performance cri-
teria, a portion of any outstanding awards under the LTIP may vest, subject to a reduction pro rata to reflect
shortened period of employment between grant and the end of the holding period. In general, the original
performance period will continue to apply. However, where, in the opinion of the Remuneration Committee,
early vesting is appropriate, or where it is otherwise necessary, awards will vest by reference to performance
criteria achieved over the period of employment.
If, during the three years after the dismissal of the executive Director as a good leaver, it is established that
the executive Director was a bad leaver, the provisions applicable to bad leavers will apply.
Executive Directors - notice periods
Notice periods are set out in the executive Director's service contract. Generally speaking, either party may
terminate the service contract by giving the other party not more than one year and not less than seven
months' notice and the Group will reserve the right to terminate without notice in certain circumstances.
Notice periods will be reviewed by the Board and the Remuneration Committee when contracts are due for
renewal with consideration given to business continuity and potential candidates in the market, amongst
other factors.
Service contracts and letters of appointment
The service contracts of executive Directors do not have a fixed duration and may be terminated by either
party (see further details above under "Notice Periods"). They may contain tailored terms which allow for
termination payments to be paid if the executive Director’s employment is terminated under certain cir-
cumstances, such as following a corporate change, a change in control, involuntary termination, termination
without cause, for "good leaver" reasons (including) death or disability, each as defined in the applicable
executive Director’s service contract. Details of such terms contained in the current executive Directors' ser-
vice contract are described below (the executive Directors’ service contracts and non-executive Directors’
letters of appointment are available for inspection at TBC PLC’s registered office):
(a) Service contracts of the Group's current executive Director
Service contracts with TBC PLC
On 12 May 2016, TBC PLC entered into a service agreement with Vakhtang Butskhrikidze. The service agree-
ment can be terminated by either party giving to the other party not less than seven months' written notice.
In addition, TBC PLC may terminate the service agreement without notice or pay in lieu of notice for cause
(as defined in the service contract). The service contract contains non-compete and confidentiality provi-
sions and is governed by English law.
Service contracts with TBC JSC
Vakhtang Butskhrikidze also serves as CEO of TBC JSC. Although it is not strictly required under UK law,
we have described the service contract that the Group's executive Director has with TBC JSC below for
completeness.
The current service agreement provides for Mr Butskhrikidze to act as CEO of TBC JSC. The service agree-
ment contains non-compete and confidentiality provisions and is governed by Georgian law.
212
REMUNERATION COMMITTEE REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2020 (b) Letters of appointment – non-executive Directors
Each non-executive Director is required to submit himself or herself for annual re-election at the Annual
General Meeting. The appointments are for one year, renewable each year following the AGM approval.
The letters of appointment 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 Group 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 documented
incurred expenses incurred prior to the termination date.
Legacy arrangements
The Remuneration Committee reserves the right to make any remuneration payments and payments for
loss of office notwithstanding that they are not in line with the Policy set out above, where the terms of that
payment were agreed before the Policy came into effect (including, without limitation, pursuant to awards
granted before the Policy came into effect), or before the individual became a Director of the Group (provid-
ed the payment was not in consideration for the individual becoming a Director). This includes the exercise
of any discretion available to the Remuneration Committee in connection with such payments.
14. CONSIDERATION OF EMPLOYMENT CONDITIONS WITHIN THE GROUP
The Company recognises the importance of employee engagement in setting remuneration for the exec-
utive Directors, NEDs and senior management. To this end, in 2019, the Board appointed Tsira Kemularia as
the designated non-executive Director to enhance the dialogue between the workforce and the Board and
to further strength employee engagement on the topic of executive remuneration.
In accordance with prevailing commercial practice, the Remuneration Committee evaluates the compensa-
tion and conditions of employees of the Group when determining the Policy with respect to executive Di-
rectors. The Remuneration Committee may engage external advisors to assist in analysing remuneration in
the Group. Consistent with practice in the industry in which the Group operates, it is not the Group's policy
to consult with staff on the pay of its Directors.
15. MINOR CHANGES
The Remuneration Committee may make, without the need for shareholder approval, minor amendments to
the Policy for administrative purposes or to take account of changes in legislation.
213
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 AUDIT COMMITTEE REPORT
CHAIRPERSON’S LETTER
Dear shareholders,
I am pleased to introduce the Audit Committee Report for 2020, having taken over as interim Chair of the
Audit Committee on 14 February 2021 following the retirement of Nicholas Haag from the role. I have been a
member of the Committee since September 2018. On behalf of both the Board and the Supervisory Board
of the JSC, I would like to thank Nicholas for his role in shaping the work and the practice standards of the
Committee, and the management team for their invaluable support during this interim period.
During this difficult year, which has been marked by extraordinary events following the global COVID-19
pandemic, the Audit Committee has continued to fulfil its responsibilities and meet its key objectives. On
behalf of the Board, the Committee has focused on reviewing a number of key accounting judgements
relevant to the financial statements, including Expected Credit Loss Allowances to reflect new macroeco-
nomic assumptions and sector specific estimates, whilst continuing to supervise internal management con-
trol functions to ensure that the exceptional working environment in 2020 has not impacted on standards.
Regarding accounting principles, the Committee reviewed and agreed an accounting policy change with
regard to valuing the subsequent measurement of land, buildings and construction in progress, recorded
under Premises and Equipment where the Group now applies the cost model (please refer to page 242 for
details). I am pleased to note that, thanks to the incredible resilience of TBC Bank Group’s management and
employees, along with agile adaptation to a new, hybrid way of working, the Group’s internal processes and
systems have succeeded in maintaining best practice and delivering the expected results.
Ongoing co-operation with the Risk Committee has been essential in obtaining assurance about the Group’s
long-term viability. The fact that several Directors are joint members of both the Audit Committee and the
Risk Committee has been helpful in ensuring the smooth coordination of the oversight function delegated
by the Board to the Committees. The Viability Statement required by the Code can be found at pages 159-
160. This has been assessed and challenged by both the Audit and Risk Committees.
The Committee also reviewed the management and Internal Audit assessment of the Group’s internal con-
trols, which covers all aspects of external statutory and regulatory reporting. The Committee considers all
reports in detail and ensures implementation of all actions to address the deficiencies that have been iden-
tified. I would draw shareholders’ attention to the initiatives that the Committee has undertaken to sup-
port Internal Audit in performing information technology audits. Given the increase in the number of digital
214
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 transactions by our customers as well as the new hybrid working environment implemented to maintain
the best safety standards for our employees, cyber security has become highly significant to the business.
The Committee has considered an initial review of our cyber security systems, and further reviews will be
undertaken in 2021 so that the Board and Management can continue to implement new initiatives towards
excellence in this field.
Maria Luisa Cicognani
Chairman of Audit Committee
26 April 2021
COMMITTEE MEMBERS AND MEETINGS
The members of the Audit Committee throughout the year were: Nicholas Haag (Chairman), Maria Luisa
Cicognani, Arne Berggren and Tsira Kemularia. On 15 February 2021, Nicholas Haag stepped down as Chair-
man of the Committee whilst remaining a member, and Maria Luisa Cicognani took over as interim Chair. A
search for a new Chair of the Audit Committee is underway and the Board hopes to be able to appoint a new
Chair by the end of June 2021. In March 2021, Arne Berggren stepped down from the membership of Audit
Committee, further to his appointed as the Chairman of the Board and the Supervisory Board.
As of date of this report, the Audit Committee consists of three independent, non-executive Directors: Ma-
ria Luisa Cicognani (interim Chair), Tsira Kemularia and Nicholas Haag.
All members of the Committee were independent non-executive Directors, and there were no changes to
the membership of the Committee during the year under review. For the purpose of the UK Corporate Gov-
ernance Code, Maria Luisa Cicognani, Nicholas Haag, Arne Berggren and Tsira Kemularia all have relevant
financial experience. Full biographical details of all Committee members are given on pages 162-165. This
depth of experience enables the Committee to deal efficiently with the matters under its remit and chal-
lenge management when required.
To maintain a close link with the activities of the Risk Committee, the Chairman of the Audit Committee is
also a member of the Risk Committee; Arne Berggren, Tsira Kemularia and Nicholas Haag are also Chairman
and members, respectively, of the Risk Committee.
HOW THE COMMITTEE SPENT ITS TIME
Internal Audit
External Audit
Financial & Regulatory Reproting
Committee Governance Matters
Other Matters
215
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 The Committee met nine times during the year.
The Committee invites the Chairman, CEO, CFO, CRO, Head of Internal Audit and Head of Compliance to
all meetings. Other members of management attended to present relevant matters. Representatives of PwC
attended all meetings. The Company Secretary acted as Secretary to the Committee. After each Commit-
tee meeting, the Board receives the meeting minutes and a report from the Committee chair.
Members’ attendance at the Audit Committee’s meetings during the year, at the Company and the Bank
levels, are set out in the Directors’ Governance statement on page 154.
COMMITTEE RESPONSIBILITIES
The Committee acts independently of management to fulfil its fiduciary duty to shareholders and ensure
that their interests are properly protected in relation to financial reporting, to maintaining an appropriate
relationship with external auditors, and to the effectiveness of the Group’s systems of internal controls and
risk management.
The Committee’s terms of reference have been adopted by the Board and are available on the Company’s
website, www.tbcbankgroup.com.
The Committee has a number of key responsibilities, which are, primarily, as follows:
to monitor the integrity of the financial statements of the Group to ensure that they meet all statutory re-
quirements and appropriate Financial Reporting Standards and that all areas of judgement are fully con-
sidered before recommending to the Board that they give a fair, balanced and understandable position of
the Company;
to review the Company’s internal financial controls and other internal controls to ensure the effectiveness
of the internal control structure and review any recommendations on changes to them, and, in conjunc-
tion with the Company’s Risk Committee, to assess, manage and monitor the Group’s internal control, risk
management, compliance and governance functions;
to consider the effectiveness of the Group’s internal audit activities and its relationship with the external
auditors; and
to make recommendations to the Board in relation to the appointment, re-appointment and removal of
the Group’s external auditors, and approving their remuneration and terms of engagement.
THE COMMITTEE’S EFFECTIVENESS
The Committee undertook an internal assessment of its performance as part of the overall Board evaluation
process, as described on pages 151-152. This assessment was led by the Company Secretary and collated
the Committee members’ responses to an internally developed questionnaire. The outcome of the process
indicated the need for the Committee to consider the following in 2021:
review the processes associated with preparation of financial statements, particularly the annual report,
to make the process more streamlined and effective;
consider the Group’s internal control structure holistically and ensure that key control processes are op-
erating effectively;
review the robustness of the data points used to calculate Key Performance Indicators that generate
management variable compensation; and
consider an ongoing training programme for current members and new appointees.
The Committee has in place a schedule of work that details all of the tasks planned for the year. Before each
meeting, the Secretary discusses the agenda with the Committee Chair, and combines planned tasks from
the schedule of work with any other matters that have arisen. All papers are circulated to Committee mem-
bers for review a week prior to the meeting.
The Committee undertakes an assessment at the end of the financial year to ensure that it has covered all
the required items detailed in the Committee’s terms of reference.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020AUDIT COMMITTEE REPORT CONTINUED
THE COMMITTEE’S AGENDA DURING THE YEAR
During the year under review, the Audit Committee considered the following matters:
Key area of review
Committee review and conclusion
Audited financial statements
Considering the Group’s and the JSC TBC Bank’s Consolidated and Sep-
arate Financial Statements along with the Independent Auditor’s Report
for the year ended 31 December 2020;
Ensuring that the statements give a fair, balanced and understandable
picture to shareholders of the Group’s operations;
Considering and agreeing to any significant accounting judgements pro-
posed by management and taking into account the report of PwC, the
Group’s Auditors, on the financial statements before recommending their
approval to the Boards of the respective companies.
Planning the 2020 financial year audit
Discussions with the Group’s auditors, PwC, over internal control issues
Interim statements of the Group
arising from the 2019 financial year audit;
Considering the issues impacting on the Group, in particular going con-
cern and viability as a result of the COVID-19 pandemic;
Agreeing an audit plan for 2020 with the auditors.
Reviewing the statements for the half-year and first and third quarters,
along with the results presentations to investors; and recommending
those statements to the Board for approval.
External auditors
Discussion on external audit fees and agreeing the level of fees paid to
the auditors;
Reviewing the level of usage and, where appropriate, approving fees to
the auditors for non-audit matters;
Discussing the effectiveness of the audit; considering a range of alternative
auditors available to the Group and whether to conduct an audit tender.
Internal audit plan for 2020
Approving the methodology for identifying areas in need of review by the
internal audit team;
Approving the areas requiring review in accordance with regulatory re-
quirements, including, for 2020, the impact of COVID-19 on operational
processes across the business;
Agreeing on areas planned for review by the operational risks and compli-
ance teams;
Approving the process that the internal audit follows to determine and
report on these key risks, as explained on pages 223-224 of this report.
Cyber risk and other IT issues
Considering a suitable provider to co-source the internal audit of IT issues
Reports from internal audit
across the Group;
Agreeing a scope of works for 2020 and 2021;
Reviewing the results of an audit of the Group’s cyber security structure
and governance.
The Committee analyzed and discussed the outcome of 83 audits un-
dertaken in 2020, covering a wide range of areas including the Bank’s op-
erations, the loan portfolio, significant risk management and other bank
related processes, and IT processes;
The Committee also received reports on internal risk and operational
control systems of the Group’s key subsidiaries and ecosystems busi-
nesses. This was crucial in delivering assurance to the Board in relation to
soundness of the Group’s risk management, internal controls and gover-
nance as a whole;
Where these reports identify areas deemed in need of improvement, the
issue is highlighted and the Management’s response discussed, along-
side their proposed timetable to resolve the issue.
217
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Overseeing the management and
operation of the internal audit function
Considering Committee matters
The Assessment of the Head of Internal Audit’s performance and her team;
The effectiveness of the whole function;
The development objectives for the staff members of the team;
A review of the Internal Audit Charter; and
Approving a revised Internal Audit handbook, which incorporates all the
recommendations from the Effective Quality Assurance project under-
taken in 2019 with the support and advice of one of the Big Four audit
companies, which explains the function and role of the department to the
Group’s management.
Reviewing the revised terms of reference for both the PLC Audit Com-
mittee and JSC TBC Bank Audit Committee and recommending them to
their respective Boards;
Ensuring that all actions required by the terms of reference had been
completed; agreeing a calendar of items for the forthcoming year; and
Evaluating the performance of the Committee.
Other Items
Reviewing PwC benchmarking report on impairment and provisioning
under IFRS 9;
Considering issues related to the convergence of local accounting stan-
dards with IFRS 9 principles.
HOW THE AUDIT COMMITTEE REVIEWED THE FINANCIAL STATEMENTS
The Committee, under the powers delegated to it under its terms of reference, has reviewed the annual
report and financial statements with the intention of providing advice to the Board on whether, as required
by the UK Corporate Code, “the annual report and accounts, taken as a whole, is fair, balanced and under-
standable and provides the information necessary for shareholders to assess the company’s position and
performance, business model and strategy”.
To make this assessment, the Committee considered the annual report and financial statements in detail
to ensure that the key messages of the annual report were aligned with the Group’s performance and the
strategy being pursued. The significant issues considered by the Committee in relation to the financial
statements were consistent with those identified by the Independent Auditors’ report on pages 225 to 232.
Prior to the start of the audit, the Committee considered the audit coverage levels and underlying audit
materiality levels and agreed them with the external auditors, PwC. The Committee ensured that the ma-
teriality levels agreed were sufficient to obtain appropriate audit evidence and that all key risk areas were
adequately addressed. Details of the materiality levels agreed are disclosed in the Independent Auditor’s
report on page 229.
The Committee has considered the range of Alternative Performance Measures (APMs) used by the Group.
APMs are used in accordance with ESMA guidelines and the Management highlights any impact on APMs
as a result of changes to accounting methods.
In addition, in conjunction with the work undertaken by the Company’s Risk Committee, the Committee has
satisfied itself that the impact of the COVID-19 global pandemic has been reflected in the analysis of the
Group’s financial position. This has enabled the Board to be confident in agreeing to prepare the accounts
on a Going Concern basis, and approve the Viability Statement prepared in accordance with the UK Corpo-
rate Governance code.
In addition, throughout the year the Audit Committee has undertaken a robust review of the financial state-
ments published at the half year and the two quarterly statements.
The Committee has reviewed the various actions that the Company has taken to ensure that all decisions
have been taken in accordance with s172 of the UK Companies Act, and that all stakeholder considerations
have been taken into account when making key decisions. This has enabled the Board to approve the stake-
holder engagement disclosure on pages 70-73 of the Strategic Report.
218
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020AUDIT COMMITTEE REPORT CONTINUED THE EFFECTIVENESS OF THE EXTERNAL AUDIT PROCESS
In preparation for the audit of the 2020 financial year, the Committee held audit planning meetings with PwC
in the fourth quarter. The Committee suggested priority areas for PwC to consider, highlighting any concerns.
The Committee carried out a formal External Auditor Assessment Review for 2020, which confirmed its view
that PwC continues to perform satisfactorily. A series of relationship meetings were held with PwC to dis-
cuss potential improvements in terms of their delivery to the Group. The Committee, with the concurrence
of the Board, concluded that it had reached a satisfactory understanding with PwC both as to the level of
fees to be charged in 2020 and the resource base to be made available. A further review to consider wheth-
er to hold a formal audit tender will be undertaken in 2021. At present, the Committee considers that PwC
continues to offer an independent, professional and cost-effective service, and is satisfied that PwC has
a robust process for maintaining independence and monitoring such compliance in accordance with the
FRC’s 2019 Ethical Standards and the 2019 International Ethics Standards Board for Accountants (IESBA), to
which Georgian law also refers.
Due to the structure of the Group, both the Edinburgh and Tbilisi practices of PwC are involved in the ex-
ternal audit process. PwC Georgia is part of PwC’s Central and Eastern Europe network. In the opinion of
the Committee, this ‘double coverage’ works well and provides extra reassurance in terms of scrutiny. The
cooperation and communication between the two practices is well coordinated and draws, as required, on
wider international subject matter experts of the firm, for example in insurance. The London team coordi-
nates the entire audit for the Company with audit instructions issued by London and processes in place to
monitor PwC Tbilisi’s work.
In 2020, the engagement leader of the Bank’s audit was rotated whilst the Group’s audit leader was rotated
in 2019 and continues his role in the 2020 audit.
SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATE-
MENTS AND HOW THEY WERE ADDRESSED
In reviewing and recommending the Group’s financial statements for the year to 31 December 2020 to the
Board, the Committee considered the following judgements recommended by the management:
Determination of the going concern basis and the impact of COVID-19
In light of the increased uncertainty caused by the COVID-19 pandemic, the Management has performed an
assessment of the Group’s ability to continue as a going concern, which the Committee and Board reviewed
in detail.
The Group posted resilient financial results for the year ended on 31 December 2020. The Committee be-
lieves that the Group’s robust records of financial results increases its abilities to perform under stress con-
ditions and maintain strong capital, liquidity and funding positions.
In the light of the ongoing COVID-19 pandemic, the management updated its view of the main financial
parameters, including profitability, liquidity and capital adequacy ratios, and the impact on them of the
COVID-19 pandemic. The Management has performed a stress test exercise to assess the Group’s ability to
continue as a going concern. The Bank’s capital position in the stress scenario has been assessed. The re-
sults show that the Bank has enough capital to meet the NBG’s regulatory requirements. The test is based on
the Bank’s expectations of movements in the major macroeconomic parameters of the Georgian economy
for the next three years in line with the stress scenario. In addition to the stress test, the Management also
performed a reverse test exercise, to see in what scenario its capital adequacy was at risk. The results of the
reverse test have indicated that such a scenario would be highly unlikely and that the Bank would recover
within one year.
Considering the results of the stress test exercise, the Bank’s ability to maintain operational resilience and
attract additional necessary funding and the regulatory relief measures introduced by the NBG, the Direc-
tors have not identified any material uncertainties that could threaten the going concern assumption and
have a reasonable expectation that the Company and the Group have adequate resources to remain opera-
tional and solvent for the foreseeable future (which is, for this purpose, a period of 12 months from the date
of approval of these financial statements).
219
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Accordingly, the Group’s and the Company’s consolidated financial statements are prepared in line with the
going concern basis of accounting.
Expected credit loss allowance of loans and advances to customers in relation to COVID-19
Expected Credit Losses (ECLs) are a measure of the probability-weighted estimate of credit losses, which the
management needs to estimate every year. For the 2020 financial year, this was more significant due to the
impact of COVID-19 on the Georgian economy. Following a review, the Committee agreed that the ECL for
2020 should be increased from GEL 312,557 thousand to GEL 606,246 thousand. Note 3 to the Consolidated
Financial Statements contains the sensitivity analysis associated with the key drivers that affect the ECL.
The Committee discussed with PwC the current provisioning methodology for ECLs used by the Bank,
including: the impact of COVID-19 on creditors; the reasonableness of the assumptions made; and individ-
ual, mostly corporate, loan exposures categorised as defaulted and ‘watch lists’. Review of the ‘watch list’
indicated that the overall position was stable with only a limited number of frequent additions that would
indicate a deteriorating book or poor ‘capture’ of problem loans.
The Committee also discussed with the external auditors the governance controls around the model used
by the Group for calculating the ECL.
Changes in accounting policy in relation to the measurement of land, buildings and construction in progress
During 2020, the Committee agreed that the Group should change its accounting policy in relation to the
subsequent measurement of land, buildings and construction in progress, as recorded under Premises and
Equipment. The Group now applies the cost model, whereby assets are carried at cost less accumulated de-
preciation and any accumulated impairment. Prior to this change, the Group applied a revaluation model that
carried land, buildings and construction in progress at a revalued amount being the fair value at the date of
revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
In considering this change, the Committee reviewed the impact that it would have on the Group’s financial
statements and key ratios. As a result of the change, the balance sheet accounts for the affected periods
were restated accordingly. In particular, the Group’s assets, equity and liabilities decreased by GEL 51.0 mil-
lion, GEL 48.6 million and GEL 2.4 million, respectively, as at 31 December 2019, whilst the Group’s assets,
equity and liabilities decreased by GEL 52.0 million, GEL 49.6 million and GEL 2.4 million, respectively, as at
31 December 2018. Note 2 to the Consolidated Financial Statements details the amounts and the impacted
financial statement line items. The Committee noted that the change in policy provided a more relevant and
consistent basis for the valuation of land, buildings and construction in progress, whilst it also enabled in-
vestors to make accurate comparisons across the banking industry, since the application of the cost model
is a common and widespread market practice.
THE INDEPENDENCE OF OUR EXTERNAL AUDITOR
In line with its terms of reference the Committee is required to consider: the reappointment of the auditors;
the suitability of the lead engagement partner, as well as the wider audit team; their remuneration; and the
terms of engagement. PwC has been the auditor of JSC TBC Bank since 2008, and became auditors of TBC
Bank Group Plc in 2016 following the Company’s premium listing on the London Stock Exchange. Under
the UK implementation of the EU Audit Regulations for Public Interest Entities, the audit rotation rules set
the date for the 10-year mandatory tendering of the Group audit in 2016; therefore a mandatory audit tender
is not required until 2026. Nevertheless, in 2018, the Committee held extensive discussions on the merits
and demerits of putting the Group’s audit out for tender and embarked on a series of discussions during
the year with three other major international accounting firms. The Committee concluded no realistic al-
ternative was available as no other significant audit firm was yet sufficiently well-resourced in the Georgian
market, although there is an encouraging trend in this direction. The Committee, however, noted that new
regulations from the National Bank of Georgia required a shorter period for rotation of the Bank’s auditor to
another firm. The Committee will consider the need to tender the whole Group audit prior to 2023, in line
with those regulations.
At present, the PwC partner leading the audit across the Group is Allan McGrath, who was rotated into this
position in 2019. The engagement leader of the Bank’s audit was rotated to Thomas Magill in 2020.
220
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020AUDIT COMMITTEE REPORT CONTINUED The Committee considers that the Company has complied for the financial year under review, and to the
date of this report, with the requirements of the Statutory Audit Services for Large Companies Market In-
vestigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order
2014, which relates to the frequency and governance of tenders for the appointment of external auditors and
to the scrutiny of a policy on the provision of non-audit services (see below).
In addition to the annual review of effectiveness, the Committee considered the independence and objec-
tivity of PwC through a combination of:
assurances provided by the External Auditor on the safeguards in place to maintain independence; and
oversight of the non-audit services policy and fees paid.
PwC have confirmed in writing (in their annual independence letter) both their independence and that only
permitted non-audit services were provided over 2020. Reviewing and ensuring the continuation of the
independence and objectivity of PwC as our external statutory auditors was an important factor in fulfill-
ing our governance as a Committee and was equally monitored by PwC through their own procedures for
pre-approving any non-audit services.
The Group’s Non-Audit Services Policy governs the engagement of PwC to provide non-audit services. As
defined by the policy, the Committee must approve all non-audit services in advance, following a recom-
mendation by the Group Chief Financial Officer. The policy only permits the use of PwC for non-audit ser-
vices where there was either a clear synergy with their audit role (i.e. an immediate ‘by product’ of the audit
process), or when required by legislation. The Group monitors all tracking procurement and tendering for all
non-audit fees. Amounts approved under the policy are reported at Committee meetings. Overall in 2020,
the Group spent US$ 1.28 million (2019 US$ 3.0 million) for work undertaken by various accounting-based
professional services firms for both audit and non-audit services.
As for the fees paid specifically to the Group’s current audit company, in 2020 the Group contractual fees
paid to PwC were US$ 0.95 million, of which US$ 0.94 million was in respect of audit services. This was pre-
dominantly for the Bank audit, but included audits of the subsidiaries of both the Bank and PLC, notably TBC
Leasing, TBC Insurance and TBC Bank Uzbekistan. PwC’s proposed fees were benchmarked against other
similar services provided by other suppliers. The Committee concluded that the total amount of non-audit
fees, US$ 100,000, paid to PwC were not-material in nature and linked to their audit role. The figure repre-
sented 1% of the average fees to the firm for the Group audit services over the preceding three years, which
is within the 70% cap required by the Group policy on non-audit services. In 2019, the costs related to the
issuance of senior and AT1 bonds and paid to PwC for non-audit services totalled US$ 0.415 million over the
year, which represented 53% of the average fees to the firm for the Group audit services over the preceding
three years. The figure was still well within the 70% cap required by the Group policy on non-audit services
The Group has a policy of sharing business between suitable audit firms to provide diversification, promote
competition and build relationships. In 2020, non-audit work was allocated to 7 different accounting-based
firms, in line with a decision to reach out beyond the Big Four. The largest single non-audit contractual
spending in 2020 was related to the work performed externally by the international consulting company, to
perform the valuation of repossessed real estate for a total fee of GEL 57 thousand.
HOW THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL
SYSTEM WORKS
Internal Control
The Board has delegated to the Committee responsibility for reviewing the effectiveness of the system of
internal control. This covers all material controls including financial, operational and compliance controls, in
addition to the financial reporting process.
A sound system of internal control contributes to safeguarding the best interests of all stakeholders and
the Group’s assets and liabilities. While the management is responsible for establishing and maintaining
adequate internal controls over the capturing, processing and reporting of financial information, the Com-
mittee is responsible for ensuring the effectiveness of these controls and for confirming that they are suf-
ficiently robust to cope with changing economic conditions and continued strong growth in the Group. As
noted above, Internal Audit provides reports on control weaknesses and breakdowns that include a robust
221
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 root cause analysis and recommendations for improvements, along with clear ownership/accountability and
deadlines for remediation. The Committee regularly reviews progress of this vital function and alerts the
CEO, CFO, CRO and divisional heads as well as, if necessary, the full Board if it sees intractable problems
and insufficient commitment to continuous process improvement. The Committee was pleased to note
that in 2020 there was further improvement in the rate and speed of remediation of identified internal audit
report deficiencies.
The Committee is aware of increased regulatory and stakeholder focus on Internal Control Over Financial
Reporting (ICFR) issues and the need for proactive responses from companies and audit committees. Much
of the finance function involves data gathering, the vast majority of which is system generated. The Group
is increasing its automation of remaining manual controls, which reduces the risks of human error or mal-
practice and also delivers cost-saving benefits. The Group’s finance function is also considering how both
data analytics and artificial intelligence can deliver improved predictive insights relevant to the Group’s
reporting system and provisioning schedule. In 2021, the Committee will continue to monitor the Group’s
finance function during its transformation strategy, considering the risk of change inherent in the process.
The Committee is also monitoring the impact on the Group of the planned international expansion and di-
versification, and is taking steps to ensure that the finance function has sufficient resources in place to cope
with the extra workload involved.
The Committee has reviewed the opinions of both PwC and the Internal Audit team on the robustness of the
Group’s internal controls, risk management and governance systems. The Committee considers that there
is a proper system and allocation of responsibilities for day to day monitoring of financial and other controls
within the Group, with no significant systemic failings or weaknesses. It has also considered the risk of exec-
utive override of controls, and discussed with PwC their assessment of this mandatory significant audit risk.
Following every noted fraud event larger than US$ 20,000, the Management conducts a full review, which
is presented to the Committee and, if appropriate, to the full Board, along with the Management’s recom-
mendations to avoid any future repeat events. During 2020, two cases of internal fraud were identified and
further escalated to Internal Audit for investigation. The Committee has directly discussed all larger frauds
with senior management and is confident that the CEO and his deputies have taken full ownership of the
issues and rectified any arising vulnerabilities.
The Committee reviewed PwC’s management letter from the 2019 audit, and discussed the management’s
responses to it. The committee is satisfied that there are no major issues raised therein. We are also content
with the PwC’s requested management representation letter (signed by the CEO and CFO) in relation to the
2020 audit.
Internal Control and Risk Management effectiveness
Following the Committee’s review and recommendation, the Board agreed that the system of internal con-
trol (including risk management) continues to be effective.
During the year, Internal Audit has conducted several engagements in the Risk Management and the Cyber
Security functions. Taking into account the actions taken, the Committee also confirms that no significant
failings or weaknesses have been identified during the year and up to the date of this Annual Report. Pro-
cesses are in place to ensure that necessary action is taken, and progress is monitored where areas for
improvement have been identified.
Regulatory compliance
The Committee provided oversight of the Group’s compliance with:
All necessary regulatory requirements, including requirements for the performance of internal audits of
certain processes within the Group; and
All necessary regulatory reporting.
222
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020AUDIT COMMITTEE REPORT CONTINUED HOW INTERNAL AUDIT FUNCTIONS
Internal Audit provides an objective and professionally challenging review of how the Group handles both
key financial and non-financial reporting and data management tasks, to protect the assets, reputation and
sustainability of the organisation. While primary responsibility to manage risk under the Group’s risk mod-
el resides with the Management, Internal Audit’s role, as the “third line of defence”, is to identify potential
problems and recommend ways of improving risk management and internal controls. Internal Audit has
unrestricted access and scope for review across the whole organisation.
The Head of Internal Audit attends all Committee meetings, as well as Risk Committee meetings. The Com-
mittee meets regularly with the Head of Internal Audit (Chief Audit Executive) with no management present.
Internal Audit undertakes audits of all of the Group’s key operating units on a regular basis with a rolling
audit plan agreed in advance with the Committee. In 2020, 99% of all pre-agreed internal audit assignments
were completed. The Head of Internal Audit reports the outcome of all audits and identifies any deficiencies
to the Committee, which then considers the issue both in terms of severity and underlying trends, noting
management’s proposed remediation. Appropriate follow-up is then monitored by the Committee. Opera-
tional units of the Group that have showed continuing weaknesses are routinely re-inspected to confirm if
improvements have been made and the Committee advised. Despite the further improvement in the rate
and speed of remediation of deficiencies, the CEO has confirmed that although all deficiencies will be ad-
dressed and will be prioritised according to the potential systemic risk they represent.
Internal Audit delivers an annual assurance statement to the Committee, which sets out the Head of Internal
Audit’s opinion, together with summarised reports of the internal audit work performed in comparison to the
plan during the year, and an assessment of compliance with auditing standards.
The hiring and retention of local Georgian internal auditors remains a challenge and, whilst attracting new tal-
ent, the Group also embraces alternative and more flexible staffing models. The Committee is, nevertheless,
satisfied that Internal Audit has sufficient human and financial resources to perform its role and the Commit-
tee has the correct training and tools (e.g. specialist software) to ensure that team members can function ef-
fectively. All managerial Internal Audit executives are currently training to achieve the relevant, internationally
recognised qualification (Certified Internal Auditor); at present, two team members are certified.
There is a particular shortage of IT internal auditors in Georgia. Given the importance of mitigating IT risk,
the Committee decided to co-source these skills from EY to carry out appropriate reviews and, at the same
time, educate our own audit staff to gain experience in this key risk area for the Group. The co-sourcing
practice arrangement will continue into 2021. It is planned by then to recruit and train a number of suitably
qualified IT internal auditors.
Internal Audit’s Charter was reviewed and approved in March 2020, ensuring its appropriateness for the
Group. The Committee routinely reviews Internal Audit’s remit and the annual and rolling five-year plan of
audits in place. The plan allows for some flexibility to allow urgent matters or emerging risks to be reviewed.
The Committee undertakes a formal assessment of Internal Audit and ensures that it is effective and suit-
ably embedded in the organisation. The Head of Internal Audit attends all monthly Management Board
meetings to identify developments in the business that might need review.
The Committee determines both the IA budget for the Group and compensation, including variable bonus
payments, for the staff. The Committee is also responsible for supervising the annual personal performance
assessment of the Head of Internal Audit, drawing on input from peers, direct reports and senior manage-
ment, including the CEO and CFO.
The Committee considers, with corroboration from an External Quality Assessment (EQA), that Internal Au-
dit has established its arms-length independence from the management and is free from any interference
in determining the scope and performance of its work and the communication of its results.
The Committee is overseeing a project to move the Internal Audit function towards a more ‘agile’ approach.
Internal Audit is seeking to use robust root cause analysis to develop more themed reports, prioritising the
higher risk areas of the Group and responding rapidly to emerging issues, undertaking special deep-dive
investigations (particularly arising from situations where the Group may have heightened vulnerability or has
been the victim of fraud) and ensuring that Internal Audit is able to add more strategic value.
223
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In addition to its regular workload, the Committee commissioned Internal Audit to undertake a number of
special assignments, including: investigations of particular fraud events; and some of the Bank’s significant
subsidiaries, in particular TBC Pay, TBC Insurance and TBC Leasing as well as My.ge (which is TBC’s only
material digital ecosystem).
In addition, Internal Audit maintained its focus on the identification/reporting processes around capturing
and disclosing related party lending and anti-money laundering procedures within the Group, in line with
regulatory requirements in Georgia.
Internal Audit assessed the Bank’s compliance with ISO 14001:2015 requirements for its Environmental and
Social Risk Management Systems.
External Assessment and the Evolution of Internal Audit
In early 2019, the Committee supervised the completion of an External Quality Assessment (EQA) of the
Group’s Internal Audit department assessing Internal Audit’s function in terms of “efficiency and effective-
ness in matters of Governance, People, Infrastructure and Operations”. The benchmark was the Code of
Ethics and International Standards for the Professional Practice of Internal Auditing and the Chartered Insti-
tute of Internal Auditors’ (“IIA”) September 2017 Guidance on Effective Internal Audit in the Financial Services
Sector. The exercise was conducted by EY and included a benchmarking analysis against peers according
to the IIA’s Audit Intelligence Suite Benchmarking Report. It was the first time that the Group has conducted
an EQA exercise, and not only were the results reassuring, but the unit also benefited from the feedback and
the assessment process itself. The conclusion gave Internal Audit a “generally conforms” score (the high-
est available ranking), concluding that “in general there is a high degree of compliance with IIA standards’
requirements”, with the function being “well aligned with the Bank’s operations and its people”. The recom-
mendations issued during this exercise have in the main been put in place by Internal Audit during 2020.
224
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020AUDIT COMMITTEE REPORT CONTINUED INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF TBC BANK GROUP PLC
Report on the audit of the financial statements
Opinion
In our opinion, TBC Bank Group PLC’s group financial statements and company financial statements (the
“financial statements”):
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2020
and of the group’s and company’s profit and the group’s and company’s cash flows for the year then end-
ed;
have been properly prepared in accordance with International accounting standards in conformity with
the requirements of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: Consoli-
dated and Separate Statements of Financial Position as at 31 December 2020; Consolidated Statement of
Profit or Loss and Other Comprehensive Income, Consolidated and Separate Statements of Cash Flows
and Consolidated and Separate Statements of Changes in Equity for the year then ended; and the notes to
the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union
As explained in note 2 to the financial statements, the group, in addition to applying international account-
ing standards in conformity with the requirements of the Companies Act 2006, has also applied interna-
tional financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In our opinion, the group financial statements have been properly prepared in accordance with international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the Europe-
an Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and appli-
cable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ 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 remained independent of the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to list-
ed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in note 34 to the financial statements, we have provided no non-audit services
to the company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
The scope of our audit and the nature, timing and extent of audit procedures performed were determined
by our risk assessment, the financial significance of components and other qualitative factors (including
history of misstatement through fraud or error).
225
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Our scoping was primarily driven by legal entity contribution to profit before tax and other key financial
metrics. This approach also ensures that we align our resources with the location of the key financial re-
porting functions and material operations of the group. We also considered overall coverage in assessing
the appropriateness of our scoping.
Key audit matters
Expected credit loss allowance on loans and advances to customers (group)
Impact of COVID-19 (group and parent)
Materiality
Overall group materiality: GEL 23.5 million (2019: GEL 29.3 million) based on 5% of the average profit be-
fore tax for the last three years (2019: 5% of profit before tax).
Overall company materiality: GEL 16.2 million (2019: GEL 15.7 million) based on 1% of total assets.
Performance materiality: GEL 17.6 million (group) and GEL 12.2 million (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design proce-
dures in line with our responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial
statements section, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-com-
pliance with laws and regulations related to the rules of the National Bank of Georgia, and we considered
the extent to which non-compliance might have a material effect on the financial statements. We also con-
sidered those laws and regulations that have a direct impact on the preparation of the financial statements
such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that
the principal risks were related to management bias through judgements and assumptions in significant
accounting estimates . The group engagement team shared this risk assessment with the component au-
ditors so that they could include appropriate audit procedures in response to such risks in their work. Audit
procedures performed by the group engagement team and/or component auditors included:
Enquiries of management, including the group’s Chief Legal Counsel, and Internal Audit, in relation to
known or suspected instances of non-compliance with laws and regulations and fraud.
Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and
detect fraud and errors in financial reporting.
Assessment of matters reported on the group’s whistleblowing helpline and the results of management’s
investigation of such matters.
Attendance at and inquiry of selected key governance committees and reviewing management informa-
tion presented at these meetings.
Reading key correspondence with regulatory authorities and legal advisors.
Challenging assumptions and judgements made by management in their significant accounting esti-
mates, in particular in relation to the expected credit loss allowance on loans and advances to customers.
Identifying and testing journal entries meeting specific risk criteria.
Incorporated unpredictability into the nature, timing and/or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware
of instances of non-compliance with laws and regulations that are not closely related to events and trans-
actions reflected in the financial statements. Also, 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 con-
cealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
226
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF TBC BANK GROUP PLC CONTINUED
of material misstatement (whether or not due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the ef-
forts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Expected credit loss allowance on loans and advances to
customers (group)
Refer to pages 214 to 224 (Audit Committee Chair’s report),
pages 241 to 261 (Significant accounting policies), page 261
to 263 (Critical accounting estimates and judgements in
applying accounting policies), and pages 270 to 293 (note 9:
Loans and Advances to customers).
We focused on this area as the management estimates
regarding the expected credit loss (‘ECL’) allowance are
complex and require a significant degree of judgement.
Under IFRS 9 management is required to determine the credit
loss allowance expected to occur over either a 12 month
period or the remaining life of an asset, depending on the
categorisation of the individual asset. This categorisation
is determined by assessing whether or not there has been
a significant increase in credit risk (‘SICR’) or default of the
borrower since loan origination. Additionally, certain events in
course of the year (e.g. payment holidays) resulted in necessity
for management to apply judgement in determination of the
stage of credit quality of the exposure.
It is also necessary to consider the impact of different future
macroeconomic conditions in the determination of ECLs. The
impact of COVID-19 on the economy has further increased
the level of uncertainty in the macroeconomic forecasts.
Management has designed and implemented a number
of models to achieve compliance with the requirements of
IFRS 9. Among others, management has applied judgement
to the models in situations where past experience was not
considered to be reflective of future outcomes due to limited
or incomplete data.
We consider the appropriateness of the model methodologies
and the following judgements used in the determination of
the modelled ECL allowance to be significant:
Setting of appropriate staging criteria
including
identification of SICR and default, taking into consideration
the impact of payment holidays granted to the borrowers
due to COVID-19 pandemic ;
Critical assumptions applied in the determination of loss
given default (‘LGD’) and probability of default (‘PD’);
Assessment of model limitations and use of post model
adjustments (‘PMAs’) if required to address such risks; and
Assessment of the key assumptions related to forward-
looking information (‘FLI’) including the appropriateness
of scenario weightings and macro economic variables in
light of COVID-19 impact.
We understood and evaluated the design of the key controls
over the determination of ECL allowance and tested their
operating effectiveness. These controls included among
others:
Controls over model performance monitoring, including
periodic reviews of the policy and models, testing model
estimates against actual outcomes and approval of
model methodology changes ;
Review and approval of the key
judgements and
assumptions used for determining staging criteria, LGDs,
PDs and FLI;
Controls over key parameters calculation by
the
calculation engine;
Controls over regular monitoring of the financial standing
of the borrowers;
Controls over assignment of staging criteria to exposures;
Controls over ECL calculation and analysis of results; and
The Management Risk Committee’s review and approval
of judgemental assumptions and assessment of ECL
modelled outputs.
We noted no exceptions
effectiveness of the above controls.
in the design or operating
We assessed whether the IFRS 9 ECL model methodologies
developed by management are appropriate, engaging our
credit risk modelling specialists and our industry knowledge.
This included an evaluation of the criteria set by management
for determining whether there had been a SICR or default,
and the critical judgements and assumptions applied in
determination of LGDs, PDs and FLI. We concluded that
management’s judgements in deriving staging, LGDs, PDs
and FLI were reasonable.
We independently verified the calculation of ECL and
assessed whether the ECL calculations were consistent with
the approved model methodologies.
We critically evaluated key aspects of model monitoring and
validation (“backtesting” of projected ECL) performed by
management relating to model performance and stability
and critically assessed the monitoring results. The test
results of statistical models were interpreted in the context
of COVID-19 circumstances and explanations were obtained
for deviations from the expectation.
We challenged management
the
appropriateness of the macroeconomic models as well as
weightings applied to each macroeconomic scenario. We
are satisfied that macroeconomic assumptions and scenario
weightings used by the Bank are reasonable.
respect of
in
227
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Impact of COVID-19 (group and parent)
Refer to page 214-224 (Audit Committee Chair’s report) and
pages 4 to 145 (Strategic Report).
and
support
conditions
programmes
The impact of the Covid-19 pandemic has resulted in
unprecedented economic
resulting
government
regulatory
interventions to support businesses and people. The Covid-19
pandemic has also changed the way that companies operate
their businesses, with one of most substantial impacts being
the transition to remote working. A substantial proportion of
the group’s employees have been working remotely during
2020. Our audit team has also been working remotely for
most of 2020.
and
The
impact of the Covid-19 pandemic and resulting
uncertainty has impacted a number of the estimates in the
Group and parent Company financial statements.
We challenged management in respect of the completeness
and ongoing appropriateness of PMAs recognised. We
assessed the PMAs applied including judgements and
assumptions used and calculations involved. As a result, we
deem that the impact of COVID-19 pandemic is appropriately
addressed by applying PMAs where existing models were
not able to capture the emerging risks, and management’s
judgements are reasonable.
Our planning and execution of the audit has given specific
consideration to the impact of COVID-19. This included
adopting a different basis for determining materiality to
take account of the significant reduction in profits due to
expected credit losses.
We engaged with the Board and management in a manner
consistent with our previous audits, albeit remotely using
video and telephone calls. The information and audit
evidence we need for the audit was provided in electronic
format in most of the cases. While our team ensured
that certain physical presence was still maintained and
inspection of physical evidence was still performed, audit
procedures were mostly performed virtually. We understood
and assessed the transition of Group employees to working
remotely on the control environment relevant to financial
reporting, and reflected this in our audit approach for new or
changed processes and controls.
Our work in relation to expected credit losses, the most
significant accounting judgements with COVID-19 impact,
is set out in the Key Audit Matter ‘expected credit loss
allowance on loans and advances to customers’ above.
reviewed management’s going concern
We have
assessment and conclusions are included in the section
‘Conclusions relating to going concern’ later in this opinion.
We assessed the disclosures made in the Group and parent
company financial statements. We are satisfied that these
disclosures are appropriate and in compliance with the
accounting requirements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the structure of the group and the company, the
accounting processes and controls, and the industry in which they operate.
TBC Bank Group’s banking and insurance activities are primarily carried out in Georgia, with small subsidi-
ary operations in four other countries. The Group’s business activities comprise of four segments for which
it manages and reports its operating results and financial position, namely Retail Banking, Corporate and
Investment Banking, Micro Small and Medium Enterprises (‘MSME’) and Corporate Centre.
JSC TBC Bank is the largest subsidiary of the group. Its main operations are Retail and Commercial bank-
ing, with all significant operations based in Georgia. Accounting functions and management of JSC TBC
Bank are primarily based in Georgia, and represent 98% of the group assets and 94% of revenue. We per-
formed audit procedures over this component which is considered financially significant in the context
of the group, using a materiality of GEL 22 million (2019: GEL 27.8 million). We also performed other audit
procedures including testing information technology general controls and other relevant controls related to
financial reporting, to mitigate the risk of material misstatement.
Our audit approach and team was also designed to reflect the structure of the group, and we therefore used
component auditors from PwC in each of the relevant territories, all of whom are familiar with the relevant
businesses in their geographical locations, to audit the relevant component that was in scope for the group
228
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF TBC BANK GROUP PLC CONTINUED audit. As part of the planning and execution of the audit, given COVID-19 restrictions, the UK audit team held
remote meetings via video-conference with the significant component in Georgia on several occasions, in
order to ensure that the procedures performed to support the group audit were sufficient for our purposes.
Specific audit procedures were also performed at the UK parent company, mainly related to the presenta-
tion of the group financial statements, the consolidation process, taxation and elements of laws and regula-
tions specific to the UK. Based on the procedures we performed over the reporting units our audit scoping/
coverage accounted for 98% of revenue and 99% of total assets of the group.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresh-
olds for materiality. These, together with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures on the individual financial statement line
items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Financial statements - group
Financial statements - company
Overall materiality
GEL 23.5 million (2019: GEL 29.3 million).
GEL 16.2 million (2019: GEL 15.7 million).
How we determined it
5% of the average profit before tax for the
last three years (2019: 5% of profit before tax)
1% of total assets
Rationale for
benchmark applied
Profit before tax is a primary measure used
by the shareholders in assessing the per-
formance of the group and is a generally
accepted benchmark for determining au-
dit materiality. We have considered the
economic impact of the COVID-19 pan-
demic in the Group's results. Whilst profit
before tax is still considered to be a suit-
able benchmark, we used a three year av-
erage, to eliminate the volatility introduced
by COVID-19.
The parent company is a holding company with
investments in the subsidiaries within the Group.
The parent company’s performance is measured
primarily on the value of these investments, and
therefore total assets is considered an appropriate
materiality benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall
group materiality. The range of materiality allocated across components was between GEL 22 million and
GEL 23.5 million. Certain components were audited to a local statutory audit materiality that was also less
than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the nature and extent of our testing of account bal-
ances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to GEL 17.6 million for the group financial statements
and GEL 12.2 million for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstate-
ments, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an
amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above GEL 1.1 million (group audit) (2019: GEL 1.4 million) and GEL 0.8 million (company audit) (2019:
GEL 0.8 million) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
229
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt
the going concern basis of accounting included:
A risk assessment to identify factors that could impact the going concern basis of accounting, including
the current and forecast financial performance, regulatory metrics and the sector in which the group op-
erates;
Evaluation of the reasonableness of the group's forecasts, including their assessment of macro scenarios,
budget planning, recovery planning, stress testing and estimated financing pipeline;
Review of the group's regulatory correspondence and reports provided to governance forums; and
Reviewing the appropriateness of the disclosures in the Annual report.
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's and the company’s
ability to continue as a going concern for a period of at least twelve months from when the financial state-
ments are authorised for issue.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as
to the group's and the company's ability to continue as a going concern.
In relation to the directors’ 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.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial state-
ments and our auditors’ report thereon. The directors are responsible for the other information. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an au-
dit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial state-
ments or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify
an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material mis-
statement of this other information, we are required to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures re-
quired by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strate-
gic report and Directors’ Report for the year ended 31 December 2020 is consistent with the financial state-
ments and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in
the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’
Report.
230
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF TBC BANK GROUP PLC CONTINUED Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term
viability and that part of the corporate governance statement relating to the company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other information are described in the Reporting on
other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the corporate governance statement, included within the Directors' report is materially consistent with
the financial statements and our knowledge obtained during the audit, and we have nothing material to add
or draw attention to in relation to:
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to
identify emerging risks and an explanation of how these are being managed or mitigated;
The directors’ statement in the financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them, and their identification of any material
uncertainties to the group’s and company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
The directors’ explanation as to their assessment of the group's and company’s prospects, the period this
assessment covers and why the period is appropriate; and
The directors’ statement as to whether they have a reasonable expectation that the company will be able
to continue in operation and meet its liabilities as they fall due over the period of its assessment including
any related disclosures drawing attention to any necessary qualifications or assumptions
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less
in scope than an audit and only consisted of making inquiries and considering the directors’ process sup-
porting their statement; checking that the statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement is consistent with the financial state-
ments and our knowledge and understanding of the group and company and their environment obtained in
the course of the audit.
In addition, 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 and
our knowledge obtained during the audit:
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the group’s and com-
pany's position, performance, business model and strategy;
The section of the Annual Report that describes the review of effectiveness of risk management and in-
ternal control systems; and
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to
the company’s compliance with the Code does not properly disclose a departure from a relevant provision
of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they deter-
mine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
231
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 In preparing the financial statements, the directors are responsible for assessing the group’s and the com-
pany’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 company or to cease operations, or have no realistic alternative but to do so.
Auditors’ 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 auditors’ report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conduct-
ed 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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves selecting a limited number of items for testing,
rather than testing complete populations. We will often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body
in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
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
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements and the part of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 11 August
2016 to audit the financial statements for the year ended 31 December 2016 and subsequent financial peri-
ods. The period of total uninterrupted engagement is 5 years, covering the years ended 31 December 2016
to 31 December 2020.
Allan McGrath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
26 April 2021
232
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF TBC BANK GROUP PLC CONTINUED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other
comprehensive income
Bonds carried at amortised cost
Net investments in leases
Investment properties
Current income tax prepayment
Deferred income tax asset
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
Investments in associates
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provision for liabilities and charges
Other liabilities
Lease Liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Shares held by trust
Share premium
Retained earnings
Group reorganisation reserve
Share based payment reserve
Fair value reserve
Cumulative currency translation reserve
Net assets attributable to owners
Non-controlling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December2020
31 December 2019
(as restated)*
31 December 2018
(as restated)*
6
7
8
9
10
11
13
17
35
12
14
15
16
15
18
19
20
23
35
21
22
24
16
25
26
26
26
27
39
1,635,405
50,805
2,098,506
14,594,274
1,527,268
1,089,801
271,660
68,689
69,888
2,787
171,302
266,960
372,956
53,927
239,523
59,964
4,090
1,003,583
33,605
1,591,829
12,349,399
985,293
1,022,684
256,660
72,667
25,695
2,173
133,736
255,712
334,728
59,693
167,597
61,558
2,654
1,166,911
47,316
1,422,809
10,038,452
1,005,239
654,203
203,802
84,296
2,116
2,097
167,518
192,792
315,502
–
109,220
31,286
2,432
22,577,805
18,359,266
15,445,991
4,486,373
12,572,728
227,432
853
13,088
1,496,497
25,335
87,842
58,983
672,740
3,593,901
10,049,324
113,608
1,634
18,888
1,213,598
23,128
95,162
59,898
591,035
19,641,871
15,760,176
1,682
(33,413)
848,459
2,281,428
(162,167)
(20,568)
11,158
(2,124)
2,924,455
11,479
2,935,934
22,577,805
1,682
(27,516)
848,459
1,961,231
(162,167)
(17,803)
(6,476)
(6,850)
2,590,560
8,530
2,599,090
18,359,266
3,031,503
9,352,142
98,714
63
19,793
13,343
18,767
104,337
–
650,919
13,289,581
1,650
–
796,854
1,531,562
(162,167)
(16,294)
8,680
(6,937)
2,153,348
3,062
2,156,410
15,445,991
* Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the adjustments made due to the change in
accounting policy of Premises and equipment as described in Note 2. Restatement does not apply to Right of use assets as transition provisions
for IFRS 16 have been adopted in 2019.
The consolidated and the separate financial statements on pages 233 to 372 were approved by the Board of
Directors on 26 April 2021 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
The notes set out on pages 240 to 372 form an integral part of these consolidated and the separate financial
statements.
233
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
31 December
2020
Note
31 December
2019
(as restated)*
31 December
2018
(as restated)*
1,667,999
(853,516)
1,436,843
(663,860)
1,284,235
(506,213)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
in thousands of GEL
Interest income
Interest expense
Net interest gains on currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net insurance premiums earned
Net insurance claims incurred and agents’ commissions
Insurance profit
Net gains from currency derivatives, foreign currency operations and translation
Net (losses)/gains from disposal of investment securities measured at fair value
through other comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Credit loss allowance for loans to customers
(Credit loss allowance)/Credit loss allowance reversal for investments in leases
Credit loss allowance reversal /(Credit loss allowance) for performance guarantees
and credit related commitments
Credit loss allowance for other financial assets
Credit loss allowance for financial assets measured at fair value through other
comprehensive income
Operating income after expected credit losses
Staff costs
Depreciation and amortization
Provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
Profit before tax
Income tax credit/(expense)
Profit for the year
Other comprehensive income/ (expense) for the year
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve
Exchange differences on translation to presentation currency
Other comprehensive income/ (expense) for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Profit is attributable to:
– Shareholders of TBCG
– Noncontrolling interest
Profit for the year
Total comprehensive income is attributable to:
– Shareholders of TBCG
– Noncontrolling interest
Total comprehensive income for the year
Earnings per share for profit attributable to the owners of the Group:
– Basic earnings per share (in GEL)
– Diluted earnings per share (in GEL)
30
30
30
31
31
2
20,950
835,433
314,177
(131,410)
182,767
53,359
(33,874)
19,485
98,018
(624)
32
20,512
9
13
22
12
33
15,16,17
22
34
35
10
–
117,906
(330,811)
(8,398)
3,238
(14,067)
(1,809)
803,744
(244,043)
(68,392)
(2,706)
(128,482)
(443,623)
(41,015)
319,106
3,383
322,489
17,633
4,707
22,340
344,829
317,752
4,737
322,489
340,092
4,737
344,829
28,556
801,539
293,431
(106,141)
187,290
38,199
(19,689)
18,510
101,187
169
18,916
632
120,904
(82,030)
582
(2,156)
(8,098)
(290)
1,036,251
(247,803)
(59,478)
(1,264)
(142,181)
(450,726)
–
585,525
(45,184)
540,341
(15,156)
85
(15,071)
525,270
537,895
2,446
540,341
522,843
2,427
525,270
–
778,022
235,701
(78,171)
157,530
23,601
(11,326)
12,275
107,047
2
31,438
1,154
139,641
(143,723)
(1,765)
(4,056)
(16,609)
(86)
921,229
(220,354)
(45,740)
(4,000)
(140,935)
(411,029)
–
510,200
(72,765)
437,435
6,949
425
7,374
444,809
435,080
2,355
437,435
442,454
2,355
444,809
28
28
5.8
5.8
9.8
9.8
8.1
8.0
* Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the adjustments made due to the change
in accounting policy of premises and equipment and reclassification of net gains from currency derivatives, foreign currency operations and
translation as described in Note 2. Restatement does not apply to Right of use assets as transition provisions for IFRS 16 have been adopted in
2019.
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
234
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Capital
Shares
held
by trust
Share
premium
Group
reorganisa-
tion reserve
Share
based
payments
reserve
Revalu-
ation
reserve for
premises
Fair
value
reserve
Cumulative
currency
translation
reserve
Retained
earnings
Total
equity
excluding
non-con-
trolling
interests
Non-
con-
trolling
interest
Total
Equity
1,605
–
714,651
(162,167)
9,828
70,045
1,731
(7,360)
1,169,937
1,798,270
28,536 1,826,806
in thousands of GEL Note
Balance as of
1 January 2018
(as originally
presented)
Effect of change in
accounting policy
2
–
–
–
–
(70,045)
–
–
28,953
(41,092)
(63)
(41,155)
Balance as of 1
January 2018 (as
restated)*
Profit for the year
Other
comprehensive
income (as
restated)*
Total
comprehensive
income for 2018 (as
restated)*
Share issue
Share based
payment
Purchase of
additional interest
from NCI
Dividends declared
Conversion of
shares
Balance as of
31 December 2018
(as restated)*
Profit for the year
Other
comprehensive
income (as
restated)*
Total
comprehensive
income for 2019 (as
restated)*
Business
Combination
Share issue
Shar buy-back
Share based
payment
Purchase of
additional interest
from NCI
Dividends declared
Other movements
Balance as of
31 December 2019
(as restated)*
Profit for the year
Other
comprehensive
income
Total
comprehensive
income for 2020
Share based
payment
Delivery of
SBP shares to
employees
Share buy-back
Other movements
Balance as of
31 December 2020
26
27
27
26
27
27
1,605
–
–
–
23
–
–
–
22
1,650
–
–
–
–
32
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
714,651
(162,167)
9,828
–
–
–
42,031
–
–
–
40,172
–
–
–
–
–
–
–
–
–
–
–
(38,669)
12,547
–
–
–
796,854
(162,167)
(16,294)
–
–
–
–
51,605
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(35,306)
–
33,797
–
–
–
– (27,516)
–
–
–
–
–
–
–
–
1,682 (27,516)
848,459
(162,167)
(17,803)
–
–
–
–
–
–
–
–
–
19,596
– (25,493)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,342
(21,107)
–
–
1,682 (33,413)
848,459
(162,167)
(20,568)
–
–
1,730
(7,359)
1,198,890
1,757,179
28,473 1,785,652
–
–
435,080
435,080
2,355
437,435
–
6,949
425
–
7,374
–
7,374
–
6,949
425
435,080
442,452
2,355
444,809
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
–
–
–
3,385
–
3,385
12,547
(879)
11,668
4,380
4,380
(4,415)
(35)
(88,952)
(88,952)
(116)
(89,068)
(17,838)
22,356 (22,356)
–
8,680
(6,937)
1,531,562
2,153,348
3,062 2,156,410
–
–
537,895
537,895
2,446
540,341
–
(15,156)
85
–
(15,071)
–
(15,071)
–
(15,156)
85
537,895
522,824
2,446
525,270
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
2
–
–
–
–
4
3,134
3,136
16,331
(27,517)
–
–
16,331
(27,517)
33,797
(35)
33,762
–
(19)
(19)
(108,622)
(108,622)
–
(108,622)
394
394
(58)
336
(6,476)
(6,850)
1,961,231 2,590,560
8,530 2,599,090
–
–
317,752
317,752
4,737
322,489
–
17,633
4,707
–
22,340
–
22,340
–
17,633
4,707
317,752
340,092
4,737
344,829
–
–
–
–
–
–
–
–
1
–
–
–
19
–
–
–
18,342
13
18,355
(1,511
(25,493)
–
–
(1,511)
(25,493)
2,445
2,465
(1,801)
664
11,158
(2,124)
2,281,428
2,924,455
11,479 2,935,934
*Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the adjustments made due to the change in
accounting policy of Premises and equipment as described in Note 2.
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
235
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 CONSOLIDATED STATEMENT OF CASH FLOWS
in thousands of GEL
Cash flows from/(used in) operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Insurance and reinsurance received
Insurance claims paid
(Expense)/income from trading in foreign currencies
Other operating income received
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Cash flows from operating activities
before changes in operating assets and liabilitie
Net change in operating assets
Due from other banks and mandatory cash balances
with the National Bank of Georgia
Loans and advances to customers
Net investments in leases
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from/(used in) operating activities (as restated)
Cash flows from/ (used in) investing activities
Acquisition of investment securities measured at fair value
through other comprehensive income
Proceeds from disposal of investment securities measured at fair value
through other comprehensive income
Proceeds from redemption at maturity of investment securities measured
at fair value through other comprehensive income
Dividends received
Acquisition of subsidiaries, net of cash acquired
Acquisition of bonds carried at amortised cost
Proceeds from redemption of bonds carried at amortised cost
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
10
10
10
11
11
15
Proceeds from disposal of investment properties
Net cash used in investing activities
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Redemption of subordinated debt
Acquisition of treasury shares
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Net cash flows from financing activities (as restated)
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
31 December
2020
31 December
2019 (as restated)
31 December
2018 (as restated)
1,462,815
20,950
(839,258)
297,024
(133,385)
86,447
(27,139)
(92,191)
48,402
(238,577)
(134,348)
(46,268)
1,360,296
28,556
(647,427)
282,715
(106,526)
76,101
(21,787)
79,287
44,248
(216,465)
(169,582)
(70,413)
1,224,606
–
(501,984)
235,508
(78,140)
54,682
(15,174)
91,678
11,407
(202,897)
(136,670)
(34,918)
404,472
639,003
648,098
(353,975)
(22,009)
(343,772)
(1,059,684)
(2,013,577)
(1,718,446)
(2,902)
(41,774)
33,109
(32,294)
1,432,051
115,370
(8,153)
486,220
(43,719)
47,128
1,577
(1,938)
272,023
(8,267)
5,816
(1,123,963)
(54,784)
(35,570)
(4,486)
69,755
1,371,675
(12,136)
3,618
(76,048)
(763,531)
(1,781,816)
(717,729)
287,917
240,603
14,781
165,632
1,598,536
370,571
694
–
(668,477)
413,038
(164,379)
3,627
13,513
–
(36,301)
(613,383)
216,871
(120,333)
13,225
13,338
(711,966)
(469,260)
4,036,810
(3,324,230)
(13,251)
–
–
(25,493)
104,838
–
(1,344)
777,330
80,238
631,822
6
6
1,003,583
1,635,405
1,819,899
(1,392,897)
(6,453)
–
(104,079)
(27,516)
1,176,049
(14,296)
(91,928)
1,358,779
71,116
(163,328)
1,166,911
1,003,583
–
809
(395,717)
200,658
(89,263)
813
42,515
(572,562)
1,776,489
(1,515,562)
–
255,900
(60,910)
–
–
(7,596)
(85,484)
362,837
21,207
(264,566)
1,431,477
1,166,911
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
236
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
SEPARATE STATEMENT OF FINANCIAL POSITION
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Other financial assets
Investments in subsidiaries
Other assets
TOTAL ASSETS
LIABILITIES
Other financial liabilities
Debt securities in issue
TOTAL LIABILITIES
EQUITY
Share capital
Shares held by trust
Share premium
Retained earnings
(Loss)/profit for the year
Share based payment reserve
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December 2020
31 December 2019
31 December 2018
2
26
26
27
27
10,444
27,700
108
1,588,662
478
1,627,392
5,095
76,985
82,080
1,682
(33,413)
848,459
781,678
(12,476)
(40,618)
1,545,312
1,627,392
5,546
40,815
278
1,519,922
465
1,567,026
1,751
–
1,751
1,682
(27,516)
848,459
681,048
100,630
(39,028)
1,565,275
1,567,026
2,204
79,135
170
1,473,168
3
1,554,680
2,334
–
2,334
1,650
–
796,854
668,364
121,306
(35,828)
1,552,346
1,554,680
The consolidated and separate financial statements on pages 233 to 372 were approved by the Board of
Directors on 26 April 2021 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
Registered No. 10029943
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
237
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
SEPARATE STATEMENT OF CHANGES IN EQUITY
in thousands of GEL
Note
Balance as of 1 January 2018
Profit for the year
Total comprehensive income for 2018
Share issue
Dividends declared
Share based payment
Balance as of 31 December 2018
Profit for the year
Total comprehensive income for 2019
Share issue
Share buy-back
Dividends declared
Share based payment
Balance as of 31 December 2019
Loss for the year
Total comprehensive loss for 2020
Share buy-back
Shares award to employees under share
based payment scheme
Share based payment
26
26
27
26
26
26
27
26
27
Share
Capital
1,605
–
–
45
–
–
1,650
–
–
32
–
–
–
1,682
–
–
–
–
–
Shares
held
by trust
Share
premium
Share based
payment
reserve
–
–
–
–
–
–
–
–
–
–
(27,516)
–
–
(27,516)
–
–
(25,493)
19,596
–
714,651
–
–
82,203
–
–
796,854
–
–
51,605
–
–
–
(8,828)
–
–
(38,668)
–
11,668
(35,828)
–
–
(34,941)
–
–
31,741
848,459
–
(39,028)
–
–
–
–
–
–
–
(19,596)
18,006
Retained
earnings
757,233
121,306
121,306
–
(88,869)
–
789,670
100,630
100,630
–
–
(108,622)
–
781,678
(12,476)
(12,476)
–
Total
1,464,661
121,306
121,306
43,580
(88,869)
11,668
1,552,346
100,630
100,630
16,696
(27,516)
(108,622)
31,741
1,565,275
(12,476)
(12,476)
(25,493)
–
–
–
18,006
Balance as of 31 December 2020
1,682
(33,413)
848,459
(40,618)
769,202
1,545,312
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
238
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
SEPARATE STATEMENT OF CASH FLOWS
in thousands of GEL
Cash flows from/(used in) operating activities
Interest received
Interest paid
Fees and commissions paid
Staff costs paid
Administrative and other operating expenses paid
Other operating income received
Cash flows used in operating activities before changes in
operating assets and liabilities
Net change in operating assets
Other financial assets
Other assets
Net change in operating liabilities
Other financial liabilities
Net cash used in operating activities
Cash flows from/(used in) investing activities
Acquisition of subsidiaries, net of cash acquired
Cash contribution to subsidiaries
Dividends received
Income from recharge agreement
Dividends paid
Placement of deposits
Withdrawal of deposits
Net cash flows from investing activities (as restated)
Cash flows from/used in financing activities
Acquisition of treasury shares
Proceeds from debt securities in issue
Net cash used in financing activities (as restated)
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
31 December 2020
31 December 2019
(as restated)
31 December 2018
(as restated)
3,179
(447)
(11)
(3,738)
(5,582)
256
(6,343)
161
(16)
2,274
(3,924)
–
(76,546)
6,155
25,749
–
(85,368)
99,066
(30,945)
(25,493)
73,237
47,744
(7,977)
4,898
5,546
10,444
9,933
(42)
(17)
(4,520)
(10,439)
215
(4,870)
(10)
(101)
360
(4,621)
(40,162)
(8,857)
99,662
43,521
(91,925)
(153,369)
187,376
36,246
(27,516)
–
(27,516)
(1,037)
3,342
2,204
5,546
1,908
–
(12)
(3,797)
(3,569)
16
(5,454)
5
3
(161)
(5,607)
–
(800)
124,561
8,955
(85,484)
(88,054)
48,499
7,677
–
–
–
(76)
1,994
210
2,204
The notes set out on pages 240 to 372 form an integral part of these consolidated and separate financial
statements.
239
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
1. INTRODUCTION
Principal activity. TBC Bank Group PLC is a public limited liability company, incorporated in England and
Wales. TBC Bank Group PLC held 99.88% of the share capital of JSC TBC Bank (hereafter the “Bank”) as at
31 December 2020 (2019: 99.88%, 2018: 99.88%), thus representing the Bank’s ultimate parent company. The
Bank is a parent of a group of companies incorporated in mainly in Georgia, Azerbaijan and Uzbekistan,
their primary business activities include providing banking, leasing, brokerage and card processing services
to corporate and individual customers. TBC Bank Group PLC and its subsidiaries is referred as “TBCG” or
“Group”. The Group’s list of subsidiaries is provided in Note 2.
The shares of TBCG (“TBCG Shares”) were 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 list-
ed securities effective on 10 August 2016 (the “Admission”). TBC Bank Group PLC’s registered legal address
is Elder House St Georges Business Park, 207 Brooklands Road, Weybridge, Surrey, KT13 0TS. Registered
number of TBC Bank Group PLC is 10029943. The Bank is the Group’s main operating unit and it accounts
for most of the Group’s activities.
JSC TBC Bank was incorporated on 17 December 1992 and is domiciled in Georgia. The Bank is a joint stock
company limited by shares and was set up in accordance with Georgian regulations. The Bank’s registered
address and place of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia.
The Bank’s principal business activity is universal banking operations that include corporate, small and me-
dium enterprises, retail and micro operations within Georgia. The Bank has been operating since 20 January
1993 under a general banking license issued by the National Bank of the Georgia (“NBG”). In 2018, the Bank
launched fully-digital bank, Space.
The Bank has 149 (2019:148; 2018:146) branches within Georgia.
As of 31 December 2020, 31 December 2019 and 31 December 2018, the following shareholders directly
owned more than 5% of the total outstanding shares of the Group. Other shareholders individually owned
less than 5% of the outstanding shares. As of 31 December 2020, 31 December 2019 and 31 December 2018
the Group had no ultimate controlling party.
Shareholders
European Bank for Reconstruction and Development
Dunross & Co.
Schroder Investment Management
JPMorgan Asset Management
Badri Japaridze*
Liquid Crystal International S.A.R.L.
Mamuka Khazaradze*
Other**
Total
% of ownership interest held as of 31 December
2020
5.05%
7.42%
3.12%
4.56%
6.00%
5.04%
3.60%
2019
8.04%
6.61%
6.48%
6.22%
6.00%
5.55%
4.71%
2018
8.18%
5.51%
7.08%
8.40%
6.08%
5.64%
6.19%
65.21%
56.39%
52.92%
100.00% 100.00%
100.00%
* Represents direct ownership of the shares for Mamuka Khazaradze and Badri Japaridze. Mamuka Khazaradze has beneficial ownership of 8.64%
(2019: 10.26%, 2018: 13.54%) and Badri Japaridze has beneficial ownership of 6.00%, (2019: 6.00%; 2018: 6.77%). Beneficial ownerships of major
shareholders are presented in Directors Report above.
** Other includes individual as well as corporate shareholders.
Operating environment of the Group. Georgia, where groups most activities are located, displays certain
characteristics of an emerging market. Its economy is particularly sensitive mostly to tourism. The legal, tax
and regulatory frameworks continue to develop and are subject to frequent changes and varying interpre-
tations (Note 38). The Georgian economy continues to be negatively impacted by ongoing political tension
in the region.
On 12 March 2020, the World Health Organisation declared the outbreak of COVID-19 a global pandemic. In
response to the pandemic, the Georgian authorities implemented numerous measures attempting to contain
the spreading and impact of COVID-19, such as travel bans and restrictions, lockdowns and limitations on
business activity, including closures. The above measures were in place for the most period during 2020 but
gradually relaxed in 2021. These measures have, among other things, severely restricted economic activity
240
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
1. INTRODUCTION CONTINUED
in Georgia and have negatively impacted, and could continue to negatively impact businesses, market par-
ticipants, clients of the Group, as well as the Georgian and global economy for an unknown period of time.
Management is taking necessary measures to ensure sustainability of the Group’s operations and support
its customers and employees.
The future effects of the current economic situation and the above measures are difficult to predict and
management’s current expectations and estimates could differ from actual results.
For the purpose of measurement of expected credit losses (“ECL”) the Group uses supportable forward-look-
ing information, including forecasts of macroeconomic variables. As with any economic forecast, however,
the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different from those projected. Note 37 provides more
information of how the Group incorporated forward-looking information in the ECL models.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
In accordance with the exemption permitted under section 408 of the Companies Act 2006, the standalone
statement of comprehensive income of TBCG is not presented as part of these separate financial state-
ments. TBCG’s income for the year is disclosed within the separate statement of financial position and the
separate statement of changes in equity.
The consolidated financial statements of the Group and the separate financial statements of TBC Bank
Group PLC, together referred as “financial statements”, have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and, for the group,
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union. The consolidated and separate financial statements have been prepared under the
historical cost convention, as modified by the certain financial assets and liabilities (including derivative
instruments) which are measured at fair value. The principal accounting policies applied in the preparation
of the consolidated and separate financial statements are set out below. These policies have been consist-
ently applied to all the periods presented, unless otherwise stated below.
Changes in presentation of the net gains from currency derivatives, foreign currency operations and
translation
To further foster clarity of the consolidated statement of comprehensive income, the Group has re-considered
the presentation of the net gains from currency derivatives, foreign currency operations and translation. As a
result of reclassification, management has combined “Net gains/(losses) from trading in foreign currencies”,
“Net gains/(losses) from foreign exchange translation” and “Net gains/(losses) from derivative financial
instruments”, under one financial statement line item “Net gains from currency derivatives, foreign currency
operations and translation”. Management believes, that such presentation will allow the Group to present
the results of foreign currency operations clearly and allow the users to understand the effectiveness of
the Group’s foreign currency management. The presentation of comparative figures has been adjusted to
confirm to the presentation of the current period amounts:
in thousands of GEL
Net gains/(losses) from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
Net gains/(losses) from derivative financial instruments
Net gains from currency derivatives, foreign currency
operations and translation
31 December 2019
(as originally presented)
Reclassification
31 December 2019
(as reclassified)
79,279
22,188
(280)
-
(79,279)
(22,188)
280
101,187
-
-
-
101,187
241
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 NOTES TO THE FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
in thousands of GEL
Net gains/(losses) from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
Net gains/(losses) from derivative financial instruments
Net gains from currency derivatives, foreign currency
operations and translation
31 December 2018
(as originally presented)
Reclassification
31 December 2018
(as reclassified)
91,678
15,196
173
-
(91,678)
(15,196)
(173)
107,047
-
-
-
107,047
For disclosure purposes, net gains from currency derivatives, foreign currency operations and translation for
2020 is composed of following line items:
in thousands of GEL
Net gains/(losses) from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
Net gains/(losses) from derivative financial instruments
Total net gains from currency derivatives, foreign currency operations and translation
2020
(92,110)
190,120
8
98,018
Changes in accounting policies, IAS 16
In 2020, the Group changed the accounting policy in relation to subsequent measurement for land, build-
ings and construction in progress. The Group now applies the cost model, where assets are carried at cost
less accumulated depreciation and any accumulated impairment. Prior to this change, the Group applied
revaluation model: it carried land, buildings and construction in progress at a revalued amount being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulat-
ed impairment losses. The Group believes that the cost model provides more relevant and consistent infor-
mation, as well as it enables investors to make accurate comparisons across the banking industry, since the
application of the cost model is a common and widespread market practice. The balance sheet accounts for
the affected periods were restated accordingly, while the prior period income statement accounts remained
the same, due to the fact that the change did not have material impact on them. Change did not have ma-
terial effect on EPS amounts.
Effects on respective periods are disclosed below:
In thousands of GEL
Assets:
Premises and equipment
Liabilities:
Deferred income tax liability
Equity:
Retained earnings
Revaluation reserve for premises
In thousands of GEL
Assets:
Premises and equipment
Liabilities:
Deferred income tax liability
Equity:
Retained earnings
Revaluation reserve for premises
31 December 2019
(as originally presented)
Change in
accounting policy
31 December 2019
(as restated)
385,736
21,332
1,953,421
56,374
(51,008)
(2,444)
7,810
(56,374)
334,728
18,888
1,961,231
-
31 December 2018
(as originally presented)
Change in
accounting policy
31 December 2018
(as restated)
367,503
22,237
1,523,879
57,240
(52,001)
(2,444)
7,683
(57,240)
315,502
19,793
1,531,562
-
242
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Changes in presentation of the consolidated ans separate statement of cash flows
To further foster clarity and understandability of the consolidated and separate statements of cash flows,
the Group has separately presented the cash spent on acquisition of treasury shares both for 2020 and 2019
years. The following adjustments were made in the consolidated and separate statement of cash flows for
2019 to reflect the changes:
For consolidated statement of cash flows – the amount spent on acquisition of treasury shares have been
separated from “Other financial assets” (operating activity) and transferred to the financing cash flow un-
der the caption of “Acquisition of treasury shares”;
For separate statement of cash flows – the amount spent on acquisition of treasury shares have been
transferred from “Income received from recharge agreement” (investing activities) to the financing cash
flow under the caption of “Acquisition of treasury shares”.
Under previous classification, the Group has reflected the amounts from the perspective of the inter-
company recharge agreement, according to which cash is transferred from TBC Bank JSC to TBC Bank
Group Plc for acquisition of shares and further distribution to management under share based payment
schemes. Management thinks, that previously disclosed amounts were misclassified and believes, that by
separating such amounts and disclosing them into the cash flow from financing activities would add clarity
for the users on the amounts spent for share acquisitions.
Effect on consolidated statement of cash flows
in thousands of GEL
Cash flows from operating activities: change in other financial assets
Cash flows used in financing activities: acquisition of treasury shares
31 December 2019
(as originally
presented)
19,612
-
Restatement
27,516
(27,516)
31 December 2019
(as restated)
47,128
(27,516)
Effect on separate statement of cash flows
in thousands of GEL
Cash flows from investing activities: income received from recharge
agreement
Cash flows used in financing activities: acquisition of treasury shares
31 December 2019
(as originally
presented)
Restatement
31 December 2019
(as restated)
16,005
-
27,516
(27,516)
43,521
(27,516)
As a result of above restatement, sub-totals for respective activities in the consolidated and separate
statement of cash flows have been updated accordingly.
Going Concern. The Board of Directors of TBC Bank Group PLC has prepared these financial statements on
a going concern basis. In making this judgement, management considered the Group’s financial position,
current intentions, profitability of operations and access to financial resources. Management is not aware
of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going
concern. In reaching this assessment, the directors have specifically considered the implications of the
COVID-19 pandemic upon the Group’s performance and projected funding and capital position and also
taken into account the impact of further stress scenarios. On this basis, the directors are satisfied that the
Group will maintain adequate levels of funding and capital for the foreseeable future.
Presentation currency. These consolidated financial statements are presented in thousands of Georgian
Lari (“GEL thousands”), except per-share amounts and unless otherwise indicated.
Consolidated financial statements. Subsidiaries are those investees, including structured entities, that the
Group controls because it (i) has power to direct relevant activities of the investees that significantly affect
their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii)
has the ability to use its power over the investees to affect the amount of investor’s returns. The existence
and effect of substantive rights, including substantive potential voting rights, are considered when assess-
ing whether the Group has power over another entity. For a right to be substantive, the holder must have
243
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
practical ability to exercise that right when decisions about the direction of the relevant activities of the
investee need to be made. The Group may have power over an investee even when it holds less than the
majority of voting power in it. In such a case, the Group assesses the size of its voting rights relative to the
size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the in-
vestee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s
activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee.
Subsidiaries are consolidated from the date on which control is transferred to the Group, and are deconsol-
idated from the date on which control ceases.
Subsidiaries and associates. The TBC Bank Group PLC holds 99.88% of the Bank as of 31 December 2020.
The consolidated financial statements include the following principal subsidiaries
Proportion of voting rights and
ordinary share capital held
as of 31 December
Subsidiary name
JSC TBC Bank
United Financial Corporation JSC
TBC Capital LLC
TBC Leasing JSC
2020
2019
2018
99.88%
99.53%
99.88% 99.88%
99.53% 98.67%
100.00% 100.00% 100.00%
100.00% 100.00% 99.61%
Principal place
of business or
incorporation
Year of
incorpo-
ration
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
1992
1997
1999
2003
TBC Kredit LLC
100.00% 100.00% 100.00%
Baku, Azerbaijan
1999
Principal
activities
Banking
Card processing
Brokerage
Leasing
Non-banking credit
institution
N/A
N/A 100.00%
Tbilisi, Georgia
2009
Information services
Banking System Service
Company LLC
TBC Pay LLC
TBC Invest LLC
Index LLC
JSC TBC Insurance
Redmed LLC
TBC Ecosystem companies LLC1
Swoop JSC
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
N/A
100.00% 100.00%
100.00% 100.00%
N/A
100.00% 100.00% 100.00%
Tbilisi, Georgia
Ramat Gan,Israel
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
Online Tickets LLC
55.00%
55.00%
N/A
Tbilisi, Georgia
51.00%
75.00%
65.00%
75.00%
65.00%
100.00% 100.00%
51.00%
100.00% 100.00%
90.00% 90.00%
100.00% 100.00%
N/A
100.00%
51.00%
51.00%
100.00% 100.00%
N/A
100.00%
N/A
100.00%
N/A
100.00%
N/A Tashkent, Uzbekistan
Tbilisi, Georgia
N/A
Tbilisi, Georgia
N/A
Tbilisi, Georgia
N/A
Tbilisi, Georgia
N/A
Tbilisi, Georgia
N/A
Tbilisi, Georgia
N/A
N/A
Tbilisi, Georgia
N/A Tashkent, Uzbekistan
N/A Tashkent, Uzbekistan
N/A
Tbilisi, Georgia
N/A Tashkent, Uzbekistan
Tbilisi, Georgia
N/A
TKT UZ
My.Ge LLC
Mypost LLC
Billing Solutions LLC
Vendoo LLC (Geo)
Allproperty.ge LLC
F Solutions LLC
TBC Connect
Inspired LLC
VENDOO LLC (UZ Leasing)
TBC Concept LLC
TBC Bank UZ
TBC Group Support LLC
244
2015
Processing
2009
2011
PR and marketing
2011 Real estate management
Insurance
2014
Insurance
2019
Asset management
2019
Retail Trade
2010
Computer and Software
Services
Retail Trade
2019
E-Commerce
2019
Postal Service
2019
Software Services
2019
Retail Leasing
2019
2013 Real estate management
Software Services
2019
Software Services
2020
Processing
2011
Retail Leasing
2019
Food and Bavarage
2020
Banking
2020
Risk Monitoring
2020
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The Group has investments in the following associates:
Proportion of voting rights and
ordinary share capital held
as of 31 December
Associate name
2020
2019
2018
Principal place
of business
or incorporation
Year of
incorporation
Principal
activities
21.08%
28.87%
21.08%
28.87%
21.08%
N/A
Tbilisi, Georgia
Tbilisi, Georgia
2005
2019
Financial intermediation
Finance, Service
Online Tickets LLC2
N/A
N/A
26.00%
Tbilisi, Georgia
22.87%
27.70%
N/A
Tbilisi, Georgia
17.33%
10.03%
17.33%
10.03%
N/A
N/A
Tbilisi, Georgia
Tbilisi, Georgia
2019
2019
2019
2015
Finance, Service
Finance, Service
Finance, Service
Computer and
Software Services
CreditInfo Georgia JSC
Tbilisi Stock Exchange JSC
Georgian Central Securities
Depository JSC
Georgian Stock Exchange JSC
Kavkasreestri JSC
The country of registration or incorporation is also the principal area of operation of each of the above sub-
sidiaries.
The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries and
associates, which are not consolidated or equity accounted due to immateriality. A full list of these under-
takings, the country of incorporation and the ownership of each share class is set out belowi.
Proportion of voting rights and
ordinary share capital held
as of 31 December
Company name
2020
2019
2018
TBC Invest International Ltd3
University Development Fund3
Natural Products of Georgia LLC3
100.00% 100.00% 100.00%
33.33%
33.33%
25.00%
25.00%
33.33%
25.00%
Principal place
of business
or incorporation
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
Mobi Plus JSC3
14.81%
14.81%
14.81%
Tbilisi, Georgia
GRDC
Georgian Card JSC
Georgian Securities Central
Depositor
JSC Givi Zaldastanishvili
American Academy In Georgia
United Clearing Centre
Banking and Finance Academy of
Georgia3
Tbilisi's City JSC3
TBC Trade3
Mineral Oil Distribution
Corporation JSC3
Freeshop.ge LLC3
The.ge LLC3
1.75%
0.15%
1.75%
0.15%
1.75%
0.15%
Tbilisi, Georgia
Tbilisi, Georgia
0.003%
0.05%
0.05%
Tbilisi, Georgia
14.48%
14.48%
14.48%
Tbilisi, Georgia
18.75%
18.75%
18.75%
Tbilisi, Georgia
16.67%
16.67%
16.67%
Tbilisi, Georgia
1.80%
1.80%
100.00% 100.00% 100.00%
1.80%
Tbilisi, Georgia
Tbilisi, Georgia
9.90%
9.90%
9.90%
Tbilisi, Georgia
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
Tbilisi, Georgia
Tbilisi, Georgia
1 The company was renamed from TBC International LLC to TBC Ecosystem companies
LLC in the end of 2020.
2 The group became 55% shareholder of the company in 2019
3 Dormant
Year of
incorporation
Principal
activities
2016
2007
2001
2009
2008
1997
1999
2001
2008
1998
2007
2008
2009
2010
2010
Investment Vehicle
Education
Trade, Service
Data monitoring and
processing
Investment Real Estate
Plastic Card Services
Finance, Service
Education
Clearing Centre
Education
Education
Trade, Service
Data monitoring and
processing
Retail Trade
Retail Trade
245
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Business combinations and goodwill accounting. Business combinations are accounted for using the ac-
quisition method. The cost of an acquisition is measured at the fair value of the consideration, including
contingent consideration, given at the acquisition date. Acquisition-related costs are recognised as an ex-
pense in the profit or loss in the period in which they are incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured at their fair values at the acqui-
sition date, irrespective of the extent of any non-controlling interest.
The Group measures the non-controlling interest that represents the current ownership’s interest and enti-
tles the holder to a proportionate share of net assets in the event of liquidation on a transaction by transac-
tion basis, either at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the
acquired entity. Non-controlling interests that are not present ownership interests are measured at fair value.
Goodwill is measured by deducting the acquiree’s net assets from the aggregate of the consideration trans-
ferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest
in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is
recognised in profit or loss, after the management reassesses whether it identified all the assets acquired
and all liabilities and contingent liabilities assumed, and reviews appropriateness of their measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity
instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from con-
tingent consideration arrangements, but excludes acquisition related costs such as advisory, legal, valuation
and similar professional services.
Transaction costs incurred for issuing equity instruments are deducted from the equity; transaction costs
incurred for issuing debt are deducted from its carrying amount and all other transaction costs associated
with the acquisition are expensed.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. The Bank and all of
its subsidiaries use uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to inter-
ests that are not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate com-
ponent of the Group’s equity.
Associates. Associates are entities over which the Group has significant influence (directly or indirectly),
but not control, generally accompanying a shareholding of between 20 and 50 per cent of the voting rights.
Investments in associates are accounted for using the equity method of accounting, and are initially rec-
ognised at cost. The carrying amount of associates includes goodwill identified on acquisition less ac-
cumulated impairment losses, if any. Dividends received from associates reduce the carrying value of the
investments in associates. Other post-acquisition changes in Group’s share of net assets of an associate are
recognised as follows: (i) the Group’s share of profits or losses of associates is recorded in the consolidat-
ed profit or loss for the year as share of result of associates, (ii) the Group’s share of other comprehensive
income is recognised in other comprehensive income and presented separately, (iii); all other changes in
the Group’s share of the carrying value of net assets of associates are recognised in profit or loss within the
share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides ev-
idence of an impairment of the asset transferred.
Purchases and sales of non-controlling interests. The Group applies the economic entity model to ac-
count for transactions with owners of non-controlling interest. Any difference between the purchase con-
sideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction
directly in equity. The Group recognises the difference between sales consideration and carrying amount of
non-controlling interest sold as a capital transaction in the statement of changes in equity.
246
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or signifi-
cant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying
amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subse-
quently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in respect of that entity are accounted for
as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previ-
ously recognised in other comprehensive income are recycled to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss
where appropriate.
Financial instruments – key measurement terms. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The best evidence of fair value is the price in an active market. An active market is one in which trans-
actions for the asset or the liability take place with sufficient frequency and volume to provide pricing infor-
mation on an ongoing basis. The fair value of financial instruments traded in an active market is measured as
the product of the quoted price for the individual asset or liability and the quantity owned by the entity. This
is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and
placing orders to sell the position in a single transaction might affect the quoted price.
A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active
market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the
price that would be received to sell a net long position (ie an asset) for a particular risk exposure or paid to
transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between
market participants at the measurement date.
Valuation techniques such as discounted cash flow models or models based on recent arm’s length transac-
tions or consideration of financial data of the investees are used to measure the fair value of certain financial
instruments for which external market pricing information is not available. Fair value measurements are ana-
lysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjust-
ed) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques
with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that
is, derived from prices), and (iii) level three measurements are valuations not solely based on observable
market data (that is, the measurement requires significant unobservable inputs). Transfers between levels of
the fair value hierarchy are deemed to have occurred at the end of the reporting period.
Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to ac-
quire an asset at the time of its acquisition and includes transaction costs
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of
a financial instrument. An incremental cost is one that would not have incurred if the transaction had not
taken place. Transaction costs include fees and commissions paid to agents (including employees acting
as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and
transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or
internal administrative or holding costs.
Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition
less any principal repayments, plus accrued interest, and for financial assets less any write-down for ex-
pected credit losses. Accrued interest includes the amortisation of transaction costs deferred at initial rec-
ognition and of any premium or discount to maturity amount using the effective interest method. Accrued
interest income and accrued interest expense, including both accrued coupon and amortised discount or
premium (including fees deferred at origination, if any), are not presented separately and are included in the
carrying values of related items in the consolidated statement of financial position. Repayments for loans
are accounted for penalties in the first place, then accrued interest and after that principal amount.
The effective interest method is a method of allocating interest income or interest expense over the term
of the financial instrument so as to achieve a constant periodic rate of interest (effective interest rate) on
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the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash pay-
ments or receipts (excluding future credit losses) through the expected life of the financial instrument or a
shorter period, if appropriate, to the net carrying amount of the financial instrument. The effective interest
rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the
premium or discount which reflects the credit spread over the floating rate specified in the instrument, or
other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole
expected life of the instrument. The present value calculation includes all fees paid or received between
parties to the contract that are an integral part of the effective interest rate (refer to income and expense
recognition policy). For assets that are purchased or originated credit impaired (“POCI”) at initial recognition,
the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on
initial recognition instead of contractual payments.
Initial recognition of financial instruments. Financial instruments at FVTPL are initially recorded at fair
value. All other financial instruments are initially recorded at fair value adjusted for transaction costs. Fair
value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition
is only recorded if there is a difference between fair value and transaction price which can be evidenced
by other observable current market transactions in the same instrument or by a valuation technique whose
inputs include only data from observable markets. After the initial recognition, an ECL (expected credit loss)
allowance is recognised for financial assets measured at AC and investments in debt instruments measured
at FVOCI, resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the time frame set by regulation or
market convention (“regular way” purchases and sales) are recorded at trade date, which is the date that the
Group commits to deliver a financial asset. All other purchases are recognised when the entity becomes a
party to the contractual provisions of the instrument.
Financial assets – classification and subsequent measurement – measurement categories. The Group
classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classifica-
tion and subsequent measurement of debt financial assets depends on: (i) the Group’s business model for
managing the related assets portfolio and (ii) the cash flow characteristics of the asset.
Financial assets – classification and subsequent measurement – business model. The business model
drives classification of financial assets. Management applied judgement in determining the level of ag-
gregation and portfolios of financial instruments when performing the business model assessment. When
assessing sales transactions, the Group considers their historical frequency, timing and value, reasons for
the sales and expectations about future sales activity. Sales transactions aimed at minimising potential loss-
es due to credit deterioration are considered consistent with the “hold to collect” business model. Other
sales before maturity, not related to credit risk management activities, are also consistent with the “hold to
collect” business model, provided that they are infrequent or insignificant in value, both individually and in
aggregate. The Group assesses significance of sales transactions by comparing the value of the sales to
the value of the portfolio subject to the business model assessment over the average life of the portfolio. In
addition, sales of financial asset expected only in stress case scenario, or in response to an isolated event
that is beyond the Group’s control, is not recurring and could not have been anticipated by the Group, are
regarded as incidental to the business model objective and do not impact the classification of the respec-
tive financial assets.
The “hold to collect and sell” business model means that assets are held to collect the cash flows, but selling
is also integral to achieving the business model’s objective, such as, managing liquidity needs, achieving
a particular yield, or matching the duration of the financial assets to the duration of the liabilities that fund
those assets.
The residual category includes those portfolios of financial assets, which are managed with the objective of
realising cash flows primarily through sale, such as where a pattern of trading exists. Collecting contractual
cash flow is often incidental for this business model.
Financial assets – classification and subsequent measurement – cash flow characteristics. Where the
business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and
sell, the Group assesses whether the cash flows represent solely payments of principal and interest (“SPPI”).
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Financial assets with embedded derivatives are considered in their entirety when determining whether their
cash flows are consistent with the SPPI feature. In making this assessment, the Group considers whether the
contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consider-
ation for credit risk, time value of money, other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending
arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on
initial recognition of an asset and it is not subsequently reassessed. The judgements applied by the Group
in performing the SPPI test for its financial assets is as follows:
The time value of money element may be modified, for example, if a contractual interest rate is periodically
reset but the frequency of that reset does not match the tenor of the debt instrument’s underlying base in-
terest rate, for example a loan pays three months interbank rate but the rate is reset every month. The effect
of the modified time value of money was assessed by comparing relevant instrument’s cash flows against
a benchmark debt instrument with SPPI cash flows, in each period and cumulatively over the life of the
instrument. The Group applied a threshold of 10% to determine whether differences against a benchmark
instruments are significantly different. In case of a scenario with cash flows that significantly differ from the
benchmark, the assessed instrument’s cash flows are not SPPI and the instrument is then carried at FVTPL.
The Group identified and considered contractual terms that change the timing or amount of contractual cash
flows. The SPPI criterion is met if a loan allows early settlement and the prepayment amount substantially rep-
resents principal and accrued interest, plus a reasonable additional compensation for the early termination of
the contract. The asset’s principal is the fair value at initial recognition less subsequent principal repayments,
ie instalments net of interest determined using the effective interest method. As an exception to this princi-
ple, the standard also allows instruments with prepayment features that meet the following condition to meet
SPPI: (i) the asset is originated at a premium or discount, (ii) the prepayment amount represents contractual
amount and accrued interest and a reasonable additional compensation for the early termination of the con-
tract, and (iii) the fair value of the prepayment feature is immaterial at initial recognition.
Financial assets – reclassification. Financial instruments are reclassified only when the business model for
managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place
from the beginning of the first reporting period that follows after the change in the business model. The
Group changed its business model during the current period in relation to certain portfolio of bonds carried
at amortized cost. Respective reclassifications will be applied in the financial statements from 1 January
2021 as required by IFRS.
Financial assets impairment - expected credit loss (ECL) allowance. The Group assesses, on a for-
ward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising
from loan commitments and financial guarantee contracts. The Group measures ECL and recognises credit
loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability
weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money
and (iii) all reasonable and supportable information that is available without undue cost and effort at the end
of each reporting period about past events, current conditions and forecasts of future conditions.
The Group applies a three stage model for impairment, based on changes in credit quality since initial rec-
ognition:
Stage 1: A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1.
Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that
results from default events possible within the next 12 months or until contractual maturity, if shorter (“12
Months ECL”);
Stage 2: If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the
asset is transferred to Stage2 and its ECL is measured based on ECL on a lifetime basis (“Lifetime ECL”).
If a SICR is no longer observed, instrument will move back to Stage 1.Refer to Note 37 for a description of
how the Group determines, on a forward-looking basis, when a SICR has occurred;
Stage 3: Credit impaired assets are transferred to Stage 3 and allowance for Lifetime ECL is recognized.
The Group’s definition of credit impaired assets and definition of default is based on the occurrence of
one or more loss events, described further in Note 37.
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Change in ECL is recognized in the statement of profit or loss with a corresponding allowance reported as a
decrease in carrying value of the financial asset on the statement of financial position. For financial guarantees
and credit commitments, provision for ECL is reported as a liability in Provisions for Liabilities and Charges.
Gross carrying amount and write offs. Gross carrying amount of a financial asset is the amortised cost of a
financial asset, before adjusting for any loss allowance. The Group directly reduces the gross carrying amount
of a financial asset when the entity has no reasonable expectations of recovering a financial asset in its en-
tirety or a portion thereof. The latter includes penalties under the local regulation requirements. The loans are
collectively assessed for write off based on overdue days criteria or are individually evaluated, depending on
the loan segment and product type.
Financial assets- derecognition and modification. The Group derecognises financial assets when (a) the
assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has
transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through
arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii)
neither transferring nor retaining substantially all risks and rewards of ownership, but not retaining control.
Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an
unrelated third party without needing to impose restrictions on the sale. The Group sometimes renegotiates
or otherwise modifies the contractual terms of the financial assets. The Group assesses whether the mod-
ification of contractual cash flows is substantial considering, among other, the following factors: change in
interest rate due to market environment changes, change in the currency denomination; consolidation of
two or more loans into one new loan; change in counterparty; loan with no schedule is replaced with loan
with schedule or vice versa; Based on below shown internally developed methodology there are certain
qualitative triggers which lead to asset derecognition with no further quantitative testing required. These
qualitative criteria are included in the list below:
Change in contract currency;
Consolidation of two or more loans into one new loan;
Change in counterparty;
Loan with no predetermined payment schedule is changed with loan with schedule or vice versa;
Change in contractual interest rate due to market environment changes.
The Group compares the original and revised expected cash flows to assets whether the risks and rewards
of the asset are substantially different as a result of the contractual modification. It should be assessed
whether change in contractual cash flow is significant (significance defined as 10% change). If the test result
is above 10% threshold, loan should be derecognized, whereas if the test is passed and result is below or
equal to 10%, financial asset can be assessed as modified.
If the risks and rewards do not change, the modified asset will not be substantially different (exceed 10%
test) from the original asset and the modification does not result in derecognition. The Group recalculates
the gross carrying amount by discounting the modified contractual cash flows by the original effective in-
terest rate or, when applicable, the revised effective interest rate and recognises a modification gain or loss
in profit or loss. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are
amortised over the remaining term of the modified financial asset.
Payment holidays granted by the Group in response to COVID-19 pandemic are treated as contractual mod-
ifications of the respective loans and advances if they do not lead to derecognition as guided by the policy
stated above. Their impact of modifications on the gross carrying amount (net modification loss) is present-
ed in profit or loss within losses from modifications of financial instruments.
Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured
at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabili-
ties held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer
in a business combination and other financial liabilities designated as such at initial recognition and (ii)
financial guarantee contracts and loan commitments.
Financial liabilities – derecognition and modification. Financial liabilities are derecognised when they are
extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
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An exchange between the Group and its original lenders of debt instruments with substantially different
terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are
accounted for as an extinguishment of the original financial liability and the recognition of a new financial
liability. The terms are substantially different if the discounted present value of the cash flows under the new
terms, including any fees paid net of any fees received and discounted using the original effective interest
rate, is at least 10% different from the discounted present value of the remaining cash flows of the original
financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominat-
ed in, changes in the type of interest rate, new conversion features attached to the instrument are also con-
sidered. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment,
any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange
or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying
amount of the liability and are amortised over the remaining term of the modified liability.
Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate
using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic
substance of the difference in carrying values is attributed to a capital transaction with owners.
Cash and cash equivalents. Cash and cash equivalents are items which are readily convertible to known
amounts of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents in-
clude cash on hand, amounts due from the National Bank of Georgia (NBG), excluding mandatory reserves,
and all interbank placements and interbank receivables with original maturities of less than three months.
Funds restricted for a period of more than three months on origination are excluded from cash and cash
equivalents. Cash and cash equivalents are carried at AC because: (i) they are held for collection of con-
tractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. Features
mandated solely by legislation, such as the bail-in legislation in certain countries, do not have an impact on
the SPPI test, unless they are included in contractual terms such that the feature would apply even if the
legislation is subsequently changed.
The payments or receipts presented in the statement of cash flows represent the Group’s transfers of cash
and cash equivalents, including amounts charged or credited to current accounts of the Group’s counter-
parties held with the Group, such as loan interest income or principal collected by charging the customer’s
current account or interest payments or disbursement of loans credited to the customer’s current account,
which represent cash or cash equivalent from the customer’s perspective.
Mandatory cash balances with the National Bank of Georgia. Mandatory cash balances with the NBG are
carried at AC and represent mandatory reserve deposits that are not available to finance the Group’s day to
day operations. Hence they are not considered as part of cash and cash equivalents for the purposes of the
consolidated statement of cash flows.
Due from other banks. Amounts due from other banks are recorded when the Group advances money to
counterparty banks. Amounts due from other banks are carried at AC when: (i) they are held for the purposes
of collecting contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at
fair value through profit or loss (FVTPL). Otherwise they are carried at fair value (FV).
Investments in debt securities. Based on the business model and the cash flow characteristics, the Group
classifies investments in debt securities as carried at AC, fair value through other comprehensive income
(FVOCI) or FVTPL. Debt securities are carried at AC if they are held for collection of contractual cash flows
and where those cash flows represent SPPI, and if they are not voluntarily designated at FVTPL in order to
significantly reduce an accounting mismatch.
Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling,
where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these
assets is calculated using the effective interest method and recognised in profit or loss. An impairment
allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All
other changes in the carrying value are recognised in OCI. When the debt security is derecognised, the
cumulative gain or loss previously recognised in OCI is reclassified from OCI to profit or loss. Investments
in debt securities are carried at FVTPL if they do not meet the criteria for AC or FVOCI. The Group may also
irrevocably designate investments in debt securities at FVTPL on initial recognition if applying this option
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significantly reduces an accounting mismatch between financial assets and liabilities being recognised or
measured on different accounting bases.
Investments in equity securities. Financial assets that meet the definition of equity from the issuer’s per-
spective, i.e. instruments that do not contain a contractual obligation to pay cash and that evidence a re-
sidual interest in the issuer’s net assets, are considered as investments in equity securities by the Group.
Investments in equity securities are measured at FVTPL, except where the Group elects at initial recog-
nition to irrevocably designate an equity investments at FVOCI. The Group’s policy is to designate equity
investments as FVOCI when those investments are held for strategic purposes other than solely to generate
investment returns. When the FVOCI election is used, fair value gains and losses are recognised in OCI
and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses and their
reversals, if any, are not measured separately from other changes in fair value. Dividends continue to be
recognised in profit or loss when the Group’s right to receive payments is established except when they
represent a recovery of an investment rather than a return on such investment.
Loans and advances to customers. Loans and advances to customers are recorded when the Group ad-
vances money to purchase or originate a loan due from a customer. Based on the business model and the
cash flow characteristics, the Group classifies loans and advances to customers into one of the following
measurement categories: (i) AC: loans that are held for collection of contractual cash flows and those cash
flows represent SPPI and loans that are not voluntarily designated at FVTPL, and (ii) FVTPL: loans that do not
meet the SPPI test or other criteria for AC or FVOCI are measured at FVTPL.
Impairment allowances are determined based on the forward-looking ECL models. Note 37 provides infor-
mation about inputs, assumptions and estimation techniques used in measuring ECL, including an explana-
tion of how the Group incorporates forward-looking information in the ECL models.
Repossessed collateral. Repossessed collateral represents non-financial assets acquired by the Group to
settle overdue loans. The assets are initially recognised at fair value when acquired and included in prem-
ises and equipment, investment property or repossessed collateral within other assets depending on their
nature and the Group’s intention in respect of recovery of these assets and are subsequently re-measured
and accounted for in accordance with the accounting policies for these categories of assets. Repossessed
assets are recorded at the lower of cost or net realisable value.
Loan commitments. The Group issues commitments to provide loans. These commitments are irrevocable
or revocable only in response to a material adverse change. Such commitments are initially recognised at
their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a
straight line basis over the life of the commitment, except for commitments to originate loans if it is prob-
able that the Group will enter into a specific lending arrangement and does not expect to sell the resulting
loan shortly after origination; such loan commitment fees are deferred and included in the carrying value
of the loan on initial recognition. At the end of each reporting period, the commitments are measured at (i)
the remaining unamortised balance of the amount at initial recognition, plus (ii) the amount of the loss al-
lowance determined based on the expected credit loss model, unless the commitment is to provide a loan
at a below market interest rate, in which case the measurement is at the higher of these two amounts. The
carrying amount of the loan commitments represents a liability.
Financial guarantees. Financial guarantees require the Group to make specified payments to reimburse
the holder of the guarantee for a loss it incurs because a specified debtor fails to make payment when due
in accordance with the original or modified terms of a debt instrument. Financial guarantees are initially
recognised at their fair value, which is normally evidenced by the amount of fees received. This amount
is amortised on a straight line basis over the life of the guarantee. At the end of each reporting period, the
guarantees are measured at the higher of (i) the amount of the loss allowance for the guaranteed exposure
determined based on the expected loss model and (ii) the remaining unamortised balance of the amount at
initial recognition. In addition, an ECL loss allowance is recognised for fees receivable that are recognised
in the statement of financial position as an asset.
Performance guarantees. Performance guarantees are contracts that provide compensation if another
party fails to perform a contractual obligation. Such contracts transfer non-financial performance risk in
addition to credit risk. Performance guarantees are initially recognised at their fair value, which is normally
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evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life
of the contract. At the end of each reporting period, the performance guarantee contracts are measured
at the higher of (i) the unamortised balance of the amount at initial recognition and (ii) the best estimate of
expenditure required to settle the contract at the end of each reporting period, discounted to present value.
Where the Group has the contractual right to revert to its customer for recovering amounts paid to settle
the performance guarantee contracts, such amounts will be recognised as an asset upon transfer of the loss
compensation to the guarantee’s beneficiary. These fees are recognised within fee and commission income
in profit or loss.
Sale and repurchase agreements. Sale and repurchase agreements (“repo agreements”), which effective-
ly provide a lender’s return to the counterparty, are treated as secured financing transactions. The lender
provides funds to the borrower and receives security as collateral. Securities sold under such sale and re-
purchase agreements are not derecognized. The securities are not reclassified in the statement of financial
position unless the transferee has, by contract, the right or custom to sell or repledge the securities, in
which case they are reclassified as repurchase receivables. The corresponding liability is presented within
amounts due to credit institutions. The repurchase agreements are short-term in nature. Investment secu-
rities at fair value through other comprehensive income or bonds carried at amortised cost reclassified to
repurchase receivables continue to be carried at fair value or amortised cost respectively in accordance with
the accounting policies for these categories of assets.
Securities purchased under agreements to resell (“reverse repo agreements”), which effectively provide a
lender’s return to the Group, are recorded as due from other banks or loans and advances to customers, as
appropriate. The difference between the sale and repurchase price is treated as interest income and ac-
crued over the life of repo agreements using the effective interest method.
Securities lent to counterparties for a fixed fee are retained in the consolidated financial statements in their
original category in the statement of financial position unless the counterparty has the right by contract
or custom to sell or repledge the securities, in which case they are reclassified and presented separately.
Securities borrowed for a fixed fee are not recorded in the consolidated financial statements, unless these
are sold to third parties, in which case the purchase and sale are recorded in profit or loss for the year within
gains less losses arising from trading securities. The obligation to return the securities is recorded at fair
value in other borrowed funds. Based on classification of securities sold under the sale and repurchase
agreements, the Group classifies repurchase receivables into one of the following measurement categories:
AC, FVOCI, and FVTPL.
Net investments in leases. Where the Group is a lessor in a lease that substantially transfers all risks and
rewards incidental to ownership to the lessee, the assets leased out are presented as net investments in
leases and carried at the present value of the future lease payments. Net investments in leases are initially
recognised at commencement (when the lease term begins) using a discount rate determined at inception
(the early date of the lease agreement and the date of commitment by the parties to the principal provisions
of the lease).
The difference between the gross receivable and the present value represents unearned finance income.
This income is recognised over the term of the lease using the net investment method (before tax), which
reflects a constant periodic rate of return. Incremental costs directly attributable to negotiating and arrang-
ing the lease are included in the initial measurement of the net investments in leases and reduce the amount
of income recognised over the lease term. Finance income from leases is recorded within interest income
in the profit or loss.
The ECL is determined in the same way as for loans and advances measured at AC and recognised through
an allowance account to write down the receivables’ net carrying amount to the present value of expected
cash flows discounted at the interest rates implicit in the lease investments. There is a ‘three stage’ ap-
proach which is based on the change in credit quality of financial lease receivables since initial recognition.
Immediate loss that is equal to the 12-month ECL is recorded on initial recognition of financial leases that
are not credit impaired. In case of a significant increase in credit risk, impairment is measured using lifetime
ECL rather than 12-month ECL. The estimated future cash flows reflect the cash flows that may result from
obtaining and selling the assets subject to the lease.
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The Group normally structures its finance lease contracts so that the lessee makes a minimum prepayment
of 20% of the equipment purchase price at the inception of the lease term. The Group holds title to the
leased assets during the lease term. The title to the asset under the finance lease contract is transferred
to the lessees at the end of the contracts terms, including full repayment of lease payments. Generally the
lease terms are up to five years.
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty.
The main types of collateral obtained are:
Leased assets (inventory and equipment);
Down payment;
Real estate properties;
Third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets
where collateral and other credit enhancements are equal to or exceed the assets’ carrying value(“over-col-
lateralised assets”) and (ii) those assets where collateral and other credit enhancements are less than the
assets’ carrying value (“under-collateralised assets”).
The Company classifies its portfolio into three stages:
Stage 1 – assets for which no significant increase of credit risk since initial recognition is identified;
Stage 2 – assets for which significant increase in credit risk since initial recognition is identified;
Stage 3 – credit-impaired exposures.
For stage 1 exposures the Company creates 12 months expected credit losses, whereas for stage 2 and stage
3 lifetime expected credit losses are created.
For the Stage 2 classification purposes the Company applies both quantitative and the qualitative criteria
including, but not limited to:
30 days past due (DPD) overdue;
Downgrade of the risk category of the borrower since initial recognition;
Default definition includes criteria such as: (i) 90 DPD overdue (ii) distressed restructuring and (iii) other cri-
teria indicating the borrower’s unlikeness to repay the liabilities.
The Group incorporates forward looking information (FLI) for both individual and collective assessment. For
FLI purposes the Company defines three scenarios, which are:
Baseline (most likely);
Upside (better than most likely);
Downside (worse than most likely).
The Group derives the baseline macro scenario and takes into account projections from various external
sources – the National Bank of Georgia, Ministry of Finance, IMF as well as other IFIs - to ensure the align-
ment to the consensus market expectations. Refer to Note 37 for the description of how the Group incorpo-
rates FLI in ECL calculations. Upside and downside scenarios are defined based on the framework devel-
oped by the Bank’s macroeconomic unit.
The Group calculates expected impairment losses for each scenario. In order to come up with the final ex-
pected credit loss figures the bank applies probability weighted average approach where probabilities of
each scenario are used as weights.
In relation to COVID-19, payment holidays are accounted on the same basis as disclosed above within
paragraph of financial assets- derecognition and modification.
Receivables from terminated leases. The company recognizes receivables from terminated contracts at
the moment of lease contract termination. These receivables are recognized at amount comprising dif-
ference between fair value of repossessed assets and outstanding balance of net investments in leases.
Receivables are accounted for at AC less ECL.
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Prepayment for purchase of leasing assets. Prepayment for purchase of leasing assets comprises of ad-
vance payments made to purchase assets for transfer into leases. Such advances are accounted for as
non-financial assets. On commencement of the leases, advances towards lease contracts are transferred
into net investment in finance lease.
Due to credit institutions. Amount due to credit institutions are recorded when counterparty banks ad-
vance money or other assets to the Group. The non-derivative liability is carried at AC. If the Group pur-
chases its own debt, it is removed from the consolidated statement of financial position and the difference
between the carrying amount of the liability and the consideration paid is included in gains or losses arising
from retirement of debt.
Customer accounts. Customer accounts are non-derivative liabilities to individuals, state or corporate cus-
tomers and are carried at AC.
Subordinated debt. Subordinated debt can only be paid in the event of a liquidation after the claims of
other higher priority creditors have been met and is included in the Bank’s “tier 2” capital. Subordinated debt
is carried at AC.
Debt securities in issue. Debt securities in issue include promissory notes, bonds, certificates of deposit
and debentures issued by the Group. Debt securities are stated at AC. If the Group purchases its own debt
securities in issue, they are removed from the consolidated statement of financial position and the differ-
ence between the carrying amount of the liability and the consideration paid is included in gains arising
from retirement of debt.
Derivative financial instruments. Derivative financial instruments, including foreign exchange contracts,
interest rate futures, forward rate agreements, currency and interest rate swaps, currency and interest rate
options are recognized at their fair value. The Group also enters into offsetting deposits with its counterpar-
ty banks to exchange currencies. Such deposits, while legally separate, are aggregated and accounted for as
a single derivative financial instrument (currency swap) on a net basis where (i) the deposits are entered into
at the same time and in contemplation of one another, (ii) they have the same counterparty, (iii) they relate
to the same risk and (iv) there is no apparent business purpose for structuring the transactions separately
that could not also have been accomplished in a single transaction. All derivative instruments are carried
as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of
derivative instruments are included in profit or loss. The Group does not apply hedge accounting. Certain
derivative instruments embedded in other financial instruments are treated as separate derivative instru-
ments when their risks and characteristics are not closely related to those of the host contract.
When derivative instruments are entered into with a view to decrease cost of funding, respective interest
effect is presented as a separate line of statement of comprehensive income, within net interest income.
Goodwill. Goodwill is carried at cost less accumulated impairment losses, if any. The Group tests goodwill
for impairment at least annually and whenever there are indications that goodwill may be impaired. Goodwill
is allocated to the cash-generating units, or groups of cash-generating units, that are expected to benefit
from the synergies of the business combination. Such units or group of units represent the lowest level at
which the Group monitors goodwill, and are not larger than an operating segment. Gains or losses on dis-
posal of an operation within a cash generating unit to which goodwill has been allocated include the carry-
ing amount of goodwill associated with the disposed operation. This is generally measured on the basis of
the relative values of the disposed operation and the portion of the cash-generating unit which is retained.
Premises and equipment. Premises and equipment are stated at cost, less accumulated depreciation and
provision for impairment, where required. Cost of premises and equipment of acquired subsidiaries is the
estimated fair value at the date of acquisition.
Costs of minor repairs and maintenance are expensed when incurred. Costs of replacing major parts or
components of premises and equipment items are capitalised and the replaced part is retired.
At the end of each reporting period management assesses whether there is any indication of impairment
of premises and equipment. If any such indication exists, management estimates the recoverable amount,
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying
amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the
year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the
estimates used to determine the asset’s value in use or fair value less costs to sell.
Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in
profit or loss for the year (within other operating income or expenses).If impaired, premises and equipment
are written down to the higher of their value in use and fair value less costs to sell. The decrease in carrying
amount is charged to profit or loss. An impairment loss recognised for an asset in prior years is reversed if there
has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell.
Depreciation. Land and construction in progress are not depreciated. Depreciation on other items of prem-
ises and equipment and right-of-use assets is calculated using the straight-line method to allocate their
cost or revalued amounts to their residual values over their estimated useful lives as follows:
Premises
Furniture and fixtures
Computers and office equipment
Motor vehicles
Other equipment
Right-of-use assets
Leasehold improvements
30 – 100 years;
5 – 8 years;
3 – 8 years;
4 – 5 years;
2 – 10 years;
the term of the underlying lease; and
the term of the underlying lease or if not defined, not more than 7 years.
The residual value of an asset is the estimated amount that the Group would currently obtain from disposal
of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition
expected at the end of its useful life. The residual value of an asset is nil if the Group expects to use the as-
set until the end of its physical life. The assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
Investment property. Investment property is property that the Groups owns to earn rental income or for
capital appreciation, or both, and that it does not occupy.
Investment property is stated at cost less accumulated depreciation and provision for impairment, where
required. It is amortised on a straight line basis over an expected useful lives of 30 to 50 years. In case of any
indication that the investment properties may be impaired, the Group estimates the recoverable amount as
the higher of value in use and fair value less costs to sell. The carrying amount of an investment property is
written down to its recoverable amount through a charge to profit or loss for the year. An impairment loss
recognised in prior years is reversed if there has been a subsequent change in the estimates used to deter-
mine the asset’s recoverable amount.
Land included in investment property is not depreciated. Depreciation on other items of investment proper-
ties is calculated using the straight-line method to allocate their cost to their residual values over their estimat-
ed useful lives of 30 to 50 years. Residual values of investment properties are estimated to be nil.
Earned rental income is recorded in profit or loss for the year within other operating income.
Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future
economic benefits associated with the expenditure will flow to the Group and the cost can be measured
reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property be-
comes owner-occupied, it is reclassified to premises and equipment.
Intangible assets. The Group’s intangible assets other than goodwill have definite useful lives and primarily
include capitalised computer software. Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific software. Development costs that are directly
associated with identifiable and unique software controlled by the Group are recorded as intangible assets
if the inflow of incremental economic benefits exceeding costs is probable. Capitalised costs include staff
costs of the software development team and an appropriate portion of relevant overheads. All other costs
associated with computer software, e.g. its maintenance, are expensed when incurred. Capitalised comput-
er software is amortised on a straight line basis over expected useful lives of 2 to 20 years.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Accounting for leases by the Group as a lessee from 1 January 2019. The Group leases office, branches
and service centre premises. Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group. Each lease payment is allocated be-
tween the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The
right-of-use asset is recognised at cost and depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payment that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be de-
termined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with
similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs, and
restoration costs.
As an exception to the above, the Group accounts for short-term leases and leases of low value assets by
recognising the lease payments as an operating expense on a straight line basis.
In determining the lease term, management of the Group considers all facts and circumstances that create
an economic incentive to exercise an extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated).
The Group applied the Amendment to IFRS 16 to COVID-19 related rent concessions granted by lessors for
the period April - June 2020. These concessions were recorded as a reduction in the lease liability and vari-
able rent in the period in which they were granted. The amount was not material to the financial statements.
Accounting for operating leases by the Group as a lessee prior to 1 January 2019. Where the Group is a
lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from
the lessor to the Group, the total lease payments are charged to profit or loss for the year (rental expense) on
a straight-line basis over the period of the lease.
Leases embedded in other agreements are separated if (a) fulfilment of the arrangement is dependent on
the use of a specific asset or assets and (b) the arrangement conveys a right to use the asset.
Accounting for operating leases by the Group as a lessor. When assets are leased out under an operating lease,
the lease payments receivable are recognised as rental income on a straight-line basis over the lease term.
Insurance and reinsurance receivables. Insurance and reinsurance receivables are recognised based on
insurance policy terms and measured at cost. The carrying value of insurance and reinsurance receivables
is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not
be recoverable, with any impairment loss recorded in the consolidated statement of income. Reinsurance
receivables primarily include balances due from both insurance and reinsurance companies for ceded in-
surance liabilities. Insurance premiums are recognised as revenue (earned premiums) proportionally over
the period of coverage of respective insurance contracts. Premiums are shown before deduction of com-
mission and are gross of any taxes or duties levied on premiums. Amounts due to reinsurers are estimated in
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
a manner consistent with the associated reinsured policies and in accordance with the reinsurance contract.
Premiums ceded and claims reimbursed are presented on a gross basis.
An impairment review is performed on all reinsurance assets when an indication of impairment occurs.
Reinsurance receivables are impaired only if there is objective evidence that the Group may not receive all
amounts due to it under the terms of the contract that this can be measured reliably.
Liability adequacy test. Liability adequacy tests are performed at each balance sheet date to ensure the ad-
equacy of recognised insurance liabilities net of related deferred acquisition costs. In performing the tests,
current best estimates of future contractual cash flows, claims handling and administration costs in respect
of claims, as well as investment income from assets backing such liabilities, are used. Where tests highlight
a deficiency, insurance liabilities are increased with any deficiency being recognised in the consolidated
statement of comprehensive income.
Income taxes. Income taxes are provided in the consolidated financial statements in accordance with the
legislation enacted or substantively enacted by the end of reporting period in the respective territories that
the Bank and its subsidiaries operate. The income tax charge/credit comprises of current tax and deferred
tax and is recognised in profit or loss except if it is recognised directly in other comprehensive income be-
cause it relates to transactions that are also recognised, in the same or a different period, directly in other
comprehensive income.
Current tax is the amount expected-to-be-paid to or recovered from the tax authorities in respect of taxable
profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if consoli-
dated financial statements are authorised prior to filing relevant tax returns. Taxes, other than on income, are
recorded within administrative and other operating expenses.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and
temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not
recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than
a business combination if the transaction, when initially recorded, affects neither accounting nor taxable
profit. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill
and subsequently for goodwill that is not deductible for tax purposes. Deferred tax balances are measured
at tax rates enacted or substantively enacted at the end of reporting period that are expected to apply to
the extent of time when the temporary differences will reverse or the tax loss carry forwards will be utilised.
Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax
assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that
it is probable that future taxable profit will be available against which the deductions can be utilised.
Deferred income tax is provided on post-acquisition retained earnings of subsidiaries, except where the
Group controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through
dividends or otherwise in the foreseeable future.
Uncertain tax positions. The Group’s uncertain tax positions are reassessed by the management at the end
of each reporting period. Liabilities are recorded for income tax positions that are determined by the manage-
ment as more likely than not to result in additional taxes being levied if the positions were to be challenged
by the tax authorities. The assessment is based on the interpretation of 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 for penalties, interest and taxes other than on income are recognised based on the management’s
best estimate of the expenditure required to settle the obligations at the end of the reporting period.
Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of
uncertain timing or amount. They are accrued when the Group has a present legal or constructive obligation
as a result of past events, 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 the obligation can be made. Mate-
rial provisions include provision for performance guarantees and credit related commitments.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Share capital. Ordinary shares with discretionary dividends are classified as equity. Incremental costs di-
rectly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is
recorded as share premium in equity.
Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends de-
clared after the end of the reporting period and before the consolidated financial statements are authorised
for issue, are disclosed in the subsequent events note.
Income and expense recognition. Interest income and expense are recorded for all debt instruments, other
than those at FVTPL, using the effective interest method. As part of interest income or expense this method
defers all fees paid or received between the parties to the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums or discounts. The group does not have Interest in-
come on debt instruments at FVTPL.
Fees integral to the effective interest rate include origination fees received or paid by the entity relating to
the creation or acquisition of a financial asset or issuance of a financial liability, for example fees for evalu-
ating creditworthiness, evaluating and recording guarantees or collateral, negotiating the terms of the in-
strument and for processing transaction documents. Commitment fees received by the Group to originate
loans at market interest rates are integral to the effective interest rate if it is probable that the Group will
enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origina-
tion. The Group does not designate loan commitments as financial liabilities at FVTPL.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial
assets, except for (i) financial assets that have become credit impaired (Stage 3), for which interest income is
calculated by applying the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets
that are purchased or originated credit impaired, for which the original credit-adjusted effective interest rate
is applied to the AC.
All other fees, commissions and other income and expense items are generally recorded when earned by
reference to completion of the specific transaction assessed on the basis of the actual service provided as
a proportion of the total services to be provided.
Fee and commission income. Fee and commission income is recognised over time on a straight line ba-
sis as the services are rendered, when the customer simultaneously receives and consumes the benefits
provided by the Group’s performance. Such income includes recurring fees for recurring fees for account
maintenance, account servicing fees, account subscription fees, annual plastic card fees etc. Variable fees
are recognised only to the extent that management determines that it is highly probable that a significant
reversal will not occur.
Other fee and commission income is recognised at a point in time when the Group satisfies its performance
obligation, usually upon execution of the underlying transaction. The amount of fee or commission received
or receivable represents the transaction price for the services identified as distinct performance obligations.
Such income includes fees for arranging a sale or purchase of foreign currencies on behalf of a customer,
fees for processing payment transactions, plastic card transactions, merchant fees, fees for cash settle-
ments, collection or cash disbursements, etc..
Foreign currency translation. The Group’s presentation currency is the Georgian Lari. TBCG’s and the
Bank’s functional currency is the Georgian Lari. The functional currency of each of the Group’s consolidated
entities is the currency of the primary economic environment in which the entity operates. 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 are translated into each entity’s functional currency at the official exchange
rate of the territories where the Bank and its subsidiaries operate, at the respective reporting period. For-
eign exchange gains and losses resulting from the settlement of transactions and from the translation of
monetary assets and liabilities into each entity’s functional currency at year-end official exchange rates are
recognised in profit or loss. Translation at year-end rates does not apply to non-monetary items, including
259
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
equity investments. The effects of exchange rate changes on the fair value of equity securities are recorded
as part of the fair value gain or loss.
The results and financial position of each group entity (the functional currency of none of which is a curren-
cy of a hyperinflationary economy) are translated into the presentation currency as follows:
Assets and liabilities for each statement of financial position presented are translated at the closing rate
at the end of the respective reporting period;
Income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions);
Components of equity are translated at the historic rate; and
All resulting exchange differences are recognised in other comprehensive income.
After losing control over a foreign operation, the exchange differences previously recognised in other com-
prehensive income are reclassified to profit or loss for the year as part of the gain or loss on disposal. On
partial disposal of a subsidiary without loss of control, the related portion of accumulated currency transla-
tion differences is reclassified to non-controlling interest within equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. At 31 December 2020 the closing rate of
exchange used for translating foreign currency balances was GBP 1 = 4.4529 (2019: GBP 1 = GEL 3.7593; 2018:
GBP 1 = GEL 3.3955); USD 1 = 3.2766 (2019: USD 1 = GEL 2.8677; 2018: USD 1 = GEL 2.6766); EUR 1 = 4.0233 (2019:
EUR 1 = GEL 3.2095; 2018: EUR 1 = GEL 3.0701).
Offsetting. Financial assets and liabilities are offset and the net amount reported in the consolidated state-
ment of financial position only when there is a legally enforceable right to offset the recognised amounts,
and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simulta-
neously.
Staff costs and related contributions. Wages, salaries, paid annual leave and sick leave, bonuses, and
non-monetary benefits as well as the cash settled part of the share based payment schemes are accrued in
the year in which the associated services are rendered by the Group’s employees.
Earnings per share. Earnings per share (“EPS”) are determined by dividing the profit or loss attributable to
owners of the Group by the weighted average number of participating shares outstanding during the re-
porting period.
Diluted earnings per share. Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. In cal-
culating diluted EPS, non-vested ordinary shares are treated as outstanding on the grant date.
Segment reporting. Operating segments are reported in a manner consistent with the internal reporting
provided to the Group’s chief operating decision maker. Segments whose revenue, result or assets are ten
percent or more of all the segments are reported separately.
Share based payments. A share-based payment arrangement is an agreement between the entity and an-
other party (including an employee) that entitles the other party to receive cash or other assets of the en-
tity for amounts that are based on the price (or value) of equity instruments (including shares) of the entity
or another group entity, or equity instruments (including shares or share options) of the entity or another
group entity, provided the specified vesting conditions, if any, are met. Under the share-based compensa-
tion plan the Group receives services from the management as consideration for equity instruments of the
Group. The fair value of the employee services received in exchange for the grant of the equity instruments
is recognised as an expense. The total amount to be expensed is determined by the reference to the fair
value of the equity instruments granted, excluding the impact of any non-market service and performance
vesting conditions. Non-market vesting conditions are included in the assumptions about the number of
equity instruments that are expected to vest. The total amount expensed is recognised over the vesting
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
period, which is the period over which all of the specified vesting conditions are to be satisfied. At each
balance sheet date, the Group revises its estimates of the number of equity instruments that are expected
to vest based on the non-marketing vesting conditions. It recognises the impact of the revision of original
estimates, if any, in profit or loss, with a corresponding adjustment to equity. Increase in equity on accrued
shares resulting from the equity settled scheme is accounted for under share based payment reserve. Upon
award of shares to the scheme participants, respective share based payment reserve is transferred to share
capital and share premium in case shares are issued on the market. When shares are repurchased from mar-
ket initially and held via employee benefit trust, these shares are presented as treasury shares under shares
held by trust category in the Statement of Financial Position until they are awarded to participants. When
award takes place, treasury shares amount are credited with corresponding debit recognized in share based
payment reserve. When portions of a single grant vest on two or more dates the entity applies graded vest-
ing for accounting of share based payment arrangement. Vesting period of each tranche of the grant ends
when the employee owns the shares with no further service restrictions. Under graded vesting scheme the
expense for earlier years is higher than for later years. Each tranche is expensed over its own service period
with a credit entry being equity.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities with-
in the next financial year. Estimates and judgements are continually evaluated and are based on the man-
agement’s experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. The management also makes certain judgements, apart from those
involving estimations, in the process of applying the accounting policies. Judgements that have the most
significant effect on the amounts recognised in the consolidated financial statements and estimates that
can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial
year include:
ECL measurement. Measurement of ECLs is a significant estimate that involves forecasting future econom-
ic conditions, longer the term of forecasts more management judgment is applied and those judgements
may be the source of uncertainty. Details of ECL measurement methodology are disclosed in Note 37. The
following components have a major impact on credit loss allowance: definition of default, definition of sig-
nificant increase in credit risk (SICR), probability of default (“PD”), exposure at default (“EAD”), and loss given
default (“LGD”), as well as models of macro-economic scenarios. The Group regularly reviews and validates
the models and inputs to the models to reduce any differences between expected credit loss estimates and
actual credit loss experience.
Significant increase in credit risk (“SICR”). The Bank applies both qualitative and quantitative indicators
to determination of SICR considering all reasonable and supportable information available without undue
cost and effort, on past events, current conditions and future behavioural aspects of particular portfolios.
The Bank tries to identify indicators of increase in credit risk of individual instruments prior to delinquency
and incorporates significant assumptions in the model in doing so. One of such judgement is determination
of thresholds of significant increase in credit risk. The effects of respective sensitivity are described below:
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
In thousands of GEL
20% decrease
in SICR thresholds
10% increase
in Stage 2 exposures
2020
Increase credit loss
allowance on loans and
advances by GEL 2,543.
Change of the Bank’s
cost of credit risk ratio
by 2 basis points.
Increase credit loss
allowance on loans and
advances by GEL 3,311.
Change of the Bank’s
cost of credit risk ratio
by 2 basis points.
2019
Increase credit loss
allowance on loans and
advances by GEL 1,954.
Change of the Bank’s
cost of credit risk ratio
by 2 basis points.
Increase credit loss
allowance on loans and
advances by GEL 2,380.
Change of the Bank’s
cost of credit risk ratio
by 2 basis points.
2018
Increase credit loss
allowance on loans and
advances by GEL 2,056.
Change of the Bank’s
cost of credit risk ratio
by 2 basis points.
Increase credit loss
allowance on loans and
advances by GEL 2,723.
Change of the Bank’s
cost of credit risk ratio
by 3 basis points.
Risk parameters: Probability of default (PD) and Loss given default (LGD) parameters are one of the key
drivers of expected credit losses. The effects of respective sensitivity are described below:
In thousands of GEL
10% increase
(decrease) in
PD estimates
10% increase
(decrease) in
LGD estimates
2020
Increase (decrease) credit loss
allowance on loans andadvances
by GEL 24,901 (GEL 26,013).
Change of the Bank’s cost of
credit risk ratio by 18 (19) basis
points.
Increase (decrease) credit loss
allowance on loans and advances
by GEL 50,719 (GEL 53,813).
Change of the Bank’s cost of
credit risk ratio by 37 (39) basis
points.
2019
Increase (decrease) credit loss
allowance on loans and advances
by GEL 17,427 (GEL 17,547).
Change of the Bank’s cost of
credit risk ratio by 16 (16) basis
points.
Increase (decrease) credit loss
allowance on loans and advances
by GEL 24,758 (GEL 26,604).
Change of the Bank’s cost of
credit risk ratio by 22 (24) basis
points.
2018
Increase credit loss allowance on
loans and advances by GEL 18,876
(GEL 18,942).
Change of the Bank’s cost of
credit risk ratio by 21 (21) basis
points.
Increase credit loss allowance on
loans and advances by GEL 28,185
(GEL 28,012).
Change of the Bank’s cost of
credit risk ratio by 31 (31) basis
points.
Macroeconomic scenarios: The Bank incorporates forward-looking information with three macro-economic
scenarios to calculate unbiased and probability weighted ECL. They represent the Baseline scenario (most
likely outcome) and two less likely scenarios, referred as the Upside (better than Baseline) and Downside
(worse than Baseline).
Due to the prolongation and severity of the COVID-19 pandemic impact, the scenario probabilities were
also adjusted to reflect the management’s expectations regarding their future realisation. The baseline,
upside and downside scenarios were assigned probability weighing of 60%, 10% and 30%, respectively (31
December 2019: 50%, 25% and 25%).
The following table describes the key macroeconomic variables under each scenario for future 3-year period
as at 31 December 2020:
Growth rates YoY, %
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment
Baseline
Upside
Downside
2021
4.2%
3.2
(3.5%)
2.6%
2022
7.4%
3.1
5.2%
1.0%
2023
5.3%
3.0
7.5%
1.0%
2021
4.9%
3.0
(2.1%)
2.8%
2022
8.3%
2.8
4.6%
1.3%
2023
6.5%
2.7
6.9%
1.3%
2021
2.7%
3.5
(5.7%)
2.4%
2022
5.2%
3.4
6.3%
0.7%
2023
2.6%
3.3
4.2%
0.6%
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
The Bank assessed the impact of changes in GDP growth and unemployment variables on ECL. These
two macroeconomic variables were identified as most critical economic factors in ECL assessment. The
sensitivity analysis was performed separately for each of the variable to show their significant in ECL
assessment, but changes in those variables may not happen in isolation as various economic factors tend
to be correlated across the scenarios. The variables were adjusted in all three macroeconomic scenarios
and the staging has been maintained unchanged. From the assessment of forward looking scenarios
management is comfortable with the scenarios capturing the non-linearity of the losses.
The table below shows the impact of +/-20% change in GDP growth and unemployment variables across all
scenarios on the Bank’s ECL:
in thousands of GEL
Impact on ECL
Change in GDP growth
Change in unemployment
20% increase
(6,973)
20% decrease
7,323
20% increase
3,899
20% decrease
(3,083)
4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
The following amended standards became effective from 1 January 2020, but did not have any material
impact on the Group:
Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effec-
tive for annual periods beginning on or after 1 January 2020). The revised Conceptual Framework includes
a new chapter on measurement; guidance on reporting financial performance; improved definitions and
guidance - in particular the definition of a liability; and clarifications in important areas, such as the roles of
stewardship, prudence and measurement uncertainty in financial reporting.
Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisi-
tions from the beginning of annual reporting period that starts on or after 1 January 2020).The amend-
ments revise definition of a business. A business must have inputs and a substantive process that together
significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate
when an input and a substantive process are present, including for early stage companies that have not
generated outputs. An organised workforce should be present as a condition for classification as a business
if are no outputs. The definition of the term ‘outputs’ is narrowed to focus on goods and services provided
to customers, generating investment income and other income, and it excludes returns in the form of lower
costs and other economic benefits. It is also no longer necessary to assess whether market participants are
capable of replacing missing elements or integrating the acquired activities and assets. An entity can apply
a ‘concentration test’. The assets acquired would not represent a business if substantially all of the fair value
of gross assets acquired is concentrated in a single asset (or a group of similar assets).
Definition of material – Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for
annual periods beginning on or after 1 January 2020). The amendments clarify the definition of material
and how it should be applied by including in the definition guidance that until now has featured elsewhere
in IFRS. In addition, the explanations accompanying the definition have been improved. Finally, the amend-
ments ensure that the definition of material is consistent across all IFRS Standards. Information is material
if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the pri-
mary users of general purpose financial statements make on the basis of those financial statements, which
provide financial information about a specific reporting entity.
Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019
and effective for annual periods beginning on or after 1 January 2020). The amendments were triggered by
replacement of benchmark interest rates such as LIBOR and other inter-bank offered rates (‘IBORs’). The
amendments provide temporary relief from applying specific hedge accounting requirements to hedging
relationships directly affected by the IBOR reform.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS CONTINUED
COVID-19-Related Rent Concessions Amendment to IFRS 16 (issued on 28 May 2020 and effective for
annual periods beginning on or after 1 June 2020). The amendment provides lessees with relief in the form
of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modifi-
cation. Lessees can elect to account for rent concessions in the same way as if they were not lease modifi-
cations. The practical expedient only applies to rent concessions occurring as a direct consequence of the
COVID-19 pandemic and only if all of the following conditions are met: the change in lease payments results
in revised consideration for the lease that is substantially the same as, or less than, the consideration for the
lease immediately preceding the change; any reduction in lease payments affects only payments due on or
before 30 June 2021; and there is no substantive change to other terms and conditions of the lease.
The application of the amendment did not have any impact on the right-of-use asset and no material effect
on lease liabilities and income statement.
5. NEW ACCOUNTING PRONOUNCEMENTS
Minor amendments to IFRSs
The IASB has published a number of minor amendments some of which has not yet been endorsed for use
in the EU. The Group has not early adopted any of the amendments effective after 31 December 2020 and
it expects they will have an insignificant effect, when adopted, on the consolidated financial statements of
the Group and the separate financial statements of TBC Bank Group PLC.
Major new IFRSs
IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or
after 1 January 2023). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on account-
ing for insurance contracts using existing practices. As a consequence, it was difficult for investors to com-
pare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single
principle-based standard to account for all types of insurance contracts, including reinsurance contracts
that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts
at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of
the available information about the fulfilment cash flows in a way that is consistent with observable market
information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the
unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the
profit from a group of insurance contracts over the period they provide insurance coverage, and as they are
released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss
immediately. The Group expects to apply the standard to performance guarantees that it issues and is cur-
rently assessing the impact of the new standard on its financial statements. Potential impact on insurance
products embedded in loans and similar instruments is also under consideration.
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual pe-
riods beginning on or after 1 January 2023). The amendments include a number of clarifications intended
to ease implementation of IFRS 17, simplify some requirements of the standard and transition. The amend-
ments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the
standard. The following amendments to IFRS 17 were made:
Effective date: The effective date of IFRS 17 (incorporating the amendments) has been deferred by two
years to annual reporting periods beginning on or after 1 January 2023; and the fixed expiry date of the
temporary exemption from applying IFRS 9 in IFRS 4 has also been deferred to annual reporting periods
beginning on or after 1 January 2023.
Expected recovery of insurance acquisition cash flows: An entity is required to allocate part of the ac-
quisition costs to related expected contract renewals, and to recognise those costs as an asset until the
entity recognises the contract renewals. Entities are required to assess the recoverability of the asset
at each reporting date, and to provide specific information about the asset in the notes to the financial
statements.
264
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
Contractual service margin attributable to investment services: Coverage units should be identified, con-
sidering the quantity of benefits and expected period of both insurance coverage and investment ser-
vices, for contracts under the variable fee approach and for other contracts with an ‘investment-return
service’ under the general model. Costs related to investment activities should be included as cash flows
within the boundary of an insurance contract, to the extent that the entity performs such activities to en-
hance benefits from insurance coverage for the policyholder.
Reinsurance contracts held – recovery of losses: When an entity recognises a loss on initial recognition
of an onerous group of underlying insurance contracts, or on addition of onerous underlying contracts to
a group, an entity should adjust the contractual service margin of a related group of reinsurance contracts
held and recognise a gain on the reinsurance contracts held. The amount of the loss recovered from a
reinsurance contract held is determined by multiplying the loss recognised on underlying insurance con-
tracts and the percentage of claims on underlying insurance contracts that the entity expects to recover
from the reinsurance contract held. This requirement would apply only when the reinsurance contract
held is recognised before or at the same time as the loss is recognised on the underlying insurance con-
tracts.
Other amendments: Other amendments include scope exclusions for some credit card (or similar) con-
tracts, and some loan contracts; presentation of insurance contract assets and liabilities in the state-
ment of financial position in portfolios instead of groups; applicability of the risk mitigation option when
mitigating financial risks using reinsurance contracts held and non-derivative financial instruments at
fair value through profit or loss; an accounting policy choice to change the estimates made in previous
interim financial statements when applying IFRS 17; inclusion of income tax payments and receipts that
are specifically chargeable to the policyholder under the terms of an insurance contract in the fulfilment
cash flows; and selected transition reliefs and other minor amendments.
The Group is currently assessing the impact of the amendments on its financial statements.
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to
IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after
a date to be determined by the IASB). These amendments address an inconsistency between the require-
ments in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor
and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is
recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction
involves assets that do not constitute a business, even if these assets are held by a subsidiary. The Group is
currently assessing the impact of the amendments on its consolidated financial statements.
Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020
and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments
clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the
end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the
reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a
right to be unconditional. Management’s expectations whether they will subsequently exercise the right
to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity com-
plies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a
condition is breached at or before the reporting date even if a waiver of that condition is obtained from the
lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant
is breached only after the reporting date. In addition, the amendments include clarifying the classification
requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the
extinguishment of a liability with cash, other resources embodying economic benefits or an entity’s own
equity instruments. There is an exception for convertible instruments that might be converted into equity,
but only for those instruments where the conversion option is classified as an equity instrument as a sep-
arate component of a compound financial instrument. The Group is currently assessing the impact of the
amendments on its financial statements.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS
1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023). The
amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020
with an original effective date 1 January 2022. However, in response to the Covid-19 pandemic, the effective
date was deferred by one year to provide companies with more time to implement classification changes
resulting from the amended guidance. The Group is currently assessing the impact of the amendments on
its financial statements.
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Con-
ceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements
to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effec-
tive for annual periods beginning on or after 1 January 2022). The amendment to IAS 16 prohibits an entity
from deducting from the cost of an item of PPE any proceeds received from selling items produced while
the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the
costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost
of those items. Cost will not include depreciation of the asset being tested because it is not ready for its in-
tended use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning
properly’ when it assesses the technical and physical performance of the asset. The financial performance
of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intend-
ed by management and subject to depreciation before it has achieved the level of operating performance
expected by management.
The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that
the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an al-
location of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate
provision for an onerous contract is established, an entity recognises any impairment loss that has occurred
on assets used in fulfilling the contract, rather than on assets dedicated to that contract.
IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to de-
termine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3
referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3
was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities
and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the
2018 Conceptual Framework. Without this new exception, an entity would have recognised some liabilities
in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acqui-
sition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an
economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in
IAS 37, at the acquisition date.
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of
financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment,
costs or fees paid to third parties will not be included in the 10% test.
Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from
the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential
confusion about the treatment of lease incentives.
IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can
measure its assets and liabilities at the carrying amounts that would be included in its parent’s consolidat-
ed financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for
consolidation procedures and for the effects of the business combination in which the parent acquired
the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure
cumulative translation differences using the amounts reported by the parent, based on the parent’s date of
transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differ-
ences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and
joint ventures that have taken the same IFRS 1 exemption.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was
removed. This amendment is intended to align with the requirement in the standard to discount cash flows
on a post-tax basis. The Group is currently assessing the impact of the amendments on its financial state-
ments.
Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). The
Phase 2 amendments address issues that arise from the implementation of the reforms, including the re-
placement of one benchmark with an alternative one. The amendments cover the following areas:
Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform:
For instruments to which the amortised cost measurement applies, the amendments require entities, as
a practical expedient, to account for a change in the basis for determining the contractual cash flows as
a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of
IFRS 9. As a result, no immediate gain or loss is recognised. This practical expedient applies only to such
a change and only to the extent it is necessary as a direct consequence of IBOR reform, and the new basis
is economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS
9 are also required to apply the same practical expedient. IFRS 16 was also amended to require lessees
to use a similar practical expedient when accounting for lease modifications that change the basis for
determining future lease payments as a result of IBOR reform.
End date for Phase 1 relief for non contractually specified risk components in hedging relationships: The
Phase 2 amendments require an entity to prospectively cease to apply the Phase 1 reliefs to a non-con-
tractually specified risk component at the earlier of when changes are made to the non-contractually
specified risk component, or when the hedging relationship is discontinued. No end date was provided
in the Phase 1 amendments for risk components.
Additional temporary exceptions from applying specific hedge accounting requirements: The Phase 2
amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge
accounting requirements to hedging relationships directly affected by IBOR reform.
Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the
entity is managing the transition to alternative benchmark rates, its progress and the risks arising from the
transition; (ii) quantitative information about derivatives and non-derivatives that have yet to transition,
disaggregated by significant interest rate benchmark; and (iii) a description of any changes to the risk
management strategy as a result of IBOR reform.
The Group is currently assessing the impact of the amendments on its financial statements.
Unless otherwise described above, the new standards and interpretations are not expected to affect signifi-
cantly the Group’s consolidated financial statements.
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12
February 2021 and effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended
to require companies to disclose their material accounting policy information rather than their significant
accounting policies. The amendment provided the definition of material accounting policy information. The
amendment also clarified that accounting policy information is expected to be material if, without it, the
users of the financial statements would be unable to understand other material information in the financial
statements. The amendment provided illustrative examples of accounting policy information that is likely
to be considered material to the entity’s financial statements. Further, the amendment to IAS 1 clarified that
immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not
obscure material accounting policy information. To support this amendment, IFRS Practice Statement 2,
‘Making Materiality Judgements’ was also amended to provide guidance on how to apply the concept of
materiality to accounting policy disclosures. The Group is currently assessing the impact of the amend-
ments on its financial statements.
Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for
annual periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies
should distinguish changes in accounting policies from changes in accounting estimates. The Group is
currently assessing the impact of the amendments on its financial statements.
267
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 6. CASH AND CASH EQUIVALENTS
in thousands of GEL
Cash on hand
Cash balances with the National Bank of Georgia (other than mandatory
reserve deposits)
2020
2019
2018
755,687
650,700
491,928
102,522
35,132
118,749
Correspondent accounts and overnight placements with other banks
588,409
191,420
371,902
Placements with and receivables from other banks with original maturities of
less than three months
Total gross amount of cash and cash equivalents
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
Total cash and cash equivalents
188,867
126,360
184,429
1,635,485
(80)
(80)
-
-
1,003,612
(29)
(27)
(2)
-
1,635,405
1,003,583
1,167,008
(97)
(97)
-
-
1,166,911
89% of the correspondent accounts and overnight placements with other banks are placed with OECD (The
Organization for Economic Co-operation and Development) banking institutions (31 December 2019: 85%;
31 December 2018: 95%).
As at 31 December 2020 GEL 25,030 thousand was placed on interbank term deposits with one non-OECD
bank and GEL 163,838 thousand with one OECD bank (2019: GEL 11,348 thousand with one non-OECD bank
and GEL 115,012 thousand with one OECD bank; 2018: GEL13,383 thousand with one non-OECD bank and
GEL 171,046 thousand with two OECD banks). Interest rate analysis of cash and cash equivalents is disclosed
in Note 37.
The credit-rating of correspondent accounts and overnight placements with other banks is as follows:
in thousands of GEL
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
Not rated
2020
–
1,891
417,938
1,896
35,753
–
64,985
897
–
1,858
9,088
53,688
15
400
2019
–
–
66,805
13,816
–
20,286
69,302
–
733
3,680
12,346
4,452
–
–
Total correspondent accounts and overnight placements with other banks
588,409
191,420
2018
5,883
–
249,802
4,628
–
93,450
–
873
241
208
16,394
381
42
–
371,902
268
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 6. CASH AND CASH EQUIVALENTS CONTINUED
in thousands of GEL
AAA
A-
BBB+
BB
BB-
B+
Not rated
Total placements with and receivables from other banks
with original maturities of less than three months
2020
–
–
163,838
–
25,016
–
13
2019
–
115,012
–
1,719
–
9,629
–
2018
10,021
161,025
–
–
–
13,383
–
188,867
126,360
184,429
The table illustrates the ratings by international agencies Standard & Poor’s and Fitch Ratings. When dif-
ferent credit ratings are designated by the agencies, the highest designated rating for this asset is used, for
those financial institutions which are not assigned credit ratings country ratings are used. As at 31 December
2020 there were no investment securities held as collateral against placements with other banks under the
reverse repo agreements (2019: nil; 2018: nil).
7. DUE FROM OTHER BANKS
Amounts due from other banks include placements with original maturities of more than three months that
are not collateralised and represent neither past due nor impaired amounts at the end of 2020, 2019 and
2018. Credit ratings of placements with other banks with original maturities of more than three months were
as follows:
in thousands of GEL
AA
AA-
A+
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
Total placements with other banks with original
maturities of more than three months
2020
–
31
10,908
98
–
2,011
–
10,972
12,041
14,744
–
50,805
2019
–
–
9,549
–
2,493
–
–
9,045
5,323
7,195
–
33,605
2018
8,913
–
–
80
3,838
–
4,388
–
26,238
3,194
665
47,316
As at 31 December 2020 the Group had no placements, with original maturities of more than three months
and with aggregated amounts above GEL 5,000 thousand (2019: nil; 2018: placement with one bank). The
total aggregated amount of these placement was GEL 2,012 thousand (2019: Nil; 2018: GEL 19,311 thousand)
or 4.0% of the total amount due from other (2019: 40.8 %; 2018: 41 %).
As at 31 December 2020 GEL 11,744 thousand, (2019: GEL 11,836 thousand; 2018: GEL 15,725 thousand) were
kept on deposits as restricted cash under an arrangement with a credit card company or credit card related
services with other banks. Refer to Note 42 for the estimated fair value of amounts due from other banks.
Interest rate analysis of due from other banks is disclosed in Note 37.
For the purpose of ECL measurement due from other banks balances are included in Stage 1. The ECL for
these balances as at 31 December 2020 is GEL 8 thousand (2019: GEL 9 thousand; 2018: GEL 39 thousand).
269
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 8. MANDATORY CASH BALANCES WITH THE NATIONAL BANK OF GEORGIA
Mandatory cash balances with the National Bank of Georgia (“NBG”) represent amounts deposited with the
NBG. Resident financial institutions are required to maintain an interest-earning obligatory reserve with the
NBG, the amount of which depends on the level of funds attracted by the financial institutions. The Group
earned up to 8.0%, (0.25%) and (0.7%) annual interest in GEL, USD and EUR respectively on mandatory re-
serves with NBG in 2020 (2019: 9.0%, 1.25% and (0.7%) in GEL, USD and EUR respectively; 2018: 6.0%, 0.8% and
(0.6%) in GEL, USD and EUR respectively).
In April 2020 Fitch Ratings has affirmed Georgia’s long-term foreign and local-currency issuer default ratings
(IDRs) at ‘BB’. The outlook was revised to negative from stable. The issue ratings on long-term senior unse-
cured foreign and local-currency bonds were affirmed at ‘BB’. The country ceiling was affirmed at ‘BBB-’ and
the short-term foreign and local-currency IDRs at ‘B’.
9. LOANS AND ADVANCES TO CUSTOMERS
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium enterprises
Total gross loans and advances to customers at AC
Less: credit loss allowance
Total loans and advances to customers at AC
2020
5,690,749
2,011,585
3,942,102
3,556,084
15,200,520
(606,246)
14,594,274
2019
4,660,473
1,884,006
3,169,197
2,948,279
12,661,955
(312,556)
2018
3,177,289
1,989,516
2,709,183
2,496,594
10,372,582
(334,130)
12,349,399
10,038,452
As at 31 December 2020 loans and advances to customers carried at GEL 889,353 thousand have been
pledged to local banks or other financial institutions as collateral with respect to other borrowed funds
(2019: GEL 474,480 thousand; 2018: GEL 228,454 thousand).
In 2020, the Group has reassessed its definition of segments as disclosed in Note 29. Some of the clients
were reallocated to different segments. Comparative information has not been updated due to impractica-
bility. However recent period information per old segmentation is disclosed in Note 29.
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans
and advances to customers carried at amortised cost between the beginning and the end of the reporting
period. Below main movements in the table are described:
Transfers occur between Stage 1, 2 and 3, due to significant increases (or decreases) of credit risk or
exposures becoming defaulted in the period, and the consequent "step up" (or "step down") between
12-month and Lifetime ECL. It should be noted, that:
• Movement does not include exposures, which were issued and repaid during the period;
• For loans, which existed at the beginning of the period, opening exposures are disclosed as transfer
amounts;
• For newly issued loans, exposures at the beginning of the period are disclosed as transfer amounts;
• For the exposures which changed stages multiple times during the period, only transfers between
starting and ending stage is disclosed.
New originated or purchased gives us information regarding gross loans issued and corresponding credit
loss allowance created during the period (however, exposures which were issued and repaid during the
period and issued to refinance existing loans are excluded);
Derecognised during the period refers to the balance of loans and credit loss allowance at the beginning
of the period, which were repaid during the period. Exposures which were issued and repaid during the
period, written off or refinanced by other loans, are excluded;
Net repayments refers to the net changes in gross carrying amounts, which is loan disbursements less
repayments;
Net write offs refer to write off of loans during the period, and net of written off and recoveries of already
written off loans for ECL;
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Foreign exchange movements refers to the translation of assets denominated in foreign currencies and
effect to translation in presentational currency for foreign subsidiary;
Net remeasurement due to stage transfers and risk parameters changes refers to the movements in ECL
as a result of transfer of exposure between stages or changes in risk parameters and forward looking ex-
pectations;
Resegmentation refers to the transfer of loans from one reporting segment to another.
For presentation purposes, amounts are rounded to the nearest thousands of GEL, which in certain cases is
disclosed as nil.
Total loans
in thousands of GEL
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Total
Stage 3
(lifetime
ECL for
credit
impaired)
Total
At 1 January 2020
11,551,934
757,094
352,927
12,661,955
95,689
82,687
134,180 312,556
Transfers
– to lifetime (from Stage
1 and Stage 3 to Stage
2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during the
period
Net repayments
Net Write-offs
Net remeasurement due
to stage transfers and risk
parameters changes
Foreign exchange
movements
(1,834,720) 1,871,883
(37,163)
(456,349) (195,488)
651,837
116,479 (115,394)
(1,085)
–
–
–
(10,824)
23,099
(12,275)
(53,436)
(27,314)
80,750
15,269
(14,677)
(592)
–
–
–
3,361,543
–
–
3,361,543
110,226
–
–
110,226
(922,671)
(83,851)
(23,487)
(1,030,009)
12,225
789
(13,151)
(137)
(982,755)
(60,770)
(42,984)
(1,086,509)
(66,028)
(66,028)
–
–
–
–
–
–
(44,892)
(44,892)
–
–
(45,959)
70,894
165,031
189,966
–
–
–
–
1,042,872
280,445
59,792
1,383,109
7,038
7,437
24,052
38,527
Modifications
(15,774)
(5,793)
(1,974)
(23,541)
–
–
–
–
At 31 December 2020
11,860,559 2,448,126
891,835 15,200,520
130,228
142,915
333,103 606,246
271
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Total loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Total
Total
At 1 January 2019
9,226,512
791,969
354,101 10,372,582
96,812
95,784
141,534 334,130
Transfers
– to lifetime (from Stage
1 and Stage 3 to Stage
2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during the
period
Net repayments
Net Write-offs
Net remeasurement due
to stage transfers and risk
parameters changes
Foreign exchange
movements
(646,985)
682,879
(35,894)
(151,728) (138,204)
289,932
269,543 (264,141)
(5,402)
–
–
–
(22,811)
34,649
(11,838)
(11,259)
(24,668)
35,927
28,411
(26,682)
(1,729)
–
–
–
4,403,046
–
– 4,403,046
72,517
–
–
72,517
(535,371)
(165,034)
(183,020)
(883,425)
(1,331)
(16,526)
(23,859)
(41,716)
(1,293,956)
(177,292)
56,480 (1,414,768)
(140,161)
(140,161)
–
–
–
–
–
–
(106,360)
(106,360)
–
–
(67,845)
19,033
94,975
46,163
–
–
–
–
280,873
26,917
16,891
324,681
1,195
1,097
5,530
7,822
At 31 December 2019
11,551,934
757,094
352,927 12,661,955
95,689
82,687
134,180 312,556
272
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Total loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2018
7,299,871
967,528
285,822
8,553,221
74,539
100,571
116,484
291,594
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(626,292)
662,877
(36,585)
(199,046)
(191,153)
390,199
284,679 (278,844)
(5,835)
–
–
–
(52,145)
61,498
(9,353)
(36,294)
(27,861)
64,155
18,610
(17,041)
(1,569)
–
–
–
5,875,598
109
20 5,875,727
111,964
–
–
111,964
(2,676,648)
(279,310)
(125,050) (3,081,008)
(38,195)
(20,991)
(49,298)
(108,484)
Net repayments
(806,531)
(98,415)
(15,349)
(920,295)
Other movements
1,225
3,792
5,017
(147,996)
(147,996)
–
–
–
–
–
–
–
–
–
–
(101,317)
(101,317)
–
–
18,306
(417)
122,332
140,221
–
–
–
–
–
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
73,656
9,177
5,083
87,916
27
25
100
152
At 31 December 2018
9,226,512
791,969
354,101 10,372,582
96,812
95,784
141,534
334,130
273
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
4,434,685
104,409
121,379 4,660,473
39,153
1,969
39,628
80,750
(750,779)
750,779
–
(57,281)
(14,021)
71,302
20,142 (20,142)
–
–
–
–
(7,395)
7,395
–
(1,394)
(1,307)
2,701
227
(227)
–
–
–
–
854,821
–
–
854,821
14,830
–
–
14,830
(285,949)
(20,839)
(7,919)
(314,707)
(3,328)
(1,915)
(3,800)
(9,043)
(145,390)
16,644
(32,056)
(160,802)
–
21,785
(5,380)
(5,380)
–
76
–
–
–
–
–
–
–
76
(5,047)
(5,047)
21,785
–
–
–
–
–
–
–
6,388
1,006
1,641
9,035
Corporate loans
in thousands of GEL
At 1 January 2020
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
Net repayments
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
484,641
140,115
14,966
639,722
5,438
1,273
10,329
17,040
Modifications
(2,541)
(1,758)
(864)
(5,163)
–
–
–
–
At 31 December 2020
4,574,134
955,187
161,428 5,690,749
53,995
8,194
45,452
107,641
274
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Corporate loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2019
2,903,313
138,715
135,261
3,177,289
32,940
4,994
43,571
81,505
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
Net repayments
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
(126,154)
137,126
(10,972)
(27,531)
(5,261)
32,792
72,484
(71,151)
(1,333)
–
–
–
(2,876)
5,184
(2,308)
(2,914)
(192)
3,106
2,806
(2,806)
–
–
–
–
1,638,709
–
– 1,638,709
25,355
–
–
25,355
1,988
(31,192)
(13,862)
(43,066)
(2,544)
(1,064)
(9,094)
(12,702)
(186,958)
(70,285)
(27,812)
(285,055)
55,356
–
–
711
–
–
–
–
–
56,067
–
–
–
176
–
–
76
–
–
–
630
–
252
630
(14,698)
(4,398)
991
(18,105)
103,478
5,746
7,305
116,529
908
175
2,732
3,815
At 31 December 2019
4,434,685
104,409
121,379 4,660,473
39,153
1,969
39,628
80,750
275
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Corporate loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2018
2,041,538
325,919
107,935
2,475,392
21,208
15,036
31,719
67,963
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(93,957)
100,702
(6,745)
(3,395)
(85,409)
88,804
129,019 (126,886)
(2,133)
–
–
–
(1,811)
2,185
(374)
(32)
(8,341)
8,373
3,908
(3,908)
–
–
–
–
1,787,999
–
–
1,787,999
22,031
–
–
22,031
(873,776)
(53,958)
(14,720)
(942,454)
(9,217)
(3,140)
(21,293)
(33,650)
Net repayments
(145,691)
(25,028)
(39,857)
(210,576)
2
36,699
–
–
–
488
–
–
–
–
(321)
2
37,187
(321)
–
–
283
–
–
–
–
–
–
–
–
–
–
283
3,269
3,269
–
–
(3,430)
3,162
21,877
21,609
Other movements
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
24,875
2,887
2,298
30,060
–
–
–
–
At 31 December 2018
2,903,313
138,715
135,261
3,177,289
32,940
4,994
43,571
81,505
276
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Loans to micro, small and
medium enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Gross carrying amount
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2020
2,650,261
204,699
93,319
2,948,279
18,341
18,593
29,211
66,145
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(539,299)
546,322
(7,023)
(103,564)
(83,981)
187,545
31,201
(30,770)
(431)
–
–
–
(6,860)
8,580
(1,720)
(8,258)
(9,097)
17,355
3,130
(2,954)
(176)
–
–
–
1,033,189
–
–
1,033,189
23,407
–
–
23,407
(303,253)
(33,879)
(5,525)
(342,657)
(1,314)
(157)
(1,759)
(3,230)
Net repayments
(290,204)
(26,683)
(11,097)
(327,984)
Resegmentation
(22,888)
–
(22,888)
(15,696)
(15,696)
–
(76)
–
–
–
–
–
–
–
(76)
(8,623)
(8,623)
–
–
(5,102)
29,155
48,679
72,732
–
–
–
–
–
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
209,565
57,071
22,183
288,819
1,222
2,733
5,600
9,555
Modifications
(3,222)
(1,432)
(324)
(4,978)
–
–
–
–
At 31 December 2020
2,661,786
631,347
262,951
3,556,084
24,490
46,853
88,567
159,910
277
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Loans to micro, small and
medium enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Gross carrying amount
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2019
2,210,617
193,157
92,820
2,496,594
19,273
22,379
29,362
71,014
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
Net repayments
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
(181,576)
186,581
(5,005)
(51,354)
(42,338)
93,692
49,093 (48,292)
(801)
–
–
–
(3,097)
5,142
(2,045)
(2,568)
(6,711)
9,279
6,191
(5,872)
(319)
–
–
–
1,312,100
–
–
1,312,100
11,981
–
–
11,981
(354,274)
(47,777)
(48,874)
(450,925)
(2,356)
(2,582)
(6,102)
(11,040)
(333,112)
(42,333)
(14,348)
(389,793)
(55,356)
(786)
–
(56,142)
–
(28,963)
(28,963)
–
(176)
–
–
(78)
–
–
–
–
(254)
(12,946)
(12,946)
–
–
–
(11,134)
6,047
10,948
5,861
–
–
54,123
6,487
4,798
65,408
227
268
1,034
1,529
At 31 December 2019
2,650,261
204,699
93,319
2,948,279
18,341
18,593
29,211
66,145
278
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Loans to micro, small and
medium enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2018
1,630,103
149,799
64,770
1,844,672
9,894
11,890
24,468
46,252
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(142,901)
152,463
(9,562)
(83,887)
(21,578)
105,465
31,601
(30,683)
(918)
–
–
–
(13,479)
15,630
(2,151)
(6,489)
(2,130)
8,619
2,973
(2,552)
(421)
–
–
–
1,360,236
–
–
1,360,236
21,595
–
–
21,595
(528,289)
(61,702)
(49,272)
(639,263)
(4,626)
(2,621)
(3,210)
(10,457)
Net repayments
(146,754)
(20,622)
Other movements
(21)
6
788
349
(166,588)
334
–
–
–
–
–
–
–
–
Resegmentation
75,069
23,747
1,725
100,541
4,615
8,399
1,611
14,625
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
–
–
–
(22,004)
(22,004)
–
–
(5,664)
(5,664)
–
–
–
4,781
(6,245)
5,997
4,533
15,460
1,727
1,479
18,666
9
8
113
130
At 31 December 2018
2,210,617
193,157
92,820 2,496,594
19,273
22,379
29,362
71,014
279
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Consumer loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2020
1,593,262
216,817
73,927
1,884,006
36,724
52,439
44,793
133,956
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(165,248)
178,014
(12,766)
(114,928)
(58,650)
173,578
40,086 (39,544)
(542)
–
–
–
(3,846)
9,861
(6,015)
(24,678)
(14,790)
39,468
11,333
(10,945)
(388)
–
–
–
669,973
–
–
669,973
62,912
–
–
62,912
(219,243)
(14,197)
(9,175)
(242,615)
11,426
220
(4,949)
6,697
Net repayments
(287,650)
(19,815)
3,789
(303,676)
–
831
(44,356)
(44,356)
–
–
–
–
–
–
–
–
–
–
(31,240)
(31,240)
–
–
(45,618)
29,130
83,373
66,885
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
831
–
–
–
–
–
Modifications
(5,981)
(1,769)
(758)
(8,508)
45,457
6,440
4,033
55,930
119
–
437
–
2,059
2,615
–
–
At 31 December 2020
1,556,559
267,296
187,730
2,011,585
48,372
66,352
127,101
241,825
280
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
credit im-
paired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
Consumer loans
in thousands of GEL
At 1 January 2019
1,641,978
265,687
81,851
1,989,516
42,903
59,245
54,575
156,723
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(166,459)
176,428
(9,969)
(60,362)
(67,012)
127,374
81,453 (80,023)
(1,430)
–
–
–
(16,454)
21,029
(4,575)
(5,682)
(16,168)
21,850
16,851
(16,013)
(838)
–
–
–
641,207
–
–
641,207
34,363
–
–
34,363
(101,437)
(39,416)
(125,004)
(265,857)
3,706
(11,085)
(7,972)
(15,351)
Net repayments
(460,554)
(42,061)
109,208
(393,407)
2,583
1,092
572
4,247
–
(110,243)
(110,243)
–
15
–
–
97
–
–
184
–
296
(97,652)
(97,652)
–
–
–
(38,995)
15,212
78,558
54,775
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
–
–
14,853
2,122
1,568
18,543
17
122
663
802
At 31 December 2019
1,593,262
216,817
73,927
1,884,006
36,724
52,439
44,793
133,956
281
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Consumer loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2018
1,788,523
301,923
72,981
2,163,427
42,066
64,309
48,195
154,570
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(244,838)
253,057
(8,219)
(97,030)
(64,020)
161,050
73,142
(71,235)
(1,907)
–
–
–
(34,737)
38,429
(3,692)
(28,073)
(16,142)
44,215
10,012
(9,115)
(897)
–
–
–
1,359,515
109
20
1,359,644
65,303
–
–
65,303
(794,286)
(96,300)
(52,401)
(942,987)
(23,551)
(13,147)
(23,220)
(59,918)
Net repayments
(339,487)
(34,337)
32,155
(341,669)
Other movements
1,033
(77)
1,636
2,592
–
–
–
–
–
–
–
–
Resegmentation
(109,359)
(24,193)
(1,725)
(135,277)
(4,886)
(8,391)
(1,611)
(14,888)
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
–
–
–
(122,095)
(122,095)
–
–
(100,885)
(100,885)
–
–
–
16,760
3,298
92,489
112,547
4,765
760
356
5,881
9
4
(19)
(6)
At 31 December 2018
1,641,978
265,687
81,851
1,989,516
42,903
59,245
54,575
156,723
282
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Mortgage loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2020
2,873,726
231,169
64,302
3,169,197
1,471
9,686
20,548
31,705
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
Net repayments
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
(379,394)
396,768
(17,374)
(180,576)
(38,836)
219,412
25,050 (24,938)
(112)
–
–
–
7,277
(2,737)
(4,540)
(19,106)
(2,120)
21,226
579
(551)
(28)
–
–
–
803,560
–
–
803,560
9,077
–
–
9,077
(114,226)
(14,936)
(868)
(130,030)
5,441
2,641
(2,643)
5,439
(259,511)
(30,916)
(3,620)
(294,047)
–
(596)
272
(596)
–
–
–
–
–
–
–
–
18
–
–
18
272
–
–
–
–
–
–
–
(1,627)
11,603
31,338
41,314
303,209
76,819
18,610
398,638
259
2,994
6,064
9,317
Modifications
(4,030)
(834)
(28)
(4,892)
–
–
–
–
At 31 December 2020
3,068,080
594,296
279,726
3,942,102
3,371
21,516
71,983
96,870
283
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Mortgage loans
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Total
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2019
2,470,604
194,410
44,169 2,709,183
1,696
9,166
14,026
24,888
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
Net repayments
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
(172,796)
182,744
(9,948)
(12,481)
(23,593)
36,074
66,513 (64,675)
(1,838)
–
–
–
(384)
3,294
(2,910)
(95)
(1,597)
1,692
2,563
(1,991)
(572)
–
–
–
811,030
–
–
811,030
818
–
–
818
(81,648)
(46,649)
4,720 (123,577)
(137)
(1,795)
(691)
(2,623)
(313,332)
(22,613)
(10,568)
(346,513)
(572)
(955)
(4,172)
(955)
–
(15)
–
–
(95)
–
–
(184)
3,608
–
(294)
3,608
(2,583)
(1,017)
–
–
–
–
–
–
(3,018)
2,172
4,478
3,632
108,419
12,562
3,220
124,201
43
532
1,101
1,676
At 31 December 2019
2,873,726
231,169
64,302 3,169,197
1,471
9,686
20,548
31,705
284
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
credit im-
paired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
Mortgage loans
in thousands of GEL
At 1 January 2018
1,839,707
189,887
40,136 2,069,730
1,371
9,336
12,102
22,809
Transfers
– to lifetime (from
Stage 1 and Stage 3
to Stage 2)
– to credit-impaired
(from Stage 1 and
Stage 2 to Stage 3)
– to 12-months ECL
(from Stage 2 and
Stage 3 to Stage 1)
New originated or
purchased
Derecognised during
the period
(144,596)
156,655
(12,059)
(14,734)
(20,146)
34,880
50,917 (50,040)
(877)
–
–
–
(2,118)
5,254
(3,136)
(1,700)
(1,248)
2,948
1,717
(1,466)
(251)
–
–
–
1,367,848
–
–
1,367,848
3,035
–
–
3,035
(480,297)
(67,350)
(8,657)
(556,304)
(801)
(2,083)
(1,575)
(4,459)
Net repayments
(174,599)
(18,428)
(8,435)
(201,462)
Other movements
Resegmentation
Net Write-offs
Net remeasurement
due to stage transfers
and risk parameters
changes
Foreign exchange
movements
211
(2,409)
–
–
71
(42)
–
–
1,807
–
(3,576)
2,089
(2,451)
(3,576)
–
–
(12)
–
–
–
(8)
–
–
–
–
1,963
–
–
(20)
1,963
–
–
195
(632)
1,969
1,532
28,556
3,803
950
33,309
9
13
6
28
At 31 December 2018
2,470,604
194,410
44,169
2,709,183
1,696
9,166
14,026
24,888
285
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The credit quality of loans to customers carried at amortised cost is as follows at 31 December 2020:
in thousands of GEL
Corporate loans risk category
– Very low
– Low
– Moderate
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2020
Stage 1
(12months ECL)
Stage 2
(lifetime ECL for SICR)
Stage 3
(lifetime ECL for
credit impaired)
4,324,191
248,246
1,697
–
4,574,134
(53,995)
4,520,139
1,010,723
453,899
91,937
–
–
1,556,559
(48,372)
1,508,187
2,852,661
186,597
28,822
–
–
3,068,080
(3,371)
3,064,709
2,252,448
395,733
13,605
–
–
2,661,786
(24,490)
2,637,296
6,178
913,832
35,177
–
955,187
(8,194)
946,993
20,041
64,950
159,726
22,579
–
267,296
(66,352)
200,944
97,936
334,579
154,372
7,409
–
594,296
(21,516)
572,780
145,445
348,147
121,925
15,830
–
631,347
(46,853)
584,494
–
–
–
161,428
161,428
(45,452)
115,976
–
–
–
–
187,730
187,730
(127,101)
60,629
–
–
–
–
279,726
279,726
(71,983)
207,743
–
–
–
–
262,951
262,951
(88,567)
174,384
Total
4,330,369
1,162,078
36,874
161,428
5,690,749
(107,641)
5,583,108
1,030,764
518,849
251,663
22,579
187,730
2,011,585
(241,825)
1,769,760
2,950,597
521,176
183,194
7,409
279,726
3,942,102
(96,870)
3,845,232
2,397,893
743,880
135,530
15,830
262,951
3,556,084
(159,910)
3,396,174
286
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
in thousands of GEL
Corporate loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2019
Stage 1
(12months ECL)
Stage 2
(lifetime ECL for SICR)
Stage 3
(lifetime ECL for
credit impaired)
4,094,403
339,960
322
–
–
4,434,685
(39,153)
4,395,532
1,107,490
330,361
155,411
–
–
1,593,262
(36,724)
1,556,538
2,668,691
182,049
22,986
–
–
2,873,726
(1,471)
2,872,255
2,223,262
407,106
19,893
–
–
2,650,261
(18,341)
2,631,920
7,882
75,872
19,827
828
–
104,409
(1,969)
102,440
5,436
17,620
176,815
16,946
–
216,817
(52,439)
164,378
17,970
80,289
121,743
11,167
–
231,169
(9,686)
221,483
23,114
87,244
80,947
13,394
–
204,699
(18,593)
186,106
–
–
–
–
121,379
121,379
(39,628)
81,751
–
–
–
–
73,927
73,927
(44,793)
29,134
–
–
–
–
64,302
64,302
(20,548)
43,754
–
–
–
–
93,319
93,319
(29,211)
64,108
Total
4,102,285
415,832
20,149
828
121,379
4,660,473
(80,750)
4,579,723
1,112,926
347,981
332,226
16,946
73,927
1,884,006
(133,956)
1,750,050
2,686,661
262,338
144,729
11,167
64,302
3,169,197
(31,705)
3,137,492
2,246,376
494,350
100,840
13,394
93,319
2,948,279
(66,145)
2,882,134
287
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Analysis by credit quality of loans outstanding as at 31 December 2018 is as follows:
in thousands of GEL
Corporate loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2018
Stage 1
(12months ECL)
Stage 2
(lifetime ECL for SICR)
Stage 3
(lifetime ECL for
credit impaired)
2,712,885
189,086
1,344
–
–
2,903,315
(32,940)
2,870,375
1,118,057
349,406
174,530
–
–
1,641,993
(42,903)
1,599,090
2,268,634
177,274
24,695
–
–
2,470,603
(1,697)
2,468,906
1,865,077
324,306
21,342
–
–
2,210,725
(19,301)
2,191,424
6,417
130,798
1,238
260
–
138,713
(4,994)
133,719
3,373
19,874
212,707
29,719
–
265,673
(59,245)
206,428
20,051
62,060
104,550
7,749
–
194,410
(9,165)
185,245
16,285
72,742
84,520
19,502
–
193,049
(22,379)
170,670
–
–
–
–
135,261
135,261
(43,571)
91,690
–
–
–
–
81,850
81,850
(54,575)
27,275
–
–
–
–
44,170
44,170
(14,026)
30,144
–
–
–
–
92,820
92,820
(29,334)
63,486
Total
2,719,302
319,884
2,582
260
135,261
3,177,289
(81,505)
3,095,784
1,121,430
369,280
387,237
29,719
81,850
1,989,516
(156,723)
1,832,793
2,288,685
239,334
129,245
7,749
44,170
2,709,183
(24,888)
2,684,295
1,881,362
397,048
105,862
19,502
92,820
2,496,594
(71,014)
2,425,580
288
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The contractual amounts outstanding on loans to customers that have been written off partially or fully, but
are still subject to enforcement activity was principal amount GEL 48 million (31 December 2019: GEL 110
million), accrued interest GEL 11 million (31 December 2019: GEL 28 million) and accrued off balance sheet
penalty GEL 135 million (31 December 2019: GEL 114 million).
In 2020, grace periods were granted to customers due to the COVID-19 pandemic. There were 2 major
three-month grace periods offering to eligible customers during 2020. First time the approach was of larger
coverage, whereas at later stage holidays were granted to narrower focus groups. Payment holidays did not
lead to derecognition of financial assets, but rather resulted in total net modification loss of 41 million during
the year, out of which GEL 37.1 million was related to losses incurred on loans and advances to customers,
whilst GEL 3.9 million was related to losses incurred on investments in leases, reflecting the decrease in
the present value of cash flows resulting from the grace periods granted to the borrowers. Furthermore,
the COVID-19 effect led to the creation of an additional ECL charge for 2020. The implication of COVID-19
impact on ECL methodology is described in Note 37.
Economic sector risk concentrations within the customer loan portfolio are as follows:
31 December 2020
31 December 2019
31 December 2018
in thousands of GEL
Individual
Real Estate
Hospitality Restaurants & Leisure
Energy & Utilities
Food Industry
Other
Trade
Construction
Agriculture
Healthcare
Services
Automotive
Metals and Mining
Pawn Shops
Transportation
Financial Services
Communication
Total gross loans and advances
to customers
Amount
5,948,346
1,460,821
1,368,887
1,078,504
898,597
841,850
708,559
667,904
642,024
369,645
268,982
263,276
229,368
168,571
159,857
78,923
46,406
%
39%
10%
9%
7%
6%
6%
5%
4%
4%
2%
2%
2%
2%
1%
1%
1%
0%
Amount
5,046,804
1,076,102
988,467
1,089,643
785,539
704,558
616,475
576,923
498,783
305,152
212,661
183,912
99,321
203,633
134,223
96,430
43,329
%
40%
8%
8%
9%
6%
5%
5%
5%
4%
2%
2%
1%
1%
2%
1%
1%
0%
Amount
4,677,328
564,197
759,605
776,204
570,810
483,672
445,290
359,549
418,432
220,756
180,045
156,241
100,855
278,384
80,075
71,617
229,522
%
45%
5%
7%
7%
6%
5%
4%
3%
4%
2%
2%
2%
1%
3%
1%
1%
2%
15,200,520
100%
12,661,955
100%
10,372,582
100%
As of 31 December 2020 the Group had 307 borrowers (2019: 239 borrowers; 2018: 170 borrowers) with aggre-
gated gross loan amounts above GEL 5,000 thousand. The total aggregated amount of these loans was GEL
5,598,041 thousand (2019: GEL 4,443,036 thousand; 2018: GEL 3,054,314 thousand) or 36.8% of the gross loan
portfolio (2019: 35.1%; 2018: 29.4%).
The amount and type of collateral required depend on an assessment of the credit risk of the counterparty.
There are three key types of collateral:
Real estate;
Movable property including fixed assets, inventory and precious metals;
Financial assets including deposits, shares, and third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets
where collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-col-
lateralised assets”) and (ii) those assets where collateral and other credit enhancements are less than the
assets’ carrying value (“under-collateralised assets”).
289
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The effect of collateral as at 31 December 2020:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium enterprises
31 December 2020
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
4,603,143
9,630,768
869,317
2,231,778
3,703,164
3,114,829
7,915,172
7,102,534
1,087,606
1,142,268
238,938
441,255
477,701
20,474
158,292
157,047
813,514
Total
12,290,453
26,880,252
2,910,067
The effect of collateral as at 31 December 2019:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium enterprises
Total
The effect of collateral as at 31 December 2018:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
31 December 2019
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
3,682,456
8,481,849
950,847
2,232,728
2,949,426
2,579,002
10,161,731
6,171,802
5,983,285
978,017
933,159
219,771
369,277
310,419
37,658
107,183
164,979
620,239
22,869,664
2,500,224
31 December 2018
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
2,857,207
6,516,492
1,213,594
2,543,720
2,663,362
5,404,518
320,082
775,922
45,821
155,747
47,249
34,242
28,934
68,110
Loans to micro, small and medium enterprises
2,340,847
5,324,290
Total
9,075,010
19,789,020
1,297,572
178,535
The effect of collateral by classes as at 31 December 2020:
Over-collateralised Assets
Under-collateralised Assets
31 December 2020
in thousands of GEL
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
290
Carrying value
of the assets
332,438
115,139
753,658
137,749
10,697,040
254,429
-
Fair value
of collateral
358,847
158,008
2,149,849
849,249
23,217,956
146,343
-
Carrying value
of the assets
12,937
Fair value
of collateral
39,109
37,856
24,536
7,960
428,092
310,272
2,088,414
37,946
24,498
20,313
395,398
296,250
-
813,514
12,290,453
26,880,252
2,910,067
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The effect of collateral by classes as at 31 December 2019:
Over-collateralised Assets
Under-collateralised Assets
31 December 2019
in thousands of GEL
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
309,228
140,627
794,209
146,762
8,435,227
335,677
-
Fair value
of collateral
333,329
174,531
2,221,293
1,256,843
18,547,991
335,677
-
10,161,730
22,869,664
2,500,225
The effect of collateral by classes as at 31 December 2018:
Over-collateralised Assets
Under-collateralised Assets
31 December 2018
in thousands of GEL
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
Carrying value
of the assets
221,107
219,221
1,002,308
216,433
6,826,688
589,254
-
9,075,011
Fair value
of collateral
235,578
257,706
2,477,727
1,421,488
14,807,266
589,255
-
19,789,020
1,297,571
Carrying value
of the assets
Fair value
of collateral
25,299
49,118
33,916
8,558
225,511
259,786
1,898,037
35,207
58,054
14,711
17
68,327
7,778
1,113,477
35,507
66,943
33,740
11,361
212,902
259,786
-
620,239
35,207
58,054
14,718
18
62,760
7,778
-
178,535
The financial effect of collateral is determined by comparing the fair value of collateral to outstanding gross
loans and advances in the reporting date.
Stage 3 loans presented by segments and collateral classes as at 31 December 2020 are the following:
in thousands of GEL
Corporate
Consumer
Mortgage
Loans to micro, small
and medium enterprises
31 December 2020
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
21
-
15,991
-
97,824
5,013
42,579
161,428
36
1,717
8,909
-
65,645
968
110,455
187,730
38
-
185
-
273,577
2,308
3,618
279,726
47
430
4,250
54
231,925
7,347
18,898
262,951
291
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Stage 3 loans presented by segments and collateral classes as at 31 December 2019 are the following:
31 December 2019
in thousands of GEL
Corporate
Consumer
Mortgage
Loans to micro, small
and medium enterprises
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
18
-
9,675
1,245
92,652
1,633
16,156
121,379
89
1,289
4,819
-
29,084
1,805
36,841
73,927
78
-
13
-
61,918
1,687
606
64,302
724
400
1,702
50
82,511
4,531
3,401
93,319
Stage 3 loans presented by segments and collateral classes as at 31 December 2018 are the following:
in thousands of GEL
Corporate
Consumer
Mortgage
Loans to micro, small
and medium enterprises
31 December 2018
Cash Cover
Gold
Inventory
Other
Real Estate
Third party guarantees
Unsecured
Total
614
-
8,591
1,043
114,803
1,687
8,523
135,261
20
1,391
11,974
-
23,738
4,457
40,271
81,851
-
-
-
-
43,279
402
488
44,169
313
18,119
1,556
-
60,130
8,842
3,860
92,820
The gross carrying amount of loans by stages that have been modified since initial recognition at a time
when the loss allowance was measured at an amount equal to lifetime expected credit losses and for which
the loss allowance has changed during the reporting period to an amount equal to 12-month expected
credit losses loans are the following:
in thousands of GEL
Stage 1
Stage 2
Stage 3
Total
2020
737,197
1,602,759
293,205
2,633,161
2019
119,637
82,754
25,513
2018
169,545
62,542
67,567
227,904
299,654
At the central level a specific unit manages collateral to ensure that they serve as an adequate mitigation for
credit risk management purposes. In line with the Group's internal policies, collateral provided to loans are
evaluated by the Internal Appraisal Group (external reviewers are used in case of loans to related parties or
specific cases when complex objects are appraised). The Internal Appraisal Group is part of the collateral
management unit and, in order to ensure adequate and objective appraisal procedures, it is independent
from the loan granting process. Real estate collateral of significant value is re-evaluated annually by internal
appraisers. Statistical methods are used to monitor the value of real estate collateral that are of non-signifi-
cant value and other types of collateral such as movable assets and precious metals.
In some instances, where the discounted recovery from the liquidation of collateral (adjusted for the liquid-
ity haircut and discounted for the period of expected workout time) is larger than the estimated exposure at
default, no credit loss allowance is recognised.
292
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Collateral values include the contractual price of third-party guarantees, which, due to their nature, are
capped at the loan’s carrying value. The values of third-party guarantees in the tables above amounted
to GEL 564,701 thousand, GEL 595,464 thousand and GEL 625,719 thousand as of 31 December 2020, 2019
and 2018, respectively. These third-party guarantees are not taken into consideration when assessing the
impairment allowance. Refer to Note 42 for the estimated fair value of each class of loans and advances to
customers. Interest rate analysis of loans and advances to customers is disclosed in Note 37. Information
on related party balances is disclosed in Note 44. For the year ended 31 December 2020 net (losses)/ gains
recognised in profit or loss on modifications of loans with lifetime ECL that did not lead to derecognition
was GEL (15,523) thousand (31 December 2019: GEL 844 thousand; 31 December 2018: GEL 196 thousand).
10. INVESTMENT SECURITIES MEASURED AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME
in thousands of GEL
Corporate bonds
Ministry of Finance of Georgia treasury bills
Ministry of Finance of Uzbekistan treasury bills
Certificates of deposit of the National Bank of Georgia
Netherlands government bonds
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
Total debt securities
Corporate shares – unquoted
2020
666,133
839,839
1,951
21,687
–
(3,258)
(3,258)
–
–
1,526,352
916
2019
611,694
330,096
1,596
40,346
–
(1,438)
(1,438)
(2)
–
982,294
2,999
2018
549,477
373,447
–
14,985
66,760
(1,136)
(1,136)
–
–
1,003,533
1,706
Total investment securities measured at fair value through other
comprehensive income
1,527,268
985,293
1,005,239
All debt securities in 2020 and 2019 except for corporate bonds and Uzbekistan treasury bills are issued by
the Government of Georgia and National Bank of Georgia. Country rating for Georgia stands at BB with neg-
ative outlook (as assigned by international rating agencies in February 2021). Latest country rating for Uzbeki-
stan stands at BB-. 46.9% of corporate bonds are issued by triple A rated international financial institutions,
17.8% of corporate bonds are issued by A- rated international financial institutions and 30.7% of corporate
bond are issued at BB- rating, and 4.6% of corporate bonds are issued by B+ and B- rated corporations. The
investees have not published recent financial information about their operations, their shares are not quoted
and recent trade prices are not publicly accessible. The Group designated investments in corporate shares
disclosed in the above table as equity securities at FVOCI. The FVOCI designation was made because the
investments are expected to be held for strategic purposes rather than with a view to profit on a subsequent
sale, and there are no plans to dispose of these investments in the short or medium term.
As at 31 December 2020 investment securities measured at fair value through other comprehensive income
carried at GEL 699,483 thousand have been pledged with local banks or financial institutions as a collateral
with respect to other borrowed funds (2019: GEL 696,961 thousand; 2018: GEL 613,466 thousand). Refer to
Note 19. As at 31 December 2020 the principal equity investment securities measured at fair value through
other comprehensive income are as follows:
in thousands of GEL
JSC GRDC
Georgian Stock Exchange
Other
Total corporate shares
Nature of business
Country of registration
2020
Property development
Stock exchange
Various
Netherlands Antilles
Georgia
Various
365
–
551
916
2019
365
2,111
523
2,999
2018
365
1,004
337
1,706
293
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
10. INVESTMENT SECURITIES MEASURED AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME CONTINUED
The movements in investment securities measured at fair value through other comprehensive income are
as follows:
in thousands of GEL
Carrying amount as of 1 January
Purchases
Disposals
Redemption at maturity
Revaluation
Interest income accrued
Interest income received
Effect of translation to presentation currency
Transfer to investment in associate
Change in credit loss allowance
Carrying amount as of 31 December
Note
30
2020
985,293
763,530
(92,103)
(165,632)
17,633
103,516
(93,493)
11,825
(1,480)
(1,821)
2019
1,005,239
1,781,817
(213,362)
(1,598,534)
(15,156)
74,043
(58,539)
10,087
–
(302)
2018
657,938
717,630
(14,781)
(370,571)
6,949
57,057
(48,442)
596
–
(1,136)
1,527,268
985,293
1,005,240
11. BONDS CARRIED AT AMORTISED COST
in thousands of GEL
Ministry of Finance treasury bills
Government notes
Certificates of deposit of National Bank of Uzbekistan
Corporate bonds
Total gross amount of bonds carried at amortised cost
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
2020
1,062,110
19,335
9,405
1,118
1,091,968
(2,167)
(2,167)
–
–
2019
1,023,459
–
–
1,131
1,024,590
(1,906)
(1,906)
–
–
2018
654,618
–
–
500
655,118
(915)
(915)
–
–
Total bonds carried at amortised cost
1,089,801
1,022,684
654,203
All debt securities except for corporate bonds are issued by the Government of Georgia, National Bank of
Georgia and National Bank of Uzbekistan. Country rating for Georgia stands at BB with negative outlook (as
per international rating agencies in February 2021). Latest country ratings for Uzbekistan stands at BB-.
The movements in bonds carried at amortised cost are as follows:
in thousands of GEL
Carring amount at 1 January
Disposals
Purchases
Redemption at maturity
Interest income accrual
Interest income received
Effect of translation to presentation currency
Change in credit loss allowance
Carrying amount as of 31 December
2020
1,022,684
(195,815)
668,477
(413,038)
97,122
(89,368)
–
(261)
1,089,801
2019
654,203
(27,241)
614,000
(216,667)
58,682
(59,316)
14
(991)
1,022,684
2018
449,538
–
396,217
(200,658)
40,625
(30,611)
7
(915)
654,203
294
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. BONDS CARRIED AT AMORTISED COST CONTINUED
For the disclosure of bonds’ fair value carried at amortised cost refer to Note 42. An analysis on interest rate
For the disclosure of bonds’ fair value carried at amortised cost refer to Note 42. An analysis on interest rate
for bonds carried at amortised cost is disclosed in Note 37.
for bonds carried at amortised cost is disclosed in Note 37.
As at 31 December 2020 bonds carried at amortised cost of GEL 843,303 thousand have been pledged to
As at 31 December 2020 bonds carried at amortised cost of GEL 843,303 thousand have been pledged to
local banks or financial institutions as collateral with respect to other borrowed funds (2019: GEL 579,142
local banks or financial institutions as collateral with respect to other borrowed funds (2019: GEL 579,142
thousand; 2018: GEL 212,337 thousand). Refer to Note 19.
thousand; 2018: GEL 212,337 thousand). Refer to Note 19.
None of the bonds carried at amortised cost as at 31 December 2020, 2019 and 2018 were either overdue or
None of the bonds carried at amortised cost as at 31 December 2020, 2019 and 2018 were either overdue or
defaulted.
defaulted.
12. OTHER FINANCIAL ASSETS
12. OTHER FINANCIAL ASSETS
in thousands of GEL
Receivables from sales of repossessed assets
Receivables on guarantees / letters of credit
Prepayments for purchase of leasing assets
Insurance and reinsurance receivables
Receivables on credit card services and money transfers
Trade receivable
Rental income receivables
Receivable on terminated leases
Foreign exchange forward contracts
Investment held at fair value through profit or loss
Advance to promotional service provider
Other
Total gross amount of other financial assets
Less: credit loss allowance
Total other financial assets
2020
19,962
1,943
2,266
21,831
25,227
4,203
3,243
23,207
28,915
17,239
15,766
48,528
212,330
(41,028)
171,302
2019
32,844
1,695
3,866
26,177
21,895
4,921
2,833
21,837
2,087
–
14,055
32,395
164,605
(30,869)
133,736
2018
43,671
36,869
32,293
21,451
14,390
8,292
3,492
12,651
1,490
–
–
21,013
195,612
(28,094)
167,518
As at 31 December 2020, 2019 and 2018, presentation of other financial assets gross carrying amount, except
insurance and reinsurance receivables and credit loss allowance by IFRS 9 stages is as follows:
295
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 12. OTHER FINANCIAL ASSETS CONTINUED
Gross carrying amount
Credit loss allowance
Other financial assets
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
At 1 January 2020
121,889
25
16,514 138,428
18,207
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
(751)
751
–
(484)
–
484
60
(10)
(50)
–
–
–
(1)
(4)
5
New originated or purchased
141,297
Derecognised during the
period
Net repayments
Foreign exchange
movements
Changes to ECL
measurement model
assumptions
(97,574)
7,747
525
–
(6)
(110)
(15)
–
141,297
10,106
(1,988)
(99,568)
(401)
1,936
9,573
259
769
–
–
–
–
845
–
103
At 31 December 2020
172,709
635
17,155 190,499
28,860
Stage 3
(lifetime ECL
for credit
impaired)
Total
12,656 30,869
–
4
(1)
–
–
–
–
10,106
(1,848)
(2,250)
1,204
2,047
–
–
153
256
12,168
41,028
6
1
–
(4)
–
(1)
(2)
–
–
–
Gross carrying amount
Credit loss allowance
Other financial assets
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2019
126,785
74
47,302
174,161
13,144
14
14,936 28,094
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
(21)
23
(55)
(15)
47
(47)
(2)
70
–
–
–
–
(4)
(1)
4
(15)
4
(4)
–
16
–
–
–
–
New originated or purchased 106,839
Derecognised during the
period
Net repayments
Net Write-offs
Foreign exchange
movements
Changes to ECL
measurement model
assumptions
(115,851)
4,022
–
123
–
–
(11)
–
–
1
–
– 106,839
21,675
(30,852) (146,714)
(16,642)
355
4,377
(1,489)
(1,489)
1,130
1,254
–
–
–
–
–
31
–
13
–
–
–
–
21,675
(2,255)
(18,884)
–
–
(1,489)
(1,489)
–
–
(6)
1,448
1,473
At 31 December 2019
121,889
25
16,514 138,428
18,207
6
12,656 30,869
296
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 12. OTHER FINANCIAL ASSETS CONTINUED
Gross carrying amount
Credit loss allowance
Other financial assets
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2018
115,149
174
33,099 148,422
9,895
32
9,112 19,039
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
(48)
48
–
(5,013)
(17)
5,030
210
(86)
(124)
–
–
–
(3)
(81)
3
(4)
–
85
57
(20)
(37)
–
–
–
New originated or purchased
50,343
13
35,855
86,211
Derecognised during the
period
Net repayments
Net Write-offs
Foreign exchange
movements
Changes to ECL
measurement model
assumptions
(26,787)
(6,070)
–
(999)
–
(44)
(14)
–
–
–
(1,243)
(28,074)
(130)
(6,214)
(16,772)
(16,772)
(8,413)
(9,412)
4,439
(510)
–
–
–
–
–
(653)
1
(6)
–
–
–
8
5,596 10,036
(1,342)
(1,858)
–
–
(6,404)
(6,404)
219
219
7,707
7,062
At 31 December 2018
126,785
74
47,302
174,161
13,144
14
14,936 28,094
The credit quality of Other Financial Assets is as follows at 31 December 2020:
in thousands of GEL
Other Financial Assets risk category
– Very low
– Low
– Moderate
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime EC
for credit impaired)
172,362
261
86
–
172,709
(28,860)
143,849
–
11
624
–
635
–
635
–
–
–
17,155
17,155
(12,168)
4,987
Total
172,362
272
710
17,155
190,499
(41,028)
149,471
297
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
12. OTHER FINANCIAL ASSETS CONTINUED
The credit quality of Other Financial Assets is as follows at 31 December 2019:
in thousands of GEL
Other Financial Assets risk category
– Very low
– Low
– Moderate
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2019
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
121,589
219
81
–
121,889
(18,207)
103,682
1
1
23
–
25
(6)
19
–
–
–
16,514
16,514
(12,656)
3,858
The credit quality of Other Financial Assets is as follows at 31 December 2018:
in thousands of GEL
Other Financial Assets risk category
– Very low
– Low
– Moderate
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2018
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
126,540
238
7
–
126,785
(13,144)
113,641
18
39
17
–
74
(14)
60
–
–
–
47,302
47,302
(14,936)
32,366
Total
121,590
220
104
16,514
138,428
(30,869)
107,559
Total
126,558
277
24
47,302
174,161
(28,094)
146,067
Impaired receivables include receivables on terminated leases and other receivables for which credit loss
allowance was assessed individually. A receivable’s overdue status is a primary factor for the Group to con-
sider a receivable as impaired. Receivables on terminated leases individually determined to be impaired
are under-collateralised and their estimated fair value of collateral amounts to nil (2019: GEL 1,531 thousand;
2018: GEL 1,484 thousand). The remaining assets are not collateralised.
298
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. NET INVESTMENTS IN LEASES
As at 31 December 2020 net investments in leases of GEL 271,660 thousand (2019: GEL 256,660 thou-
sand; 2018: GEL 203,802 thousand) are represented by leases of fixed assets excluding land and buildings.
Finance lease payments receivable (gross investment in the leases) and their present values are as follows:
in thousands of GEL
Due
in
1 year
Due
between 1
and 2 year
Due
between 2
and 3 year
Due
between 3
and 4 year
Due
between 4
and 5 year
Lease payments receivable as at 2020
Unearned finance income
Credit loss allowance
134,310
(32,917)
(5,439)
102,136
(20,745)
(1,829)
65,085
(10,904)
(1,886)
31,307
(4,656)
(928)
13,922
(1,712)
(425)
Due in
5 year
or more
7,662
(986)
(335)
Total
354,422
(71,920)
(10,842)
Present value of lease payments re-
ceivable as at 31 December 2020
Lease payments receivable as at 2019
Unearned finance income
Credit loss allowance
Present value of lease payments re-
ceivable as at 31 December 2019
Lease payments receivable as at 2018
Unearned finance income
Credit loss allowance
Present value of lease payments re-
ceivable as at 31 December 2018
For fair values refer to Note 42.
95,954
79,562
52,295
25,723
11,785
6,341
271,660
147,959
(41,969)
(1,430)
97,959
(23,467)
(492)
55,978
(10,470)
(475)
25,236
(3,914)
(222)
9,333
(1,089)
(86)
4,637
(748)
(80)
341,102
(81,657)
(2,785)
104,560
74,000
45,033
21,100
8,158
3,809
256,660
122,056
(32,981)
(1,789)
76,117
(18,276)
(364)
42,651
(8,126)
(681)
18,647
(3,075)
(307)
7,370
(1,088)
(124)
3,838
271
(337)
270,679
(63,275)
(3,602)
87,286
57,477
33,844
15,265
6,158
3,772
203,802
The table below illustrates the movements in the credit loss allowance of net investments in leases:
in thousands of GEL
Credit loss allowance at the beginning of the year
Amounts written off during the year as uncollectible
Credit loss allowance /(reversal of loss allowance) during the year
Credit loss allowance at the end of the year
2020
2,785
(341)
8,398
10,842
2019
2018
3,602
(235)
(582)
2,785
2,237
(400)
1,765
3,602
299
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 13. NET INVESTMENTS IN LEASES CONTINUED
The following table discloses the changes in the credit loss allowance and gross carrying amount
for net investments in leases between the beginning and the end of the reporting period:
in thousands of GEL
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2020
205,615
23,799
30,031 259,445
1,999
96
690
2,785
3,315
(2,645)
(670)
-
(592)
592
(0)
(0)
(41,908)
42,491
(193)
390
(121)
(148)
477
208
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
(26,117)
(1,642)
28,035
276
(472)
New originated or purchased
89,402
18,654
10,101
118,157
Derecognised during the
period
(40,360)
(13,560)
(11,171)
(65,091)
Net repayments
-
-
-
-
Foreign exchange move-
ments
Other movements
Changes due to change in
credit quality
6,726
3,405
3,559
13,690
(1,436)
-
43
-
136
(1,257)
-
-
Partial repayment
(23,588)
(9,704)
(9,816)
(43,108)
1,967
(331)
(4)
(357)
(83)
1,007
-
(23)
509
(63)
(4)
22
59
647
152
433
2,909
(323)
(717)
(56)
348
(4)
(64)
13
(28)
2,417
2,160
5,584
-
-
-
At 31 December 2020
171,649
60,841
50,012
282,502
3,013
3,457
4,372
10,842
300
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 1
1,319
(858)
(467)
–
–
–
13. NET INVESTMENTS IN LEASES CONTINUED
in thousands of GEL
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
At 1 January 2019
178,171
10,861
18,372 207,404
2,045
205
1,352
3,602
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
(5,951)
6,598
(647)
(22,099)
(2,941)
25,040
4,968
(2,972)
(1,996)
–
–
–
New originated or purchased
138,634
18,663
5,836 163,133
(14)
14
(27)
(65)
(1)
89
–
92
–
–
–
–
81
1,489
Derecognised during the
period
Net repayments
Foreign exchange move-
ments
Other movements
Partial repayment
At 31 December 2019
in thousands of GEL
At 1 January 2018
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
Derecognised during the
period
Net repayments
Foreign exchange move-
ments
Other movements
Partial repayment
At 31 December 2018
(55,562)
(4,849)
(10,407)
(70,818)
–
2,622
3,660
–
170
522
(38,828)
205,615
(2,253)
23,799
–
–
1,022
3,814
2,259
6,441
(9,448)
(50,529)
30,031 259,445
1,999
(154)
(1,536)
(2,548)
8
–
–
–
96
701
242
–
–
–
–
–
–
690
2,785
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit
impaired)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Total
Stage 3
(lifetime ECL
for credit
impaired)
Total
128,500
11,610
5,224 145,334
864
445
928 2,237
(3,996)
4,078
(82)
(10,605)
(4,533)
15,138
1,052
(1,033)
(19)
–
–
–
(36,040)
(5,372)
(3,541)
(44,953)
–
1,250
2,003
(24,985)
178,171
–
94
277
(1,468)
10,861
–
–
289
1,633
1,085
3,365
(4,887)
(31,340)
(9)
9
–
(367)
(20)
387
–
–
357
(357)
–
–
1,350
(103)
(47)
–
–
–
108
(81)
101
–
–
–
256
1,714
(717)
(901)
498
552
–
–
–
–
–
–
New originated or purchased
120,992
7,208
5,165 133,365
18,372 207,404
2,045
205
1,352 3,602
301
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 13. NET INVESTMENTS IN LEASES CONTINUED
All clients from Covid-19 affected sectors, which is in turn determined by TBC Leasing’s credit risk depart-
ment, using sector forecasts derived by Group’s macro economists’ team, where these sectors show sig-
nificant declines, are moved to stage 2 unless obviously they fall in stage 3. Also restructurings that where
categorized as good before grace period, are not removed from stage 2 pool because of application of
grace period.
As at 31 December 2020, credit quality of net investments in leases is analysed below:
in thousands of GEL
Net investments in leases risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
153,156
18,493
–
–
–
171,649
(3,013)
168,636
423
55,259
4,810
349
–
60,841
(3,457)
57,384
–
–
–
–
50,012
50,012
(4,372)
45,640
As at 31 December 2019, credit quality of net investments in leases is analysed below:
in thousands of GEL
Net investments in leases risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2019
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
175,468
30,147
–
–
–
205,615
(1,999)
203,616
–
13,688
6,361
3,750
–
23,799
(96)
23,703
–
–
–
–
30,031
30,031
(690)
29,341
Total
153,579
73,752
4,810
349
50,012
282,502
(10,842)
271,660
Total
175,468
43,835
6,361
3,750
30,031
259,445
(2,785)
256,660
302
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. NET INVESTMENTS IN LEASES CONTINUED
As at 31 December 2018, credit quality of net investments in leases is analysed below:
in thousands of GEL
Net investments in leases risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2018
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
145,220
32,951
–
–
–
178,171
(2,045)
176,126
–
2,350
6,712
1,799
–
10,861
(205)
10,656
–
–
–
–
18,372
18,372
(1,352)
17,020
Total
145,220
35,301
6,712
1,799
18,372
207,404
(3,602)
203,802
The effect of collateral as at 31 December 2020:
in thousands of GEL
Investments in leases
Total
31 December 2020
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
219,599
219,599
363,753
363,753
62,903
62,903
51,783
51,783
The effect of collateral as at 31 December 2019:
in thousands of GEL
Investments in leases
Total
31 December 2019
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
228,651
228,651
Fair value
of collateral
365,934
365,934
Carrying value
of the assets
Fair value
of collateral
30,794
30,794
22,292
22,292
The effect of collateral as at 31 December 2018:
in thousands of GEL
Investments in leases
Total
31 December 2018
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
166,362
166,362
253,582
253,582
41,042
41,042
34,527
34,527
303
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
14. OTHER ASSETS
in thousands of GEL
Current other assets
Repossessed collateral
Prepayments for other assets
Prepayments for purchase of leasing assets
Other inventories
Prepaid taxes other than income tax
Total current other assets
Non-current other assets
Assets repossessed from terminated leases
Prepayments for construction in progress
Reinsurance share in insurance reserves
Prepaid insurance of leasing assets
Assets purchased for leasing purposes
Other
Total non-current other assets
Total other assets
2020
2019
2018
174,197
41,917
11,450
8,725
2,412
152,109
33,664
31,426
6,965
2,890
238,701
227,054
8,619
7,625
7,559
2,805
157
1,494
28,259
266,960
6,321
10,401
6,968
2,876
190
1,902
28,658
255,712
120,663
29,027
–
4,198
856
154,744
10,819
2,259
14,529
2,174
6,985
1,282
38,048
192,792
Repossessed collateral represents real estate assets acquired by the Group in settlement of overdue loans.
The Group expects to dispose of the assets in the foreseeable future. The assets do not meet the definition
of non-current assets held for sale and are classified as inventories in accordance with IAS 2 “Inventories”.
The assets were initially recognised at fair value when acquired. In 2020, collateral repossessed for settle-
ment of impaired loans amounted to GEL 51.0 million (2019: GEL 78.9million; 2018: GEL 30 million).
With regards to certain repossessed collateral, the Group has granted previous owners a right to repurchase
the repossessed collateral at prices equal to or higher than the carrying value of the loan at the date of re-
possession. This right is usually effective for a period of 6 to 24 months from the repossession date, during
this time the repossessed collateral may not be disposed to third parties. As at 31 December 2020, the car-
rying value of the repossessed collateral subjected to the repurchase agreement was GEL 26,309 thousand
(2019: GEL 62,578 thousand; 2018: GEL 44,024 thousand).
304
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
in thousands of GEL
Cost or valuation as at 31 December 2017
Accumulated depreciation/amortisation includ-
ing accumulated impairment loss
Carrying amount as of 31 December 2017
Accounting policy change effect
on gross amount
Accounting policy change on accumulated
Depreciation
Cost as at 1 January 2018 (as restated)
Accumulated depreciation/amortisation includ-
ing accumulated impairment loss
(as restated)
Carrying amount as of 1 January 2018
(as restated)
Additions
Business combination
Transfers within premises and equipment
Transfers from investment property
Transfer to investment property
Disposals
Effect of translation to presentation
currency - cost
Effect of translation to presentation
currency - accumulated depreciation
Impairment charge
Depreciation/amortisation charge
Elimination of accumulated depreciation/amorti-
sation on disposals
Carrying amount as of 31 December 2018
(as restated)
Cost as at 31 December 2018 (as restated)
Accumulated depreciation/amortisation includ-
ing accumulated impairment loss
(as restated)
Additions
Business combination
Transfers within premises and equipment
Transfers from investment property
Transfer to financial leases or repossessed
assets
Disposals
Effect of translation to presentation
currency - cost
Effect of translation to presentation
currency - accumulated depreciation
Impairment reversal/(charge)
Depreciation/amortisation charge
Elimination of accumulated depreciation/amorti-
sation on disposals
Land,
premises and
leasehold
improvements*
Office
and other
equipment
Construc-
tion in
progress*
Total
premises
andequip-
ment*
Intangible
assets
Total*
233,118
191,762
90,455
515,335
123,834 639,169
(35,194)
(113,228)
–
(148,422)
(40,342)
(188,764)
197,924
78,534
90,455
366,913
83,492 450,405
(41,091)
1,128
-
-
(1,299)
(42,390)
-
(42,390)
-
1,128
-
1,128
192,027
191,762
89,156
472,945
123,834 596,779
(34,066)
(113,228)
-
(147,294)
(40,342)
(187,636)
157,961
78,534
89,156
325,651
83,492
409,143
8,804
3,607
2,661
-
-
(4,159)
23
(22)
46,619
301
-
-
-
(22,945)
23
35
(474)
(5,754)
(21)
(22,548)
356
8,783
8,538
-
(2,661)
1,317
(32,628)
-
63,961
3,908
-
1,317
(32,628)
(27,104)
42,525
-
-
-
-
(603)
106,486
3,908
-
1,317
(32,628)
(27,707)
-
-
(4)
-
-
46
13
11
(7)
57
6
(499)
(28,302)
-
(16,257)
(499)
(44,559)
9,139
59
9,198
163,003
88,781
63,718
315,502
109,220
424,722
202,542
215,741
63,718
482,001
165,766
647,767
(39,539)
(126,960)
-
(166,499)
(56,546) (223,045)
4,359
1,027
3,597
-
27,862
857
36
-
24,946
-
(3,633)
1,817
57,167
1,884
-
1,817
70,319
4,782
-
-
127,486
6,666
-
1,817
-
(1,439)
-
(1,439)
-
(1,439)
(5,571)
(11,805)
(4,641)
(22,017)
(753)
(22,770)
48
(48)
75
(45)
-
-
123
23
146
(93)
(25)
(118)
-
(5,761)
44
(22,869)
(6)
-
38
(28,630)
-
(16,604)
38
(45,234)
1,983
8,393
-
10,376
635
11,011
305
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS CONTINUED
in thousands of GEL
Carrying amount as of 31 December 2019
(as restated)
Cost as at 31 December 2019 (as restated)
Accumulated depreciation/amortisation includ-
ing accumulated impairment loss
(as restated)
Additions
Transfers
Transfer to right of use assets
Disposals
Effect of translation to presentation
currency - cost
Effect of translation to presentation
currency - accumulated depreciation
Impairment charge
Depreciation/amortisation charge
Elimination of accumulated depreciation/amorti-
sation on disposals
Transfer to Inventory
Carrying amount as of 31 December 2020
Cost as at 31 December 2020
Accumulated depreciation/amortisation includ-
ing accumulated impairment loss
Land,
Premises and
leasehold
improvements*
Office
and other
equipment
Construc-
tion in
progress*
Total
Premise
and equip-
ment*
Intangible
assets
Total*
162,637
89,890
82,201
334,728
167,597
502,325
206,125
232,072
82,201
520,398
240,452
760,850
(43,488)
(142,182)
-
(185,670)
(72,855)
(258,525)
9,649
5,365
(2,842)
(3,658)
170
(155)
(2,016)
(5,466)
38,756
-
(310)
(5,455)
169
(97)
(1,204)
(22,026)
458
5,769
(395)
163,747
212,398
(39)
105,453
263,989
27,020
(5,365)
-
(100)
75,425
-
(3,152)
(9,213)
97,243
-
-
(263)
172,668
-
(3,152)
(9,476)
-
-
-
-
-
-
339
48
387
(252)
(314)
(566)
(3,220)
(27,492)
(676)
(24,149)
(3,896)
(51,641)
6,227
(434)
37
6,264
-
(434)
103,756
103,756
372,956
580,143
239,523
336,804
612,479
916,947
(48,651)
(158,536)
-
(207,187)
(97,281) (304,468)
*Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the adjustments made due to the change in
accounting policy as described in Note 2.
**Office and other equipment include furniture and fixtures, computer and office equipment, motor vehicles as well as other equipment.
The depreciation and amortisation charge presented on the face of the statement of profit or loss and other
comprehensive income include depreciation and amortisation charge of premises and equipment, invest-
ment properties and intangible assets.
Construction in progress consists of construction and refurbishment of branch premises and the Bank’s
new headquarters. Upon completion, assets are to be transferred to premises.
16. RIGHT OF USE ASSETS AND LEASE LIABILITIES
The Group leases offices, branches and service centres. Rental contracts are typically made for
fixed periods of 1 to 15 years.
Until 31 December 2018 leases of premises were classified as operating leases. From 1 January
2019, leases are recognised as a right-of-use asset and a corresponding liability from the date
when the leased asset becomes available for use by the Group.
The right of use assets by class of underlying items is analysed as follows:
306
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 16. RIGHT OF USE ASSETS AND LEASE LIABILITIES CONTINUED
in thousands of GEL
Carrying amount at 1 January
Additions of new contracts
Increases in value from substantial changes in contractual terms
Disposals
Depreciation charge
Carrying amount at 31 December
2020
Premises
59,693
-
11,011
(955)
(15,822)
53,927
2019
Premises
61,043
20,437
-
(8,476)
(13,311)
59,693
The lease agreements do not impose any covenants, other than the security interests in the leased
assets, that are held by the lessor. Leased assets cannot be used as collateral for borrowings.
Extension and termination options are included in a number of property leases across the Group.
These are used to maximise operational flexibility in terms of managing the assets used in the
Group’s operations. The majority of extension and termination options held are exercisable only
by the Group and not by the respective lessor.
Expenses relating to short-term leases and to leases of low-value assets that are not classified as
short-term leases are included in in administrative and other operating expenses:
in thousands of GEL
Expense relating to short-term leases
Expense relating to leases of low-value assets
2020
6,830
7,023
2019
7,388
6,154
17. INVESTMENT PROPERTIES
in thousands of GEL
Cost as of 1 January
Accumulated depreciation and impairment as of 1 January
Carrying amount as of 1 January
Transfer to premises and equipment
Transfer from repossessed collateral
Acquisition through business combination
Addition from foreclosure
Disposals
Depreciation charge
Elimination of depreciation on disposal
Impairment charge
Transfer from premises and equipment
Cost as of 31 December
Accumulated depreciation and impairment as of 31 December
Carrying amount of Investment properties as of 31 December
Note
15
2020
76,521
(3,854)
72,667
–
10,367
–
–
2019
86,884
(2,588)
84,296
(1,817)
4,914
–
47
2018
83,871
(4,639)
79,232
(1,317)
4,625
3,157
–
(13,012)
(13,507)
(36,080)
(929)
159
(563)
–
73,876
(5,187)
68,689
(933)
717
(1,050)
–
76,521
(3,854)
72,667
(1,181)
3,232
–
32,628
86,884
(2,588)
84,296
307
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
17. INVESTMENT PROPERTIES CONTINUED
As of 31 December 2020, investment properties comprised of 58 lots (2019: 63 lots; 2018: 73 lots) of land and
111 buildings (2019: 111 buildings; 2018: 127 buildings) located in Tbilisi and other regions of Georgia with the
fair value amounting to GEL 120,959 thousand (2019: GEL 123,325 thousand; 2018: GEL 97,425 thousand).
For disclosure purposes a latest fair valuation exercise was carried out for investment proper-
ties as of 31 December 2020. The valuation was carried out by external valuators who hold a
recognised and relevant professional qualification and who have recent experience in valuation
of assets of similar location and category. In the process of comparison, they have used three
comparative analogues (registered sale and/or offer for sale), in which prices were applied ad-
justments based on the difference between subject assets and analogues. The assets have been
estimated by using the market approach due to the market situation, particularly based on a suf-
ficient number of registered sales and proposals by the date of valuation.
In thousands of GEL (ex-
cept for range of inputs)
Land
Buildings
Fair value as of
31 December 2020
(valuation date)
59,171
61,788
Valuation
technique
Unobservable
inputs
Range of
unobser vable inputs
(weighted average)
Sales comparison approach
Price per square meter
0.45 – 6,245 (217)
Sales comparison approach
Price per square meter
8 – 9,502 (1,242)
Sensitivity of the input to fair value – increase/(decrease) in the price per square metre by 20% would result
in increase/(decrease) in fair value by GEL 698 thousand/ (GEL 2,113 thousand).
Where the Group is the lessor, the future minimum lease payments receivable under non-cancellable oper-
ating leases, were as follows. Future operating lease payments receivable for later than 5 years was nil as at
31 December 2020, 2019 and 2018.
in thousands of GEL
Not later than 1 year
Later than 1 year and not later than 5 years
Total operating lease payments receivable
18. GOODWILL
Movements in goodwill arising on the acquisition of subsidiaries are:
in thousands of GEL
Carrying amount as of 1 January
Acquisition of subsidiaries
Impairment loss
Carrying amount as of 31 December
2020
82
–
82
2019
207
230
437
2018
185
–
185
2020
2019
2018
61,558
–
(1,594)
31,286 28,658
2,628
30,272
–
–
59,964
61,558
31,286
308
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 18. GOODWILL CONTINUED
Goodwill Impairment Test
Goodwill is allocated to cash-generating units (CGUs, which represent the lowest level within the Group at
which the goodwill is monitored by Management and which are not larger than a segment) as follows:
in thousands of GEL
JSC Bank Republic
– Bank Republic Retail
– Bank Republic Corporate
– Bank Republic MSME
– Bank Republic Other
LLC My.ge
LLC Inspired
LLC Bonaco
JSC TBC Insurance
CGU Micro
JSC United Financial Corporation
LLC TKT.ge
JSC Swoop
LLC TBC Kredit
LLC F Solution
Total carrying amount of goodwill
2020
24,166
11,088
7,491
4,791
796
15,812
14,015
2,567
1,766
769
695
174
–
–
–
59,964
2019
24,166
11,088
7,491
4,791
796
15,812
14,015
2,567
1,766
769
695
175
61
1,262
270
61,558
2018
24,166
11,088
7,491
4,791
796
–
–
2,567
1,766
769
695
–
61
1,262
–
31,286
The recoverable amount of each CGU was determined based on value-in-use calculations. These calcula-
tions use cash flow projections based on financial budgets approved by the management covering a five-
year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stat-
ed below.
The pre-tax discount rate applied to the discounted cash flows of LLC TBC Kredit had been 16.25%, in terms
of cash flow projection based on financial budged approved by management, the Group impaired the car-
rying value of goodwill by 1,262,261 GEL.
The pre-tax discount rate applied to the discounted cash flows of LLC Swoop had been 82.92%, in terms of
cash flow projection based on financial budged approved by management, the Group impaired the carrying
value of goodwill by 61,000 GEL.
The pre-tax discount rate applied to the discounted cash flows of LLC F Solution had been 62.48%, in terms
of cash flow projection based on financial budged approved by management, the Group impaired the car-
rying value of goodwill by 270,000 GEL.
309
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 18. GOODWILL CONTINUED
Assumptions used for value-in-use calculations to which the recoverable amount is most sensitive were:
in thousands of GEL
12/31/2020
12/31/2019
12/31/2018
JSC Bank Republic**
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
CGU SME / JSC Bank Constanta
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
JSC United Financial Corporation
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
LLC TBC Kredit
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
JSC TBC Insurance
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
LLC Bonaco
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
LLC My.ge
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
LLC Inspired
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
*p.a. means per annum.
5.20% p.a.
24.56% p.a.
4.64% p.a.
16.5% p.a.
5.54% p.a.
20.27% p.a.
5.20% p.a.
19.7% p.a.
4.64% p.a.
10.36% p.a.
5.54% p.a.
13.06% p.a.
5.20% p.a.
15.05% p.a.
4.64% p.a.
15.51% p.a.
5.54% p.a.
18.31% p.a.
N/A
N/A
2.7% p.a.
16.37% p.a.
1.3% p.a.
24.57% p.a.
5.20% p.a.
26.79% p.a.
4.64% p.a.
17.49% p.a.
5.54% p.a.
18.24% p.a.
5.20% p.a.
11.43% p.a.
4.64% p.a.
10.17% p.a.
5.20% p.a.
17.92% p.a.
4.64% p.a.
17.49% p.a.
5.50% p.a.
5.5% p.a.
15.5% p.a.
21.14% p.a.
N/A
N/A
N/A
N/A
N/A
N/A
*Assumptions related to JSC Bank Republic are similar for all related CGU’s.
The management determined the budgeted gross margin based on past performance and its market ex-
pectations. The weighted average long term growth rates used are consistent with the forecasts included in
the industry reports. The discount rates reflect specific risks related to the relevant CGUs.
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic
Retail had been 10 percentage points higher than the management’s estimates, the Group would not need
to reduce the carrying value of goodwill or carrying value of net assets of the CGU. Recoverable amount of
Bank Republic Retail CGU exceeds its carrying amount by GEL 619,250 thousand (2019: GEL 3,068,466 thou-
sand; 2018: GEL 84,111 thousand). The CGU’s carrying amount would equal its value in use at a discount rate
of 35.49% p.a. (2019: 39.87% p.a.; 2018: 21.77% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic
Corporate had been 10 percentage points higher than the management’s estimates, the Group would not
need to reduce the carrying value of either goodwill or carrying value of net assets of the CGU. Recover-
able amount of Bank Republic Retail CGU exceeds its carrying amount by GEL 410,824 thousand (2019: GEL
2,316,056 thousand; 2018: GEL 850,072 thousand). The CGU’s carrying amount would equal its value in use at
a discount rate of 30.87% p.a. (2019: 36.34% p.a.; 2018: 38.86% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic
MSME had been 10 percentage points higher than the management’s estimates, the Group would not need
to reduce the carrying value of either goodwill or carrying value of net assets of the CGU. Recoverable
310
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18. GOODWILL CONTINUED
amount of Bank Republic Retail CGU exceeds its carrying amount by GEL 389,641 thousand (2019: GEL
1,210,045 thousand; 2018: GEL 461,500 thousand). The CGU’s carrying amount would equal its value in use at
a discount rate of 35.87% p.a. (2019: 36.52% p.a.; 2018: 35.83% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Micro/JSC Bank
Constanta had been 10 percentage points higher than the management’s estimates, the Group would not
need to reduce the carrying value of either goodwill or carrying value of net assets of the CGU. Recoverable
amount of CGU Micro/JSC Bank Constanta CGU exceeds its carrying amount by GEL 370,815 thousand
(2019: GEL 732,567 thousand; 2018: GEL 913,325 thousand). The CGU’s carrying amount would equal its value
in use at a discount rate of 45.25% p.a. (2019: 29.74% p.a.; 2018: 48.53% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of JSC United Financial
Corporation had been 10 percentage points higher than the management’s estimates, the Group would
not need to reduce the carrying value of goodwill or carrying value of net assets of the CGU. Recoverable
amount of JSC United Financial Corporation CGU exceeds its carrying amount by GEL 23,116 thousand
(2019: GEL 8,222 thousand; 2018: GEL 13,458 thousand). The CGUs’ carrying amount would equal its value in
use at a discount rate of 24.23% p.a. (2019: 19.53% p.a.; 2018: 29.8% p.a.)
If the revised estimated pre-tax discount rate applied to the discounted cash flows of JSC TBC Insurance
had been 10 percentage points higher than the management’s estimates, the Group would not need to re-
duce the carrying value of either goodwill or carrying value of net assets of the CGU. Recoverable amount of
JSC TBC Insurance CGU exceeds its carrying amount by GEL 31,179 thousand (2019: GEL 142,799 thousand;
2018: 208,095). The CGU’s carrying amount would equal its value in use at a discount rate of 53.08%p.a. (2019:
62.29% 2018: 111.71%).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of LLC Bonaco had been
10 percentage points higher than the management’s estimates, the Group would not need to reduce the car-
rying value of either goodwill or carrying value of net assets of the CGU. Recoverable amount of LLC Bonaco
CGU exceeds its carrying amount by GEL 116,174 thousand (2019: GEL 500,031 thousand). The CGU’s carrying
amount would equal its value in use at a discount rate of 25.75% p.a. (2019: 49.45% ).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of LLC My.ge had been
10 percentage points higher than the management’s estimates, the Group would not need to reduce the car-
rying value of either goodwill or carrying value of net assets of the CGU. Recoverable amount of LLC My.ge
CGU exceeds its carrying amount by GEL 46,079 thousand (2019: GEL 48,629 thousand). The CGU’s carrying
amount would equal its value in use at a discount rate of 37.86% p.a. (2019: 35.31%).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of LLC Inspired had
been 10 percentage points higher than the management’s estimates, the Group would not need to reduce
the carrying value of either goodwill or carrying value of net assets of the CGU. Recoverable amount of LLC
Inspired CGU exceeds its carrying amount by GEL 100,925 thousand (2019: GEL 22,965 thousand). The CGU’s
carrying amount would equal its value in use at a discount rate of 55.26% p.a. (2019: 37.65% )
311
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 19. DUE TO CREDIT INSTITUTIONS
in thousands of GEL
Due to other banks
Correspondent accounts and overnight placements
Deposits from banks
Total due to other banks
Other borrowed funds
Borrowings from foreign banks and international financial institutions
Borrowing from Ministry of Finance
Borrowings from other financial institutions
Borrowings from other local banks and financial institutions
National Bank of Georgia
Total other borrowed funds
Total amounts due to credit institutions
2020
2019
2018
43,298
97,496
140,794
2,370,656
–
58,949
32,684
1,883,290
4,345,579
4,486,373
27,747
139,267
167,014
2,005,900
536
41,456
62,916
1,316,079
3,426,887
3,593,901
23,273
136,161
159,434
2,065,560
1,520
35,078
63,332
706,579
2,872,069
3,031,503
As of 31 December 2020 for the purposes of maturity analysis of financial liabilities (Note 37) the above-men-
tioned loans are included within the amounts for which repayment is expected within 3 months.
20. CUSTOMER ACCOUNTS
in thousands of GEL
State and public organisations
Current/settlement accounts
Term Deposits
Other legal entities
Current/settlement accounts
Term deposits
Individuals
Current/settlement accounts
Term deposits
Total customer accounts
2020
2019
2018
504,019
590,426
616,397
298,177
667,553
538,311
3,490,836
722,710
3,151,507
310,558
2,791,092
251,215
3,487,017
3,777,720
2,712,910
2,959,775
12,572,728
10,049,324
2,426,597
2,677,374
9,352,142
312
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. CUSTOMER ACCOUNTS CONTINUED
State and public organisations include government owned profit orientated businesses. Economic sector
concentrations within customer accounts are as follows:
in thousands of GEL
Individual
Trade
Financial services
Government sector
Construction
Other
Services
Energy & utilities
Transportation
Real estate
Healthcare
Hospitality & leisure
Agriculture
Metals and mining
31 December 2020
31 December 2019
31 December 2018
Amount
7,264,737
873,995
709,943
647,856
610,321
590,423
526,227
384,660
332,850
323,547
131,936
99,770
58,005
18,458
%
58%
7%
6%
5%
5%
5%
4%
3%
2%
3%
1%
1%
0%
0%
Amount
5,672,685
741,385
288,860
505,494
596,703
572,017
446,876
322,331
308,268
322,416
98,294
110,816
50,915
12,264
%
56%
7%
3%
5%
6%
6%
5%
3%
3%
3%
1%
1%
1%
0%
Amount
5,103,971
550,527
394,336
531,964
613,973
542,770
360,084
397,653
422,281
207,227
76,464
102,529
35,884
12,479
%
55%
6%
4%
6%
7%
5%
4%
4%
5%
2%
1%
1%
0%
0%
Total customer accounts
12,572,728
100%
10,049,324
100%
9,352,142
100%
As of 31 December 2020 the Group had 452 customers (2019: 359 customers; 2018: 305 customers) with bal-
ances above GEL 3,000 thousand. Their aggregate balance was GEL 5,569,608 thousand (2019: GEL 4,327,035
thousand; 2018: GEL 4,117,881 thousand) or 44% of total customer accounts (2019: 43%; 2018: 44%).
As of 31 December 2020 included in customer accounts are deposits of GEL 4,903 thousand and GEL 94,348
thousand (2019: GEL 9,555 thousand and GEL 101,615 thousand; 2018: GEL 6,766 thousand and GEL 158,306
thousand) held as collateral for irrevocable commitments under letters of credit and guarantees issued, re-
spectively. The latter is discussed in Note 37. As of 31 December 2020, deposits held as collateral for loans
to customers amounted to GEL 512,637 thousand (2019: GEL 469,205 thousand; 2018: 270,787 thousand).
Refer to Note 42 for the disclosure of the fair value of each class of customer accounts. Information on relat-
ed party balances is disclosed in Note 44.
313
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
21. DEBT SECURITIES IN ISSUE
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Private placement
Private placement
Bonds issued on Georgian Stock Exchange
Total debt securities in issue
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Total debt securities in issue
Carrying
amount as of
31 December 2020
Currency
USD
USD
USD
USD
GEL
Currency
USD
USD
966,793
414,216
44,467
32,517
38,504
1,496,497
Carrying
amount as of
31 December 2019
371,127
842,471
1,213,598
Carrying
amount as of
Maturity
Date
6/19/2024
Coupon
rate
Effective
interest rate
5.8%
10.8%
10/3/2024
8.2%
5/27/2023
3/19/2023
6.5%
3/20/2023 TIBR3M+3.25%
6.4%
11.4%
8.99%
7.1%
12.5%
Maturity
Date
10/3/2024
6/19/2024
Coupon
rate
10.8%
5.8%
Effective
interest rate
11.4%
6.4%
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Total debt securities in issue
Currency
USD
USD
31 December 2018 Maturity Date
7/22/2019
5/16/2019
7,927
5,416
13,343
Coupon
rate
7.3%
8.0%
Effective
interest rate
8.1%
8.7%
On 27 May 2020 the TBC Bank Group PLC completed the transaction of USD 15 million 3-year 8.20% senior
unsecured bonds issue (the "Notes"). The private placement is direct, unsecured and unsubordinated obli-
gations of the Group.
On 20 March 2020, TBC Leasing with the help of TBC Capital placed senior secured bonds of amount GEL
58.4 million on the Georgian Stock Exchange. The percentage of securities is variable, 3.25% added to the
3-month Tbilisi Interbank Interest rate. Fitch rates the bonds ‘BB-‘.
On 19 March 2020 the TBC Bank Group PLC completed the transaction of a USD 10 million 3-year 6.45%
senior unsecured bonds issue. The private placement is direct, unsecured and unsubordinated obligations
of the Group.
On 3 July 2019 the Bank completed the transaction of a debut inaugural USD 125 million 10.75% yield Addi-
tional Tier 1 Capital Perpetual Subordinated Notes issue (“AT1 Notes”). The AT1 Notes are listed on the reg-
ulated market of Euronext Dublin and are rated B- by Fitch. The AT1 Notes have been simultaneously listed
on JSC Georgian Stock Exchange, making it the first dual-listed international offering of additional Tier 1
Capital Notes from Georgia.
On 19 June 2019 the Bank completed the transaction of a debut USD 300 million 5-year 5.75% (6% yield)
senior unsecured bonds issue. The Notes are listed on the regulated market of Euronext Dublin and are
rated Ba2 by Moody's and BB- by Fitch. The Notes have been simultaneously listed on JSC Georgian Stock
Exchange, making it the first dual-listed international offering of senior unsecured Notes from Georgia.
314
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. PROVISION FOR PERFORMANCE GUARANTEES, CREDIT RELATED
COMMITMENTS AND LIABILITIES AND CHARGES
Movements in credit loss allowance for performance guarantees, credit related commitment and liabilities
and charges are as follows:
in thousands of GEL
Carrying amount as of 1 January 2018
Charges less releases recorded in profit or loss
Effect of translation to presentation currency
Carrying amount as of 31 December 2018
Charges less releases recorded in profit or loss
Utilization of provision
Effect of translation to presentation currency
Carrying amount as of 31 December 2019
Charges less releases recorded in profit or loss
Effect of translation to presentation currency
Carrying amount as of 31 December 2020
Performance
guarantees
Credit related
commitments
2,751
1,640
2
4,393
3,069
–
4
7,466
(2,644)
781
5,603
3,578
1,846
–
5,424
(913)
–
–
4,511
(597)
333
4,247
Other
2,894
6,056
–
8,950
3,305
(1,104)
–
11,151
4,334
–
15,485
Total
9,223
9,542
2
18,767
5,461
(1,104)
4
23,128
1,093
1,114
25,335
Credit related commitments and performance guarantees: Impairment allowance estimation methods dif-
fer for (i) letter of credits and guarantees and (ii) undrawn credit lines.
For letter of credits and guarantees allowance estimation purposes the Group applies the staged approach
and classifies them in stage 1, stage 2 or stage 3. Significant stage 3 guarantees are assessed individually.
Non-significant stage 3 as well as all stage 1 and stage 2 guarantees and letter of credits are assessed col-
lectively using exposure, marginal probability of conversion, loss given default and discount factor. Amount
of the expected allowance differs based on the classification of the facility in the respective stage.
For impairment allowance assessment purposes for undrawn exposures the Group distinguishes between
revocable and irrevocable loan commitments. For revocable commitments the Group does not create im-
pairment allowance. As for the irrevocable undisbursed exposures the Group estimates utilization parameter
(which represents expected limit utilization percentage conditional on the default event) in order to convert
off-balance part of the exposure to on-balance.
Once the respective on balance exposure is estimated, the Group applies the same impairment framework
approach as the one used for the respective type of on balance exposures.
Additions less releases recorded in profit or loss for “Other” provisions does not include gross change in
total reserves for insurance claims in amount of GEL 1,625 thousand (2019: GEL 2,040 thousand; 2018: GEL
1,486 thousand) that are included in net claims incurred. Additions less releases recorded in profit or loss
for provision for impairment of credit related commitments include provision for insurance payables in the
amount of GEL 106 thousand (2019: GEL 842 thousand; 2018: GEL 570 thousand), that are included in charges
less releases recorded in profit or loss for “Other” provision.
315
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 Note
41
23. OTHER FINANCIAL LIABILITIES
Other financial liabilities comprise the following:
in thousands of GEL
Derivative financial liabilities
Trade payables
Liabilities related to co-financing of hotels and
restaurants sectors
Liabilities to asset and service providers of finance
leases
Insurance contract liabilities
Debit or credit card payables
Pre payments related to guarantees
Payable to deposit insurance agency
Security deposits for net investments in leases
Other accrued liabilities
Total other financial liabilities
2020
127,204
34,957
13,771
10,851
8,548
6,408
1,152
930
91
23,520
227,432
Refer to Note 42 for disclosure of the fair value of other financial liabilities.
24. OTHER LIABILITIES
Other liabilities comprise the following:
in thousands of GEL
Accrued employee benefit costs
Taxes payable other than on income
Advances received
Unearned insurance premium
Other
Total other liabilities
2020
31,148
13,162
10,487
25,852
7,193
87,842
2019
20,161
23,687
315
25,924
7,613
13,259
879
549
1,171
20,050
113,608
2019
42,197
10,730
11,260
24,156
6,819
95,162
2018
2,119
24,270
-
21,691
16,839
19,146
413
498
409
13,329
98,714
2018
48,393
19,477
10,867
17,911
7,689
104,337
All of the above liabilities are expected to be settled within twelve months after the year-end.
25. SUBORDINATED DEBT
As of 31 December 2020, subordinated debt comprised of:
in thousands of GEL
KfW
KfW
Green for Growth Fund
European Fund for Southeast Europe
European Fund for Southeast Europe
European Fund for Southeast Europe
Private Lenders
Subordinated Bond (Private lender)
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
Asian Developement Bank
ResponsAbility SICAV (Lux) Micro and SME Finance
Fund
Micro and SME Finance Leaders
Global Climate Partnership Fund
ResponsAbility SICAV (Lux) - Financial Inclusion Fund
Total subordinated debt
Grant
Date
6/10/2014
5/4/2015
12/18/2015
12/21/2018
12/18/2015
3/15/2016
6/8/2017
8/31/2018
12/14/2018
12/14/2018
10/18/2016
Maturity
Date
5/8/2021
5/8/2021
12/18/2025
12/21/2028
12/18/2025
3/15/2026
12/19/2024
1/25/2023
12/14/2025
12/14/2028
12/31/2026
11/30/2018
11/30/2028
11/30/2018
11/20/2018
11/30/2018
11/30/2028
11/20/2028
11/30/2028
Outstanding
amount
in original
currency
Outstanding
amount
in GEL
Currency
GEL
GEL
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
6,161
6,737
15,244
20,079
7,633
7,631
25,217
10,102
14,949
14,941
50,438
5,930
1,005
25,096
3,115
6,161
6,737
49,950
65,789
25,010
25,004
82,628
33,098
48,983
48,956
165,266
19,430
3,292
82,230
10,206
672,740
316
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. SUBORDINATED DEBT CONTINUED
As of 31 December 2019, subordinated debt comprised of:
in thousands of GEL
KfW
KfW
Green for Growth Fund
European Fund for Southeast Europe
European Fund for Southeast Europe
Private Lenders
Subordinated Bond (Private lender)
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
European Fund for Southeast Europe
Asian Developement Bank
ResponsAbility Micro and SME finance fund
Micro and SME Finance Leaders
Global Climate Partnership Fund
ResponsAbility SICAV (Lux) Financial Inclusion Fund
Total subordinated debt
Grant
Date
6/10/2014
5/4/2015
12/18/2015
12/18/2015
3/15/2016
6/8/2017
8/31/2018
12/14/2018
12/14/2018
12/21/2018
10/18/2016
11/30/2018
11/30/2018
11/20/2018
11/30/2018
Maturity
Date
5/8/2021
5/8/2021
12/18/2025
12/18/2025
3/15/2026
12/19/2024
1/25/2023
12/14/2025
12/14/2028
12/21/2028
12/31/2026
11/30/2028
11/30/2028
11/20/2028
11/30/2028
Outstanding
amount
in original
currency
Outstanding
amount
in GEL
Currency
GEL
GEL
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
6,162
6,739
15,305
7,663
7,662
25,218
10,101
14,924
14,920
20,074
50,585
5,935
1,006
25,089
3,117
6,162
6,739
43,890
21,975
21,971
72,317
28,976
42,798
42,786
57,565
145,064
17,020
2,884
71,948
8,940
591,035
As of 31 December 2018, subordinated debt comprised of:
in thousands of GEL
Deutsche Investitions und Entwicklungsgesellschaft MBH
Nederlandse Financierings-Maatschappij Voor
Ontwikkelingslanden N.V.
KfW
KfW
Green for Growth Fund
European Fund for Southeast Europe
European Fund for Southeast Europe
Asian Development Bank
Private lenders
Subordinated Bond (Private lender)
Global Climate Partnership Fund
Micro and SME Finance Leaders
ResponsAbility SICAV (Lux) Financial Inclusion Fund
ResponsAbility Micro and SME Finance Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
European Fund for Southeast Europe
Total subordinated debt
Grant
Date
Maturity
Date Currency
6/26/2013
6/15/2020
12/19/2013
4/15/2023
6/10/2014
5/4/2015
12/18/2015
12/18/2015
3/15/2016
10/18/2016
6/30/2017
8/31/2018
11/20/2018
11/30/2018
11/30/2018
11/30/2018
12/14/2018
12/14/2018
12/21/2018
5/8/2021
5/8/2021
12/18/2025
12/18/2025
3/15/2026
12/31/2026
12/19/2024
1/25/2023
11/20/2028
11/30/2028
11/30/2028
11/30/2028
12/14/2025
12/14/2028
12/21/2028
USD
USD
GEL
GEL
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
Outstanding
amount
in original
currency
Outstanding
amount
in GEL
7,509
20,100
29,213
78,191
6,161
6,737
15,312
7,666
7,665
50,617
25,218
10,109
25,111
1,007
3,121
5,943
14,916
14,915
20,049
6,161
6,737
40,983
20,520
20,516
135,482
67,497
27,057
67,211
2,695
8,354
15,906
39,923
39,923
53,663
650,919
The subordinated debt ranks after all other creditors in case of liquidation.
Refer to Note 42 for the disclosure of the fair value of subordinated debt. Information on related party bal-
ances is disclosed in Note 44.
317
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
26. SHARE CAPITAL
in thousands of GEL
As of 1 January 2018
Shares issued
Scrip dividend issued
Share exchange
As of 1 January 2019
Scrip dividend issued
Shares issued
As of 31 December 2019
As of 31 December 2020
Number of ordinary shares
Share Capital
52,931,867
1,605
618,640
58,762
635,060
54,244,329
296,392
615,175
55,155,896
55,155,896
21
2
22
1,650
10
22
1,682
1,682
As of 31 December 2020 the total authorised number of ordinary shares was 55,155,896 shares (31 December
2019: 55,155,896 shares; 31 December 2018: 54,244,329 shares). Each share has a nominal value of one British
Penny. All issued ordinary shares are fully paid and entitled to dividends.
Part of the shares are held by employee benefit trust (EBT) for the purpose of future employee share based
payments plan. The number of shares held by trust as at 31 December 2020 comprised 778,183 shares (31
December 2019: 595,380 shares). The EBT has waived its rights to receive dividends on such shares.
On 21 March 2019, 615,175 new ordinary shares of TBC Bank Group PLC were admitted to the premium seg-
ment of the London Stock Exchange. The Offer Shares were issued pursuant to the terms of the TBC PLC
group long term incentive plan and rank pari passu in all respects with TBC PLC's existing ordinary shares.
On 24 June 2019, at the Annual General Meeting, TBC Bank Group PLC’s shareholders agreed on a dividend
of GEL 1.98 per share, based on the 2018 audited financial statements. The dividend was recorded respec-
tively and on 12 July 2019 shareholders received the payment of the total GEL 91,926 thousands. Scrip divi-
dend shares amounted to 296,392 shares and were issued on 12th of July.
On 21 May 2018, at the Annual General Meeting, TBC Bank Group PLC’s shareholders agreed on a dividend
of GEL 1.64 per share, based on the 2017 audited financial statements. The dividend was recorded on 24
May 2018 of amount GEL 88,869 thousand and was paid on 22 June 2018 out of which scrip dividend shares
amounted to 58,762 shares and were issued on 22th of June.
On 24 April 2018, 635,060 new ordinary shares of TBC Bank Group PLC were admitted to the premium seg-
ment of the London Stock Exchange. The Offer Shares were issued pursuant to the terms of a private offer
to the holders of the ordinary shares of JSC TBC Bank, who have tendered Bank shares pursuant to the Of-
fer. The holders of Bank shares are individuals who did not participate in the tender offer to holders made in
2016 or 2017 by TBC Bank Group PLC. Holders of Bank shares received one Offer Share for each Bank Share
tendered pursuant to the Offer.
On 8 March 2018, 618,640 new ordinary shares of TBC Bank Group PLC were admitted to the premium seg-
ment of the London Stock Exchange. The Offer Shares were issued pursuant to the terms of the TBC PLC
group long term incentive plan and rank pari passu in all respects with TBC PLC's existing ordinary shares.
318
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27. SHARE BASED PAYMENTS
June 2015 arrangement:
In June 2015, the Bank’s Supervisory Board approved new management compensation scheme for the top
and middle management and it accordingly authorised the issue of a maximum 3,115,890 new shares. The
system was enforced from 2015 through 2018. According to the scheme, each year, subject to predefined
performance conditions, a certain number of shares were awarded to the Group’s top managers and most
of the middle ones. The performance features key performance indicators (KPIs) divided into (i) corporate
and (ii) individual. The corporate KPIs are mainly related to achieving profitability, efficiency, and portfolio
quality metrics set by the Board as well as non-financial indicators with regards to customers’ experience
and employees’ engagement. The individual performance indicators are set on an individual basis and are
used to calculate the number of shares to be awarded to each employee. According to the scheme, mem-
bers of top management also received the fixed number of shares. Once awarded, all shares carry service
conditions and, before those conditions are met, are eligible to dividends; however they cannot be sold or
transferred to third parties.
Service conditions foresee continuous employment until the gradual transfer of the full title to the scheme
participants is complete. Shares for each of the 2015, 2016, 2017 and 2018 tranche gradually ran over on the
second, third and fourth year following the performance appraisal. Eighty percent of the shares are vested in
3 years after being awarded. Under this compensation system the total vesting period extends to March 2022.
In 2015 the Group considered 17 June as the grant date. Based on the management’s estimate of reached
targets, as of 31 December 2015 1,908,960 shares were granted. The shares were gradually awarded to the
members as per the described scheme. At the grant date the fair value amounted to GEL 24.64 per share, as
quoted on the London Stock Exchange.
Following the listing on the Premium segment of the London Stock Exchange, the share-based payment
scheme remained conceptually the same and was only updated to reflect the Group’s new structure, where-
by TBC Bank Group PLC distributes its shares to the scheme’s participants, instead of JSC TBC Bank. The
respective shares’ value is recharged to JSC TBC Bank. As a result, the accounting of the scheme did not
change in the consolidated financial statements.
The Bank also paid personal income tax on behalf of equity settled scheme beneficiaries, which was ac-
counted as cash settled part.
The share based payment scheme for middle management and other eligible employees continues under
existing terms for 2019-2020 except for vesting conditions that changed from 10%, 10%, 80% to 33%, 33%,
34% for the 3 year period.
December 2018 arrangements:
A new compensation system was approved by shareholders at the AGM on 21 May 2018 and came into
effect on 1 January 2019 and it covers the period 2019-2021 inclusive. On 28 December 2018, the Board of
Directors approved the following details for this new compensation schemes for the top management and
the Group considers that as a grant date. All the top management schemes are equity settled and account-
ed respectively.
Deferred share salary plan
Part of the top management salary is paid with shares with the objective of closely promoting the long-term
success of the Group and aligning senior executive directors’ and shareholders’ interests. Shares are usually
delivered during the first quarter of the second year (i.e. the year after the performance year) and the exact
date is determined by the Board. 50% of the shares have 1 year deferral period and the remaining 50% is de-
ferred for 2 years from the delivery date. The shares are registered in the trustees name as nominee for the
participants and the participants are entitled to receive dividends.
Where applicable, deferred share salary is paid in part under the executive director’s service contract with
TBC JSC and in part under his service contract with TBC PLC, to reflect the executive director’s duties to
319
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 27. SHARE BASED PAYMENTS CONTINUED
each. Initial salaries are set and approved by the Supervisory Board and Board of Directors. The Remuner-
ation Committee assists both Boards in compensation related matters and makes respective recommen-
dations. Deferred compensation is subject to the Group’s malus and clawback policies until the shares
are vested and during the holding period. If at any time after making the deferred compensation there is a
material misstatement in the financial results for the year in respect of which the compensation was formally
granted, the Remuneration Committee has the right to cause some or all of the deferred compensation for
that year or any subsequent financial year that is unvested (or unpaid) to lapse (or not be paid).
The number of shares is calculated based on the average share price of the last 10 days preceding the com-
mittee decision date.
Deferred Bonus plan
The annual bonus for the top management is determined as to the extent that the annual KPIs have been
met. Shares are usually delivered during the first quarter of the second year (i.e. the year after the perfor-
mance year): and the exact date is determined by the Board. 50% of the shares have 1 year deferral period
and the remaining 50% is deferred for 2 years from the delivery date. The shares are registered in the trust-
ees name as nominee for the participants and the participants are entitled to receive dividends.
Annual KPIs are set by the Remuneration Committee at the beginning of each year in relation to that year
and approved by the Board. To the extent that the KPIs are achieved, the Remuneration Committee may
recommend to the Board whether an award may be made and the amount of such award. The Group does
not pay guaranteed bonuses to executive directors. The nature of the KPIs with their specific weightings and
targets is disclosed in the published annual report. Awards are subject to the Group’s malus and clawback
policies until the shares are vested and during the holding period. If at any time after making the award there
is a material misstatement in the financial results for the year in respect of which the award was formally
granted, the Remuneration Committee can recommend to the Board that some or all of the award for that
year or any subsequent financial year that is unvested (or unpaid) to lapse (or not be paid).
The number of shares is calculated based on the average share price of the last 10 days preceding the com-
mittee decision date.
Long Term Incentive Plan (LTIP)
Long term incentive plan is used to provide a strong motivational tool to achieve long term performance
conditions and to provide rewards to the extent those performance conditions are achieved. Performance
conditions are chosen to align the Group’s and the Bank’s executive directors’ interests with strategic ob-
jectives of the Group over multi-year periods and encourage a long-term view. In order for the shares to be
delivered, the executive directors need to meet rolling performance conditions over the 3 year performance
period.
More details about the LTIP and share based payments are given in Remuneration Committee report.
During 2020 the Executive Directors of TBC Bank Group PLC and Management of JSC TBC Bank has for-
feited their rights to deferred share bonuses and long-term incentive plan grants attributable to 2020.The
above mentioned decision had no effect on the incentive schemes for 2019 and 2021 years. Decision has
been agreed with remuneration committee details of which are given in remuneration report above.
320
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27. SHARE BASED PAYMENTS CONTINUED
Tabular information on the schemes is given below:
Number of unvested shares at the beginning of the period
Number of shares granted
Number of shares granted - Deferred salary
Number of shares granted - Deferred bonus
Number of shares granted - LTIP
Number of shares granted - Middle management,
subsidiaries’ management and other eligible employees
Number of shares granted
Change in estimates of number of shares expected to be granted**
Change in estimates for 2019-2021 all awards
Change in estimates for 2020 award for Deferred salary, 2021 awards for
Deferred bonus and LTIP
Management forfeiture of rights for 2020 bonus
Change in estimates of number of shares expected to be granted**
Change in estimate of number of shares expected to vest based on
performance conditions - 2019 performance
Change in estimate of number of shares expected to vest based on
performance conditions - 2018 performance
Change in estimate of number of shares expected to vest based on
performance conditions - 2017 performance
Number of shares vested:
2014 year award – 80% vesting
2015 year award – 80% vesting
2015 year award – 10% vesting
2016 year award – 80% vesting
2016 year award – 10% vesting
2017 year award – 10% vesting
2018 year award – 10% vesting
Number of shares vested
Number of unvested shares at the end of the period
Value at grant date per share according to June 2015 scheme (GEL)
Value at grant date per share (GEL) middle management and
other eligible employees plan
Value at grant date per share (GEL) Deferred share salary plan
Value at grant date per share (GEL) Deferred bonus plan
Value at grant date per share (GEL) LTIP*
Expense on equity-settled part (GEL thousand)
Expense on cash-settled part (GEL thousand)
Expense recognised as staff cost during the period (GEL thousand)
31 December
2020
31 December
2019
31 December
2018
3,141,541
2,121,129
2,284,773
–
–
–
285,047
471,778
459,751
528,325
396,525
528,325
1,613,101
–
(57,058)
479,580
(428,451)
–
–
51,129
(57,058)
(71,847)
–
(16,501)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(413,544)
–
(105,527)
(101,259)
(620,330)
3,028,818
25
50
50
50
50
19,448
(950)
18,498
–
166,377
–
(405,573)
–
–
(51,693)
(61,864)
–
(519,130)
3,141,541
25
50
50
50
50
33,798
59
33,857
(227,631)
–
(50,697)
–
(51,693)
–
–
(330,021)
2,121,129
25
–
–
–
–
11,668
8,424
20,092
*Grant date for LTIP plan has been determined for the first award tranche only, which is planned to be awarded in 2022. For remaining tranches
expense is accrued based on estimated fair value during the future grant date.
** The maximum amount is fixed for deferred share compensations for top management, the exact number will be calculated as per policy.
*** Represents shares granted to subsidiaries’ management.
321
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 27. SHARE BASED PAYMENTS CONTINUED
Liability in respect of the cash-settled part of the award amounted to GEL 2,000 thousand as 31 December
2020 (31 December 2019: GEL 3,160 thousand; 31 December 2018: 11,001). Tax part of the existing bonus sys-
tem for the top management is accounted under equity settled basis.
Staff costs related to equity settled part of the share based payment schemes are recognised in the income
statement on a straight line basis over the vesting period of each relevant tranche and corresponding entry
is credited to share based payment reserve in equity.
On 31 December 2020 based on level of achievement of key performance indicators the management has
reassessed the number of shares that will have to be issued to the participants of the share based payment
system by decreasing estimated number of shares to vest by 71,847 (31 December 2019: decreased estimat-
ed number of shares to vest by 16,501).
In 2019 the Group established employee benefit trust (EBT) set up Executive Equity Compensation Trust-
ee – Sanne Fiduciary Services Limited (the “Trustee”) which acts as the trustee of the Group’s share based
payments plan. It purchases Group’s shares from the open market and holds them before they are awarded
to participants and vesting date is due. The number of shares to be purchased and held are instructed by
the Group. The shares are presented as treasury shares under shares held by trust category in the statement
of financial position until they are awarded to participants. When award takes place, treasury shares amount
are credited with corresponding debit recognized in share based payment reserve. As at 31 December 2020
the share number held by Trustee was 778,183 (31 December 2019: 595,380), which represents 1.4% of total
outstanding shares (31 December 2019: 1.1%).
28. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the profit or loss attributable to the owners of the Group
by the weighted average number of ordinary shares in issue during the year.
in thousands of GEL
Profit for the period attributable to the owners of the Bank
2020
2019
2018
317,752
537,895
435,080
Weighted average number of ordinary shares in issue
54,399,669
54,684,038
53,906,472
Basic earnings per ordinary share attributable
to the owners of the Group (expressed in GEL per share)
5.8
9.8
8.1
Diluted earnings per share are calculated by dividing the profit or loss attributable to owners of the Group
by the weighted average number of ordinary shares adjusted for the effects of all dilutive potential ordinary
shares during the year. Ordinary shares with dilutive potential represent those shares, that were granted to
the participants of the share based payments scheme and are not yet distributed.
in thousands of GEL
Profit for the period attributable to the owners of the Bank
2020
317,752
2019
2018
537,895
435,080
Weighted average number of ordinary shares in issue adjusted for the effects of
all dilutive potential ordinary shares during the period
55,206,050
55,129,444
54,415,642
Diluted earnings per ordinary share attributable
to the owners of the Group (expressed in GEL per share)
5.8
9.8
8.0
322
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 29. SEGMENT ANALYSIS
The Board of Directors is the chief operating decision maker and it reviews the Group’s internal reporting
in order to assess the performance and to allocate resources. In 2020 the Group made the re-segmenta-
tion after which some of the clients were reallocated to different segments – GEL 127 million of loans and
customers amount was transferred from MSME to Corporate segment. While GEL 5 million amounts were
transferred from Corporate to MSME segment. In the tables below is disclosed the information as of 31 De-
cember 2020 both with and without re-segmentation effect.
The operating segments are determined as follows:
Corporate – legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or
who have been granted facilities with more than GEL 5.0 million. Some other business customers may
also be assigned to the corporate segment or transferred to MSME on a discretionary basis;
Retail – non-business individual customers; all individual customers are included in retail deposits;
MSME – Business customers who are not included in either corporate or legal entities who have been
granted a pawn shop loan; or individual customers of the newly-launched fully-digital bank, Space;
Corporate centre and other operations - comprises of the treasury, other support and back office func-
tions, and non-banking subsidiaries of the Group.
The Board of Directors assesses the performance of the operating segments based on a measure of profit
before income tax.
The reportable segments are the same as the operating segments.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of
the Group’s total revenue in 2020, 2019 or 2018.
The vast majority of the Group’s revenues are attributable to Georgia. A geographic analysis of origination
of the Group’s assets and liabilities is given in Note 37.
Allocation of indirect expenses is performed based on drivers identified for each type of cost if possible. If
there is no identifiable driver for any type of expense/overhead cost, those expenses are allocated between
segments based on the same logic as applied for the expenses with similar nature (e.g. other operating ex-
penses would follow the pattern of closest category of operating expenses).
Intersegment transfer pricing methodology is internally created tool, which is based on matched maturity
logics. It is used to manage liquidity and interest rate risks. Corporate centre borrows monetary amounts
(deposits) from business segments, therefore, each of segment is compensated on each deposit based on
its currency, duration, type and liquidity requirements. Business segments then borrow money from corpo-
rate centre, to fund loans, on which each segment pays agreed price to corporate centre, based on each
loans currency, type (fixed or floating), duration, capital requirement.
323
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 29. SEGMENT ANALYSIS CONTINUED
Segment disclosure below is prepared with the effect of 2020 re-segmentation as described above.
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and
other
operations
Total
31 December 2020
– Interest income
– Interest expense
– Net interest gains on currency swaps
– Inter-segment interest (expense)/income
Net interest income
– Fee and commission income
– Fee and commission expense
Net fee and commission income
– Insurance profit
– Net gains /(loss) from derivatives, foreign currency
operations and translation
– Gains less losses from disposal of investment
securities measured at FVOCI
– Other operating income
Other operating non-interest income and insurance
profit
– Credit loss allowance for loans to customers
– Credit loss allowance reversal/(credit loss allowance)
for performance guarantees and credit related
commitments
– Credit loss allowance for net investments in leases
– Credit loss allowance for other financial assets
– Credit loss allowance for financial assets
– measured at FVOCI
Operating income/(expense) after expected credit
losses
462,383
617,124
335,161
253,331
1,667,999
(203,390)
-
34,455
293,448
57,197
(8,575)
48,622
–
(184,990)
–
(59,379)
372,755
214,377
(109,822)
104,555
–
(12,100)
–
(125,599)
197,462
26,405
(10,896)
15,509
–
(453,036)
20,950
150,523
(28,232)
16,198
(2,117)
14,081
19,485
(853,516)
20,950
–
835,433
314,177
(131,410)
182,767
19,485
51,443
31,561
27,187
(12,173)
98,018
–
–
1,856
6,901
–
429
(624)
11,326
(624)
20,512
53,299
38,462
27,616
18,014
137,391
(29,089)
(201,652)
(100,070)
3,546
(241)
(67)
–
(5,600)
(875)
–
(1,476)
–
–
–
–
–
–
(8,398)
(6,991)
(330,811)
3,238
(8,398)
(14,067)
(934)
(1,809)
363,351
312,403
140,450
(12,460)
803,744
Losses from modifications of financial instruments
(6,345)
(23,633)
– Staff costs
– Depreciation and amortisation
– Provision for liabilities and charges
– Administrative and other operating expenses
Operating expenses
Profit/(loss) before tax
– Income tax (expense)/credit
Profit /(loss) for the year
(35,580)
(4,296)
(400)
(13,649)
(53,925)
303,081
(18,695)
(110,988)
(45,256)
(2,200)
(66,987)
(225,431)
63,339
21,360
(7,153)
(48,631)
(11,187)
–
(22,186)
(82,004)
51,293
3,568
(3,884)
(41,015)
(48,844)
(7,653)
(106)
(25,660)
(82,263)
(98,607)
(2,850)
(244,043)
(68,392)
(2,706)
(128,482)
(443,623)
319,106
3,383
284,386
84,699
54,861
(101,457)
322,489
Total gross loans and advances to customers reported
5,690,749 5,953,687
3,556,084
Total customer accounts reported
Total credit related commitments
and performance guarantees
3,939,501
7,255,020
1,378,207
3,125,279
189,288
317,790
–
–
–
15,200,520
12,572,728
3,632,357
324
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 29. SEGMENT ANALYSIS CONTINUED
For comparison purposes segment disclosure for 2020 below is prepared without the effect of 2020 re-
segmentation as described above.
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
Total
454,364
617,124
343,180
253,331
1,667,999
31 December 2020
– Interest income
– Interest expense
– Net interest gains on currency swaps
– Intersegment interest (expense) / income
Net interest income
– Fee and commission income
– Fee and commission expense
Net fee and commission income
– Insurance profit
– Net gains /(loss) from derivatives, foreign
currency operations and translation
– Gains less losses from disposal of investment
securities measured at fair value through other
comprehensive income
– Other operating income
Other operating non-interest income and
insurance profit
– Credit loss allowance for loans to customers
– Credit loss allowance reversal/ (credit loss
allowance) for performance guarantees and
credit related commitments
– Credit loss allowance for net investments in
leases
– Credit loss allowance for financial assets
measured at fair value through OCI
Operating income/(expense) after expected
credit losses
Losses from modifications of financial
instruments
– Staff costs
– Depreciation and amortisation
– Provision for liabilities and charges
– Administrative and other operating expenses
Operating expenses
Profit/(loss) before tax
– Income tax (expense)/credit
Profit /(loss) for the year
– Total gross loans and advances to customers
reported
– Total customer accounts reported
– Total credit related commitments and
performance guarantees
(203,165)
-
34,455
285,654
57,197
(8,575)
48,622
–
(184,990)
-
(59,379)
372,755
214,377
(109,822)
104,555
–
51,443
31,561
–
–
1,856
6,901
(12,325)
-
(125,599)
205,256
26,405
(10,896)
15,509
–
27,187
–
429
53,299
38,462
27,616
(29,089)
(201,652)
(100,070)
3,546
(241)
(67)
–
–
(875)
–
–
–
–
(453,036)
20,950
150,523
(28,232)
16,198
(2,117)
14,081
19,485
(12,173)
(853,516)
20,950
-
835,433
314,177
(131,410)
182,767
19,485
98,018
(624)
(624)
11,326
18,014
–
–
(8,398)
(6,991)
20,512
137,391
(330,811)
3,238
(8,398)
(14,067)
(934)
(1,809)
355,557
312,403
148,244
(12,460)
803,744
(6,345)
(23,633)
(7,153)
(3,884)
(41,015)
(35,580)
(4,296)
(400)
(13,649)
(53,925)
295,287
(18,096)
(110,988)
(45,256)
(2,200)
(66,987)
(225,431)
63,339
21,360
277,191
84,699
(48,631)
(11,187)
–
(22,186)
(82,004)
59,087
2,969
62,056
5,690,749
5,953,687
3,556,084
3,939,501
7,255,020
1,378,207
3,125,279
189,288
317,790
(48,844)
(7,653)
(106)
(25,660)
(82,263)
(98,607)
(2,850)
(101,457)
(244,043)
(68,392)
(2,706)
(128,482)
(443,623)
319,106
3,383
322,489
–
–
–
15,200,520
12,572,728
3,632,357
325
– Credit loss allowance for other financial assets
(5,600)
(1,476)
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 29. SEGMENT ANALYSIS CONTINUED
Segment disclosure below is prepared without the effect of 2020 re-segmentation as described above.
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
Total
31 December 2019
– Interest income
– Interest expense
– Net interest gains on currency swaps
– Intersegment interest income/(expense)
Net interest income
– Fee and commission income
– Fee and commission expense
Net fee and commission income
– Insurance profit
– Net gains /(loss) from derivatives, foreign
currency operations and translation
– Gains less losses from disposal of
investment securities measured at FVOCI
– Other operating income
– Share of profit of associates
Other operating non-interest income and
insurance profit
– Credit loss allowance reversal/(credit loss
allowance) for loans to customers
– (Credit loss allowance)/ credit loss
allowance reversal for performance
guarantees and credit related
commitments
– Credit loss allowance reversal for net
investments in leases
– Credit loss allowance reversal/(credit loss
allowance) for other financial assets
– Credit loss allowance for financial assets
measured at FVOCI
Operating income after expected credit
losses
– Staff costs
– Depreciation and amortisation
– Provision for liabilities and charges
– Administrative and other operating
expenses
Operating expenses
Profit/(loss) before tax
– Income tax (expense)/credit
Profit for the year
Total gross loans and advances
to customers reported
Total customer accounts reported
Total credit related commitments and
performance guarantees
356,652
582,788
299,451
197,952
1,436,843
(160,064)
–
31,352
227,940
49,338
(7,069)
42,269
–
(152,751)
–
(66,951)
363,086
207,258
(88,679)
118,579
–
49,851
30,726
–
2,953
–
–
9,563
–
(10,202)
–
(101,424)
187,825
26,271
(9,081)
17,190
–
24,220
–
1,093
–
(340,843)
28,556
137,023
22,688
10,564
(1,312)
9,252
18,510
(663,860)
28,556
–
801,539
293,431
(106,141)
187,290
18,510
(3,610)
101,187
169
5,307
632
169
18,916
632
52,804
40,289
25,313
21,008
139,414
3,261
(77,323)
(7,968)
(2,691)
–
411
–
2,211
(3,545)
(141)
–
124
–
(11)
–
–
–
(82,030)
(2,156)
582
582
(6,753)
(8,098)
(149)
(290)
325,653
441,497
222,473
46,628
1,036,251
(38,360)
(2,571)
–
(134,143)
(45,522)
–
(48,018)
(7,210)
–
(27,282)
(4,175)
(1,264)
(247,803)
(59,478)
(1,264)
(17,127)
(77,563)
(21,094)
(26,397)
(142,181)
(58,058)
267,595
(29,048)
238,547
(257,228)
184,269
(18,101)
166,168
(76,322)
146,151
(14,825)
131,326
4,660,473
5,053,203
2,948,279
3,187,319
5,673,917
1,188,088
2,451,769
205,433
302,648
(59,118)
(12,490)
16,790
4,300
–
–
–
(450,726)
585,525
(45,184)
540,341
12,661,955
10,049,324
2,959,850
326
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 29. SEGMENT ANALYSIS CONTINUED
Segment disclosure below is prepared without the effect of 2020 re-segmentation as described above.
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
Total
31 December 2018
– Interest income
– Interest expense
– Intersegment interest income/(expense)
– Net interest income
– Fee and commission income
– Fee and commission expense
Net fee and commission income
– Insurance profit
– Net gains from derivatives, foreign currency
operations and translation
– Gains less losses from disposal of
investment securities measured at fair
value through other comprehensive
income
– Other operating income
– Share of profit of associates
Other operating non-interest income and
insurance profit
– Credit loss allowance for loansto
customers
– Credit loss allowance for performance
guarantees and credit related
commitments
– Credit loss allowance for net investments
in leases
– Credit loss allowance for other financial
assets
– Credit loss allowance for financial assets
measured at fair value through OCI
Operating income after expected
credit losses
– Staff costs
– Depreciation and amortisation
– Provision for liabilities and charges
– Administrative and other operating
expenses
Operating expenses
Profit before tax
– Income tax expense
Profit for the year
– Total gross loans and advances to
customers reported
– Total customer accounts reported
– Total credit related commitments and
performance guarantees
264,559
609,989
255,833
153,854
1,284,235
(133,302)
35,531
166,788
40,667
(6,661)
34,006
–
(123,729)
(78,453)
407,807
170,082
(64,270)
105,812
–
44,629
28,588
–
–
19,691
–
8,658
–
(9,710)
(83,475)
162,648
22,498
(6,861)
15,637
–
22,002
–
748
–
(239,472)
126,397
40,779
2,454
(379)
2,075
12,275
(506,213)
–
778,022
235,701
(78,171)
157,530
12,275
11,828
107,047
2
2
2,341
1,154
31,438
1,154
64,320
37,246
22,750
27,600
151,916
(9,826)
(118,043)
(15,854)
–
(143,723)
(2,827)
(412)
(247)
(570)
(4,056)
–
–
(8,634)
(3,959)
(95)
–
–
(2)
–
(1,765)
(1,765)
(4,014)
(16,609)
9
(86)
243,732
428,451
184,932
64,114
921,229
(30,266)
(128,957)
(2,226)
–
(36,745)
–
(43,385)
(4,980)
–
(17,746)
(1,789)
(4,000)
(220,354)
(45,740)
(4,000)
(12,616)
(90,329)
(21,184)
(16,806)
(140,935)
(45,108)
198,624
(29,907)
168,717
(256,031)
172,420
(22,898)
149,522
(69,549)
115,383
(17,250)
98,133
3,177,289
4,698,699
2,496,594
3,230,653
5,103,971
1,017,518
1,578,184
246,639
246,824
(40,341)
23,773
(2,710)
21,063
(411,029)
510,200
(72,765)
437,435
–
–
–
10,372,582
9,352,142
2,071,647
327
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 29. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
Total
31 December 2020
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
57,197
1,856
59,053
214,377
6,901
221,278
59,053
–
218,986
2,292
26,405
429
26,834
26,834
–
16,198
11,326
27,524
314,177
20,512
334,689
27,524
–
332,397
2,292
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
31 December 2019
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
49,338
2,952
52,290
52,262
28
207,258
9,563
216,821
215,341
1,480
26,271
1,093
27,364
27,359
5
Total
293,431
18,916
312,347
10,564
5,308
15,872
15,872
–
310,834
1,513
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
31 December 2018
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
40,667
19,691
60,358
56,397
3,961
170,082
8,658
178,740
160,555
18,185
22,498
748
23,246
22,950
296
2,454
2,341
4,795
4,790
5
Total
235,701
31,438
267,139
244,692
22,447
328
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29. SEGMENT ANALYSIS CONTINUED
Reportable segments’ assets were reconciled to total assets as follows:
in thousands of GEL
Total segment assets (gross loans and advances to customers)
Credit loss allowance on gross loans and advances to customers
Cash and cash equivalents
Mandatory cash balances with National Bank of Georgia
Due from other banks
Investment securities measured at fair value through other comprehensive
income
Bonds carried at amortised cost
Current income tax prepayment
Deferred income tax asset
Other financial assets
Net investments in leases
Other assets
Premises and equipment
Intangible assets
Investment properties
Goodwill
Right of use assets
Investments in associates
31 December
2020
31 December
2019
31 December
2018
15,200,520
(606,246)
1,635,405
2,098,506
50,805
12,661,955
(312,556)
1,003,583
1,591,829
33,605
10,372,582
(334,130)
1,166,911
1,422,809
47,316
1,527,268
985,293
1,005,239
1,089,801
69,888
2,787
171,302
271,660
266,960
372,956
239,523
68,689
59,964
53,927
4,090
1,022,684
25,695
2,173
133,736
256,660
255,712
334,728
167,597
72,667
61,558
59,693
2,654
654,203
2,116
2,097
167,518
203,802
192,792
315,502
109,220
84,296
31,286
–
2,432
Total assets per statement of financial position
22,577,805
18,359,266
15,445,991
29. SEGMENT ANALYSIS CONTINUED
Reportable segments’ liabilities are reconciled to total liabilities as follows:
in thousands of GEL
Total segment liabilities (customer accounts)
Due to credit institutions
Debt securities in issue
Current income tax liability
Deferred income tax liability
Provisions for liabilities and charges
Other financial liabilities
Other liabilities
Subordinated debt
Lease Liabilities
31 December
2020
31 December
2019
31 December
2018
12,572,728
4,486,373
1,496,497
853
13,088
25,335
227,432
87,842
672,740
58,983
10,049,324
3,593,901
1,213,598
1,634
18,888
23,128
113,608
95,162
591,035
59,898
9,352,142
3,031,503
13,343
63
19,793
18,767
98,714
104,337
650,919
–
Total liabilities per statement of financial position
19,641,871
15,760,176
13,289,581
329
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 30. INTEREST INCOME AND EXPENSE
in thousands of GEL
2020
2019
2018
Interest income calculated using effective interest method
Loans and advances to customers
Bonds carried at amortised cost
Investment securities measured at fair value through OCI
Due from other banks
Other financial assets
Other interest income
Investments in leases
Total interest income
Interest expense
Customer accounts
Due to credit institutions
Subordinated debt
Debt securities in issue
Other interest expense
Lease Liabilities
Total interest expense
Net interest gains on currency swaps
Net interest income
1,394,033
97,122
103,516
18,590
1,655
1,225,196
58,682
74,043
29,570
1,418
1,123,972
40,625
57,057
23,744
–
53,083
47,934
38,837
1,667,999
1,436,843
1,284,235
(397,542)
(289,369)
(55,716)
(107,929)
(2,960)
(853,516)
20,950
835,433
(320,350)
(226,899)
(63,693)
(50,248)
(2,670)
(663,860)
28,556
801,539
(266,741)
(196,498)
(41,571)
(1,403)
–
(506,213)
–
778,022
During 2020 interest accrued on defaulted loans amounted to GEL 69,285 thousand (2019: GEL 14,372
thousand; 2018: GEL 41,373 thousand).
During 2020 capitalized interest expense in the amount of GEL 1,403 thousand (2019: nil, 2018: nil), was
attributable to the development of the Group’s headquarters. The capitalisation rate used to determine the
amount of borrowing costs eligible for capitalisation is weighted average of interest bearing liabilities by
currencies: 7.7% in GEL, 3.6% in USD and 1.1% in EUR. (2019: nil, 2018: nil)
In 2019, the Group entered into swap agreements denominated in foreign currencies in order to decrease its
cost of funding. As the contracts reached significant volume, the Group revisited the presentation of effects
in the consolidated statement of profit or loss and presented respective interest effect within net interest
income. 2018 information has not been restated due to immateriality of amounts.
330
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
31. FEE AND COMMISSION INCOME AND EXPENSE
In thousands of GEL
2020
2019
2018
Fee and commission income in respect of financial instruments not at
fair value through profit or loss:
– Card operations
– Settlement transactions
– Guarantees issued
– Cash transactions
– Issuance of letters of credit
– Foreign exchange operations
– Other
Total fee and commission income
Fee and commission expense in respect of financial instruments not at
fair value through profit or loss:
– Card operations
– Settlement transactions
– Cash transactions
– Guarantees and letters of credit received
– Other
Total fee and commission expense
Net fee and commission income
32. OTHER OPERATING INCOME
in thousands of GEL
Gain from sale of investment properties
Revenues from operational leasing
Gain from sale of repossessed collateral
Revenues from sale of cash-in terminals
Revenues from non-credit related fines
Gain on disposal of premises and equipment
Revenues from e-commerce
Other
Total other operating income
146,796
99,395
35,761
8,305
6,200
1,978
15,742
314,177
101,649
13,111
6,454
4,052
6,144
131,410
182,767
2020
1,003
3,172
1,568
477
236
594
6,604
6,858
20,512
138,620
86,967
28,701
13,211
5,215
2,841
17,876
293,431
82,583
13,739
4,732
3,627
1,460
106,141
187,290
2019
938
3,046
2,755
926
344
2,440
–
8,467
18,916
106,067
70,720
19,815
17,147
6,463
2,183
13,306
235,701
55,893
8,669
5,180
2,863
5,566
78,171
157,530
2018
9,781
6,544
2,577
1,715
683
352
–
9,786
31,438
Revenue from operational leasing is wholly attributable to investment properties. The carrying value of the
repossessed collateral disposed in the year ended 31 December 2020 was GEL 22,423 thousand (2019: GEL
32,306 thousand; 2018: GEL 33,295 thousand).
33. STAFF COSTS
in thousands of GEL
Salaries and bonuses
Share based compensation
Other compensation cost
Salaries and other employee benefits
2020
215,680
18,498
9,865
244,043
2019
201,344
33,857
12,602
247,803
2018
190,304
20,092
9,958
220,354
Share based compensation represents remuneration paid in shares and is excluded as non-cash in the consolidated
statement of cash flows. On the other hand, acquisition of treasury shares for share based payment scheme is
included as financing activity in the consolidated statement of cash flows.
331
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
33. STAFF COSTS CONTINUED
Breakdown of monthly average number of employees by categories is as follows:
in thousands of GEL
Headquarters*
Branches*
Other administrative staff **
2020
3,228
3,600
1,123
2019
2,924
3,638
700
2018
2,837
3,824
509
* Under monthly average number of employees in headquarters and branches employees in JSC TBC Bank, JSC TBC Insurance, TBC Bank Uzbeki-
stan and LLC TBC Kredit’s are considered.
** Employees from other subsidiaries are considered under other administrative staff.
In 2020 monthly average number of employees in TBC PLC was 10 individuals (2019: 10; 2018: 10).
34. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
in thousands of GEL
Advertising and marketing services
Professional services
Intangible asset maintenance
Rent*
Taxes other than on income
Utilities services
Premises and equipment maintenance
Communications and supply
Stationery and other office expenses
Security services
Transportation and vehicle maintenance
Insurance
Personnel training and recruitment
Charity
Business trip expenses
Impairment of intangible assets
Loss on disposal of repossessed collateral
Loss on disposal of premises and equipment
Write down of other assets to fair value less cost to sell
Reversal of previously written-down other assets to fair value less costs to sell
Other
2020
21,260
19,649
15,677
13,853
8,764
6,596
6,475
6,059
5,841
1,872
1,732
1,706
1,632
1,530
720
676
181
148
524
(525)
14,112
2019
22,634
25,865
12,885
13,541
6,962
6,874
9,828
5,960
5,167
2,035
2,140
1,660
3,120
1,990
2,612
–
1,310
938
2,545
(815)
14,930
2018
29,575
13,951
11,366
24,389
6,757
6,491
6,098
5,173
4,841
2,040
2,043
4,589
1,880
1,074
2,273
1
137
860
567
(1,593)
18,423
Total administrative and other operating expenses
128,482
142,181
140,935
*2020 and 2019 information within occupancy and rent is reported under IFRS 16 and is not comparable with information presented for 2018
which is reported under IAS 17.
Auditors’ remuneration is included within professional services expenses above and comprises:
in thousands of GEL
Audit
Audit Related Other Services
Total
31 December 2020
Fees payable to the company’s auditors and its associates for the audit
of parent company and consolidated financial statements
Audit of the financial statements of the company’s subsidiaries
Audit-related assurance services
Other assurance services
Total auditors’ remuneration
2,175
138
–
–
2,313
–
–
334
–
334
–
–
–
26
26
2,175
138
334
26
2,673
332
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
34. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
in thousands of GEL
Audit
Audit Related Other Services
Total
31 December 2029
Fees payable to the company’s auditors and its associates for the audit
of parent company and consolidated financial statements
Audit of the financial statements of the company’s subsidiaries
Audit-related assurance services
Other assurance services
Total auditors’ remuneration
1,427
248
–
–
1,675
–
–
561
–
561
–
–
–
864
864
1,427
248
561
864
3,100
in thousands of GEL
Audit
Audit Related Other Services
Total
31 December 2018
Fees payable to the company’s auditors and its associates for the audit
of parent company and consolidated financial statements
Audit of the financial statements of the company’s subsidiaries
Audit-related assurance services
Other assurance services
Total auditors’ remuneration
1,894
241
–
–
2,135
–
–
310
–
310
–
–
–
97
97
1,894
241
310
97
2,542
Fees presented in the tables above are exclusive of taxes. For the year ended 31 December 2019, GEL 1,125
thousands (included in the table above in other assurance services and audit related assurance services) is
attributable to reporting accountant fees related to listing of debt securities on the Irish Stock Exchange.
35. INCOME TAXES
Income tax (credit)/expenses comprise of the following:
in thousands of GEL
Current tax charge
Deferred tax (credit)/charge
Total Income tax (credit)/expense for the year
2020
3,022
(6,405)
(3,383)
2019
46,166
(982)
45,184
2018
52,914
19,851
72,765
The income tax rate applicable to the majority of the Group’s income was 15% (2019: 15%; 2018: 15%). The
income tax rate applicable to the majority of subsidiaries income ranged from 15% to 20% (2019: 15% - 20%;
2018: 15% - 20%).
Reconciliation between the expected and the actual taxation (credit)/expense is provided below.
in thousands of GEL
Statutory rate
Profit before tax
Theoretical tax charge at statutory rate
Tax effect of items which are not deductible or assessable for taxation
purposes:
– Income which is exempt from taxation
– Nondeductible expenses
– Expected effects of change in tax legislation
– Other differences
Total Income tax (credit)/expense for the year
2020
15% – 20%
319,106
46,327
2019
2018
15% – 20%
585,525
87,829
15% – 20%
510,200
76,500
(21,295)
(2,322)
(23,226)
(2,867)
(3,383)
(19,318)
(2,083)
(20,757)
(487)
(16,869)
(746)
13,833
47
45,184
72,765
333
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
35. INCOME TAXES CONTINUED
Differences between IFRS as adopted by the EU and statutory taxation regulations in Georgia and Azer-
baijan give rise to temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is
detailed below and is recorded at the rate of 15% (2019: 15%; 2018: 15%) for Georgia and 20% for Azerbaijan
and United Kingdom (2019: 20%; 2018: 20%).
Income which is exempt from taxation includes interest income from placements in NBG, Georgian gov-
ernment Treasury bills and IFI securities. Revaluation of investment securities held at FVOCI does not result
in recognition of deferred tax assets/liabilities (since majority of securities are either tax exempt or are not
supposed to be sold before Estonian model transition date discussed below) and its tax effect is not rec-
ognised in OCI. Non-deductible expenses include penalties paid and charity expenses towards beneficiary
which are not registered charity organizations.
On 13 May 2016 the Government of Georgia enacted the changes in the Tax Code of Georgia effective from 1
January 2019, for commercial banks, credit unions, insurance organizations, microfinance organizations and
pawnshops and from 1 January 2017 for other entities. However, during 2018 Georgian Government changed
transition date to 1 January 2023 for commercial banks, credit unions, insurance organizations, microfinance
organizations and pawnshops.The new code impacts the recognition and measurement principles of the
Group’s income tax and it also affects the Group’s deferred income tax assets/liabilities. Companies do
not have to pay income tax on their profit before tax (earned since 1 January 2017 or 1 January 2023 for
commercial banks, credit unions, insurance organizations, microfinance organizations and pawnshops) until
that profit is distributed in a form of dividend or other forms of profit distributions. Once dividend is paid,
15% income tax is payable at the moment of the dividend payment, regardless of whether in monetary or
non-monetary form, to the foreign non-resident legal entities and foreign and domestic individuals. The
dividends paid out to the resident legal entities are tax exempted. Apart from dividends’ distribution, the tax
is still payable on expenses or other payments incurred not related to economic activities, free delivery of
goods/services and/or transfer of funds and representation costs that exceed the maximum amount deter-
mined by the Income Tax Code of Georgia, in the same month they are incurred.
Deferred tax assets/liabilities are re-measured to the amounts that are estimated to be utilized in the period
from 1 January 2020 to 31 December 2022.
in thousands of GEL
Tax effect of deductible/(taxable) temporary differences and tax
loss carry forwards
Premises and equipment
Loans and advances to customers
Other financial assets
Other assets
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Tax loss carried forward
Net deferred tax (liability)/asset
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax (liability)/asset
1 January 2020
Credited/
(charged) to profit
or loss
31 December 2020
(11,372)
(8,822)
4,721
–
(2,487)
792
(1,800)
2,253
–
(16,715)
2,173
(18,888)
(16,715)
8,019
(9,795)
(2,119)
15
803
(1,712)
(813)
(885)
12,892
6,405
614
5,791
6,405
(3,344)
(18,617)
2,602
15
(1,684)
(920)
(2,613)
1,368
12,892
(10,301)
2,787
(13,088)
(10,301)
334
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
35. INCOME TAXES CONTINUED
in thousands of GEL
1 January 2019
or loss 31 December 2019*
Credited/
(charged) to profit
Tax effect of deductible/(taxable) temporary differences and tax
loss carry forwards
Premises and equipment
Loan and advances to customers
Other financial assets
Due to credit institutions
Subordinated debt
Other financial liabilities
Other liabilities
Share based payment
Net deferred tax (liability)/asset
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax (liability)/asset
(20,758)
2,866
2,421
(3,641)
(70)
(41)
864
663
(17,696)
2,097
(19,793)
(17,696)
9,386
(11,688)
2,300
1,154
70
833
(2,664)
1,590
981
76
905
981
Credited/
(charged) to profit
(11,372)
(8,822)
4,721
(2,487)
–
792
(1,800)
2,253
(16,715)
2,173
(18,888)
(16,715)
in thousands of GEL
1 January 2018
or loss 31 December 2018*
Tax effect of deductible/(taxable) temporary differences and tax
loss carry forwards
Premises and equipment
Loan and advances to customers
Other financial assets
Other assets
Investment property
Due to credit institutions
Subordinated debt
Other financial liabilities
Other liabilities
Share based payment
Tax loss carried forward
Net deferred tax asset/(liability)
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax asset/(liability)
(4,289)
2,401
2,266
29
(342)
(816)
(23)
(72)
1,651
1,486
(29)
2,262
2,855
(593)
2,262
(16,460)
417
301
(29)
342
(2,825)
(47)
31
(787)
(823)
29
(19,851)
(659)
(19,192)
(19,851)
(20,749)
2,866
2,421
–
–
(3,641)
(70)
(41)
864
663
–
(17,687)
2,097
(19,793)
(17,687)
*Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the adjustments made due to the change in
accounting policy as described in Note 2.
In the context of the Group’s current structure and Georgian tax legislation, tax losses and current tax assets
of different group companies may not be offset against current tax liabilities and taxable profits of other
group companies and, accordingly, taxes may accrue even where there is a consolidated tax loss. Therefore,
deferred tax assets and liabilities are offset only when they relate to the same taxable entity and the same
taxation authority.
335
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
36. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below sets out movements in the Group’s liabilities from financing activities for each of the peri-
ods presented. The items of these liabilities are those that are reported as financing activities in the state-
ment of cash flows.
in thousands of GEL
Liabilities from financing activities
at 1 January 2018
Cash flows
Foreign exchange adjustments
Other non-cash movements
Liabilities from financing activities
at 31 December 2018
Adoption of IFRS 16, Leases
Liabilities from financing activities
at 1 January 2019
Cash flows
Foreign exchange adjustments
Other non-cash movements
Liabilities from financing activities
at 31 December 2019
Cash flows
Foreign exchange adjustments
Other non-cash movements
Liabilities from financing activities
at 31 December 2020
Other borrowed
funds
Debt securities
in Issue
Subordinated
debt
Lease
liabilities
2,534,496
79,390
70,883
187,300
2,872,069
–
2,872,069
222,395
122,591
209,832
3,426,887
432,690
198,957
287,045
20,695
(9,308)
554
1,402
13,343
–
13,343
1,160,729
37,362
2,164
1,213,598
111,620
164,244
7,035
426,788
171,781
9,958
42,392
650,919
–
650,919
(167,847)
45,533
62,430
591,035
(56,985)
82,517
56,173
Total
2,981,979
241,863
81,395
231,094
–
–
–
–
–
61,043
3,536,331
61,043
61,043
(21,417)
4,108
16,164
59,898
(4,908)
6,655
(2,662)
3,597,374
1,193,860
209,594
290,590
5,291,418
482,417
452,373
347,591
4,345,579
1,496,497
672,740
58,983
6,573,799
37. FINANCIAL AND OTHER RISK MANAGEMENT
Credit Quality
Depending on the type of financial asset the Group may utilize different sources of asset credit quality in-
formation including credit ratings assigned by the international rating agencies (Standard & Poor’s, Fitch),
credit scoring information from credit bureau and internally developed credit ratings. Financial assets are
classified in an internally developed credit quality grades by taking into account the internal and external
credit quality information in combination with other indicators specific to the particular exposure (e.g. de-
linquency). The Group defines following credit quality grades:
Very low risk – exposures demonstrate strong ability to meet financial obligations;
Low risk – exposures demonstrate adequate ability to meet financial obligations;
Moderate risk – exposures demonstrate satisfactory ability to meet financial obligations;
High risk – exposures that require closer monitoring, and
Default – exposures in default, with observed credit impairment.
The internal credit ratings are estimated by the Group by statistical models with the limited involvement of
credit officers. Statistical models include qualitative and quantitative information that shows the best pre-
dictive power based on historical data on defaults.
The rating models are regularly reviewed and back tested on actual default data. The Group regularly vali-
dates the accuracy of ratings estimates and appraises the predictive power of the models.
Expected credit loss (ECL) measurement
ECL is a probability-weighted estimate of the present value of future cash shortfalls. An ECL measurement
is unbiased and is determined by evaluating a range of possible outcomes. ECL measurement is based on
four components used by the Group: Probability of Default (“PD”), Exposure at Default (“EAD”), Loss Given
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Default (“LGD”) and Discount Rate. The estimates consider forward looking information, that is, ECLs reflect
probability weighted development of key macroeconomic variables that have an impact on credit risk.
The Bank uses is a three-stage model for ECL measurement and classifies its borrowers across three stages:
The Bank classifies its exposures as Stage 1 if no significant deterioration in credit quality occurred since
initial recognition and the instrument was not defaulted when initially recognized. The exposure is classi-
fied to Stage 2 if the significant deterioration in credit quality was identified since initial recognition but the
financial instrument is not considered defaulted. The exposures for which the defaulted indicators have
been identified are classified as Stage 3 instruments. The Expected Credit Loss (ECL) amount differs de-
pending on exposure allocation to one of the Stages. In the case of Stage 1 instruments, the ECL represents
that portion of the lifetime ECL that can be attributed to default events potentially occurring within the next
12 months from the reporting date. In case of Stage 2 instruments, the ECL represents the lifetime ECL,
i.e. credit losses that can be attributed to possible default events during the whole lifetime of a financial
instrument. Generally, lifetime is set equal to the remaining contractual maturity of the financial instrument.
Factors such as existence of contractual repayment schedules, options for extension of repayment maturity
and monitoring processes held by the Bank affect the lifetime determination. In case of Stage 3 instruments,
default event has already incurred and the lifetime ECL is estimated based on the expected recoveries.
Definition of default
Financial assets for which the Group observed occurrence of one or more loss events are classified in Stage
3. The Group’s definition of default for the purpose of ECL measurement, is in accordance with the Capital
Requirements Regulation (EU).
The Group uses both quantitative and qualitative criteria for the definition of default. The borrower is classi-
fied as defaulted if at least one of the following occurred:
Any amount of contractual repayments is past due more than 90 days;
Factors indicating the borrower’s unlikeliness-to-pay.
In case of individually significant borrowers the Bank additionally applies criteria including but not limited
to: bankruptcy proceedings, significant fraud in the borrower’s business that significantly affected its finan-
cial condition, breach of the contract terms etc. For SME and corporate borrowers default is identified on
the counterparty level, meaning that all the claims against the borrower are treated as defaulted. As for retail
and micro exposures, facility level default definition is applied considering additional pulling effect criteria.
If the amount of defaulted exposure exceeds predefined threshold, all the claims against the borrower are
classified as defaulted. Once financial instrument is classified as defaulted, it remains as such until it no
longer meets any of the default criteria for a consecutive period of six months, in which case exposure is
considered to no longer be in default (i.e. to have cured). Grace period of six months has been determined
on analysis of likelihood of a financial instrument returning to default status after curing. Exposures which
are moved to stage 2 from default state are kept there for certain period before transferring to Stage 1 and
classified as fully performing instruments again.
As a result of COVID-19, the Group applied additional default criteria to exposures particularly impacted by
the pandemic-related restrictions. The criteria include lower days past due threshold and deterioration in debt
coverage ratios for the compromised borrowers to facilitate the early identification of impaired exposures.
Significant increase in credit risk (“SICR”)
Financial assets for which the Group identifies significant increase in credit risk since its origination are
classified in Stage 2. SICR indicators are recognized at financial instrument level even though some of them
refer to the borrower’s characteristics. The Group uses both quantitative and qualitative indicators of SICR.
Quantitative criteria
On a quantitative basis the Bank assess change in probability of default parameter for each particular ex-
posure since initial recognition and compares it to the predefined threshold. When absolute change in
probability of default exceeds the applicable threshold, SICR is deemed to have occurred and exposure
is transferred to Stage 2. Quantitative indicator of SICR is applied to retail and micro segments, where the
Group has sufficient number of observations.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Qualitative criteria
Financial asset is transferred to Stage 2 and lifetime ECLs is measured if at least one of the following SICR
qualitative criteria is observed:
delinquency period of more than 30 days on contractual repayments;
exposure is restructured, but is not defaulted;
borrower is classified as “watch”.
The Group has not rebutted the presumption that there has been significant increase in credit risk since
origination when financial asset becomes more than 30 days past due. This qualitative indicator of SICR
together with debt restructuring is applied to all segments. Particularly for corporate and SME segment the
Group uses downgrade of risk category since origination of the financial instrument as a qualitative indica-
tor of SICR. Based on the results of the monitoring borrowers are classified across different risk categories.
In case there are certain weaknesses present, which if materialized may lead to loan repayment problems,
borrowers are classified as “watch” category. Although watch borrowers’ financial standing is sufficient to
repay obligations, these borrowers are closely monitored and specific actions are undertaken to mitigate
potential weaknesses. Once the borrower is classified as “watch” category it is transferred to Stage 2. If any
of the SICR indicators described above occur financial instrument is transferred to Stage 2. Financial asset
may be moved back to Stage 1, if SICR indicators are no longer observed.
As a result of COVID-19, the Group applied additional SICR criteria to compromised borrowers, facilitating
the early identification of increased risk exposures. The criteria is based on the repayment history of the ex-
posures after the second stage grace period and availability of the recent financial monitoring information
for the vulnerable business borrowers.
ECL measurement
The Group utilizes two approaches for ECL measurement – individual assessment and collective assess-
ment. Individual assessment is mainly used for stage 2 and stage 3 individually significant borrowers. Addi-
tionally, the Bank may arbitrarily designate selected exposures to individual measurement of ECL based on
the Bank’s credit risk management or underwriting departments’ decision.
The Bank uses the discounted cash flow (DCF) method for the determination of recovery amount under
individual assessment. In order to ensure the accurate estimation of recoverable amount the Bank may uti-
lize scenario analysis approach. Scenarios may be defined considering the specifics and future outlook of
individual borrower, sector the borrower operates in or changes in values of collateral. In case of scenario
analysis the Bank forecasts recoverable amount for each scenario and estimates respective losses. Ultimate
ECL is calculated as the weighted average of losses expected in each scenario, weighted by the probability
of scenario occurring.
As a result of COVID-19 pandemic, the Bank performed individual assessment for the majority of individually
significant borrowers operating in vulnerable sectors, such as Hospitality & Leisure and Real Estate. Under
an individual assessment, the Bank considered the financial prospects of the borrowers by taking into ac-
count the future macroeconomic conditions and analyzing the implications of COVID-19 pandemic on their
business and operations.
As for the non-significant and non-impaired significant borrowers the Bank estimates expected credit loss-
es collectively. For the collective assessment and risk parameters estimation purposes the exposures are
grouped into a homogenous risk pools based on similar credit risk characteristics. Common credit risk char-
acteristics of the group include but are not limited to: Stage (Stage 1, Stage 2 or Stage 3), type of counterpar-
ty (individual vs business), type of product, rating (external or internal), overdue status, restructuring status,
months in default category or any other characteristics that may differentiate certain sub-segments for risk
parameter’s estimation purposes. Number of pools differs for different products/ segments considering
specifics of portfolio and availability of data within each pool. Collective ECL is the sum of the multiplica-
tions of the following credit risk parameters: EAD, PD and LGD, that are defined as explained below, and
discounted to present value using the instrument’s effective interest rate.
The key principles of calculating the credit risk parameters:
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Exposure at default (EAD)
The EAD represents estimation of exposure to credit risk at the time of default occurring during the life of
financial instrument. The EAD parameter used for the purpose of the ECL calculation is time-dependent, i.e.
the Bank allows for various values of the parameter to be applied to subsequent time periods during the life-
time of an exposure. Such structure of the EAD is applied to all Stage 1 and Stage 2 financial instruments. In
case of Stage 3 financial instruments and defaulted POCI assets, the EAD vector is one-element with current
EAD as the only value. EAD is determined differently for amortising financial instruments with contractual
repayment schedules and for revolving facilities.
For amortising products EAD is calculated considering the contractual repayments of principal and interest
over the 12-month period for facilities classified in Stage 1 and over lifetime period for remaining instru-
ments. It is additionally adjusted to include effect of reduction in exposure due to prepayments. In light of
the COVID-19 pandemic, the Group expects that prepayment rates will be lower compared to the pre-pan-
demic levels. In order to reflect this expectation in the EAD modelling, downward adjustment was applied to
the prepayment rates for future one-year period. For revolving products, the Group estimates the EAD based
on the expected limit utilisation percentage conditional on the default event. Probability of default (PD)
Probability of default parameter describes the likelihood of a default of a facility over a particular time hori-
zon. It provides an estimate of the likelihood that a borrower will be unable to meet its contractual debt
obligations. The PD parameter is time-dependent (i.e. has a specific term structure) and is applied to all
non-defaulted contracts. Taking into account specific nature of different segments of clients for which the
PD is estimated as well as unique characteristics that drive their default propensity, the PD is modelled
differently for Retail and Micro segments and Corporate and SME segments. PD assessment approach is
also differentiated for different time horizons and is further adjusted due to expected influence of mac-
roeconomic variables as forecasted for the period (see ‘Forward Looking Information” section for further
details on incorporation of macroeconomic expectations in ECL calculation). Two types of PDs are used for
calculating ECLs: 12-month and lifetime PD. Lifetime PDs represent the estimated probability of a default
occurring over the remaining life of the financial instrument and it is a sum of the 12 months marginal PDs
over the life of the instrument. The Group uses different statistical approaches such as the extrapolation of
12-month PDs based on migration matrixes, developing lifetime PD curves based on the historical default
data and gradual convergence of long-term PD with the long-term default rate.
Loss given default (LGD)
The LGD parameter represents the share of an exposure that would be irretrievably lost if a borrower de-
faults. For Stage 1 and Stage 2 financial instruments, the LGD is estimated for each period in the instru-
ment’s lifetime and reflects the share of the expected EAD for that period that will not be recovered over
the remaining lifetime of the instrument after the default date. For Stage 3 financial instruments, the LGD
represents the share of the EAD as of reporting date that will not be recovered over the remaining life of
that instrument. Assessment of LGD varies by the type of counterparty, segment, type of product, securi-
tization level and availability of historical observations. The general LGD estimation process employed by
the Bank is based on the assumption that after the default of the exposure, two mutually exclusive scenarios
are possible. The exposure either leaves the default state (cure scenario) or does not leave the default state
and will be subject to recovery process (non-cure scenario). The probability that an exposure defaults again
in the cure scenario is involved in the estimation process. Risk parameters applicable to both scenarios, i.e.
cure rates and recovery rates, are estimated by means of migration matrices approach, where risk groups are
defined by consecutive months-in-default. For certain portfolios based on the limitations of observations
alternative versions of the general approach may be applied. In light of the COVID-19 pandemic, the Group
applied an additional downward adjustment to the collateral values for stage 3 exposures were applicable to
capture the expected real estate price drop. Further, the Bank reduced the recovery rates of retail and micro
exposures in stage 3 to reflect the expected impact of the pandemic-related restrictions.
Forward-looking information
The measurement of unbiased, probability weighted ECL requires inclusion of forward looking information
obtainable without undue cost or effort. For forward-looking information purposes the Bank defines three
339
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
macro scenarios. The scenarios are defined as baseline (most likely), upside (better than most likely) and
downside (worse than most likely) scenarios of the state of the Georgian economy.
To derive the baseline macro-economic scenario, the Group takes into account forecasts from various ex-
ternal sources – the National Bank of Georgia, Ministry of Finance, International Monetary Fund (“IMF”) as
well as other International Financial Institutions (“IFI”’s) – in order to ensure the to the consensus market
expectations. Upside and downside scenarios are defined based on the framework developed by the Bank’s
macroeconomic unit.
The Bank uses statistical models and historical relationship between the various macroeconomic factors
and default observations to derive forward-looking adjustments. In case these models do not provide rea-
sonable results either from statistical or business perspective, the Bank may apply expert judgment or use
alternative approach. As at 31 December 2020, the Bank used statistical models to derive forward look-
ing adjustment in all segments except for corporate. In corporate segment, due to the availability of com-
prehensive borrower-level financial information and insignificance of the statistical models, the Bank used
stress test approach instead.
Due to the prolongation and severity of the COVID-19 pandemic impact, the scenario probabilities were
also adjusted to reflect the management’s expectations regarding their future realisation. The baseline, up-
side and downside scenarios were assigned probability weighing of 60%, 10% and 30%, respectively (31
December 2019: 50%, 25% and 25%).
The forward looking information is incorporated in both individual and collective assessment of expected
credit losses.
Model maintenance and validation
The Group regularly reviews its methodology and assumptions to reduce any difference between the
estimates and the actual credit loss. Such back-testing is performed at least once a year. As part of the
back-testing process, the Group evaluates actual realization of the risk parameters and their consistency
with the model estimates. Additionally staging criteria are also analysed within the back-testing process.
The results of back-testing the ECL measurement methodology are communicated to the Group Manage-
ment and further actions for tuning the models and assumptions are defined after discussions between
authorised persons.
Geographical risk concentrations.
Assets, liabilities, credit related commitments and performance guarantees have generally been attributed
to geographic regions based on the country in which the counterparty is located. Balances legally outstand-
ing to/from off-shore companies which are closely related to Georgian counterparties are allocated to the
caption “Georgia”. Cash on hand and premises and equipment have been allocated based on the country
in which they are physically held.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The geographical concentration of the Group’s assets and liabilities as of 31 December 2020 is set out
below by country of incorporation:
in thousands of GEL
Georgia
OECD Non-OECD
Total
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through OCI
Bonds carried at amortised cost
Investments in leases
Other financial assets
Total financial assets
Non-financial assets
940,076
37,753
2,098,506
14,111,683
1,206,673
1,089,801
271,314
167,163
19,922,969
1,133,766
686,110
13,052
–
131,066
318,682
–
–
3,978
1,152,888
396
1,913
9,219 1,635,405
–
50,805
– 2,098,506
351,525 14,594,274
1,527,268
– 1,089,801
271,660
171,302
363,164 21,439,021
4,622 1,138,784
346
161
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Credit related commitments
21,056,735 1,153,284
367,786 22,577,805
2,363,147 2,110,307
10,647,808
1,496,497
227,063
57,317
115,394
14,907,226
122,684
12,919 4,486,373
911,146 1,013,774 12,572,728
– 1,496,497
227,432
13
58,983
1,666
166,405
672,740
1,194,777 19,514,753
127,118
–
356
–
390,941
3,412,750
63
4,371
15,029,910 3,412,813 1,199,148 19,641,871
2,935,934
258,659 1,751,041
8,627 1,881,316
6,026,825 (2,259,529)
746,871
4,678
745,511
1,868,011
(831,362)
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The geographical concentration of the Group’s assets and liabilities as at 31 December 2019 is set out below
by country of incorporation:
in thousands of GEL
Georgia
OECD Non-OECD
Total
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through OCI
Bonds carried at amortised cost
Investments in leases
Other financial assets
Total financial assets
Non-financial assets
701,993
21,538
1,591,829
11,775,027
985,293
1,022,684
255,596
132,060
16,486,020
978,377
287,079
12,067
–
147,222
–
–
–
1,431
447,799
364
14,511 1,003,583
33,605
–
– 1,591,829
427,150 12,349,399
–
985,293
– 1,022,684
256,660
133,736
442,970 17,376,789
982,477
1,064
245
3,726
17,464,407
448,163
446,696 18,359,266
1,813,684 1,744,130
733,778
8,406,484
–
1,213,598
329
113,271
–
59,898
343,861
100,993
2,822,098
11,707,928
830
132,559
36,087 3,593,901
909,062 10,049,324
– 1,213,598
113,608
8
59,898
–
146,181
591,035
1,091,338 15,621,364
138,812
5,423
11,840,487 2,822,928 1,096,761 15,760,176
2,599,090
622,646 1,458,884
11,459 1,500,967
5,623,920 (2,374,765)
232,328
4,476
603,910
1,485,032
(650,065)
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Credit related commitments
342
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The geographical concentration of the Group’s assets and liabilities as at 31 December 2018 is set out below
by country of incorporation:
in thousands of GEL
Georgia
OECD Non-OECD
Total
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through OCI
Bonds carried at amortised cost
Investments in leases
Other financial assets
Total financial assets
Non-financial assets
650,575
28,418
1,422,809
9,526,939
1,004,564
654,203
202,850
166,899
13,657,257
735,895
515,159
12,852
–
121,713
–
–
–
329
650,053
200
1,177 1,166,911
47,316
6,046
– 1,422,809
389,800 10,038,452
675 1,005,239
654,203
203,802
167,518
398,940 14,706,250
739,741
–
952
290
3,646
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Credit related commitments
14,393,152
650,253
402,586 15,445,991
1,154,327 1,811,299
697,753
7,790,236
7,927
–
296
98,379
420,031
94,264
65,877 3,031,503
864,153 9,352,142
13,343
98,714
650,919
9,145,133 2,929,379 1,072,109 13,146,621
142,960
5,416
39
136,624
141,750
525
685
9,286,883 2,929,904 1,072,794 13,289,581
2,156,410
5,106,269 (2,279,651)
219,207 1,195,812
291,795
875,835
3,751
684,810
870,446
(670,208)
1,638
Market risk. The Bank follows the Basel Committee’s definition of market risk as the risk of losses in on- and
off-balance sheet positions arising from movements in market prices. This risk is principally made up of (a)
risks pertaining to interest rate instruments and equities in the trading book and (b) foreign exchange rate
risk (or currency risk) and commodities risk throughout the Bank. The Bank’s strategy is not to be involved
in trading book activity or investments in commodities. Accordingly, the Bank’s exposure to market risk is
primarily limited to foreign exchange rate risk in the structural book.
Currency risk. Foreign exchange rate risk arises from the potential change in foreign currency exchange
rates, which can affect the value of a financial instrument. This risk stems from the open currency positions
created due to mismatches in foreign currency assets and liabilities. The NBG requires the Bank to monitor
both balance-sheet and total aggregate (including off-balance sheet) open currency positions and to main-
tain the later one within 20% of the Bank’s regulatory capital. As at 31 December 2020, the Bank maintained
an aggregate open currency position of 3.4% of regulatory capital (2019: 0.5%; 2018: 7.6%). The Asset-Liability
Management Committee (“ALCO”) has set limits on the level of exposure by currency as well as on aggregate
exposure positions which are more conservative than those set by the NBG. The Bank’s compliance with
such limits is monitored daily by the heads of the Treasury and Financial Risk Management Departments.
On 13 August 2018 the NBG introduced new regulation on changes to OCP (“open currency position”) calcu-
lation method, according to this regulation, from March 2019 special reserves assigned to FC balance-sheet
assets would be deductible gradually for OCP calculation purposes. As a result of COVID-19 pandemic, the
NBG implemented countercyclical measure in relation to OCP requirements: suspended the phasing in of
special reserved planned to be fully implemented by July 2022.
Currency risk management framework is governed through the Market Risk Management Policy, market
343
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
risk management procedure and relevant methodologies. The Bank has in place the methodology devel-
oped for allocating capital charges for FX risk following Basel guidelines. The table below summarises the
Group’s exposure to foreign currency exchange rate risk at the balance sheet date. While managing open
currency position the Group considers part of the provisions to be denominated in the USD, Euro and other
currencies. Gross amount of currency swap deposits is included in Derivatives. Therefore total financial
assets and liabilities below are not traceable with either balance sheet or liquidity risk management tables,
where net amount of gross currency swaps is presented.
As of 31 December 2020
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
As of 31 December 2019
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
As of 31 December 2018
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
8,756,581
8,004,885
4,556,780
120,775
21,439,021
7,115,738
10,956,193
1,315,871
126,951
159,241
2,914,494
(3,227,918)
61,164
19,514,753
(93,019)
1,800,084
(36,814)
12,991
54,988
1,831,249
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
7,502,497
6,846,799
2,970,008
57,485
17,376,789
5,706,300
8,774,033
1,035,944
105,087
(91,472)
1,945,714
(1,924,793)
56,134
15,621,364
(14,417)
1,704,725
18,480
9,271
8,532
1,741,008
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
5,920,867
7,309,173
1,375,295
100,915
14,706,250
4,663,312
7,445,413
948,398
89,498
13,146,621
98,278
319,260
(417,670)
(463)
(595)
1,355,833
183,020
9,227
10,954
1,559,046
US Dollar strengthening by 20% (weakening 20%) would decrease Group’s profit or loss and equity in 2020
by GEL 7,363 thousand (increase by GEL 7,363 thousand). Euro strengthening by 20% (weakening 20%) would
increase Group’s profit or loss and equity in 2020 by GEL 2,598 thousand (decrease by GEL 2,598 thousand).
US Dollar strengthening by 20% (weakening 20%) would increase Group’s profit or loss and equity in 2019 by
GEL 3,696 thousand (decrease by GEL 3,696 thousand). Euro strengthening by 20% (weakening 20%) would
increase Group’s profit or loss and equity in 2019 by GEL 1,854 thousand (decrease by GEL 1,854 thousand).
US Dollar strengthening by 20% (weakening 20%) would increase Group’s profit or loss and equity in 2018
by GEL 36,604 thousand (decrease by GEL 36,604 thousand). Euro strengthening by 20% (weakening 20%)
would increase Group’s profit or loss and equity in 2018 by GEL 1,845 thousand (decrease by GEL 1,845 thou-
sand).
Interest rate risk. Interest rate risk arises from potential changes in the market interest rates that can ad-
versely affect the fair value or future cash flows of the financial instrument. This risk can arise from maturity
mismatches of assets and liabilities, as well as from the re-pricing characteristics of such assets and liabil-
ities.
The Bank’s deposits and the part of the loans are at fixed interest rates, while a portion of the Bank’s borrow-
ings is at a floating interest rate. In case of need, the Bank also applies for interest rate risk hedging instru-
ments in order to mitigate interest rate risk. Furthermore, many of the Bank’s loans to customers contain a
clause allowing it to adjust the interest rate on the loan in case of adverse interest rate movements, thereby
limiting the Bank’s exposure to interest rate risk. The management also believes that the Bank’s interest rate
margins provide a reasonable buffer to mitigate the effect of possible adverse interest rate movements.
344
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The Group employs an advanced framework for the management of interest rate risk by establishing appro-
priate Risk Appetite limits, monitoring compliance with them and preparing forecasts.
From September, 2020 the NBG introduced regulation on interest rate risk and set the limit for Economic
Value of Equity (EVE) sensitivity at 15% of NBG Tier 1 Capital. The main principles and assumptions of NBG
IRR methodology are in line with Basel standards and EBA guidelines developed for IRR management pur-
poses. As of 31 December 2020 the Bank was in compliance with the regulatory requirement with EVE=3.5%.
According to NBG guidelines the net interest income sensitivity under parallel shifts of interest rate sce-
narios are maintained for monitoring purposes, while EVE sensitivity is calculated under 6 predefined stress
scenarios of interest rate changes and the limit is applied for the worst case scenario result.
Interest rate risk is managed by the financial risk management department and is monitored by the ALCO,
which decides on actions that are necessary for effective interest rate risk management and follows up on
their implementation. The major aspects of interest rate risk management development and the respective
reporting are periodically provided to the Management Board, the Supervisory Board and the Risk Committee.
The table below summarises the Group’s exposure to interest rate risks internal approaches before intro-
duction of NBG regulation. It illustrates the aggregated amounts of the Group’s financial assets and liabil-
ities at the amounts monitored by the management and categorised by the earlier of contractual interest
re-pricing or maturity dates. Cross-Currency swaps were not netted when assessing the Group’s exposure
to interest rate risks. Therefore, total financial assets and liabilities below were not traceable with either bal-
ance sheet or other financial risk management tables. The tables considered both reserves placed with NBG
and Interest bearing Nostro accounts. Income on NBG reserves and Nostros were calculated as benchmark
minus margin whereby for benchmark Federal funds rate and ECB rates were considered in case of USD and
EUR respectively. Therefore, they had impact on the TBC’s net interest income in case of both upward and
downward shift of interest rates.
In thousands of GEL
Total financial assets
Total financial liabilities
Net interest sensitivity gap as of 31
December 2019
Total financial assets
Total financial liabilities
Net interest sensitivity gap as of 31
December 2018
Less than 1
month
6,650,943
(6,016,285)
From 1 to 6
months
5,034,027
(3,087,372)
From 6 to 12
months
1,022,854
(1,026,326)
More than 1
year
5,354,287
(6,184,815)
Total
18,062,111
(16,314,798)
634,658
1,946,655
(3,472)
(830,528)
1,747,313
4,782,800
(4,563,135)
3,610,949
(3,337,999)
1,017,711
(948,719)
5,295,712
(4,297,701)
14,707,172
(13,147,554)
219,665
272,950
68,992
998,011
1,559,618
Following main assumptions under NBG IRR Regulation and EBA 2018 guidelines, at 31 December, 2020,
if interest rates had been 200 basis points higher, with all other variables held constant, profit would have
been GEL 95 million higher, mainly as a result of higher interest income on variable interest assets (2019: GEL
40 million; 2018: GEL 10 million). If interest rates at 31 December, 2020 had been 200 basis points lower with
all other variables held constant, profit for the year would have been GEL 31 million lower, mainly as a result
of lower interest income on variable interest assets (2019: GEL 39 million; 2018 GEL 10 million).
At 31 December, 2020, if interest rates had been 200 basis points lower, with all other variables held con-
stant, other comprehensive income would have been GEL 24 million higher (2019: GEL 9.4 million; 2018: GEL
8.6 million), as a result of an increase in the fair value of fixed rate financial assets measured at fair value
through other comprehensive income and repurchase receivables. If interest rates at 31 December, 2020
had been 200 basis points higher with all other variables held constant, Other comprehensive income would
have been GEL 35 million lower (2019: GEL 9.1 million; 2018: GEL 8.2 million), as a result of decrease in the fair
value of fixed rate financial assets measured at fair value through other comprehensive income.
The Bank calculates the impact of changes in interest rates using both Net Interest Income and Economic
Value sensitivity. Net Interest Income sensitivity measures the impact of a change of interest rates along the
various maturities on the yield curve on the net interest revenue for the nearest year.
Economic Value measures the impact of a change of interest rates along the various maturities on the yield
curve on the present value of the Group’s assets, liabilities and off-balance sheet instruments.
345
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
When performing Net Interest Income and Economic Value sensitivity analysis, the Bank uses parallel shifts
in interest rates as well as number of different scenarios. TBC Bank closely monitors the adverse effect of
possible parallel yield curve shift scenarios on net interest income over a one-year period to ensure compli-
ance with the predefined risk appetite of the Bank.
In order to manage interest rate risk the Bank establishes appropriate limits. The Bank monitors compliance
with the limits and prepares forecasts. ALCO decides on actions that are necessary for effective interest rate
risk management and follows up on the implementation. Periodic reporting is done to Management Board
and the Board’s Risk, Ethics and Compliance Committee.
Liquidity Risk. The liquidity risk is the risk that TBC Bank either does not have sufficient financial resources
available to meet all of its obligations and commitments as they fall due, or can access those resources only
at a high cost. The risk is managed by the Financial Risk Management and Treasury Departments and is
monitored by the ALCO.
The principal objectives of the TBC Bank’s liquidity risk management policy are to: (i) ensure the availabil-
ity of funds in order to meet claims arising from total liabilities and off-balance sheet commitments, both
actual and contingent, at an economic price; (ii) recognise any structural mismatch existing within TBC
Bank’s statement of financial position and set monitoring ratios to manage funding in line with well-bal-
anced growth; and (iii) monitor liquidity and funding on an on-going basis to ensure that approved business
targets are met without compromising the risk profile of the Bank.
The liquidity risk is categorised into two risk types: the funding liquidity risk and the market liquidity risk.
Funding liquidity risk is the risk that TBC will not be able to efficiently meet both expected and unexpected
current and future cash flow and collateral needs without affecting either its daily operations or its financial
condition. To manage funding liquidity risk TBC Bank uses the Liquidity Coverage ratio and the Net Stable
Funding ratio set forth under Basel III and defined further by the NBG. In addition the Bank performs stress
tests and “what-if” scenario analysis. In 2017, for liquidity risk management purposes National Bank of Geor-
gia introduced Liquidity Coverage Ratio (“NBG LCR”), where in addition to Basel III guidelines conservative
approaches are applied to the deposits’ withdrawal rates depending on the clients group’s concentration.
From September, 2017 the Bank also monitors compliance with NBG LCR limits. In 2019, for long-term liquid-
ity risk management purposes NBG introduced Net Stable Funding Ratio (“”NBG NSFR”). From September,
2019, on a monthly basis the Bank monitors compliance with the set limit for NBG NSFR.
The Liquidity Coverage Ratio is used to help manage short-term liquidity risks. The Bank’s liquidity risk
management framework is designed to comprehensively project cash flows arising from assets, liabilities
and off-balance sheet items over certain time buckets and ensure that NBG LCR limits, are met on a daily
basis. TBC Bank also stress tests the results of liquidity through large shock scenarios provided by the NBG.
The Net Stable Funding ratio is used for long-term liquidity risk management to promote resilience over a
longer time horizon by creating additional incentives for TBC Bank to rely on more stable sources of funding
on a continuous basis. The Bank also monitors deposit concentration for large deposits and set limits for
non-Georgian residents deposits share in total deposit portfolio.
The management believes, that a strong and diversified funding structure is one of TBC Bank’s differenti-
ators. The Bank relies on relatively stable deposits from Georgia as the main source of funding. In order to
maintain and further enhance the liability structure TBC Bank sets the targets for deposits and IFI funding
within the Bank’s risk appetite.
The loan to deposit and IFI funding ratio (defined as total value of net loans divided by total value of depos-
its and funds received from International financial institutions) stood at 101.2%, 104.8% and 89.9%, at the 31
December 2020, 2019 and 2018 respectively.
Maturity analysis. The table below summarizes the maturity analysis of the Group’s financial liabilities, based
on remaining undiscounted contractual obligations as of 31 December 2020 subject-to-notice repayments
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 Group could be required to pay and the table does not reflect
the expected cash flows indicated by the Group’s deposit retention history.
346
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The maturity analysis of financial liabilities as of 31 December 2020 is as follows:
in thousands of GEL
Due to credit institutions
Customer accounts – individuals
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled forwards
Performance guarantees
Financial guarantees
Letters of credit
Other credit related commitments
Total potential future payments for
financial obligations
Less than 3
months
From 3 to 12
months
From 1 to 5
Years
Over 5
years
Total
2,138,399
4,275,412
4,077,900
208,111
3,098
13,998
1,230
3,561,859
211,607
318,935
10,820
1,401,539
1,156,117
1,828,748
502,224
10,236
9,029
75,845
59,356
484,099
588,883
-
90,559
–
–
5,849
2,678,130
1,282,427
619,298
537
35,298
146,205 6,118,851
53,445 7,440,032
492,887 5,692,309
218,884
53,274
1,441,419 1,635,831 3,167,093
– 1,511,849
1,451,263
90,172
– 4,136,130
12,610 1,751,075
937,975
-
-
318,935
-
59,463
160,842
– 1,401,539
–
16,222,908
4,805,096
8,595,982 2,346,827 31,970,813
The maturity analysis of financial liabilities as of 31 December 2019 is as follows:
in thousands of GEL
Due to credit institutions
Customer accounts – individuals
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled forwards
Performance guarantees
Financial guarantees
Letters of credit
Other credit related commitments
Total potential future payments for
financial obligations
Less than 3
months
From 3 to 12
months
From 1 to 5
Years
Over 5
years
Total
1,590,089
3,407,952
3,722,452
90,944
4,367
2,019
–
1,476,685
115,997
241,124
41,132
1,150,110
616,417
1,658,316
339,113
10,133
12,509
55,182
56,797
552,630
332,833
-
19,687
–
–
11,988
3,724,084
699,554
250,328
4,917
57,058
435,233 6,365,823
27,344 5,793,166
142,043 4,453,936
105,994
85,922
1,255,291 2,330,270 3,642,762
– 1,213,598
1,156,801
– 2,193,414
164,099
100,552 1,458,884
909,502
-
-
241,124
-
48,914
109,733
– 1,150,110
–
11,842,871
3,653,617
8,270,548 3,047,430 26,814,466
The maturity analysis of financial liabilities as of 31 December 2018 is as follows:
in thousands of GEL
Due to credit institutions
Customer accounts – individuals
Customer accounts – other
Other financial liabilities
Subordinated debt
Debt securities in issue
Gross settled forwards
Performance guarantees
Letters of credit
Other credit related commitments
Total potential future payments for
financial obligations
Less than 3
months
From 3 to 12
months
From 1 to 5
Years
Over 5
years
Total
950,084
3,152,851
3,821,862
77,522
5,267
366
567,259
119,959
9,932
769,863
372,517
1,408,710
208,250
21,192
71,519
13,847
16,008
349,354
44,703
–
1,909,587
628,831
137,275
–
388,594
–
–
671,333
51,337
–
–
187,454 3,419,642
27,397 5,217,789
195,007 4,362,394
98,714
588,197 1,053,577
14,213
583,267
55,166 1,195,812
105,972
769,863
–
–
–
–
9,474,965
2,506,100
3,786,957 1,053,221 16,821,243
347
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The undiscounted financial liability analysis gap does not reflect the historical stability of the current accounts.
Their liquidation has historically taken place over a longer period than the one indicated in the tables above. These
balances are included in amounts due in less than three months in the tables above.
Term deposits included in the customer accounts are classified based on remaining contractual maturities, accord-
ing to the Georgian Civil Code, however, individuals have the right to withdraw their deposits prior to maturity, if
they partially or fully forfeit their right to accrued interest and the Group is obliged to repay such deposits upon the
depositor’s demand. Based on the Bank’s deposit retention history, the Management does not expect that many cus-
tomers will require repayment on the earliest possible date; accordingly, the table does not reflect the management’s
expectations as to actual cash outflows.
The Group does not use the above undiscounted maturity analysis to manage liquidity. Instead, the Group monitors
the liquidity gap analysis based on the expected maturities. In particular, the customers’ deposits are distributed in the
given maturity gaps following their behavioural analysis.
As at 31 December 2020 the analysis by expected maturities is as follows:
Less than
3 months
From 3 to
12 months
From
12 months
to 5 years
Over
5 years
Total
6,254
–
9
–
24,469
–
820
14,600
–
–
559,823
168,447
–
11,652
–
164,846
73,284
14,190
2,094
– 1,635,405
1,634,585
–
11,736
50,805
2,098,506
– 2,098,506
1,555,793 2,512,140 6,117,469 4,408,872 14,594,274
1,527,268
– 1,527,268
323,964 1,089,801
41,168
23,675
271,660
7,641
21,831
135,716
149,471
7,036,088 2,781,974 6,881,860 4,739,099 21,439,021
40,279 4,486,373
2,116,391 1,007,235 1,322,468
– 10,924,278 12,572,728
380,992
1,267,458
– 1,496,497
56,031
121
10,236
208,111
–
218,884
10,580
9,061
4,061
58,983
6,598
1,950
–
8,548
386,514
16,369
11,747
672,740
3,609,839 1,430,491 3,112,772 11,361,651 19,514,753
4,427
5,424
100,214
1,440,345
537
35,281
–
258,110
4,427
5,424
100,214
–
–
–
–
–
–
–
–
–
110,065
110,065
3,316,184 1,351,483 3,769,088 (6,622,552) 1,814,203
3,316,184 4,667,667 8,436,755 1,814,203
–
–
–
In thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measures at fair value through OCI
Bonds carried at amortised cost
Net investments in leases
Insurance and reinsurance Receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Insurance contract liabilities
Subordinated debt
Total financial liabilities
Performance guarantees
Financial guarantees
Other credit related commitments
Credit related commitments and performance
guarantees
Net liquidity gap as of 31 December 2020
Cumulative gap as of 31 December 2020
348
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
As at 31 December 2019 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measures at fair value through OCI
Bonds carried at amortised cost
Net investments in leases
Insurance and reinsurance receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Insurance contract liabilities
Subordinated debt
Total financial liabilities
Performance guarantees
Financial guarantees
Other credit related commitments
Credit related commitments and performance
guarantees
Net liquidity gap as of 31 December 2019
Cumulative gap as of 31 December 2019
Less than 3
months
From 3 to 12
months
From 1 to 5
Years
Over 5
years
Total
–
–
3,500
–
3,272
–
–
–
14,912
–
–
555,379
148,542
–
2
–
215,711
70,398
17,104
2,946
985,293
124,006
34,448
9,072
104,612
– 1,003,583
1,003,583
–
15,193
33,605
1,591,829
– 1,591,829
1,303,711 2,307,064 5,108,650 3,629,974 12,349,399
985,293
127,588 1,022,684
256,660
26,176
107,560
5,171,747 2,616,723 5,827,485 3,760,834 17,376,789
95,928 3,593,901
1,573,720
– 8,792,221 10,049,324
1,082,198
– 1,213,598
–
90,944
–
105,995
8,160
4,394
59,898
1,850
–
7,613
477,207
331
591,035
627,108 2,867,303 9,373,516 15,621,364
7,466
4,511
100,212
427,794 1,496,459
174,905
56,797
10,133
8,513
5,763
–
1,156,801
4,918
38,831
–
113,497
2,753,437
7,466
4,511
100,212
–
–
–
–
–
–
–
–
–
112,189
–
2,306,121 1,989,615 2,960,182 (5,612,682)
2,306,121 4,295,736 7,255,918 1,643,236
–
–
112,189
1,643,236
349
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
As of 31 December 2018 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measures at fair value through OCI
Bonds carried at amortised cost
Net investments in leases
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Subordinated debt
Total financial liabilities
Performance guarantees
Financial guarantees
Other credit related commitments
Credit related commitments and performance
guarantees
Net liquidity gap as of 31 December 2018
Cumulative gap as of 31 December 2018
Less than 3
months
From 3 to 12
months
From 1 to 5
Years
Over 5
years
Total
–
9,088
–
–
11,075
–
72,994
3,150
–
–
92,877
56,432
34,268
–
368,843
113,087
1,664
– 1,166,911
1,166,911
–
27,153
47,316
1,422,809
– 1,422,809
1,090,521 2,056,149 4,152,436 2,739,346 10,038,452
– 1,005,239
1,005,239
119,489
654,203
31,133
203,802
131,586
167,518
4,994,841 2,250,801 4,645,118 2,815,490 14,706,250
172,424 3,031,503
– 8,226,153 9,352,142
–
–
13,343
–
–
98,714
441,639
182,986
650,919
458,057 1,836,561 8,840,216 13,146,621
4,393
5,424
103,029
271,993 1,653,575
128,395
13,231
21,192
23,246
933,511
997,594
112
77,522
3,048
2,011,787
4,393
5,424
103,029
–
–
–
–
–
–
–
–
–
112,846
–
2,870,208 1,792,744 2,808,557 (6,024,726)
2,870,208 4,662,952 7,471,509 1,446,783
–
–
112,846
1,446,783
The management believes that the Group has sufficient liquidity to meet its current on- and off-balance sheet
obligations.
38. CONTINGENCIES AND COMMITMENTS
Legal proceedings. When determining the level of provision to be set up with regards to such claims, or
the amount (not subject to provisioning) to be disclosed in the financial statements, the management seeks
both internal and external professional advice. The management believes that the provision recorded in
these financial statements is adequate and the amount (not subject to provisioning) need not be disclosed
as the probability of material adverse effect on the financial condition or the results of future operations of
the Group is remote.
Tax legislation. Georgian and Azerbaijani tax and customs legislation is subject to varying interpretations,
and changes, which can occur frequently. The management’s interpretation of the legislation as applied to
the Group’s transactions and activity may be challenged by the relevant authorities. Fiscal periods remain
open to review by the authorities in respect of taxes for five calendar years preceding the review period. To
respond to the risks, the Group has engaged external tax specialists to carry out periodic reviews of Group’s
taxation policies and tax filings. The Group’s management believes that its interpretation of the relevant
legislation is appropriate and the Group’s tax and customs positions will be sustained. Accordingly, as of 31
December 2020, 2019 and 2018 no material provision for potential tax liabilities has been recorded.
Compliance with covenants. The Group is subject to certain covenants primarily related to its borrowings.
Non-compliance with such covenants may result in negative consequences for the Group including growth
in the cost of borrowings and declaration of default. During 2020, the bank renegotiated some of its lender
covenants to reflect the changes in the operations as a result of the COVID -19. The Group was in compli-
ance with all covenants as of 31 December 2020, 31 December 2019 and 31 December 2018.
350
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 38. CONTINGENCIES AND COMMITMENTS CONTINUED
Management of capital. The Bank manages capital requirements under regulatory rules. The Bank complied with
all its imposed capital requirements throughout the reporting period.
Credit related commitments and financial guarantees. The primary purpose of these instruments is to
ensure that funds are available to a customer as required. Financial guarantees and standby letters of credit,
which represent the irrevocable assurances that the Group will make payments in the event that a customer
cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commer-
cial letters of credit, that are written undertakings by the Group on behalf of a customer authorising a third
party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are collat-
eralised by the underlying shipments of goods to which they relate or cash deposits and therefore carry less
risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to prolong credit in the form of
loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group
is potentially exposed to a loss in an amount equal to the total unused commitments. However, the likely
amount of loss is lower than the total unused commitments since most commitments to extend credit are
contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity
of credit related commitments because longer-term commitments generally have a greater degree of credit
risk than shorter-term ones.
As of 31 December 2020 outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
Stage 2
Stage 3
1,222,916
158,131
303,046
1,684,093
(3,246)
(376)
(795)
(4,417)
1,679,676
165,798
1,464
14,571
181,833
(986)
-
(4)
(990)
180,843
12,825
1,247
1,318
15,390
(15)
-
(2)
(17)
15,373
As of 31 December 2019 outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
Stage 2
Stage 3
1,124,862
109,299
240,205
18,548
-
550
1,474,366
19,098
(2,096)
(473)
(1,244)
(3,813)
1,470,553
(514)
-
(2)
(516)
18,582
6,700
434
369
7,503
(182)
-
-
(182)
7,321
351
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 38. CONTINGENCIES AND COMMITMENTS CONTINUED
As of 31 December 2018 outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
744,047
104,590
-
848,637
(2,652)
(437)
-
(3,089)
845,548
Stage 2
15,570
-
-
15,570
(736)
-
-
(736)
14,834
Stage 3
10,246
1,382
-
11,628
(1,347)
(252)
-
(1,599)
10,029
The credit quality of contingencies and commitments is as follows at 31 December 2020:
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
1,157,753
62,193
2,963
7
-
1,222,916
(3,246)
1,219,670
157,992
139
-
-
-
158,131
(376)
157,755
268,333
34,713
-
-
-
303,046
(795)
302,251
3,820
146,114
14,723
1,141
-
165,798
(986)
164,812
-
1,464
-
-
-
1,464
-
1,464
100
14,471
-
-
-
14,571
(4)
14,567
-
-
-
-
12,825
12,825
(15)
12,810
-
-
-
-
1,247
1,247
-
1,247
-
-
-
-
1,318
1,318
(2)
1,316
Total
1,161,573
208,307
17,686
1,146
12,825
1,401,539
(4,247)
1,397,292
157,992
1,603
-
-
1,247
160,842
(376)
160,466
268,433
49,184
-
-
1,318
318,935
(801)
318,134
352
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
38. CONTINGENCIES AND COMMITMENTS CONTINUED
The credit quality of contingencies and commitments is as follows at 31 December 2019:
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2019
Stage 1
(12-months ECL)
Stage 2
(lifetime EC
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
1,027,350
92,030
5,480
2
-
1,124,862
(2,096)
1,122,766
108,476
823
-
-
-
109,299
(473)
108,826
233,004
7,027
174
-
-
240,205
(1,244)
238,961
2,706
5,589
9,455
798
-
18,548
(514)
18,034
-
-
-
-
-
-
-
-
-
62
488
-
-
550
(2)
548
-
-
-
-
6,700
6,700
(182)
6,518
-
-
-
-
433
433
-
433
-
-
-
-
370
370
-
370
Total
1,030,056
97,619
14,935
800
6,700
1,150,110
(2,792)
1,147,318
108,476
823
-
-
433
109,732
(473)
109,259
233,004
7,089
662
-
370
241,125
(1,246)
239,879
353
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
38. CONTINGENCIES AND COMMITMENTS CONTINUED
The credit quality of contingencies and commitments is as follows at 31 December 2018:
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2018
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit impaired)
679,115
51,770
13,151
11
-
744,047
(2,652)
741,395
94,760
7,863
1,967
-
-
104,590
(437)
104,153
294
3,131
10,836
1,309
-
15,570
(736)
14,834
-
-
-
-
-
-
-
-
-
-
-
-
10,246
10,246
(1,347)
8,899
-
-
-
-
1,382
1,382
(252)
1,130
Total
679,409
54,901
23,986
1,321
10,246
769,863
(4,735)
765,128
94,760
7,863
1,967
-
1,382
105,972
(689)
105,283
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does
not necessarily represent future cash requirements, as these financial instruments may expire or terminate
without being funded. Non-cancellable commitments as of 31 December 2020 were GEL 579,915 thousand
(2019: GEL 472,485 thousand; 2018: GEL 344,360 thousand).
Performance guarantees. Performance guarantees are contracts that provide compensation in case of an-
other party fails to perform a contractual obligation. Such contracts do not transfer credit risk. The risk under
the performance guarantee contracts is the possibility that the insured event occurs (i.e.: the failure to per-
form the contractual obligation by another party). The key risks the Group faces are significant fluctuations
in the frequency and severity of payments incurred on such contracts, relative to expectations.
Outstanding amount of performance guarantees and respective provision as of 31 December 2020 is GEL
1,751,041 thousand and GEL 4,427 thousand (2019: GEL 1,458,884 thousand and GEL 7,466 thousand, 2018:
GEL 1,195,812 thousand and GEL 4,393 thousand).
Fair value of credit related commitments were GEL 5,424 thousand as of 31 December 2020 (2019: GEL 4,511
thousand; 2018: GEL 5,424 thousand). Total credit related commitments and performance guarantees are
denominated in currencies as follows:
In thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
354
2020
1,208,199
1,584,878
776,307
62,973
2019
1,155,421
1,203,296
542,303
58,830
2018
853,965
955,829
218,091
43,762
3,632,357
2,959,850
2,071,647
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
38. CONTINGENCIES AND COMMITMENTS CONTINUED
Capital expenditure commitments. As of 31 December 2020, the Group has contractual capital expenditure
commitments amounting to GEL 14,631 thousand (2019: GEL 33,723 thousand; 2018: GEL 12,210 thousand).
Out of total amount as at 31 December 2020, contractual commitments related to the head office construc-
tion amounted GEL 4,853 thousand (2019: GEL 13,186 thousand).
39. NON-CONTROLLING INTEREST
The following table provides information about each subsidiary with a non-controlling interest as of 31
December 2020:
In thousands of GEL
Inspired LLC
TKT Online LLC
TKT UZ
My.Ge LLC
Allproperty.ge LLC
Billing Solutions LLC
TBC Bank JSC including:
United Financial Corporation JSC
Total Non-Controlling
Proportion of non-
controlling interest’s
voting rights held
49%
45%
25%
35%
10%
49%
0.12%
0.47%
Profit attributable to
non-controlling interest
4,164
(182)
(86)
507
9
(108)
433
22
Accumulated non-controlling
interest in the subsidiary
4,824
643
(26)
2,496
(27)
61
3,508
105
4,737
11,479
The following table provides financial information about each subsidiary with a non-controlling interest as
of 31 December 2020:
In thousands of GEL
TBC Bank JSC
Inspired LLC
United Financial
Corporation JSC
Allproperty.ge LLC
My.Ge LLC
TKT Online LLC
TKT UZ
Billing Solutions LLC
Current
assets
Non-current
assets
Current
liabilities
9,992,348 12,070,130 14,066,164
496
8,972
1,572
Non-current
liabilities
Revenue
Profit
5,251,319 1,033,580 330,969
8,498
15,094
–
Total
comprehensive
income
Net cash
flows
353,307 557,847
5,160
8,498
5,269
1,410
625
181
126
38
17,803
1,496
7,394
1,705
10
406
504
595
925
478
5
3
257
237
–
–
–
318
14,716
2,200
5,646
649
15
(17)
4,573
87
1,449
(404)
(147)
(220)
4,573
87
1,449
(404)
(147)
(220)
676
(530)
(499)
(1,255)
(107)
36
355
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 39. NON-CONTROLLING INTEREST CONTINUED
The following table provides information about each subsidiary with a non-controlling interest for the year
ended as of 31 December 2019:
in thousands of GEL
Inspired LLC
TKT Online LLC
TKT UZ
My.Ge LLC
Allproperty.ge LLC
Billing Solutions LLC
TBC Bank JSC including:
TBC Leasing JSC*
Proportion of non-
controlling interest’s
voting rights held
49%
45%
25%
35%
10%
49%
0.12%
0.39%
Profit attributable to
non-controlling interest
1,350
303
0
130
(65)
0
728
11
Accumulated non-controlling
interest in the subsidiary
1,906
815
21
2,094
(36)
169
3,561
0
United Financial Corporation JSC
0.47%
63
Total Non-Controlling
*In May 2019 the Group purchased remaining 0.39% shareholding from TBC Leasing JSC shareholders and became 100% owner of the Company.
2,446
582
8,530
The following table provides financial information about each subsidiary with a non-controlling interest as
of 31 December 2019:
In thousands of GEL
TBC Bank JSC
TBC Leasing JSC
TBC Kredit LLC
United Financial
Corporation JSC
Inspired LLC
TKT Online LLC
Allproperty.ge LLC
My.Ge LLC
TKT UZ
Billing Solutions LLC
Current
assets
Non-current
assets
Current
liabilities
8,026,612 10,280,004 11,254,319
133,198
172,275
6,238
14,140
180,282
10,605
Non-current
liabilities
Revenue
Profit
4,520,588 1,010,616 545,055
6,861
2,221
182,804
5,730
29,894
4,543
Total
comprehensive
income
545,080
6,861
2,221
Net cash
flows
(434,292)
719
473
9,507
2,796
1,586
1,286
863
231
–
8,821
1,177
1,562
1,053
5,845
5
344
155
185
1,336
426
586
1
–
435
–
–
582
–
–
–
12,023
5,683
1,468
1,965
2,122
–
–
4,725
2,759
714
651
442
(1)
–
4,725
2,756
675
651
442
(1)
–
(622)
1,686
1,280
697
482
230
–
The following table provides information about each subsidiary with non-controlling interest for the year
ended and as of 31 December 2018:
In thousands of GEL
TBC Bank JSC including:
TBC Leasing JSC
TBC Kredit LLC
United Financial Corporation JSC
BG LLC
Total Non-Controlling
Proportion of
non-controlling interest’s
voting rights held
0.12%
0.39%
0.00%
1.33%
0.00%
Profit attributable to
non-controlling interest
2,355
26
251
59
Accumulated non-controlling
interest in the subsidiary
3,062
96
0
517
(88)
2,355
0
3,062
356
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 39. NON-CONTROLLING INTEREST CONTINUED
TThe following table provides financial information about each subsidiary with a non-controlling interest as
of 31 December 2018:
In thousands of GEL
TBC Bank JSC
TBC Leasing JSC
TBC Kredit LLC
BG LLC
United Financial
Corporation JSC
Current
assets
Non-current
assets
Current
liabilities
Non-current
liabilities
Profit
7,421,134 8,031,716 9,955,303 3,385,828 1,066,089 433,051
6,585
1,836
(88)
128,610 138,582
13,961
60
160,619
19,639
8,964
126,954
10,813
8,993
26,998
3,177
123
14,987
1
Revenue
Total
comprehensive
incomeNet cash flows
(264,368)
10,773
(1,622)
63
448,749
6,585
1,836
(88)
8,711
6,646
3,284
–
12,401
4,427
4,427
(438)
*In 2018 the Group purchased remaining 25% shareholding from TBC Kredit LLC shareholders and became 100% owner of the company.
40. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
As of 31 December 2020, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
Amounts subject to
master netting and similar
arrangements not set off in the
statement of financial position
Gross amounts
before offsetting
in the statement of
financial position
(a)
Gross amounts
set off in the
statement of
financial position
(b)
Net amount after
offsetting in the
statement of financial
position
(c)=(a)-(b)
Financial
instruments
(d)
Cash
collateral
received
(e)
Net
amount of
exposure
(c)-(d)-(e
In thousands of GEL
Assets
Other financial assets:
- Receivables on credit card
services and money transfers
25,245
ASSETS SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
Liabilities
Other financial liabilities:
- Payables on credit card services
and money transfers
LIABILITIES SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
25,245
8,800
8,800
18
18
18
18
25,227
25,227
8,782
8,782
–
–
–
–
–
–
–
–
25,227
25,227
8,782
8,782
357
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
40. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONTINUED
As of 31 December 2019, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
Amounts subject to
master netting and similar
arrangements not set off in the
statement of financial position
Gross amounts
before offsetting
in the statement of
financial position
(a)
Gross amounts
set off in the
statement of
financial position
(b)
Net amount after
offsetting in the
statement of financial
position
(c)=(a)-(b)
Financial
instruments
(d)
Cash
collateral
received
(e)
Net
amount of
exposure
(c)-(d)-(e
In thousands of GEL
Assets
Other financial assets:
- Receivables on credit card
services and money transfers
24,139
2,244
21,895
ASSETS SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
Liabilities
Other financial liabilities:
- Payables on credit card services
and money transfers
LIABILITIES SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
24,139
2,244
21,895
17,518
2,244
15,274
17,518
2,244
15,274
–
–
–
–
–
–
–
–
21,895
21,895
15,274
15,274
As of 31 December 2018, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
Amounts subject to
master netting and similar
arrangements not set off in the
statement of financial position
Gross amounts
before offsetting
in the statement of
financial position
(a)
Gross amounts
set off in the
statement of
financial position
(b)
Net amount after
offsetting in the
statement of financial
position
(c)=(a)-(b)
Financial
instruments
(d)
Cash
collateral
received
(e)
Net
amount of
exposure
(c)-(d)-(e
In thousands of GEL
Assets
Other financial assets:
- Receivables on credit card
services and money transfers
17,544
3,154
14,390
ASSETS SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
Liabilities
Other financial liabilities:
- Payables on credit card services
and money transfers
LIABILITIES SUBJECT TO
OFFSETTING, MASTER NETTING
AND SIMILAR ARRANGEMENT
17,544
3,154
14,390
21,426
3,154
18,272
21,426
3,154
18,272
–
–
–
–
–
–
–
–
14,390
14,390
18,272
18,272
358
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
40. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONTINUED
The amount set off in the statement of financial position reported in column (b) is the lower of (i) the gross
amount before offsetting reported in column (a) and (ii) the amount of the related instrument that is eligible
for offsetting. Similarly, the amounts in columns (d) and (e) are limited to the exposure reported in column (c)
for each individual instrument in order not to understate the ultimate net exposure.
Deposits placed with other banks and deposits received from other banks as part of gross settled currency
swap arrangements have been netted-off in these financial statements and the instrument has been pre-
sented as either asset or liability at a fair value.
The disclosure does not apply to loans and advances to customers and related customer deposits unless
they are netted-off in the statement of financial position.
41. DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Group enters into various derivative financial instruments, to manage
currency, liquidity and interest rate risks and for trading purposes.
in thousands of GEL
Fair value of gross settled currency swaps,
included in other financial assets or due from banks
Fair value of foreign exchange forwards and
gross settled currency swaps, included in other financial liabilities
Total
2020
28,915
2019
5,849
2018
1,490
(121,934)
(20,266)
(2,085)
(93,019)
(14,417)
(595)
Foreign Exchange Forwards and gross settled currency swaps. Foreign exchange derivative financial
instruments the Group entered are generally traded in an over-the-counter market with professional
counterparties on standardised contractual terms and conditions. Derivatives have potentially favourable
(assets) or unfavourable (liabilities) conditions as a result of fluctuations in market interest rates, foreign
exchange rates or other variables relative to their terms. The aggregate fair values of derivative financial
assets and liabilities can fluctuate significantly from time to time.
The table below sets out fair values, at the balance sheet date, of currencies receivable or payable under
foreign exchange forwards contracts and gross settled currency swaps the Group entered. The table reflects
gross positions before the netting of any counterparty positions (and payments) and covers the contracts
with settlement dates after the respective balance sheet date.
in thousands of GEL
– USD payable on settlement (-)
– USD receivable on settlement (+)
– GEL payable on settlement (-)
– GEL receivable on settlement (+)
– EUR payable on settlement (-)
– EUR receivable on settlement (+)
– Other payable on settlement (-)
– Other receivable on settlement (+)
Fair value of foreign exchange forwards and
gross settled currency swaps
2020
2019
2018
Contracts with
negative fair
value
Contracts
with positive
fair value
Contracts with
negative fair
value
Contracts
with positive
fair value
Contracts
with negative
fair value
Contracts
with positive
fair value
(404,289)
353,946
(164,233)
211,903
(175,194)
199,968
(2,903)
9,717
(145,313)
3,110,150
(23,545)
135,116
(3,252,692)
-
-
54,350
(123,836)
337,218
-
108,914
(333,757)
16,048
(1,630)
2,892
(14,480)
1,746,812
(200,386)
-
(1,616,275)
9,191
(2,887)
57,759
(83,561)
130,924
(5,785)
97,386
(137,865)
1,548
(1,157)
-
(31,305)
303,202
(1,690)
8,367
(303,541)
22,188
(464)
1,158
28,915
(121,934)
5,849
(20,266)
1,490
(2,085)
Net fair value
(93,019)
(14,417)
(595)
Information on related party balances is disclosed in Note 44.
359
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
42. FAIR VALUE DISCLOSURES
(a) Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the state-
ment of financial position at the end of each reporting period. The level in the fair value hierarchy into which
the recurring fair value measurements are categorised as follows:
in thousands of GEL
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
31 December 2020
31 December 2019
31 December 2018
ASSETS CARRIED
AT FAIR VALUE
FINANCIAL ASSETS
Investment securities measured at fair value through other comprehensive income
– Certificates of
Deposits of National
Bank of Georgia
– Corporate Bonds
– Netherlands
Government notes
– Ministry of Finance of
Uzbekistan treasury
bills
– Ministry of Finance
treasury bills
– Corporate shares
–
–
–
–
–
–
21,687
664,563
–
1,950
–
–
–
–
21,687
664,563
–
1,950
838,152
–
838,152
–
916
916
–
–
–
–
–
–
40,346
–
40,346
611,000
–
1,596
–
–
–
611,000
–
1,596
329,352
– 329,352
– 2,999
2,999
–
–
–
–
–
–
14,982
548,864
66,760
–
–
–
–
–
14,982
548,864
66,760
–
372,927
–
372,927
– 1,707
1,707
Investment securities measured at fair value through Profit and loss
– Foreign exchange
forwards and gross
settled currency
swaps, included in
other financial assets
or due from banks
– Investment held at fair
value through profit
or loss
TOTAL ASSETS
RECURRING FAIR VALUE
MEASUREMENTS
LIABILITIES CARRIED
AT FAIR VALUE
FINANCIAL LIABILITIES
Foreign exchange
forwards and gross settled
currency swaps, included
in other financial liabilities
TOTAL LIABILITIES
RECURRING FAIR VALUE
MEASUREMENTS
–
28,915
–
28,915
–
5,849
–
5,849
–
1,490
–
1,490
–
–
17,239
17,239
–
–
–
–
–
–
–
–
– 1,555,267 18,155 1,573,422
–
988,143
2,999
991,142
– 1,005,023 1,707 1,006,730
–
121,934
–
121,934
–
20,266
–
20,266
–
2,085
–
2,085
–
121,934
–
121,934
–
20,266
–
20,266
–
2,085
–
2,085
There were no transfers between levels 1 and 2 during the year ended 31 December 2020 (2019 none, 2018:
none).
360
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
42. FAIR VALUE DISCLOSURES CONTINUED
The description of the valuation technique and the description of inputs used in the fair value
measurement for level 2 measurements:
Fair value at 31 December
2020
2019
2018
Valuation
technique
Inputs
used
in thousands of GEL
ASSETS CARRIED AT FAIR VALUE
FINANCIAL ASSETS
– Certificates of Deposits of NBG, Ministry of
Finance Treasury Bills, Government notes,
Corporate bonds
– Foreign exchange forwards and gross settled
currency swaps, included in due from banks
28,915
5,849
1,490
1,526,352
982,294
1,003,533
Discounted cash
flows (“DCF”)
Government
bonds yield
curve
Forward pricing
using present
value calculation
Official
exchange rate,
risk-free rate
TOTAL ASSETS RECURRING FAIR VALUE
MEASUREMENTS AT LEVEL 2
LIABILITIES CARRIED AT FAIR VALUE
FINANCIAL LIABILITIES
– Foreign exchange forwards included in other
financial liabilities
1,555,267
988,143
1,005,023
121,934
20,266
2,085
Forward pricing
using present
value calculation
Official
exchange rate,
risk-free rate
TOTAL RECURRING FAIR VALUE
MEASUREMENTS AT LEVEL 2
121,934
20,266
2,085
There were no changes in the valuation technique for the level 2 and level 3 recurring fair value measure-
ments during the year ended 31 December 2020 (2019: none; 2018: none).
Fair value measurement analysis by level in the fair value hierarchy is disclosed in Note 2.
361
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
42. FAIR VALUE DISCLOSURES CONTINUED
(b) Assets and liabilities not measured at fair value but for which fair value is disclosed
Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value
are as follows:
in thousands of GEL
Level 1
Level 2
Level 3
Carrying
Value
Level 1
Level 2
Level 3
Carrying
Value
Level 1
Level 2
Level 3
Carrying
Value
31 December 2020
31 December 2019
31 December 2018
–
–
1,166,911
47,316
FINANCIAL ASSETS
Cash and cash
equivalents
755,686
879,719
– 1,635,405
650,700
352,883
– 1,003,583
491,928
674,983
Due from other banks
–
50,805
–
50,805
Mandatory cash
balances with the NBG
Loans and advances
to customers:
– Corporate loans
– Consumer loans
– Mortgage loans
– Loans to micro,
small and medium
enterprises
Bonds carried at
amortised cost
Investments in leases
Other financial assets
NON-FINANCIAL ASSETS
Investment properties,
at cost
– 2,098,506
– 2,098,506
–
–
–
–
–
5,728,134 5,583,108
– 2,025,055 1,769,760
– 4,032,243 3,845,232
– 3,508,881
3,396,174
– 1,086,007
– 1,089,801
–
–
–
–
–
274,402
271,660
125,148
125,148
–
105,628
68,689
–
–
–
–
–
–
–
–
–
–
33,605
–
33,605
–
47,316
1,591,829
– 1,591,829
– 1,422,809
– 1,422,809
– 4,838,348 4,579,723
– 1,876,364 1,750,050
– 3,354,901
3,137,492
– 2,891,382 2,882,134
990,537
– 1,022,684
–
–
265,165
256,660
127,888
127,887
–
123,325
72,667
–
–
–
–
–
–
–
–
– 3,212,490 3,095,784
– 1,970,006 1,832,793
– 2,702,768 2,684,295
– 2,440,078 2,425,580
660,916
–
654,203
–
–
207,579
203,802
166,028
166,028
–
97,425
84,296
TOTAL ASSETS
755,686
4,115,037 15,799,491 19,934,288 650,700 2,968,854 13,477,373 16,458,315
491,928 2,806,024 10,796,373 13,783,817
FINANCIAL LIABILITIES
Customer accounts
–
7,481,872
5,113,469 12,572,728
– 6,480,250 3,580,630 10,049,324
– 5,885,242
3,482,741
9,352,142
Debt securities in issue
1,463,830
–
– 1,496,497
1,136,297
–
–
1,136,297
–
13,343
–
13,343
Due to credit institutions
– 4,490,963
– 4,486,373
Other financial liabilities
Subordinated debt
–
–
164,479
677,246
–
–
164,479
672,740
–
–
–
3,600,318
– 3,593,901
– 3,028,180
– 3,031,503
153,241
594,892
–
–
153,241
591,035
–
–
96,630
648,802
–
–
96,630
650,919
TOTAL LIABILITIES
1,463,830 12,814,560
5,113,469 19,392,817
1,136,297
10,828,701 3,580,630 15,523,798
-
9,672,197
3,482,741 13,144,537
The fair values in the level 2 and level 3 of fair value hierarchy were estimated using the discounted cash
flows valuation technique. The fair value of unquoted fixed interest rate instruments was calculated based
on estimated future cash flows expected to be received discounted at current interest rates for new instru-
ments with similar credit risk and remaining maturity. The fair value of investment properties was estimated
using market comparatives (refer to Note 17).
Amounts due to credit institutions were discounted at the Group’s own incremental borrowing
rate. Liabilities due on demand were discounted from the first date that the Group could be re-
quired to pay the amount. There were no changes in the valuation technique for the level 2 and
level 3 measurements of assets and liabilities not measured at fair values in the year ended 31
December 2020 (2019: none; 2018: none).
362
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
43. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
The following table provides a reconciliation of classes of financial assets with these measurement catego-
ries as of 31 December 2020:
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Amortised
cost
1,635,405
50,805
2,098,506
14,594,274
Investment securities measured at FVOCI
–
1,527,268
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
–
–
–
–
Total
1,635,405
50,805
2,098,506
14,594,274
1,527,268
1,089,801
171,302
–
–
–
–
–
–
46,154
1,089,801
125,148
–
–
19,593,939
1,527,268
46,154
21,167,361
–
–
–
–
–
–
271,660
1,138,784
19,593,939
1,527,268
46,154
22,577,805
Bonds carried at amortised cost
Other financial assets
TOTAL FINANCIAL ASSETS SUBJECT TO
IFRS 9 MEASUREMENT CATEGORIES
Investments in leases
Non-financial assets
TOTAL ASSETS
For the measurement purposes, IFRS 9, classifies financial assets into the categories discussed
in Note 2. The following table provides a reconciliation of classes of financial assets with these
measurement categories as of 31 December 2019:
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Investment securities measured at FVOCI
Bonds carried at amortised cost
Other financial assets
TOTAL FINANCIAL ASSETS SUBJECT TO IFRS 9 MEA-
SUREMENT CATEGORIES
Investments in leases
Non-financial assets
TOTAL ASSETS
Amortised
cost
1,003,583
33,605
1,591,829
12,349,399
–
1,022,684
131,649
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
–
–
–
–
985,293
–
–
–
–
–
–
–
–
2,087
Total
1,003,583
33,605
1,591,829
12,349,399
985,293
1,022,684
133,736
16,132,749
985,293
2,087
17,120,129
–
–
–
–
–
–
256,660
982,477
16,132,749
985,293
2,087
18,359,266
363
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
43. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
CONTINUED
The following table provides a reconciliation of classes of financial assets with these measure-
ment categories as of 31 December 2018:
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Amortised
cost
1,166,911
47,316
1,422,809
10,038,452
–
–
–
–
Investment securities measured at FVOCI
–
1,005,239
Bonds carried at amortised cost
Other financial assets
654,203
166,028
–
–
Total
1,166,911
47,316
1,422,809
10,038,452
1,005,239
654,203
167,518
–
–
–
–
–
–
1,490
TOTAL FINANCIAL ASSETS SUBJECT TO IFRS 9 MEA-
SUREMENT CATEGORIES
Investments in leases
Non-financial assets
TOTAL ASSETS
13,495,719
1,005,239
1,490
14,502,448
–
–
–
–
–
–
203,802
739,741
13,495,719
1,005,239
1,490
15,445,991
As of 31 December 2020, 2019 and 2018 all of the Group’s financial liabilities except for derivatives are carried
at amortised cost. Derivatives belong to the assets fair value through profit or loss measurement category
under IFRS 9.
44. RELATED PARTY TRANSACTIONS
Pursuant to IAS 24 “Related Party Disclosures”, parties are generally considered to be related if the parties
are under common control or one party has the ability to control the other or it can exercise significant influ-
ence over the other party in taking 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:
Parties with material ownership stake (more than 5% beneficial ownership stake for 2020, 2019 and 2018)
in the TBCG or with representatives in the Board of Directors are considered as Significant Shareholders.
The key management personnel include members of TBCG’s Board of Directors, the Management Board
of the Bank and their close family members.
Transactions between TBC Bank Group PLC and its subsidiaries also meet the definition of related party
transactions. Where these are eliminated on consolidation, they are not disclosed in the Group Financial
Statements.
The definition of the related party is different per standards of National Bank of Georgia and is regulated by
the published Decree N 26/04 of the Governor of the National Bank of Georgia (link to the document below
in the footnote1).
1 www.nbg.gov.ge
364
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
44. RELATED PARTY TRANSACTIONS CONTINUED
As of 31 December 2020, the Group’s outstanding balances with related parties were as follows:
in thousands of GEL
Gross amount of loans and advances to customers
Credit loss allowance for loans and advances to customers
Customer accounts
Contractual
interest rate
Significant
shareholders
Key management
personnel
6.6% – 36.0%
0.0% – 11.5%
54
–
16,574
6,869
4
16,555
The Group’s income and expense items with related parties except from key management compensation
for the year 2020 were as follows:
in thousands of GEL
Interest income - loans and advances to customers
Interest expense
Gains less losses from trading in foreign currencies
Foreign exchange translation gains less losses
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
Significant
shareholders
Key management
personnel
8
–
197
(61)
21
–
346
1
47
1,242
24
323
The Group’s income and expense items with related parties except from key management compensation
for the year 2020 were as follows:
in thousands of GEL
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
Significant
shareholders
Key management
personnel
107
(76)
3,750
(8,193)
During the year 2020, 6 related parties were removed from the insider list. If they had remained in the list,
customer accounts with related parties as of 31 December 2020 would have been GEL 27 thousand higher.
As of 31 December 2020, transactions and balances of TBC Bank Group PLC with subsidiaries
were as follows:
in thousands of GEL
Due from other banks
Cash and cash equivalents
Investment in subsidiary
Foreign exchange forward contracts
Contractual interest rate
31 December 2020
8.05% – 9.03%
27,700
10,631
1,456,862
2,527
Included in Investments in subsidiary in Separate Statement of Financial Position GEL 7,823 thousands re-
lates to investment in JSC TBC Insurance.
365
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
44. RELATED PARTY TRANSACTIONS CONTINUED
The income and expense items for TBC Bank Group PLC with subsidiaries except from key management
compensation for the year 2020 were as follows:
in thousands of GEL
Interest income
Fee and commission expense
Dividend income
Processional Expenses
FX
31 December 2020
3,438
5
6,297
746
2,527
As of 31 December 2019, the Group’s outstanding balances with related parties were as follows:
in thousands of GEL
Contractual
interest rate
Significant
shareholders
Key management
personnel
Gross amount of loans and advances to customers
6.6% – 36.0%
Credit loss allowance for loans and advances to customers
77
–
Customer accounts
0.0% – 11.5%
16,418
9,723
1
12,997
The Group’s income and expense items with related parties except from key management compensation
for the year 2019 were as follows:
in thousands of GEL
Interest income - loans and advances to customers
Interest expense
Gains less losses from trading in foreign currencies
Foreign exchange translation gains less losses
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
Significant
shareholders
Key management
personnel
42
87
159
50
77
68
620
197
68
283
61
978
The aggregate loan amounts advanced to, and repaid, by related parties during 2019 were as follows:
in thousands of GEL
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
Significant
shareholders
Key management
personnel
249
(1,878)
15,160
(17,747)
During the year 2019, 3 related parties were removed from the insider list. If they had remained in the list,
customer accounts with related parties as of 31 December 2019 would have been GEL 266 thousand higher.
366
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
44. RELATED PARTY TRANSACTIONS CONTINUED
As of 31 December 2019, transactions and balances of TBC Bank Group PLC with subsidiaries were as fol-
lows:
in thousands of GEL
Due from other banks
Cash and cash equivalents
Investment in subsidiary
Contractual interest rate
31 December 2019
8.05% – 9.03%
40,815
6,612
1,463,084
Included in Investments in subsidiary in Separate Statement of Financial Position GEL 7,823 thousands re-
lates to investment in JSC TBC Insurance.
The income and expense items for TBC Bank Group PLC with subsidiaries except from key management
compensation for the year 2019 were as follows:
in thousands of GEL
Interest income
Fee and commission expense
Dividend income
31 December 2019
5,625
48
109,520
As of 31 December 2018, the Group’s outstanding balances with related parties were as follows:
in thousands of GEL
Gross amount of loans and advances to customers
Credit loss allowance for loans and advances to customers
Customer accounts
Guarantees
Provision on guarantees
Contractual
interest rate
Significant
shareholders
Key management
personnel
0.4% – 48.0%
0.0% – 10.2 %
1,614
–
27,095
10,216
36
11,407
9
21,328
–
–
The Group’s income and expense items with related parties except from key management compensation
for the year 2018 were as follows:
in thousands of GEL
Interest income - loans and advances to customers
Interest expense
Gains less losses from trading in foreign currencies
Foreign exchange translation gains less losses
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
Significant
shareholders
Key management
personnel
22
411
479
28
87
89
591
301
65
352
50
297
The aggregate loan amounts advanced to, and repaid, by related parties during 2018 were as follows:
in thousands of GEL
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
Significant
shareholders
Key management
personnel
2,465
(1,055)
13,547
(10,195)
367
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020
44. RELATED PARTY TRANSACTIONS CONTINUED
During the year 2018, 7 related parties were removed from the insider list. If they had remained in the list,
customer accounts with related parties as of 31 December 2018 would have been GEL 227 thousand higher.
As of 31 December 2018, transactions and balances of TBC Bank Group PLC with subsidiaries were as fol-
lows:
in thousands of GEL
Due from other banks
Cash and cash equivalents
Investment in subsidiary
Contractual interest rate
31 December 2018
8.05% – 9.03%
79,135
2,176
1,465,345
Included in Investments in subsidiary in Separate Statement of Financial Position GEL 7,823 thousands re-
lates to investment in JSC TBC Insurance.
The income and expense items for TBC Bank Group PLC with subsidiaries except from key management
compensation for the year 2018 were as follows:
in thousands of GEL
Interest income
Fee and commission expense
Dividend income
31 December 2018
5,879
3
124,561
The compensation of the TBCG Board of Directors and the Bank’s Management Board is presented below:
in thousands of GEL
Salaries and short-term bonuses
Cash settled bonuses related to
share-based compensation
Equity-settled share-based compensation
Total
2020
2019
2018
Expense
9,997
–
11,514
21,511
Accrued
liability
–
–
–
–
Expense
10,274
(1,627)
25,695
34,342
Accrued
liability
Expense
Accrued
liability
–
–
–
–
12,481
270
6,424
8,395
9,369
–
28,274
8,665
Included in salaries and bonuses for 2020, GEL 2,513 thousand (2019: GEL 2,879 thousand, 2018: GEL 2,347
thousand) relates to compensation for directors (2020: 8 person, 2019: 9 person, 2018: 8 person) of TBCG
paid by TBC Bank Group PLC. Details of director’s compensation is discussed in the remuneration commit-
tee report.
368
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED
45. BUSINESS COMBINATION
Acquisition of Inspired LLC
In May 2019 TBC Bank Group PLC finalized acquisition process of Inspired LLC – the leading payment plat-
form “Payme”. The acquired interest amounted 51% of total shareholding. The transaction is in line with the
Group’s international expansion strategy of operations. The consideration amounted GEL 14,981 thousands.
The acquisition-date fair value of the total purchase consideration is follows:
In thousands of GEL
Cash consideration paid
Total purchase consideration
14,981
14,981
The consideration paid by the Group was based on results of an appraisal of the acquiree’s business tak-
en as a whole. However, in accordance with IFRS 3 “Business Combinations”, the Group must account for
acquisitions based on fair values of the identifiable assets acquired and liabilities and contingent liabilities
assumed. These two different approaches can lead to differences; and, as set out in the table below, recog-
nition of goodwill. Details of the assets and liabilities acquired and goodwill arising is as follows:
In thousands of GEL
Cash and cash equivalents
Due from other banks
Other financial assets
Premises and equipment
Intangible assets
Other assets
Other liabilities
Fair value of net assets of subsidiary
Non-controlling interest
Goodwill arising from the acquisition
Total purchase consideration
Less: cash and cash equivalents of subsidiary acquired
Outflow of cash and cash equivalents on acquisition
Fair Values
223
424
676
379
212
79
(159)
1,834
(868)
14,015
14,981
(223)
14,758
The goodwill is primarily attributable to the profitability of the acquired business and the positive synergies
expected to arise.
The acquired business combination contributed to Group’s net revenue in the amount of GEL 5,683 thou-
sand and to Group’s net profit in the amount of GEL 2,759 thousand from the date of acquisition to 31 De-
cember 2019. If the acquisition had occurred on 1st of January 2019, the contribution to the Group’s net rev-
enues for the year ended 31 December 2019 would have been of GEL 8,561 thousand and to net profit would
have been positive of GEL 4,272 thousandAcquisition of My.ge LLC
Acquisition of My.ge LLC
In August 2019 TBC Bank Group PLC finalized acquisition process of LLC My.ge – the leading online services
platform in Georgia “My Group”. The acquired interest amounted 65% of total shareholding. The transaction
is in line with the Group’s international expansion strategy of operations. The consideration amounted GEL
19,450 thousands.
369
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 45. BUSINESS COMBINATION CONTINUED
The acquisition-date fair value of the total purchase consideration is follows:
In thousands of GEL
Cash consideration paid
Total purchase consideration
19,450
19,450
The consideration paid by the Group was based on results of an appraisal of the acquiree’s business tak-
en as a whole. However, in accordance with IFRS 3 “Business Combinations”, the Group must account for
acquisitions based on fair values of the identifiable assets acquired and liabilities and contingent liabilities
assumed. These two different approaches can lead to differences; and, as set out in the table below, recog-
nition of goodwill. Details of the assets and liabilities acquired and goodwill arising is as follows:
In thousands of GEL
Cash and cash equivalents
Other financial assets
Premises and equipment
Intangible assets
Other assets
Other financial liabilities
Other liabilities
Fair value of net assets of subsidiary
Non-controlling interest
Goodwill arising from the acquisition
Total purchase consideration
Less: cash and cash equivalents of subsidiary acquired
Outflow of cash and cash equivalents on acquisition
Fair Values
1,667
232
1,208
4,403
1
(1,862)
(51)
5,598
(1,960)
15,812
19,450
(1,667)
17,783
The goodwill is primarily attributable to the profitability of the acquired business and the positive synergies
expected to arise.
The acquired business combination contributed to Group’s net revenue in the amount of GEL 2,122 thou-
sand and to Group’s net profit in the amount of GEL 442 thousand from the date of acquisition to 31 Decem-
ber 2019. If the acquisition had occurred on 1st of January 2019, the contribution to the Group’s net revenues
for the year ended 31 December 2019 would have been of GEL 5,208 thousand and to net profit would have
been positive of GEL 1,497 thousand.
Acquisition of Bonaco
On 31 October 2018, the Bank won the auction held by National Bank of Georgia for the acquisition of Bona-
co LLC, microfinance organization. The business process of merger has been finalized in December 2018.
The transaction is in line with Bank’s strategy to enhance its product offering to its customers. Bonaco LLC
was offering gold pawn and mortgage products to its customers and was added to the respective portfolio
for products and services offered to TBC Bank customers.
370
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED 45. BUSINESS COMBINATION CONTINUED
The acquisition-date fair value of the total purchase consideration and its components are as follows:
In thousands of GEL
Cash consideration paid
Non-cash consideration
Total purchase consideration
10
14,582
14,592
Non-cash consideration includes the fair value as at acquisition date of the loan issued from the Bank to the
Bonaco.
Details of the assets and liabilities acquired and goodwill arising is as follows:
Note
Fair Values
In thousands of GEL
Cash and cash equivalents
Placements with banks
Loans to customers*
Property and equipment
Repossessed assets
Other assets
Amounts due to customers
Other Liabilities
Fair value of acquired interest in net assets of subsidiary
Goodwill arising from the acquisition
Total purchase consideration
Less: Non-cash consideration
Less: cash and cash equivalents of subsidiary acquired
Inflow of cash and cash equivalents on acquisition
17
*The carrying amount of Loans to customers before fair value adjustments amounted to GEL 19,339 thousand.
The goodwill is primarily attributable to the profitability of the acquired business and the significant syner-
gies expected to arise.
The acquired business combination contributed to Group’s net revenue in the amount of GEL 212 thousand
and to Group’s net profit in the amount of GEL 15 thousand from the date of acquisition to 31 December 2018.
If the acquisition had occurred on 1st of January 2018, the contribution to the Group’s net revenues for the
year ended 31 December 2018 would have been of GEL 1,489 thousand and to net profit would have been
negative of GEL 11 thousand.
371
819
1,581
20,212
6,922
55
156
(17,691)
(29)
12,025
2,567
14,592
(14,582)
(819)
809
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 46. EVENTS AFTER REPORTING PERIOD
Starting from early 2021 Government of Georgia took additional measures to decrease the mobility of people by an-
nouncing public holidays and putting specific constraints in various directions. On its way out from the pandemic, the
Government of Georgia has started the first phase of Covid-19 vaccination, which is expected to last throughout the
year. Management successfully coped with the pandemic challenges in 2020 and the Group’s robust risk management
framework continues to be applied across Group and monitors the impact of COVID-19 on the Consolidated Group’s
risk profile. Non-financial risks emerging from movement restrictions, and remote working by our staff, counterpar-
ties, clients and suppliers, are being identified, assessed, managed and governed through timely application of the
Group’s risk management system.
In March 2021, the Bank obtained the funding resource of USD 30 million from Green for Growth Fund (“GGF”). Loan
agreement has the maturity of 5 years.
372
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020NOTES TO THE FINANCIAL STATEMENTS CONTINUED FULL LIST OF RELATED UNDERTAKINGS AND THE COUNTRY OF
INCORPORATION IS SET OUT BELOW
Company Name
Country of incorporation
JSC TBC Bank
United Financial Corporation JSC
TBC Capital LLC
TBC Leasing JSC
TBC Kredit LLC
TBC Pay LLC
TBC Invest LLC
Index LLC
JSC TBC Insurance
TBC Invest International Ltd
Kavkasreestri JSC
University Development Fund
JSC CreditInfo Georgia
LTD Online Tickets
VENDOO LLC
Swoop JSC
Natural Products of Georgia LLC
Mobi Plus JSC
Mineral Oil Distribution Corporation JSC
Georgian Card JSC
Georgian Securities Central Depositor
JSC Givi Zaldastanishvili American Academy In Georgia
United Clearing Centre
GRDC
Banking and Finance Academy of Georgia
Tbilisi's City JSC
Freeshop.ge LLC
TBC Trade LLC
The.ge LLC
Redmed LLC
7 Marjanishvili Street, 0102, Tbilisi, Georgia
154 Agmashenebeli Avenue, 0112, Tbilisi, Georgia
11 Chavchavadze Avenue, 0179, Tbilisi, Georgia
80 Chavchavadze Avenue, 0162,, Tbilisi, Georgia
71-77, 28 May Street, AZ1010, Baku, Azerbaijan
7 Marjanishvili Street, 0102, Tbilisi, Georgia
7 Jabonitsky street, , 52520, Tel Aviv, Israel
8 Tetelashvili,0102,, Tbilisi, Georgia
24B, Al. Kazbegi Avenue, 0160, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
6 Bagrationi st. saburtalo, Tbilisi , georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
2 Tarkhnishvili street, 0179, Tbilisi, Georgia
3 Irakli Abashidze street, 0179, Tbilisi, Georgia
3 Chavchavadze Avenue, 0128, Tbilisi, Georgia
74 Chavchavadze Avenue, 0162, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
45 Vajha Pshavela Street, 0177, Tbilisi, Georgia
11 Tskalsadeni Street, 0153, Tbilisi, Georgia
106 Beliashvili Street, 0159, Tbilisi Georgia
74 Chavchavadze Avenue, 0162, Tbilisi, Georgia
37 Chavchavadze Avenue, 0162, Tbilisi Georgia
5 Sulkhan Saba Street, 0105, Tbilisi, Georgia
2 Vagzali Square, 0112, Tbilisi, Georgia
123, Agmashenebeli Avenue, 0112, Tbilisi, Georgia
15 Rustaveli Avenue, 0108, Tbilisi Georgia
74 chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
11A Chavchavadze Ave, 0179, Tbilisi, Georgia
20 Amaglebis st. old Tbilisi, Georgia
24 Al. Kazbegi Avenue, 0160, Tbilisi, Georgia
TBC Ecosystem companies LLC
TKT UZ
My.Ge LLC
Mypost LLC
Billing Solutions LLC
Allproperty.ge LLC
F Solutions LLC
TBC Connect LLC
Inspired LLC
VENDOO LLC (UZ Leasing)
TBC Concept LLC
TBC Bank UZ
TBC Group Support LLC
Tbilisi Stock Exchange JSC
Georgian Stock Exchange JSC
7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
12, Shota Rustaveli, Yakkasaray district, Tashkent, Uzbekistan
129a Sh. Nutsubidze St. Vake,Tbilisi, Georgia
129a Sh. Nutsubidze St. Vake,Tbilisi, Georgia
14 Khelovanta St. Isani, Tbilisi, Georgia
4 Besiki St.Mtatsminda District, Tbilisi,Georgia
36, Kakheti Hwy, Isani-Samgori District, Tbilisi, Georgia
7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
1, Chust, Mirzo Ulugbek district, Tashkent, Uzbekistan
10B, Fidokor, Mirobod district, Tashkent, Uzbekistan
7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
118/1, Amir Temur avenue, Yunusobod district, Tashkent, Uzbekistan
7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
floor 2th block 8, 71 Vazha Pshavela Ave, Tbilisi, Georgia
floor 7th block 10, 71 Vazha Pshavela Ave, Tbilisi, Georgia
373
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 SHAREHOLDERS INFORMATION
REPORTS AND COMMUNICATIONS
We issue regulatory announcements through the Regulatory News Service (“RNS”). Our regulatory an-
nouncements are also available at our website www.tbcbankgroup.com in the “regulatory news” section.
SHARE PRICE INFORMATION
Our latest and historical share prices are available through our website www.tbcbankgroup.com.
SHAREHOLDER INQUIRES
TBC Bank Group’s share register is maintained by Equiniti.
If you have any questions about your TBC Bank Group’s shares, please contact Equiniti
SHAREHOLDER HELPLINE
UK callers: 0371 384 2030
International callers: +44 121 415 7047
Aspect House
Spencer Road
Lancing
West Sussex
N99 6DA
United Kingdom
OUR REGISTERED ADDRESS
TBC Bank Group PLC
Elder House St Georges Business Park
207 Brooklands Road
Weybridge, Surrey
KT13 0TS
United Kingdom
WEBSITE
Our annual report, financial results and investor presentations, as well as other significant information are
available through our website: www.tbcbankgroup.com.
374
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 GLOSSARY
Bank
Bankassurance
Bank Republic
Board
Chairman
Chief Executive Officer (or CEO)
Chief Financial Officer (or CFO)
Code
Company
Corporate segment
Corporate Centre
Deputy Chairman
Director(s)
Engagement index
Fully digital on-boarding
Group
Management Board
Mobile banking penetration ratio
Mobile and Internet banking penetration ratio
MSME (Micro, Small and Medium) segment
Nikoil Bank
Offloading ratio
Retail segment
Supervisory Board
TBC Bank
TBC Bank Group PLC
TBCG
TBC Insurance
TBC JSC
TBC PLC
Joint Stock Company TBC Bank
An arrangement in which a bank and an insurance company form a
partnership, so that the insurance company can sell its products to the bank’s
client base
Joint Stock Company Bank Republic
Board of Directors of TBC Bank Group PLC
Chairman of Board of Directors of the Company
Chief Executive Officer of TBC Bank Group PLC
Chief Financial Officer of TBC Bank Group PLC
The UK Corporate Governance Code
TBC Bank Group PLC
A legal entity/group of affiliated entities with an annual revenue exceeding
GEL 12.0 million, or which have been granted facilities of more than GEL
5 million. Some other business customers may also be assigned to the
corporate segment or transferred to MSME on a discretionary basis
Comprises the Treasury, other support and back office functions, and the
non-banking subsidiaries of the Group
Deputy chairman of Board of Directors of the Company
Members of the Board of TBC Bank Group PLC
Employees feel involved and committed to TBC Bank
Share of legal entities registered online out of total number of
newly-registered legal entities
The UK-incorporated parent company of Joint Stock Company TBC Bank
(the Bank) and a group of companies that principally operate in Georgia in
the financial sector and other closely related fields. The Group also recently
expanded its operations in Uzbekistan
Management Board of Joint Stock Company TBC Bank
Number of active mobile banking users divided by total number
of active retail clients
Number of active mobile and Internet banking users divided by total number
of active retail clients
Business customers who are not included in either the corporate or the retail
segments; or legal entities who have been granted a pawn shop loan;
or individual customers of the newly launched, fully digital bank - Space
Nikoil Open Joint-Stock Company Investment Commercial Bank
Number of transactions conducted in remote channels divided by total
number of transactions, based on JSC TBC Bank standalone data
Non-business individual customers or individual business customers who
have been granted mortgage loans; all individual customers are included
in retail deposits;
Supervisory Board of Joint Stock Company TBC Bank
The UK-incorporated parent company of Joint Stock Company TBC Bank
(the Bank) and a group of companies that principally operate in Georgia in
the financial sector and other closely related fields. The Group also recently
expanded its operations in Uzbekistan
The UK-incorporated parent company of Joint Stock Company
TBC Bank (the Bank)
TBC Bank Group PLC
Joint Stock Company TBC Insurance, formerly Joint Stock Company
Insurance Company Kopenbur
Joint Stock Company TBC Bank
TBC Bank Group PLC
375
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 ABREVIATIONS
ACCA Association of Chartered Certified Accountants
AFS
Available for sale
ALCO
Asset-liability management committee
APM
ATM
BNY
Alternative performance measure
Automated teller machine
Bank of New York
CAGR Compounded annual growth rate
CAR
CEE
CEO
CFA
CFO
CGU
CIB
CIS
COR
CRM
CRO
Capital adequacy ratio
Central and Eastern Europe
Chief executive officer
Chartered Financial Analyst
Chief financial officer
Cash generating unit
Corporate investment banking
The Commonwealth of Independent States
Cost of risk
Customer relationship management
Chief risk officer
CSAT
Customer satisfaction
CSR
CVP
DCF
EBRD
ECL
EECG
Corporate social responsibility
Cost volume profit
Discounted cash flows
European Bank for Reconstruction and
Development
Expected credit losses
Energy Efficiency Centre Georgia
EFSEDF The Development Facility of the European
Funds for Southeast Europe
Europe, Middle East and Africa
Employee Net Promoter Score
Earnings per share
Enterprise risk management
EMEA
ENPS
EPS
ERM
ESRM
Environmental and social risk management
EU
EUR
FDI
European Union
Euro
Foreign direct investment
FTSE
Financial Times Stock Exchange
FVOCI Fair value through other comprehensive income
FVPL
Fair value through profit or loss
GBP
GDP
GDR
GEL
GHG
GWP
Great British pound, national currency of the UK
Gross domestic product
Global depositary receipt
Georgian lari, national currency of Georgia
Greenhouse gas
Gross written premium
HNWI
High-net-worth individuals
HR
Human resources
376
IAS
IASB
IDR
IFC
IFI
IFRIC
IFRS
IMF
IPCC
IPO
IT
JSC
KPI
LED
LSE
LTV
International Accounting Standards
International Accounting Standards Board
Issuer default rating
International Finance Corporation
International financial institution
International Financial Reporting Interpretations
Committee
International Financial Reporting Standards
International Monetary Fund
Intergovernmental Panel on Climate Change
Initial public offering
Information technology
Joint stock company
Key performance indicators
Light-emitting diode
London Stock Exchange
Loan to value
MBA
Master of Business Administration
MBO Management-by-objectives
MSME Micro, small and medium-sized enterprises
NBG
NCI
NIM
NPL
NPS
OCI
National Bank of Georgia
Non-controlling interest
Net interest margin
Non-performing loans
Net promoter score
Other comprehensive income
OECD Organisation for Economic Cooperation
and Development
Public limited company
Point of sale
Purchasing power parity
Payment to income
PLC
POS
PPP
PTI
PWC
PricewaterhouseCoopers
ROA
ROE
SME
SPPI
STEM
UK
US$
VAR
VIP
WB
WRI
Return on average assets
Return on average equity
Small and medium-sized enterprises
Solely payments of principal and interest
Science, technology, engineering and
mathematics
United Kingdom of Great Britain and Northern
Ireland
The US dollar, national currency of the United
States
Value-at-risk
Very important person
World Bank
World Resources Institute
TBC BANK ANNUAL REPORT AND ACCOUNTS 2020 NOTES
2020