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Emerging
Stronger –
moving
forward
20
21
TBC Bank1 is the
largest banking
group in Georgia.
Contents
4 - 103
MANAGEMENT REPORT
Who we are
TBC at a glance
Group highlights 2021
CEO letter
Our strategic approach
Operating environment in Georgia
Our business model
Our business strategy and
key performance indicators
Our ESG strategy and
Climate-related Financial Disclosures
Our operating performance and
stakeholder engagement
Business review
Retail banking
MSME banking
Corporate & investment banking
Major subsidiaries
Our stakeholders
Our colleagues
Our customers
Our community
Our environmental
6
8
10
12
16
18
24
36
42
48
54
56
63
65
management system 67
Our financial performance and
risk management
Financial review
Material existing and emerging risks
Risk management
72
79
88
104 - 115
GOVERNANCE
Corporate governance
Supervisory Board biographies
The Bank’s Management board biographies
116 - 263
FINANCIAL STATEMENTS
Independent auditor’s report
Consolidated statements of financial position
Consolidated statements of profit or loss and
other comprehensive income
Consolidated statements of changes in equity
Consolidated statements of cash flows
Separate statement of financial position
Separate statements of profit or loss and
other comprehensive income
Separate statement of changes in equity
Separate statement of cash flows
Notes to the consolidated and
separate financial statements
264 - 269
ADDITIONAL INFORMATION
Glossary
Ratio definitions
Abbreviations
106
108
112
118
123
124
125
126
127
128
129
130
131
266
267
269
1 TBC Bank refers to JSC TBC Bank (the Bank) and its sub-
sidiaries (together Group)
3
TBC BANK MANAGEMENT REPORT 2021
MANAGEMENT
REPORT
TBC AT A GLANCE
Who
We Are
LEADING UNIVERSAL
BANKING FRANCHISE
IN GEORGIA1
• Retail - 38.6% loan market share, 40.3% deposit
market share;
• CIB - 39.1% loan market share, 40.5% deposit
market share;
• MSME - 63%2 of newly registered legal entities
chose TBC Bank.
BEST-IN-CLASS DIGITAL
CHANNELS AND SUPERIOR
CUSTOMER EXPERIENCE
• Award-winning internet and mobile banking
applications;
• Space – our scalable fintech platform;
• One of the highest customer satisfaction
among service companies in Georgia.
PRIMARY PAYMENTS
PROVIDER IN GEORGIA
• 45.1%1 market share by volume of POS
transactions in our terminals;
• Traditional payment channels such as
•
e-commerce, POS and self-service terminals;
Innovative payment methods comprising Apple
Pay, QR payments and e-wallet.
6
TBC BANK MANAGEMENT REPORT 2021We are the leading universal banking group in Georgia with diversified business across all major market segments. Our
Mission
Our
Strategic
Priorities
Continue steady growth
Diversify our income streams
Leverage our advanced digital
capabilities
Deliver a superior customer
experience
1 Based on data published by the National Bank of Georgia as
of 31 December 2021
2 Data is for FY 2021, source: www.napr.gov.ge, the National
Agency of Public Registry
7
TBC BANK MANAGEMENT REPORT 2021TO MAKE LIFE EASIERis deeply embedded in TBC’s culture and defines everything we do and the way we do it. By combining simplicity with ex-cellence, we strive to create a truly unique experience for our customers.For more information, please refer to our strategy and business model sections. Group
Highlights
20211
GROUP HIGHLIGHTS
Robust profitability
backed by solid capital
Diversified
earnings streams
Steady growth
Best in
class-digital-channels
Outstanding
employee and
customer experience
8
TBC BANK ANNUAL REPORT AND ACCOUNTS 2021TBC BANK ANNUAL REPORT AND ACCOUNTS 2021TBC BANK MANAGEMENT REPORT 2021TBC BANK MANAGEMENT REPORT 2021 26.3%
+ 13.4pp YoY
RETURN ON EQUITY
3.7%
+ 2.0pp YoY
RETURN ON ASSETS
13.7%
+ 3.3pp YoY
CET 1 CAR
5.0%
+ 0.3pp YoY
NIM
+ 33.2% YoY
GROWTH IN NET F&C INCOME
GEL 16,955 mln
+ 11.5% YoY
TOTAL LOANS
GEL 14,884 mln
+ 17.8% YoY
TOTAL DEPOSITS
38.8%2
- 0.2 pp YoY
TOTAL LOANS MARKET SHARE
97%3
+ 2 pp YoY
RETAIL OFFLOADING RATIO
66%4
- 2 pp YoY
ENPS
40.4%2
+ 3.2 pp YoY
TOTAL DEPOSITS MARKET SHARE
44%3
+ 3 pp YoY
DAU/MAU
56%5
N/A
NPS
1 Definitions of the ratios are given on pages 267-268
2 Based on data published by the National Bank of Georgia as of 31 December 2021
3 These terms are defined in Glossary on pages 266
4 The Employee Net Promoter Score (ENPS) was measured for the Bank’s employees by an independent consultant in October 2021
5 The Net Promoter Score (NPS) was measured based on the survey conducted by the independent research company IPM in December 2021
9
TBC BANK ANNUAL REPORT AND ACCOUNTS 2021TBC BANK ANNUAL REPORT AND ACCOUNTS 2021TBC BANK MANAGEMENT REPORT 2021TBC BANK MANAGEMENT REPORT 2021 CEO LETTER
Dear stakeholders,
2021 was a year of strong
recovery for TBC. Having
successfully adjusted to
the post-COVID reality, we
concentrated our efforts on
increasing and diversifying
our income streams. The
macroeconomic environment
was also supportive
throughout the year. As a result,
our net income amounted
to GEL 843 million and we
delivered a record high return
on equity of 26.3% in 2021.
10
pandemic related highs and by low US$ deposit rates,
while the appreciation of the GEL in the second half of
the year led to improved consumer and business senti-
ment. Furthermore, the 18% expansion in bank lending
also provided much needed support to the economic
recovery. While the Georgia economy entered 2022
with strong momentum, the current events in Ukraine
and their impact on the global economy are likely to
make 2022 a challenging year. However, I remain as-
sured by having confidence in the Georgian econo-
my’s historical resilience and proven ability to adapt
during difficult times.
STRONG FINANCIAL RESULTS ACROSS THE
BOARD BACKED BY THE SOLID CAPITAL
In 2021, our operating income amounted to GEL 1,398
million, up by 25% year-on-year, driven by an increase
in both net interest income and non-interest income.
The increase in the former was related to a higher net
interest margin of 5.0%, compared to 4.7% in 2020, as
well as 12% year-on-year growth in our loan book. Over
the same period, net fee and commission income grew
by an impressive 33%. The increase was broad-based
and demonstrated the strength of our business model.
In addition, other operating income2 grew by 49% and
made a meaningful contribution to the overall profit-
ability, mainly driven by FX operations and the sale of
investment property. Our robust income streams were
further supported by strong performance on the asset
side across all segments, with the cost of risk standing
at minus 0.3% (ie. net recoveries) in 2021. We kept our
cost to income ratio at 32.5% in 2021, below the 2020
level of 34.6%. As a result, we recorded a return on eq-
uity of 26.3% and return on assets of 3.7% for the full
year 2021.
TBC BANK MANAGEMENT REPORT 2021TBC BANK MANAGEMENT REPORT 2021The past several weeks have been overshadowed by the Russian-Ukrainian war and the adverse implica-tions of the military actions for the Ukrainian people. We hope that this war will come to an end and the parties will arrive at a peaceful solution in the nearest future. We are closely monitoring the developments in Ukraine and are assessing its possible impacts on the Georgian economy and our operations under different scenarios. The resilience of the Georgian economy and our diversified business model gives me assur-ance that we will be able to steer the company suc-cessfully though these challenging times.A FIRM MACROECONOMIC RECOVERY, BUT CHALLENGES AHEAD The Georgian economy demonstrated a firm recov-ery in 2021. For the full year, real GDP growth reached 10.4%1, which was an exceptional performance. Impor-tantly, this growth was broad-based and was reflected in almost all sources of inflows as well as in domes-tic demand, only FDI lagged behind, as investment demand takes longer to recover. Domestic demand was fueled by the normalization of saving levels after 1 According to Geostat.
2 Total non-interest income less net fee and commission income.
Note: For better presentation purposes, certain financial numbers are rounded the nearest whole number.
11
TBC BANK MANAGEMENT REPORT 2021TBC BANK MANAGEMENT REPORT 2021Strong income generation, coupled with prudent management of our capital, allowed us to maintain strong cap-ital positions. Our CET1, Tier 1 and Total Capital ratios stood at 13.7%, 16.7% and 20.3%, respectively, and remained comfortably above the minimum regulatory requirements by 2.0%, 2.7% and 1.9%, respectively. At the same time, we continued to operate at high liquidity with the net stable funding (NSFR) and liquidity coverage (LCR) ratios standing at 127.3% and 115.8%, respectively, as of 31 December 2021. A STEADY PROGRESS IN OUR CORE BANKING BUSINESS We continue to be market leaders in total loans and deposits. In 2021, our loan book increased by 17% year-on-year in constant currency terms, in line with the overall growth of the banking sector, which translated into a 39% market share. Importantly, the quality of our loan book improved, with the non-performing loan ratio decreasing to 2.4% by the end of 2021, compared to 4.7% at the end of 2020. Over the same period, our deposit growth significantly out-paced market growth and increased by 23% in constant currency terms. As a result, our market share in total deposits amounted to 40% as of 31 December 2021, up by 3 pp year-on-year. I am also delighted to report that our digitalization levels continue to increase. In the fourth quarter of 2021, the num-ber of active retail digital users increased by 14% year-on-year and reached 744,000. In addition, we made significant progress in expanding the number of monthly and daily active digital users, which reached 644,000 (up by 16% year-on-year) and 285,000 (up by 24% year-on-year) respectively in December 2021. The proportion of digital sales of our consumer loans amounted to 45%, while the deposit sales offloading ratio stood at 73%. Furthermore, to ensure the maximum safety of our customers and employees, we ran a wide-scale campaign to en-courage our staff to get vaccinated. As a result, around 85% of all our employees were vaccinated, or were scheduled to receive a vaccine, by the end of 2021. OUTLOOKOur outstanding results for 2021 provide me with much confidence that we are on the right track and that our strategy is working. We realize that the current events in Ukraine will have a negative impact on the Georgian economy and impose chal-lenges on our operations. For more information, please refer to our material existing and emerging risks section on pages 79-87.We will continue to closely monitor the events and take all appropriate measures to make sure that TBC Bank safely goes through these challenges.THANK YOUI would like to close my letter by thanking our colleagues for their hard work and dedication and recognizing their in-dividual contributions to our success. We have an exciting journey ahead of us and I am eagerly looking forward to it.Vakhtang ButskhrikidzeCEO28 April 2022 OPERATING ENVIRONMENT IN GEORGIA
Economic Overview
REAL GDP GROWTH (%)
6.4
3.6
4.4
3.0
2.9
4.8
4.8
5.0
10.4
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: Geostat
External sector
-6.8
Although the tourism sector is still suffering from the pandemic-related crisis, external inflows recorded a strong per-
formance in 2021. In 2021, exports of goods increased by 26.9% compared to last year and by 11.7% compared to 2019.
Notably, despite re-exports having a lower base effect from a year ago, domestic exports still led the recovery with the
share of domestic value-added exports in total exports increasing significantly, from 61.3% in 4Q 2019 to 76.2% in 4Q
2021. Despite the continuing recovery in tourism-related imports and re-exports, imports of goods also went up by
25.1% year-on-year in 2021 and by 5.8% compared to 2019. Importantly, the rebound of the trade in goods was broad-
based, reflecting overall increased external and domestic demand.
Remittance inflows, which cushioned the pandemic’s economic blow in 2020, performed solidly in the last year, in-
creasing by 24.6% year-on-year and by 35.6% when compared to 2019. Although part of the rebound compared to
2019 can be attributed to border closures and the greater transfer of cash remittances through digital channels, overall
growth has still been substantial given that the share of cash inflows is only likely to be around 10.0%-15.0%, according
to the NBG’s estimates.
Tourism inflows recovered moderately throughout the year. Despite the pace of the initial rebound stalling somewhat
in August-September, the recovery continued gradually thereafter, with full year inflows amounting to 38.1% of their
2019 level. Annual growth reached a 129.8% year-on-year increase in 2021 on the back of the low base a year ago. No-
tably, this growth was primarily led by the recovery of high-spending countries.
FDI inflows are taking longer to recover. While they increased 3.2% year-on-year for the full year 2021, this was on the
back of higher reinvested earnings as equity and FDI-related debt financing declined sharply in the same period.
YOY GROWTH OF INFLOWS AND IMPORT (%)
129.8
24.6
26.9
29.9
25.1
Remittance
inflows
Exports
Exports excl.
re-exports
Tourism
inflows
FDI*
Imports
3.2
* Sum of the first three quarters of the year
Source: Geostat, NBG
12
Economic growthStarting in the second quarter of 2021, the Georgian economy has been rebounding from the pandemic at a remark-able speed. For the full year 2021, according to Geostat, the Georgian economy expanded by 10.4% year-on-year, surpassing the 2019 GDP level by 2.9%.TBC BANK MANAGEMENT REPORT 2021 GROWTH OF INFLOWS AND IMPORTS COMPARED TO 2019 (%)
35.6
34.5
11.7
Remittance
inflows
Exports
Exports excl.
re-exports
Tourism
inflows
FDI*
-24.3
5.8
Imports
* Sum of the first three quarters of the year
Source: Geostat, NBG
-61.9
Fiscal stimulus
The fiscal stimulus, although still sizable, negatively affected growth in 2021 as the deficit amounted to around 6.7%
of GDP, after an expansionary 9.3% of GDP in 2020. Importantly, the major source of deficit financing in 2020-2021
was external, largely compensating for the pandemic-related drop in net inflows. At the same time, government debt,
which reached its mandated ceiling of 60.2% of GDP in 2020, has already normalized at an estimated 51.1% of GDP
by the end of 2021.
BUDGET DEFICIT AND SPENDING
BY TYPES (% OF GDP)
GOVERNMENT GROSS DEBT
(% OF GDP)
30
25
20
15
10
5
0
22.6
5.7
21.3
6.4
26.2
8.6
25.2
8.1
21.4
8.0
9.3
6.7
2.7
2.3
2.1
12
10
8
6
4
2
0
60.2
51.1
40.8
38.9
40.4
2017
2018
2019
2020
2021E
2017
2018
2019
2020
2021E
Budget deficit
Current spending
Capital spending (RHS)
Source: MoF
Source: MoF
Credit growth on a constant currency basis
By the end of 2021, bank credit growth increased to 18.3% year-on-year, compared to 9.1% year-on-year growth by
the end 2020. In terms of segments, corporate and MSME lending growth increased markedly by 8.4 pp and 12.0 pp
from 2020 to 2021 and amounted to 15.6% and 22.4% year-on-year, respectively. Expansion in the retail segment was
also highly pronounced, up by 4.8 pp to 18.0% year-on-year growth at the end of 2021, though mostly on the back of
stronger non-mortgage credit.
13
TBC BANK MANAGEMENT REPORT 2021 OPERATING ENVIRONMENT IN GEORGIA CONTINUED
YOY GROWTH OF LOANS BY SEGMENTS EXCLUDING FX EFFECT (%)
35
30
25
20
15
10
5
0
22.4
18.3
18.0
15.6
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
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n
u
J
0
2
-
l
u
J
0
2
-
g
u
A
0
2
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p
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S
0
2
-
t
c
O
0
2
-
v
o
N
0
2
-
c
e
D
0
2
-
n
a
J
0
2
-
b
e
F
1
2
-
r
a
M
1
2
-
r
p
A
1
2
-
y
a
M
1
2
-
n
u
J
1
2
-
l
u
J
1
2
-
g
u
A
1
2
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p
e
S
1
2
-
t
c
O
1
2
-
v
o
N
1
2
-
c
e
D
Total loans
Corporate
MSME
Retail
Inflation, monetary policy and the exchange rate
Despite challenges such as the unprecedented weakening of the TRY, the GEL gained value in 2021, appreciating
by 5.4% against the US$ from 3.28 to 3.10, while the real effective exchange rate appreciated by 20.4%. By the end of
2021, however, annual inflation remained elevated at 13.9%, because of the low base effect a year ago due to the state
subsidies on utilities. At the same time, monthly inflation dynamics are already around their target level. However, in
December 2021, the NBG increased its policy rate again by 0.5 pp to 10.5%, raising the rate by 2.5 pp in total during
the year.
CPI INFLATION AND MPR (%)
13.9
10.5
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
0
2
-
n
a
J
0
2
-
b
e
F
1
2
-
r
a
M
1
2
-
r
p
A
1
2
-
y
a
M
1
2
-
n
u
J
1
2
-
l
u
J
1
2
-
g
u
A
1
2
-
p
e
S
1
2
-
t
c
O
1
2
-
v
o
N
1
2
-
c
e
D
CPI inflation
Monetary policy rate (MPR)
14
12
10
8
6
4
2
14
TBC BANK MANAGEMENT REPORT 2021
Going forward
Before the Russian invasion of Ukraine, TBC Capital estimated that the Georgian economy would grow by around
6.0% in 2022, 5.5% in 2023 and 5.0% in 2024 – close to its trend rate of around 5.2%. According to the World Bank’s
projections1 as of January 2022, the Georgian economy was forecast to grow by 5.5% and 5.0% in 2022 and 2023,
respectively.
The developments in Ukraine and Russia are expected to have adverse implications for the growth outlook of Geor-
gia. Please refer to the material existing and emerging risks section on pages 79-87 for more details on the risks aris-
ing from the Russian invasion of Ukraine.
More information on the Georgian economy and financial sector can be found at www.tbccapital.ge.
1 World Bank, Global Economic Prospects, January 2022
15
TBC BANK MANAGEMENT REPORT 2021 OUR BUSINESS MODEL
Our Business Model
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.
OUR MARKETS
OUR APPROACH
16
TBC BANK MANAGEMENT REPORT 2021The leading universal financial institution in Georgia, offering a full suite of financial services:• Retail banking• Corporate and investment banking• MSME banking• Leasing• Strong focus on digitalization and innovationOur best-in-class digital capabilities, built over many years through continuous in-vestment in new technologies, strength-en our ability to grow efficiently.• Advanced data analytical capabilitiesOur advanced data analytical capabilities, embedded into the development of our value proposition, help us to maximize customer value via personalized offer-ings.• Superior customer experience and strong brand awarenessCustomer satisfaction lies at the heart of everything we do and helps us build long-standing relationships of trust with our customers.• Excellent corporate governance and strong corporate culture Our exemplary governance standards set the right tone for every employee and foster responsible behavior in all our undertakings. WHAT WE DELIVER
HOW WE SHARE VALUE
17
TBC BANK MANAGEMENT REPORT 2021• CustomersProvide tailored solutions and a superior customer experience to our clients.• ColleaguesSupport our colleagues in their profes-sional development and provide reward-ing career opportunities.• InvestorsGenerate sustainable returns for our shareholders and be a reliable partner for our debt holders. • CommunitySupport business development and fos-ter job creation, as well as take an active part in CSR activities.• Strong business growthSupported by our leading Georgian bank-ing franchise.• Diversified income streamsDriven by solid net interest margin and different sources of non-interest income.• Sound asset qualityAs a result of prudent risk management across all segments.• High levels of efficiencyOn the back of the high level of digitiza-tion and automation both in front and back offices.• Strong liquidity and a solid capital positionEnsuring the stability of our business model and ability to withstand economic headwinds. OUR BUSINESS STRATEGY AND KEY PERFORMANCE INDICATORS
CONTINUE STEADY
GROWTH
Our
Strategic
Priorities
18
TBC BANK MANAGEMENT REPORT 2021Our strategic priorities serve our mission to make people’s lives easier. Each of these priorities has been carefully selected and thought through to ensure that they are interrelated and complementary to each other so that progress in one of them reinforces progress in the others. In order to achieve growth, we need to de-velop innovative products and services and create an unparalleled customer experience. This in turn requires building strong digital and data analytical capabilities. At the same time, our growth across different segments and products, supports our income stream diversification and strengthens our resil-ience. High levels of digitalization also allow us to improve our efficiency levels and re-duce costs. This in turn allows us to concen-trate our efforts on customer satisfaction and enhancement of our value proposition.Our goal is to maintain our leadership position in Geor-gia and grow in line with the market. Despite the in-creased penetration level, the Georgian banking sector still offers attractive growth opportunities, especially in certain underpenetrated sub-segments such as mort-gages and microloans. Our strong banking franchise in Georgia, underpinned by a superior customer experience, high brand aware-ness and advanced digital capabilities, has enabled us to retain our existing clients as well as attract new cus-tomers, which led to loan book growth of 11.5% in 2021 or 17.3% on a constant currency basis. This increase was mainly driven by growth in GEL denominated loans. In term of segments, the increase was broad based. The CIB and MSME segments grew by 12.3% (or 19.5% on a constant currency basis) and 17.6% (or 23.3% on a constant currency basis) year-on-year, respectively, while retail grew by 7.2% (or 11.5% on a constant curren-cy basis) over the same period. The growth in the CIB segment was related to acquisition of both large and mid-corporate clients, while on the MSME side, we focused on increasing our presence in the small and micro sub-segments. At the same time, our retail book growth was underpinned by both mortgages and con-sumer loans.In 2021, our deposit portfolio increased by 17.8% year-on-year, primarily on the back of growth in retail and CIB deposits, reflecting the strong loyalty and trust of our customers. On a constant currency basis, the growth was 23.1%.As a result, we retained our market leadership position in both total loans and total deposits, which amounted to 38.8% and 40.4%, respectively, as of 31 December 2021, according to data published by the National Bank of Georgia. DELIVER A SUPERIOR
CUSTOMER
EXPERIENCE
We put customers at the heart of everything we do and
strive to develop the most relevant products and ser-
vices. This requires active engagement with our clients
via various channels in order to receive their feedback
about our service quality and value proposition, as well
as to understand their preferences.
Moreover, we aspire to go one step further, anticipat-
ing our customers’ needs and surprising them with tai-
lored offerings before they ask for them. This is where
our advanced data analytical capabilities come into
play, providing an opportunities for creating the right
product at the right time and the right price. In our retail
business, we rolled out several new projects in this re-
gard, including customer life-time value and loan pric-
ing, while in the CIB segment, we continued to run a
commercial excellence transformation project, which
helped us better understand and capture the potential
of existing and new clients.
During the year, we also strengthened our focus on
digital offerings across all segments and created new
remote products and services, as well as increased au-
tomatization of our internal processes. This not only
increased customer satisfaction, but also resulted in
improved efficiency.
DIVERSIFY OUR
INCOME STREAMS
Our business model is diversified in a number of ways.
We serve a wide spectrum of individual and business
clients in Georgia, offering them a full suite of financial
solutions. Our main source of income is net interest in-
come, which represented around 70% of our operating
income in 2021 and is primarily driven by our lending
operations. Our net fee and commission income is
generated through payments, settlement operations,
as well as guarantees and letters of credit. As a pre-
dominantly cash-based society, Georgia provides an
attractive growth opportunity for our payments busi-
ness, while our digital channels enable us to increase
the scale and revenue-generating capacity of our op-
erations in an efficient manner.
LEVERAGE OUR
ADVANCED DIGITAL
CAPABILITIES
Our digitalization strategy spans the entire company
from front to back office processes and encompasses
both sales and transactional operations. We constantly
invest in technology and develop new digital products
to keep abreast of global trends.
A large part of our transactional business in the retail
and MSME segments is conducted via remote chan-
nels, resulting in a retail offloading ratio above 97%,
which means that less than 3% of all transactions are
conducted in branches. Mobile and internet banking
remains the preferred channel of communication for
our customers, with the number of active retail digital
users increasing by 14.1% in 2021 and reaching 744,000.
At the same time, the daily engagement of our digital
users has also increased and in December 2021, our av-
erage daily active users reached 285,000, up by 23.9%
year-on-year. In parallel, we have been actively devel-
oping our digital sales channels for consumer loans and
installments. By the end of 2021, the share of consumer
loans issued through remote channels increased by 7
pp year-on-year and amounted to 45%. We continued
to automate the approval process for smaller MSME
loans in order to reduce “the time to yes”. For corporate
borrowers, within the scope of the commercial excel-
lence transformation project, we significantly sped up
the analysis process by utilizing sophisticated IT tools.
Our advanced digital infrastructure also allows the vast
majority of our back-office employees to work remote-
ly without any disruption and have safe and real-time
access to our IT system.
19
TBC BANK MANAGEMENT REPORT 2021 OUR BUSINESS STRATEGY AND KEY PERFORMANCE INDICATORS CONTINUED
Key Performance
Indicators Robust profitability
RETURN ON EQUITY
2021
26.3%
2020 12.9%
2019
24.3%
In 2021, we generated a record high return on equity, driven by ro-
bust income generation across the board, as well as a strong perfor-
mance on the asset quality side.
Diversified income streams
NET INTEREST MARGIN
2021
2020
2019
5.0%
4.7%
5.5%
In 2021, the year-on-year increase in net interest margin was driven
by a loan composition change and liability structure optimization.
Solid balance sheet
CET 1 CAPITAL RATIO
2021
2020
2019
13.7%
10.4%
12.0%
1 Definitions of the ratios are given on pages 267-268
2 Cost to income ratio for prior periods does not correspond
to the ratios disclosed in 2020 as they reflect the reclassifica-
tions made by the management between net impairment of
non-financial assets and administrative and other operating
expenses
The increase in Tier 1 CAR in 2021 was mainly attributable to strong
income generation during the year, which was partially offset by loan
book growth. As a result, Tier 1 CAR remained comfortably above the
minimum regulatory requirement of 11.7%.
20
TBC BANK MANAGEMENT REPORT 2021We use a broad range of financial and non-financial measures in order to as-sess our performance and provide a balanced view, taking into account the interests of all our stakeholders. The Supervisory Board regularly reviews the key performance indicators (KPIs) in or-der to ensure that they continue to show whether our strategy is working and en-sures the long-term sustainable growth of the Group. Due consideration is also given to the selection of the most rel-evant KPIs for the executive manage-ment’s remuneration in order to better align their interests with those of our stakeholders. FINANCIAL KPIS1
RETURN ON ASSETS
COST TO INCOME RATIO2
2021
3.7%
2020
1.7%
2019
3.3%
2021
2020
2019
32.5%
34.6%
37.5%
In 2021, our return on assets recovered strongly on the back of ro-
bust income generation and a strong improvement on asset quality
side.
In 2021, due to our strong income generation, we managed to im-
prove our cost to income ratio compared to the 2020 level.
GROWTH OF NET F&C INCOME
2021
33.2%
2020 5.8%
2019
14.5%
In 2021, our net fee and commission income demonstrated a strong
rebound across all major categories.
LIQUIDITY COVERAGE RATIO
NON-PERFORMING LOANS
2021
2020
2019
115.8%
134.2%
110.1%
2021
2020
2019
2.4%
4.7%
2.7%
In 2021, we utilized the excess liquidity generated in 2020 while en-
suring that our liquidity ratio remained above the regulatory mini-
mum requirement of 100%.
By the end of 2021, our non-performing ratio improved significantly
year-on-year, with a strong performance across all segments.
21
TBC BANK MANAGEMENT REPORT 2021 OUR BUSINESS STRATEGY AND KEY PERFORMANCE INDICATORS CONTINUED
Steady growth
LOAN BOOK GROWTH AT
CONSTANT CURRENCY
DEPOSIT GROWTH AT
CONSTANT CURRENCY
2021
2020
2019
17.3%
8.7%
17.9%
23.1%
2021
2020
2019 2.9%
13.7%
In 2021, our loan book grew in line with the market, maintaining our
leadership position. Our market share in total loans stood at 38.8%
by the end of the year (based on data published by the National
Bank of Georgia).
In 2021, our deposit growth outpaced the market growth. As a result,
our market share in deposits increased by 3.2 pp and reached 40.4%
by the end of the year (based on data published by the National
Bank of Georgia).
22
TBC BANK MANAGEMENT REPORT 2021 NON-FINANCIAL KPIS
High employee and customer satisfaction levels
EMPLOYEE NET PROMOTER SCORE1
NET PROMOTER SCORE2
2021
2020
2019
66%
68%
41%
2021
2020
2019
56%
n/a
n/a
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 2021, our employee satisfaction
levels remained high.
This year, we introduced a new metric to assess our customer satis-
faction levels. The Net promoter score (NPS) measures how willing
customers are to recommend our products and services to others.
Strong digital engagement with customers3
DAILY ACTIVE USERS/
MONTHLY ACTIVE USERS
2021
2020
2019
44%
41%
n/a
RETAIL OFFLOADING RATIO
2021
2020
2019
97%
95%
93%
The proportion of daily active users over monthly active users (DAU/
MAU) measures our customers’ daily digital engagement with us.
In December 2021, the number of daily and monthly active users
reached 285,000 (up by 23.9% YoY) and 644,000 (up by 16.0% YoY),
respectively.
The retail offloading ratios measures the share of transactions
conducted in our remote channels, that is outside the branches.
Our retail offloading ratio continued to grow in 2021, as we further
strengthened our digital focus and introduced new digital products
and services.
1 The Employee Net Promoter Score (ENPS) was measured for the Bank’s employees by an independent consultant in October 2021
2 The Net Promoter Score (NPS) was measured based on survey conducted by the independent research company IPM in December 2021
3 These terms are defined in glossary on page 266
23
TBC BANK MANAGEMENT REPORT 2021 OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES
Our Environmental, Social and
Governance (ESG) Strategy
Our aspiration to contribute to sustainable develop-
ment comes from our role as a leading financial insti-
tution in Georgia’s development. We are aware that
we have an impact on the country’s economy, busi-
ness development, employment and the progress of
the society, as a whole. This role is connected to our
responsibility to contribute to a better future through
innovation and technology in order to increase the ac-
cessibility of financial services and to enable our cus-
tomers to be a part of the globalized economic society.
While pursuing our aspirations, we guide our activities
in line with international sustainability standards and
principles, making them a part of the strategy, culture
and day-to-day operations of our company.
This year, we took further steps to enhance the Group’s
environmental, social and governance (ESG) frame-
work through the development of an ESG strategy.
The ESG Strategy reaffirms our commitment to make
a long-term, sustainable contribution to the country
and the region. The ESG Strategy defines several key
areas for the coming years: a strong ESG governance
structure at the Supervisory Board and executive level;
a focus on sustainable financing, services and prod-
ucts; employee diversity, equality and inclusion; green
and sustainable funding; and a system and approach
for impact measurement and reporting.
VARIOUS INITIATIVES AND PROGRAMMES
TO SUPPORT THE TARGETS SET BY THE ESG
STRATEGY
ESG in TBC’s governance and culture: 2021 was a
milestone year in the establishment of the ESG gover-
nance structure, which spans different organizational
levels. Two ESG-related committees were established
– one at the Supervisory Board level, another at the
executive management level. The ESG Coordination
Department was established in TBC Bank to support
and coordinate initiatives defined by the ESG strategy.
TBC Bank initiated an ESG Ambassadors programme,
which aims to strengthen environmental, social and
governance structures and increase the involvement
of TBC employees as focal points for these areas.
Through this initiative, TBC employees will contribute
to the quality of sustainability for customers, company,
the environment and society as a whole.
Employee diversity: In order to expand our focus on
diversity, gender and inclusion issues, we have devel-
oped a Diversity, Equality and Inclusion Policy (avail-
able at www.tbcbankgroup.com), which sets targets
and establishes a methodology to advance diversity,
equality and inclusion, integrating its approach into
the Group’s operations and management processes
and focusing on diverse areas including gender, multi-
cultural, multigenerational and disability backgrounds.
Gender equality and the empowerment of women and
girls are important dimensions of the sustainability of
the company and its stakeholders, including custom-
ers, employees, suppliers, partners and society as a
whole. The policy takes into account the United Na-
tions Women Empowerment Principles (WEPs) – a set
of principles offering guidance to businesses on how
to promote gender equality and women’s empower-
ment in the workplace, marketplace and community.
TBC Bank became a signatory of the UN WEPs in 2021.
Sustainable financing: TBC strives to increase its pos-
itive impact on society and the economy through in-
troducing new financial products and services that are
designed to deliver a specific social or environmental
benefit. The ESG Strategy sets targets for the growth
of our total sustainable loan portfolio, including financ-
ing energy efficient, renewable energy and resource
efficient projects, women-led and women-owned
business, startups and rural businesses.
Responsible procurement: Our responsible purchas-
ing practices and relationships with suppliers can have
a significant impact on the well-being, financial sta-
bility and development of suppliers, as well as on the
economy as a whole. We pay special attention to small
local suppliers and promote their inclusion in our sup-
ply chain. The ESG Strategy sets targets connected to
green procurement initiatives, social enterprises, wom-
en-owned companies, startups and local business.
OUR ESG TARGETS
2022
• Some ESG KPIs linked to senior management
remuneration in the medium term to reflect our
mid-term strategy;
• Target volume of our sustainable loan portfolio1 -
GEL 750 million.
2023
• Measure the Group’s direct performance towards
the Paris Agreement targets for reduction of GHG
emissions;
• Target volume of our sustainable loan portfolio1 -
GEL 1 billion;
• Target for women in middle managerial positions
at the Bank level - 40%;
• Target for social impact procurement - GEL 5 million.
2025
• Net-zero GHG emissions (direct).
24
TBC BANK MANAGEMENT REPORT 2021 Our Environmental, Social and
Governance (ESG) Strategy
Climate-related
Financial Disclosures 2021
In 2020, we made a promise to introduce a Task Force for Climate-related Financial Disclosure (TCFD) framework to
demonstrate our commitment towards taking active measures to mitigate the effects of climate change, to assess
and mitigate climate risks, and identify climate opportunities.
It should be noted, that the data we have used provides the best available approach to making progress, notwith-
standing the challenges that exist in the data sets and methodologies required for the Georgian environment, which
bears the largest part of our activities. We expect the availability and reliability of required data to improve over time,
and we intend to integrate improvements into our reporting as it becomes available.
Below is the first disclosure prepared by the Group considering the implementation of TCFD recommendations.
Recommended disclosure
Describe the organisation’s governance around
climate-related risks and opportunities
Describe management’s role in assessing and
managing climate-related risks and opportunities
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium, and long term
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Describe the organisation’s processes for identifying
and assessing climate-related risks
Describe the organisation’s processes for managing
climate-related risks
Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organisation’s overall risk management
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 GHG emissions and the related risks
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets
Status
Reference
Disclosed
Disclosed
1.1
1.2
Disclosed
2.1, 2.2
Disclosed
Disclosed
Disclosed
Disclosed
Disclosed
Disclosed
Disclosed
Disclosed
2.2
2.3
3
3
3
4
4
4
1 Our sustainable loan portfolio includes energy efficiency, youth support and women in business loans financed by special purpose
funds received from IFIs, as well as loans financing renewable energy, which include all hydro power plants financed by the Bank
25
TBC BANK MANAGEMENT REPORT 2021 26
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED1. GOVERNANCE1.1 Supervisory Board’s oversight of climate-related risks and opportunitiesIn November 2021, the Supervisory Board approved the Group ESG Strategy in order to address specifically the Group’s specific targets and initiatives related to climate change, its direct and indirect environmental impact and sustainable development across the Group. The ESG Strategy also covers customers, employees, suppliers, wid-er society, financial inclusion, employee relations and talent management, workplace diversity and inclusion. The Supervisory Board retains the primary responsibility for overseeing the implementation of the strategy, as part of its commitment to having direct oversight over the Group’s climate-related issues. The Supervisory Board is supported by the Risk Committee. For example, progress against the reporting metrics such as the volume of the sustainable loan portfolio are overseen by the Risk Committee, which also received updates three times a year through the Chief Risk Officers (CRO) report. In 2022, we will incorporate a Climate Risk Appetite Statement in our Risk Appetite Frame-work (RAF).In January 2022, the Group established an Environmental, Social and Governance (“ESG”) and Ethics Committee at the Supervisory Board level. This reflects the importance of sustainability in TBC’s corporate governance and allows the Supervisory Board members to dedicate more time and focus to ESG topics. The role of the Committee is formal-ized to support and advise the Supervisory Board in its oversight of the implementation of (i) strategy (ii) policies and (iii) programs of the Company and its subsidiaries in relation to Environmental, Social and Governance matters and ensuring that the ESG strategy is implemented across all relevant businesses of the Group. Furthermore, the ESG and Ethics Committee supports the Supervisory Board in promoting its collective vision of values, conduct and culture and overseeing management’s efforts (i) to foster a culture of ethics (ii) appropriate conduct, and (iii) employee ethical engagement within the Group. The Committee will provide strategic guidance on climate-related matters and will report to the Supervisory Board, which has overall oversight. The ESG and Ethics Committee will meet at least four times per year. Under the ESG oversight of the ESG and Ethics Committee are: a) periodical review of the Group’s ESG strategy, including climate strategy, as well as implementation plans and monitor its execution; b) oversee Group’s disclosures on ESG matters, including reporting in line with the TCFD principles, in the Annual Report and Accounts. The Supervisory Board of JSC TBC Bank has established a diverse and comprehensive training agenda, which is re-viewed annually. The Group’s Company Secretarial team creates a general training catalogue at the beginning of each year, which covers all relevant areas of Risk, Audit, Remuneration and Governance. In 2020 and 2021, additional atten-tion was paid to ESG and, in particular climate-related matters, regulatory compliance, reporting, shareholder views and impact. The catalogue includes an effective mix of publicly available and client-tailored webinars, analytical ma-terials, and opportunities for live discussion with industry participants. The providers of these training opportunities include the Big Four accounting firms, external legal advisors, chartered institutes (such as the Institute of Directors and the Governance Institute), and, where relevant, senior professionals with specific subject matter expertise. Direc-tors use the training catalogue in order to create their bespoke training calendars and exchange knowledge during Supervisory Board meetings or via the Group’s dedicated Supervisory Board platform. In 2022, further topic-specific training sessions on climate-related issues are planned that will equip members of the Supervisory Board as well as the executive management of TBC Bank and other relevant employees with detailed knowledge about the TCFD and climate change-related risks and opportunities and the operative tools available to implement the ESG Strategy. 1.2 Executive management’s role in assessing and managing climate-related risks and opportunitiesAt the executive level, responsibility for climate change-related risks and opportunities is assigned to the ESG Com-mittee, which was established by the Management Board in March 2021 and is responsible for implementing the ESG strategy and approving the annual as well as separate, detailed action plans for key projects. At the first meeting of the ESG Committee in March 2021, the annual action plan covering various ESG matters for 2021 was approved. For major projects, such as the implementation of the recommendations of the TCFD, a separate action plan has been devel-oped and key implementation steps defined. The progress and implementation status of action plans are monitored at the ESG committee’s meetings. The implementation of the ESG strategy is supported by the various organization-al functions responsible for ESG matters: Environmental and Social Risk Management Team, the ESG Coordinator and the ESG competence center. Among other matters, the ESG Committee’s responsibilities include the review and monitoring of climate-related risks and opportunities as well as the establishment of an effective mitigation and control system to manage identified (material) climate related risks. The ESG Committee meets on a quarterly basis. Furthermore, the Environmental Committee meets on a quarterly basis and oversees the implementation and oper-ation of the Environmental Management System, which includes implementing an internal environmental manage-ment system and addresses the resource consumption and other environmental impacts of daily operations in TBC Bank. The Environmental and Social Risk Management Team regularly reports on the environmental management plans and results to the Environmental Committee. The Environmental Committee reports directly to the Chief Risk Officer. The ESG governance structure
1
1
SUPERVISORY BOARD
RISK COMMITTEE
ESG AND ETHICS COMMITTEE
ESG COMMITTEE
ENVIRONMENTAL COMMITTEE
ESG COORDINATION DEPARTMENT
ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT TEAM
2. STRATEGY
The Group’s objective is to act responsibly and manage the environmental and social risks associated with its opera-
tions in order to minimize negative impacts on the environment. In order to achieve this, the Group has clearly defined
processes in place to identify and assess climate-related risks to our business. This approach enables the Group to
reduce our ecological footprint by using resources efficiently and promoting environmentally friendly measures in
order to mitigate the effects of climate change. Since banking is not a high-polluting activity, the implementation
of an internal Environmental Management System to address the Group’s resource consumption might not have a
significant impact on the surrounding environment. However, TBC Bank has reviewed all of the operational activities,
procured items, and outsourced services that it can control (present and planned), and has identified all of the mate-
rial environmental aspects relevant to the business. The direct environmental impact of our business activity arises
from energy, water, fuel and other resource usage, waste and emissions. The Bank has established a comprehensive
internal environmental system to manage its GHG emissions and is committed to reducing them by closely monitor-
ing its consumption of resources. In order to evaluate the significance of impact for each of the categories, we have
developed a comprehensive evaluation methodology and applied it to the whole Group. Based on this, annual goals
are defined and specific initiatives and programmes are elaborated to reach them. In 2020, the Bank obtained an ISO
14001:2015 certificate for its environmental management system; in 2021, the Bank completed the re-certification
successfully. More information about the environmental management system can be found on pages 67-71.
In 2021, the Group took further steps to enhance its ESG framework and to demonstrate its commitment towards
taking active measures to mitigate the effects of climate change. The ESG strategy was developed and approved by
the Supervisory Board in November 2021, as described above. Below are the five main pillars of TBC’s ESG strategy.
Establish ESG
governance
framework until
the end of 2021
Set-up a system
for measuring
impacts on
sustainability
across the group,
customers,
employees and
society
Access to
green and other
sustainable
financing
sources
Increase
sustainable
loan
portfolio
Increase
customer
loyalty and
employee
motivation
TBC Group’s ambition is to be a leading supporter of ESG principles in Georgia and region. We aspire to make our
direct environmental impact net zero by 2025 and continue to develop our plan to enable our indirect environmental
impact to also reach net zero as soon as practicable thereafter.
The long-term aspirations are supported by different measures outlined in the ESG Strategy. The key components
for 2022 and 2023 are listed below:
•
Increase of the sustainable loan portfolio, which largely consists of renewable energy and energy-efficiency loans
(please see detailed breakdown of the portfolio on page 70);
Implementation of the green loan framework which offers a tailored green financing for SMEs;
•
• Approach and system for data collection, segregation and analysis;
• Elaboration of a methodology to calculate financed emissions;
• Measure the group’s direct performance towards the Paris Agreement targets for the reduction of GHG emissions;
1 These terms are defined in the glossary on page 266
27
TBC BANK MANAGEMENT REPORT 2021 Incorporation of ESG matters in the risk appetite;
• Groups’ Policy on Climate Change;
•
• Excluding/limiting high-carbon activities (Please see our Exclusion List, available at www.tbcbankgroup.com); and
• ESG resource center for employees, customers and wider public in order to increase awareness and knowledge
about the risks and opportunities of climate change.
Work is continuing to further embed climate-related risks and opportunities within our business. An ESG Compe-
tence Center will be established to help the Bank deliver its strategic objectives and bring all of its climate-related
work together.
2.1. Climate-related risks
An overall climate risk profile was assessed based on the first climate risk assessment (please see more about the
climate risk assessment in the chapter risk management below). The table below shows a summary of potential tran-
sitional and physical risks identified by the Group for the Georgian environment. The time horizons considered in the
assessment are short – up to 3 years, medium – up to 8 years and long – above 8 years. with the levels of a possible
impact – low, medium or high. While assessing the impact of climate change risks on a sector, a category – low, me-
dium and high - was assigned compared to other sectors, as well as in comparison with other risk categories. Thus,
the assessment results are not comparable with the same impact categories in other countries or regions.
Transition risks
Physical risks
Risk
sources
Policy and Legal
Technology
Market
Reputation
Acute
Chronic
• Substitution
of existing
products
and services
with lower
emissions
options,
including
requirements
to replace
manufacturing
technology
to cleaner
alternatives
• Unsuccessful
investment
in new
technologies
• Changing
customer
behavior
including
deliberate
move to
lower carbon
footprint
products
• Uncertainty in
market signals
• Increased
cost of raw
materials,
increased
volatility and
costs, sourcing
restrictions for
carbon heavy
raw materials
• Shifts in
consumer
preferences to
green products
• Stigmatization
of sector,
resulting
in reduced
revenue from
negative
impacts on
workforce
management
and planning
(e.g., employee
attraction and
retention)
• Increased
stakeholder
concern or
negative
stakeholder
feedback
• Increased
severity of
extreme
weather
events such
as floods
• Changes in
precipitation
patterns
and extreme
variability
in weather
patterns
affecting food
production
and living
environment
• Rising mean
temperatures
affecting
working
conditions,
living
conditions
and local
infrastructure
• Rising
sea levels
affecting local
ecosystems,
increasing
subsidence
and flood risks
Long
Medium
Long
Medium
Long
Medium
Low
Low
Medium
Medium
Types of
risks
• Increased GHG
emissions
pricing in order
to incentivise
movement to
renewable energy
sources
• Enhanced
regulatory
environment
and mandated
requirements:
may introduce
minimum
standard or
expectations
on green
credentials of
product outputs
or business
operations,
enhanced
emissions-
reporting
obligations
• Exposure to
litigation resulting
in the costs
related to the
compensations
Long
Low
Time
horizon
Level of
potential
impacts
affecting
customers
and TBC
28
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED The overall assessment of the impact of transitional policy measures
The Georgia’s 2030 Climate Change Strategy1 and Climate Action Plan lays out different policy measures on which
TBC Bank based its identification of the potential impact of the policy measures on different economic sectors,
which are financed by TBC. As a summary of the potential impact of the various transition risks and physical risks
identified, the transitional risks in Georgia and on the TBC Bank’s activities are low. The assessment considers, that
trade and services dominate the Georgian economy, and the policy measures outlined in the Georgia’s 2030 Cli-
mate Change Strategy will have overall low impact on the economic sectors, especially in short and medium term.
The Georgia’s 2030 Climate Change Strategy takes into consideration that Georgia is a transitional and growing
economy, and therefore the government strategy is not to impede the growth of the GDP with policy measures and
rather to support a smooth transition where necessary. It is worth noting, that the economic sectors most affected
by transitional risks world-wide such as mining crude petroleum, natural gas and metal ores, manufacturing coke and
refined petroleum products2 are present to the extremely limited extend in Georgia, resulting in a low overall impact
of transitional measures on economic growth, if any.
The overall assessment of the impact of the physical risks
The geographical location and natural conditions of Georgia – a small country with a mountainous landscape, a Black
Sea coastal zone, and semi-arid areas in the Southeast – all contribute to the country’s vulnerability to the physical
risks of climate change. The sectors that are thought to be most vulnerable to climate change in Georgia include
agriculture, forestry, tourism, and healthcare3.
The impact of physical risks on economic sectors, which are financed by the TBC Bank, will become material over the
time. For the Group, the risks can materialise through the impairment of asset values and the deteriorating creditwor-
thiness of customers, operating in Georgia. Certain geographic areas and economic sectors such as winter resorts,
agricultural land are affected partially already and might deteriorate further in the medium time horizon. The overall
assessment of the potential impact in Georgia and on the TBC Bank’s activities is medium in long-term perspective. It
is understood that climate change risks are largely associated with longer-term impacts; however, those longer-term
impacts are unclear, especially considering the shorter-term maturity structure of the Bank’s loan portfolio.
2.2. Climate-related risks and opportunities on the business and financial planning
We are working to incorporate climate and broader ESG considerations in our financial planning process. In 2022,
we continue the development of measurement capabilities across the Group’s opportunities and the advancement
of the scenario analysis framework. Some qualitative considerations related to climate and ESG matters were incor-
porated in the financial planning cycle for 2022-2023. In 2022, the Group seeks to include considerations linked to
business actions identified through scenario analysis as well as progress on climate-related opportunities, including
the launch of new products and initiatives.
To encourage customers to invest in green products and services, the Group offers services, financing and funding
solutions, as outlined in the table below:
Climate-related opportunities
Customer
Renewable energy
financing
Corporate
Green Loan Framework - a
standardized approach to
sustainable finance, including
energy efficiency, renewable
energy and resource efficiency
financing
MSME
Long-term business
loan for solar panels
MSME
Our progress
TBC bank is the leading bank in the
local financing of renewable energy
project with GEL 554 million
In 2021, TBC bank developed the
Green Loan Framework with the Green
for Growth Fund (GGF) Technical
Assistance Facility, represented by
Finance in Motion GmbH and financed
by the European Union under the
EU4Energy Initiative.
In 2022, TBC launched a special long-
term loan for solar power plants. The
product considers different financial
and non-financial benefits.
Global Climate Fund (GCF)
accreditation, enabling the Bank
to have direct access to GCF
funding GCF accreditation
All
In 2021, TBC Bank became the first
commercial bank in the Caucasus
region to receive accreditation by the
Green Climate Fund (GCF).
Energy efficiency loans
Retail
Financing of hybrid/electric cars,
mortgages and energy efficient
processing. The portfolio volume
equals to GEL 15.5 million
Impact
Contributing to Georgia's transition
to low-carbon economy
Encourage customers to transition
to low carbon activities
Encourage customers to optimize
their costs and to support the
transition to low carbon activities
The accreditation will enable
the Bank to finance projects for
adaptation to, and mitigation of,
climate change and contribute
to combatting climate change in
Georgia
Encourage customers to transition
to low carbon activities
1 Georgia’s 2030 Climate Change Strategy
2 Key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change | Bank of England
3 Georgia’s Third National Communication to the UNFCCC
29
TBC BANK MANAGEMENT REPORT 2021 2.3. Climate-related scenarios
TBC Group is taking significant steps to develop sce-
nario analysis capabilities to better understand and act
on the implications of climate-related risks and oppor-
tunities for our business and customers. The develop-
ment of climate-related scenario analysis is complex,
as climate data and sub-sector information availability,
accessibility, and suitability for financial risk analysis,
as well as climate-related risk modelling capabilities
in Georgia are very limited and still evolving. This sec-
tion summarises our first-time exercise to undertake
climate scenario analysis for the Georgian context and
the related qualitative results.
The starting point for the first exercise, which was car-
ried out in 2022, are two climate scenarios - the Orderly
scenarios of 1.5°C (Net Zero 2050) and below 2°C, de-
veloped by the Network of Central Banks and Supervi-
sors for Greening the Financial System (NGFS). Orderly
scenarios assume that climate policies are introduced
early and become gradually more stringent. Both phys-
ical and transition risks are relatively subdued1. Each of
the scenarios includes a trajectory of carbon prices
and emissions over time. They are drawn from a set
of scenarios published by the NGFS. We used coun-
try-level downscaled data for Georgia considering the
NGFS 1.5°C (Net Zero 2050) and below 2°C scenarios.
While analyzing this data, we identified that the sce-
narios and underlying downscaled data show certain
inconsistencies in relation to the local economic envi-
ronment; some of the sector level downscaled results
were implausible, e.g. hydro energy outputs were fall-
ing very heavily. However, we stayed within the NGFS
scenario framework, adjusting only a few parameters,
where reasonable, and after consulting an external
knowledgeable consultant. In particular, we used the
GCAM (Global Change Assessment Model) model
as the main source of data for the scenario analysis.
We used data from the model to project how climate
change will affect net revenues of the sector for the
period of 2020-2050. Certain modifications were ap-
plied to the model data in order to reflect the specifics
of the country. Third party data was also used to better
understand how carbon emissions are allocated to var-
ious sectors and subsectors. The major variables used
from the model were carbon emissions, carbon price,
secondary and final energy prices, and demand on the
secondary and final energy. These were the only vari-
ables available on the sectoral level for Georgia from
NGFS projections.
We examined the impacts of two scenarios on a se-
lected sample from our corporate customers in the
carbon-intensive sectors (energy and utilities, oil and
gas), as well as in metals and mining. We stressed the
latest available financial statements and projection re-
sults (where applicable) for the time horizon covering
the remaining maturity of the respective exposure.
The selected sample of corporate customers includ-
ed several hydro power plants (HPPs), electricity and
gas distribution companies, a thermal power plant (the
only TPP in the Group’s portfolio) and a company in the
metal industry. For the selection, we took companies
with different sizes – small, medium and large HPPs
and some leading companies in the respective sector.
In summary, the results of the first stress scenario ex-
ercise showed those sectors had different sensitivity
levels towards transitional risks. While the transitional
risks for few cases might show negative impacts in ac-
cordance with two NGFS scenarios - largely due to the
negative impact of the incorporated extremely high
carbon taxes, it is understood that significant amend-
ments to the scenario components and analysis need
to be performed before the results can be considered
in the risk management framework. It is important to
consider that the transitional risks in Georgia are low,
and policy measures, especially carbon taxes, are not
among the measures foreseen by the Georgian gov-
ernment. At the same time, we analyzed the existing
mitigation measures for those few cases, and identi-
fied a satisfactory level of the financial resilience, con-
sidering the publicly available Georgia’s 2030 Climate
Change Strategy and Climate Action Plan, as well.
Despite these limitations, the scenario analysis allows
us to test a range of possible future climate pathways
and understand the nature and magnitude of the risks
they present. The purpose of scenario analysis is not
to forecast the future but to understand and prepare
to manage risks that could arise. In 2022, we continue
working on the climate scenario framework in order to
include other sectors, as well as the impact of physical
risks. Furthermore, in 2022, the focus will be on devel-
oping of sectoral guidelines for climate related risks
and opportunities, where deemed necessary. For more
initiatives planned in 2022, please refer to the para-
graph 3. Risk management part (p 33).
In addition to exposure sensitivity analysis, the Group
has already started work on an aggregated level sen-
sitivity analysis. To this end, we analyzed downscaled
estimates for Georgia of two NGFS Climate Scenari-
os: Net Zero 2050 and below 2°C. The main initial ob-
servation appears to be that Georgia is grouped with
high-carbon-emission countries under GCAM, MES-
SAGEix-GLOBIOM2 as well as REMIND-MAgPIE3 mod-
els. This implies that the downscaled data for Geor-
gia should be used with care. In fact, when looking at
downscaled estimates for a number of other countries
with economies of a broadly similar structure in the
context of climate change, the impact appears to be
significantly different. In particular, e.g. in GCAM mod-
el, Georgia is grouped together with Armenia, Azerbai-
jan, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turk-
menistan, Uzbekistan, while the deviation in the stress
scenario from the baseline scenarios is similar for all
30
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED countries in the group. Meanwhile, downscaled estimates for Croatia, which has rather similar characteristics of the
economy to Georgia, looks completely different as compared with the group where commodity intensive econo-
mies prevail. TBC group has started to conduct research to estimate more relevant downscaled scenario for Georgia.
In this regard, the National Bank of Georgia plans to start working on climate scenarios based on the NGFS framework
to estimate the potential aggregated impact on the financial sector in Georgia.
3. RISK MANAGEMENT
The risks associated with climate change have both a physical impact arising from more frequent and severe weather
changes, and a 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 the deteriorating creditworthiness of customers, which could result in a reduction of
the Group’s profitability. The Group may also become exposed to reputational risks as a result of its lending to or other
business operations with customers deemed to be contributing to climate change.
In order to identify, assess and manage risks associated with climate change, before the undertaking the climate risk
assessment, the Group performed a general analysis in order to understand the maturity level of the ESG framework.
The general analysis process covered the assessment of the existing policies and procedures, identification of areas
for further development and a gap analysis. Furthermore, the gap analysis considered various international standards
and concept papers (European Central Bank, European Banking Authority, TCFD, Global Reporting Initiative and the
Four accounting firms), reports about climate change in Georgia, criteria of ESG rating agencies and expectations in
relevant expert papers. Based on the analysis, the main focus areas were identified and reflected in the ESG strategy,
considering the business strategy of the Group.
As mentioned above, climate risks can materialize, first of all, through the impairment of asset values and deteriorat-
ing creditworthiness of customers. Therefore, as a first step, we looked at the material subsidiaries of the TBC Group
PLC by assets, considering the materiality level of the 1% share in assets. The Group is the only subsidiary, which
takes above 1 % of assets - JSC TBC Bank, which is the largest financial institution in Georgia. In order to increase
the understanding of climate-related risks on its loan portfolio, the Bank performed a high-level sectoral risk assess-
ment, as different sectors might be vulnerable to different climate-related risks over different time horizons. The risk
assessment process and content is based on TCFD recommendations, climate-related documents published by
the Bank of England, the climate change assessments of Georgia performed as part of the IPCC reports, and the
targets and strategy 2030 defined by the Georgian government to achieve the National Determined Contribution of
Georgia4. The risk assessment focuses on economic sectors such as: energy, oil and gas, metals and mining, tourism,
agriculture, food industry, healthcare, construction and real estate. This assessment is the first exercise conducted
with regards to overall climate change risks. Therefore, the assessment of levels and impacts might change in the
future, based on further review of the methodology, deep dive analysis and increased understanding of the impact of
climate change risks.
To define the climate-related economic sectors for the sectoral analysis, a key materiality threshold has been agreed
above 1% of the loan portfolio. The sectoral assessment was performed with the involvement of the business and
credit risk specialists responsible for the respective economic sectors in the Bank.
1 Net Zero 2050 is an ambitious scenario that limits global warming to 1.5 °C through stringent climate policies and innovation, reaching net
zero CO2 emissions around 2050. Some jurisdictions such as the US, EU and Japan reach net zero for all greenhouse gases by this point.
This scenario assumes that ambitious climate policies are introduced immediately. Carbon dioxide removal (CDR) is used to accel-
erate the de-carbonisation but kept to the minimum possible and broadly in line with sustainable levels of bioenergy production.
Net CO2 emissions reach zero around 2050, giving at least a 50 % chance of limiting global warming to below 1.5 °C by the end of
the century, with no or low overshoot (< 0.1 °C) of 1.5 °C in earlier years. Physical risks are relatively low but transition risks are high.
Below 2 °C gradually increases the stringency of climate policies, giving a 67 % chance of limiting global warming to below 2 °C. This
scenario assumes that climate policies are introduced immediately and become gradually more stringent though not as high as in
Net-zero 2050. CDR is deployment is relatively low. Net-zero CO2 emissions are achieved after 2070. Physical and transition risks are
both relatively low.
2 The MESSAGEix-GLOBIOM Integrated Assessment Model is based on the MESSAGEix framework, an open- source energy systems
optimization modelling environment including macro-economic feedback using a stylized computable general equilibrium model.
3 REMIND (REgional Model of Investment and Development) is a numerical model that represents the future evolution of the world
economies with a special focus on the development of the energy sector and the implications for our world climate. REMIND is used
in connection with other models to provide a detailed answer. One such model is MAgPIE (Model of Agricultural Production and its
Impacts on the Environment).
4 A nationally determined contribution (NDC) is a national plan highlighting climate change mitigation, including climate-related targets
for greenhouse gas emission reductions, policies and measures governments aim to implement in response to climate change and as
a contribution to achieve the global targets set out in the Paris Agreement.
31
TBC BANK MANAGEMENT REPORT 2021 GROSS LOANS BY SECTORS
0.3%
0.2%
4.4%
0.5%
0.7%
0.9% 0.7%
1.2%
1.3%
1.8%
2.0%
2.4%
37.7%
4.9%
5.1%
5.9%
6.1%
6.5%
9.4%
8.0%
GEL 16.9 BLN
TOTAL LOANS FOR
STANDALONE BANK
Individual
Real Estate
Automotive
Transportation
Hospitality & Leisure
Oil & Gas
Energy & Utilities
Pawn Shops
Construction
Food Industry
Trade
Agriculture
Healthcare
Services
Financial Services
Manufacturing
Media & Publishing
Metal & Mining
Communication
Other
The sectoral distribution of the loan portfolio for standalone Bank as of the year end 2021 is given in the table above..
The maturity of assets are essential for defining the different time horizons for the analysis and for assessing the ma-
teriality of climate-related risks for different sectors. The maturity structure of the loan portfolio shows that the major-
ity of assets is distributed in much shorter time horizons than the timeframe in which the impacts of climate change,
especially of physical risks, may arise in Georgia.
Since 2012, TBC Bank has had a process to consider environmental and social risk, which was established in line with
industry guidelines that aim to mitigate the effects of climate change. TBC Bank has developed E&S risk manage-
ment procedures to identify, assess, manage and monitor environmental and social risks which are fully compliant
with Georgian environmental legislation, follow international best practices and incorporate appropriate consider-
ation of IFC Performance Standards, EBRD Performance Requirements (PRs) and ADB’s Safeguard Requirements
(SRs). These procedures are fully integrated into the credit risk management process and are routinely applied to
SMEs and corporate customers. In collaboration with partner IFIs, a clear Environmental and Social (E&S) risk catego-
rization matrix was developed. Projects that are to be financed are classified according to E&S categories (low, me-
dium, high and A category) based on analysis; where necessary, deep dive analysis and due diligence are performed.
When categorizing the transaction according to E&S risk category, priority is given to the higher risk. Additionally,
external specialized companies are involved in the detailed assessment of E&S risks for A category projects, such as
hydroelectric plants. The Environmental Management Policy and Procedure provides TBC with a good description
of assessing environmental risks related to clients. More information about the environmental management system
can be found on pages 67-71. It is worth noting that processes related to climate risks will continue to evolve as TBC
embeds its approaches further. This process will be supported with the climate-related training to strengthen the
Bank’s capacity, knowledge and capabilities for managing climate-related risks across the business.
In order to further facilitate the integration of these risk identification processes into the Group’s overall risk manage-
ment, in 2022, the Group will undertake deep dive analyses to understand the extent to which climate-related risks are
to be categorized as principal risks. The Group will develop a Policy on Climate Change, a risk appetite statement and
risk appetite measures. The high-level sectoral assessment carried out during 2021 has provided insights into the po-
tential impacts on specific sectors. In 2022, the focus will be on developing of sectoral guidelines for climate related
risks and opportunities, where deemed necessary. Key initiatives will include further enhancement of the climate risk
management framework and the development of ESG profiles for corporate clients covering ESG factors, including
relevant climate-related risks and opportunities.
Climate risk might impact other, more traditional risk categories for banking such as: market risk, operational risk,
liquidity risk and reputational risk. A summary of the assessment is given in the table below. Certain risk factors, which
were identified for operational and reputational risks, are already covered under the existing risk management frame-
work.
32
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED Banking risk types
Impact from Physical Risk
Impact from Transition Risk
Market risk
Liquidity risk
No material impact expected
No material impact expected
No material impact expected
No material impact expected
Operational risk
Extreme events that would cause damages
to Group's own sites could affect the ability
to provide services to its clients (e.g., lack of
electricity supply, inability for employees to
work in premises).
No material impact expected
Reputational risk
No material impact expected
Financing to high-emitting borrowers could affect
brand image, as perceived by stakeholders
4. METRICS AND TARGETS
The metrics related to the Group’s own operations are given in the environmental management system section on
page 68 and include Scope 1, Scope 2 and Scope 3 GHG emissions.
In 2022, key initiatives will include further implementation of the TCFD recommendations, the development of the cli-
mate-related scenario analysis framework, the development of ESG profiles for corporate clients covering climate-re-
lated risks and opportunities and increasing our expertise in climate-related matters. These initiatives will also con-
sider sectoral guidelines for climate related risks and opportunities, where necessary and feasible.
The climate action initiatives are part of the overall ESG strategy, which was approved by the Supervisory Board in
November 2021. The ESG strategy sets aspirational targets, such as Net-Zero GHG emissions1 related to the direct
environmental impact by 2025 and an increase in the sustainable loan portfolio, which consists of renewable energy
loans, energy efficiency loans, and financing with social components, etc. As of Q4 2020, the total sustainable port-
folio stays at GEL 676.3 million. Please see more details about the sustainable portfolio on page 70. The strategy and
targets will be reviewed annually. Starting from 2022, the ESG-related KPIs are included in the long-term incentive
plans for executive remuneration.
The following table sets out some key metrics and targets of our ESG strategy. The GHG emissions targets for 2023
will be defined during the annual review of the ESG strategy, as well as the targets of sustainable portfolio for the
following years.
Metrics / Targets
Total emissions
(own operations)
Water consumption
per employee (m3/pp)
Sustainable portfolio
Management KPI
2022
2023
Annual increase below 3%
Annual increase below 1.5%
2025
Net-zero GHG
emissions (direct)
GEL 750 million – the target volume
of the sustainable loan portfolio
Long-term incentive plan (LTIP)
for management linked to the total
portfolio of sustainable assets
GEL 1 billion – the target volume
of the sustainable loan portfolio
Long-term incentive plan (LTIP)
for management linked to the total
portfolio of sustainable assets
The ESG strategy of the Group is evolving, therefore, the Group continues to develop additional targets and metrics
to measure all identified risks and opportunities of the Group. The current targets and metrics are disclosed above.
1 The Net-Zero GHG commitment refers to the direct impact of Scope 1, Scope 2 and Scope 3, which are defined on the page 68.
33
TBC BANK MANAGEMENT REPORT 2021
TBC Bank has been awarded a special prize for
its outstanding efforts to champion Sustainable
Development Goals in the country at Corporate
Responsibility Award Ceremony 2021 organized by
Global Compact Network Georgia.
34
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY AND CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED 35
TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
RETAIL BANKING
Retail
Banking
147
# OF BRANCHES
4,205
# OF SELF-SERVICE
TERMINALS
1,570
# OF ATMs1
25,990
# OF ACTIVE
MERCHANT TERMINALS2
744,000
ACTIVE DIGITAL USERS
44%
DAU/MAU
4.9
MOBILE BANKING APP RATING ON BOTH
GOOGLE PLAY STORE AND APPLE APP STORE
36
Our goal is to be the first
choice for individuals living
in Georgia and Georgian
citizens working aboard, by
providing simple, convenient
and relevant financial services
by leveraging our advanced
digital capabilities.
Tornike Gogichaishvili
In 2021, we focused our efforts on further refining our
customer journey in digital channels by introducing
new products and services, increasing the accessibil-
ity of our payments options, as well as upgrading our
branches to create a more friendly environment for our
clients. In addition, we continued to leverage our data
analytical capabilities to generate more tailored offer-
ings and increase our profitability. We also expanded
our offerings to the young generation and started to
target the Georgian diaspora.
In 2021, our gross retail loan book amounted to GEL
6,266 million, up by 11.5% year-on-year on a constant
currency basis, driven by an increase in mortgage and
consumer loans, which grew by 12.5% and 9.4% without
the FX effect, respectively. Over the same period, our
deposit portfolio increased by 19.0% year-on-year on
a constant currency basis, reaching GEL 5,630 million.
The net profit for the retail segment amounted to GEL
286.3 million. More information about the financial per-
formance of the retail segment is provided in the finan-
cial review section on pages 72 to 78.
OVERVIEW TBC Bank has established itself as a leading retail bank in Georgia over the past decade, serving around 1.5 mil-lion active clients. We have a strong presence across different customer segments, including mass retail and affluent customers, thanks to our customer centric approach and best-in-class omni-channel distribution platform. The latter is comprised of leading digital channels, modern branches, best-in-class call centers, as well as the wide-network of ATMs and self-service terminals, which serve as a strong substitute for bank branches. MULTI-CHANNEL DISTRIBUTION NETWORKOUR DIGITAL PLATFORMS TBC BANK MANAGEMENT REPORT 2021 38.6%
37.0%
97%
56%
40.3%
37.8%
1.5 mln
OUR MAIN STRATEGIC PRIORITIES
Continue enhancing our advanced omni-channel platforms
During 2021, customer engagement in remote channels remained high, with 97% of transactions conducted via re-
mote channels by retail customers, including 59% coming from our internet and mobile banking applications.
RETAIL OFFLOADING RATIO IN 2021
3%
-1pp YoY
15%
-3pp YoY
23%
-7pp YoY
59%
+11pp YoY
Internet & mobile bank
Self-service terminals
ATMs
Branches
Including partner banks
1
2 Active merchant terminals include POS terminals and ecommerce with at least one transaction conducted during the month.
3 Based on data published by the National Bank of Georgia as of 31 December 2021; in this context retail refers to individual customers.
4 Based on survey conducted by the independent research company IPM in December 2021.
37
2021 HIGHLIGHTSRETAIL LOAN MARKET SHARE3RETAIL DEPOSITS MARKET SHARE3RETAIL SHARE IN TOTAL LOAN BOOKRETAIL SHARE IN TOTAL DEPOSIT PORTFOLIORETAIL OFFLOADING RATIONUMBER OF ACTIVE CUSTOMERSNET PROMOTER SCORE (NPS)4TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
RETAIL BANKING CONTINUED
In order to increase the sale of consumer loans via
digital sales, in August 2021 we launched an end-to-
end lending process in our mobile banking. We also
continued to polish our online lending platforms TBC
credit (www.tbccredit.ge) and TBC installment plat-
form (www.tbcganvadeba.ge). As a result, the share of
consumer loans sold via remote channels grew from
38% in 4Q 2020 to 45% in 4Q 2021. Over the same
period, the share of time and savings deposits being
opened remotely stood at high 73%.
CONSUMER LOANS OFFLOADING
IN DIGITAL CHANNELS
45%
38%
4Q 2020
4Q 2021
DEPOSITS OFFLOADING
IN DIGITAL CHANNELS
72%
73%
4Q 2020
4Q 2021
In addition, we introduced open banking, which en-
ables our customers to add other Georgian bank ac-
counts to our mobile banking applications and man-
age their banking operations centrally. Furthermore, we
enriched our digital banking with more handy features,
including an IBAN scanner, which simplifies money
transfers, as well as a transaction filter, which helps
customers to quickly sort transactions by different pa-
rameters. In recognition of our efforts, we won “Best
Integrated Consumer Bank Site in Central and Eastern
Europe 2021” award from Global Finance magazine.
While we are driving our transactions and sales to-
wards digital channels, the branches play an important
role in nourishing customer relationships and commu-
nicating our vision: “to make life easier”. Therefore, this
year we launched a branch redesign project with the
aim of simplifying the customer journey in branches.
According to the new concept, the branch is divided
38
into several core zones and is tailored to the needs of
different customer segments. By the end of the year,
we redesigned 13 branches in the capital city and 5
branches in the regions.
Making payments simpler than ever
After entering Tbilisi’s transport payments network in
2020, in 2021 we expanded our presence in three other
large cities of Georgia – Kutaisi, Gori and Poti. In these
cities, customers can now pay using any of our debit
or credit cards, or by dedicated transport cards issued
by TBC. Transport cards are very easy to obtain and
use. They are nameless cards, which are not tied to any
bank account and have no expiration date. The trans-
port card can be purchased in our branches, as well as
several store chains. At the end of 2021, the number of
our active transport cards amounted to 47,100.
Another initiative on the payments side was the intro-
duction of a simplified dispute process for unautho-
rized card transactions, which allows us to decrease
the review period from 35 to 3 days. Furthermore, we
increased the number of cases for which custom-
ers could get reimbursement in case of unauthorized
card usage. These services are available for all insured
cards, TBC Concept and wealth management cus-
tomers, and they are also included in certain subscrip-
tion options for our mass retail clients.
Getting closer to our customers
In order to better meet the needs of our customers and
allow more flexibility, in the end of 2020 we introduced
a subscriptions model for our mass retail. With the help
of our advanced analytical capabilities, we have devel-
oped carefully selected packages for our customers
and are constantly updating them based on customer
feedback. We are also actively using various commu-
nication channels to explain the benefits of this sub-
scription model to our customers and encourage them
to subscribe. As a result, our subscription model has
attracted 192,000 users by the end of the year, which
represents around 13% of total active retail custom-
ers. Going forward, our goal is to shift customers from
a classic banking service model to the subscription
model, which will help us to provide more tailored of-
ferings to our customers, increase their loyalty, reduce
the churn rate, and generate more stable and long-
term fee and commission income for the bank.
TBC BANK MANAGEMENT REPORT 2021 New Branch Design
39
TBC BANK MANAGEMENT REPORT 2021 • Customer lifetime value – this project is another
very important step towards customer centricity,
as it envisages assessment of such metrics as: cus-
tomer engagement scores, customer churn, and
estimating customer lifetime value.
Launched and scaled projects:
• Subscriptions model for mass retail customers –
as described in our sub-section “getting closer to
our customers” above.
• TBC Concept service model for affluent custom-
ers – as described in our TBC concept sub-section
below.
• Next best product in retail – this project aims to
increase conversions by developing tailored offers
based on a state-of-art system algorithm, which
is available in all our sales channels. The project
proved to be very successful in increasing custom-
er satisfaction levels and increasing the conversion
rate.
• Deposit pricing and profitability improvement
– this project envisages effective management of
our retail deposits via tailored offerings to clients.
When opening a term deposit, every single cus-
tomer receives an alternative offer, which is the
best possible proposition for him/her under the
given conditions. In 2021, 32% of all newly opened
or renewed term deposits were placed with alter-
native terms.
Further develop our affluent sub-segment, TBC Con-
cept
In 2020, TBC’s affluent banking moved from stan-
dard banking to an innovative, subscription banking
business model, which offers our customers various
subscription packages better tailored to their specific
needs. Our “fully digital package” became especial-
ly relevant during the pandemic, as it allows our cus-
tomers to manage their daily banking operations and
receive financial advice online, while having access to
all private banking customer benefits. In 2021, we also
BUSINESS REVIEW
RETAIL BANKING CONTINUED
Another important initiative during the year was the
launch of TBC Z, a new sub-brand of TBC targeting the
young generation, in October 2021. Under TBC Z, we
offer a set of banking products and services tailored
to customers between ages of 6-17 (pupils) and 18-23
(students) via our web platform www.tbcz.ge. Parents
of pupils can track their children's accounts via inter-
net and mobile banking, set maximum daily limits for
their spending and withdrawals, and receive SMS no-
tifications about transactions made by their child. The
platform also offers various discounts and activities to
cardholders tailored to their interests regarding edu-
cation, entertainment, hobbies, transportation and so
on. In the last three months of 2021, our youth segment
reached 165,000 active customers.
Furthermore, this year we took up a new challenge – to
become the number one choice for Georgian citizens
working abroad – by providing simple, convenient and
relevant financial services. For this purpose, we set up a
dedicated team and started to explore the needs of the
diaspora in order to create tailored products and ser-
vices, as well as enhance the existing digital platforms
to launch dedicated services for them. Today, there are
around 1.3 million emigrants living abroad, which trans-
lates into 350 thousand potential clients, further sup-
porting our growth, according to our estimates.
We also continued to run our wide-scale loyalty pro-
gramme, Ertguli, which is part of our retail custom-
er-centric approach and allows our customers to gath-
er loyalty points by paying with TBC cards at more than
300 partner companies as well as access special offers
and discounts. Customers gain more points by paying
with credit cards compared to debit cards. This pro-
gramme both helps us to build customer loyalty and
facilitates payment business and card usage.
Continue to leverage our advanced data analytical
capabilities
Within the scope of our three-year data analytical road-
map, which was developed in 2018 with the support of
a leading global consultancy firm, we have launched
and scaled up the following projects in the retail seg-
ment, generating an extra GEL 20 million in 2021.
Ongoing projects
• Consumer and mortgage loan price optimiza-
tion and process automation – this is an on-going
project, which is continuously fine-tuned. Based
on detailed analysis of clients’ spending behavior,
risk profile and other characteristics, we determine
the price sensitivity for each customer and devel-
op tailored offerings for each individual client. The
customer level price calculation process is fully
automated and integrated into the loan origination
system.
40
TBC BANK MANAGEMENT REPORT 2021 Further develop our affluent sub-segment, TBC Concept
In 2020, TBC’s affluent banking moved from standard banking to an innovative, subscription banking business mod-
el, which offers our customers various subscription packages better tailored to their specific needs. Our “fully digital
package” became especially relevant during the pandemic, as it allows our customers to manage their daily banking
operations and receive financial advice online, while having access to all private banking customer benefits. In 2021,
we also launched a new package, which is designed for individuals who need a wider range of financial tools and are
interested in brokerage services to better manage their funds. In addition, within this package, we offered our clients
two new premium cards: Visa Signature and Mastercard World Elite, which offer its holders a wide range of services,
privileges, discounts and VIP services all over the world.
We also continued to successfully operate our TBC Concept Flagship space, which was opened in 2020 and allows
us to seamlessly merge banking with lifestyle. As a conceptual space, it was strategically developed to have 80%
lifestyle and 20% banking areas. The areas of the Flagship space include self-service and personal banking zones,
exhibitions, library and co-working spaces as well as a cafe. As a result, the Flagship space became a favorite spot for
banking, recreational activities and co-working for many of our Concept clients.
During 2021, TBC Concept has maintained its strong positioning in lifestyle offerings for its clients. With an increased
data-centered approach, TBC Concept has offered its clients over 300 special offers and promotions throughout
the year revolving around travel (discovering Georgia during the pandemic), shopping (mainly online), recreational ac-
tivities, online platforms and much more. Furthermore, we continue to offer our Concept clients concierge services,
which cover trip planning, studying abroad, restaurant reservation, flower delivery, dry cleaning, laundry, car service
and much more.
We are also proud that our affluent banking services, together with the wealth management service offered by our
CIB segment, won several prestigious awards:
THE BEST PRIVATE BANK IN GEORGIA 2021
from PWM and the Banker magazine
THE BEST PRIVATE BANK IN GEORGIA 2022
from Global Finance magazine
TBC CONCEPT
Loan Portfolio
(GEL million)
+7.9%
4,061
3,763
Deposit Portfolio
(GEL million)
+11.5%
3,125
2,804
# of Customers
+7.0%
103,162
96,385
2020
2021
2020
2021
2020
2021
OUTLOOK
Going forward, in line with our aspiration to make life easier for our customers, we will continue to accelerate sales
growth in digital channels. Furthermore, our focus is to further strengthen our position in the Georgian regions and
increase the number of active clients, as well as increase the non-mortgage share of our total loan portfolio.
41
TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
MSME BANKING
MSME
Banking
Our goal is to be a reliable
partner and supporter of
Georgian businesses from
startups to well established
enterprises, by providing a full
range of convenient products
and solutions at every
stage of their development.
We are also dedicated to
developing a strong local
business community by
fostering various initiatives and
programmes.
Tornike Gogichaishvili
DIVERSIFIED MSME PORTFOLIO
WITH A STRONG PRESENCE IN
THE AGRICULTURE, TRADE AND
HOSPITALITY & LEISURE SECTORS
15.0%
15.3%
Agriculture
Trade
Hospitality & Leisure
Construction
Food Industry
Real Estate
Services
Transportation
Healthcare
Pawn Shops
Automotive
Manufacturing
Oil & Gas
Other
1.2%
1.6%
2.6%
2.6%
3.2%
3.3%
5.1%
5.2%
13.2%
12.8%
8.1%
10.8%
42
OVERVIEW Over the years, TBC Bank has established itself as a leading partner for micro, small and medium enterprises (MSMEs) by supporting their growth and development. As a result of our continuous efforts, 63%1 of all newly-registered businesses in Georgia choose TBC.We continue to provide all-round support to business-es by offering them all the necessary tools and services in an environment still widely shaped by the COVID-19 pandemic. Our strategic priorities are expanding to digital and payment solutions, growing our share in the micro sub-segment, and enhancing our renowned business support programme. Our efforts, combined with the revival of business ac-tivities, led to an increase in the MSME loan book of 23.3% to GEL 4,141 million during 2021, on a constant currency basis. Over the same period, the deposit portfolio increased by 19.1% and reached GEL 1,564 million, without the FX effect. In 2021, our net profit in the MSME segment mounted to GEL 165.5 million. More information about the financial performance of the MSME segment is provided in the financial review section on pages 72-78.TBC BANK MANAGEMENT REPORT 2021 81,000
24.4%
98%
63%
10.5%
OUR MAIN STRATEGIC PRIORITIES
Growing our presence in the micro sub-segment, while maintaining leadership in the SME sub-segment
As we strive to support MSME businesses of all sizes, this year we focused on increasing our presence among the
smallest MSME clients, the micro sub-segment3. In order to increase our presence in this sub-segment, we undertook
several initiatives:
• We continued the automatization of the loan approval process in the micro sub-segment, the implementation of
which was hindered last year due to the pandemic. In 2021, we successfully launched fully automatic loan approv-
als so that loans up to GEL 100,000 could be approved automatically using pre-determined rules and a scoring
model, thus significantly decreasing the time-to-yes period.
• We also changed the staff motivation system of our front-office employees with a higher focus on rewarding loan
issuances with smaller ticket sizes.
As a result, our micro sub-segment loan portfolio grew by 26.9% in 2021.
On the SME side, in order to further streamline our processes, we implemented a financial statement automatization
tool, which automatically generates a business entity’s financial statements based on inputted data. This tool signifi-
cantly speeds up the loan approval process, as well as eliminates the possibility of human error. As a result, the time-
to-yes decreased by around two days for these loans.
1 Out of which 40,000 are legal entities and 41,000 are individuals with business loans
2 Data is for January-September 2021, source: www.napr.gov.ge, the National Agency of Public Registry
3
Includes business loans up to GEL 1 million
43
2021 HIGHLIGHTSNUMBER OF ACTIVE CUSTOMERS1OF NEWLY REGISTERED LEGAL ENTITIES CHOSE TBC BANK2MSME SHARE IN TOTAL LOAN BOOKMSME SHARE IN TOTAL DEPOSIT PORTFOLIOOF OUR ACTIVE CUSTOMERS USE BUSINESS INTERNET OR MOBILE BANKINGTBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
MSME BANKING CONTINUED
We are pleased that our
consistent efforts towards
innovation and digitalization
have been recognized
internationally with multiple
awards from Global Finance:
Best Corporate/Institutional
Online Portal 2021 in the world;
Best Corporate/Institutional
Online Portal 2021 in Central
and Eastern Europe;
Best Integrated Corporate/
Institutional Banking Site 2021
in Central and Eastern Europe ;
Best Corporate/Institutional
Mobile Banking App 2021 in
Central and Eastern Europe ;
Most Innovative Corporate/
Institutional Digital Bank 2021 in
Central and Eastern Europe.
Increasing digitalization
In 2021, our digital services remained in high demand,
as the trends set by the pandemic largely continued
into this year. Around 98% of our active legal custom-
ers use business Internet or mobile banking, with DAU/
MAU ratio standing at 26% by the end of 2021.
This year, the most notable innovation among our dig-
ital offerings was the introduction of open banking in
our mobile banking application. Open banking brings
together all the accounts of a client at various Georgian
banks and allows them to check their accounts in one
place. This functionality was particularly useful for our
business clients, as around half of them have accounts
in more than one bank. Previously, in order to check
their balances and transactions, clients had to log into
separate banking apps and switch between them.
We have also been actively upgrading our business
app, which was launched in 2020 to make it more con-
venient for our MSME clients. A number of new fea-
tures have been added to the app in order to better
accommodate our customers’ needs, such as imple-
menting a new module for utility payments and auto-
matic payments as well as allowing transfers using any
foreign currency.
Fine-tuning our payments solutions
In 2021, we continued to introduce innovative and con-
venient payment solutions for our customers:
•
In e-commerce, we launched an alternative pay-
ments method for small businesses, which allows
merchants to process e-commerce payments in
a simpler and cheaper way than using a tradition-
al e-commerce checkout. After receiving an order
from a client, merchants are able to generate a pay-
ment link through a dedicated platform and send
the link to the customer. Upon clicking the link, the
client then chooses a suitable payment option: any
bank’s mobile or internet banking, QR payment
through TBC’s mobile bank, Apple Pay, or payment
with our loyalty programme Ertguli points.
• Furthermore, in order to facilitate online payments,
we launched a new platform, Payments Space
(available on www.tbcpayments.ge) for our mer-
chants, which allows them to easily control their
daily transactions, receive analytical reports and
manage their payments products. The platform is
free of charge.
• On the POS side, we introduced Android POS solu-
tion, which is a smarter alternative to the traditional
POS, aimed primarily at small & medium business-
es. Thanks to its operational system (Android), it is
more flexible, allowing to add non-payment func-
tionality to POS terminals and offering better cus-
tomer experience for merchants and customers.
As of 31 December 2021, we already had 100 active
Android POS terminals.
Enhancing our business support programme
We are committed to facilitating the success of our
business clients by providing them with a full-scale
business support programme, enriched with ex-
tensive educational resources and technological
tools, which are accessible from a single platform
www.tbcbusiness.ge.
We have the largest business education programme
in Georgia, which has attracted over 30,000 attendees
through around 1,000 lectures over the past eight years.
The programme has been developed in partnership
44
TBC BANK MANAGEMENT REPORT 2021 with the Asian Development Bank and provides free
access to live lectures on various relevant topics, such
as technology, digital marketing, human resources etc.
In order to help businesses find and utilize the most
suitable tools and software, we created an online plat-
form www.businesstools.ge. This platform connects
developers with users and offers a convenient way to
find, compare and review various programmes created
for accounting, IT management, project management
and other fields.
We continue to offer our business customers Business
Club, a unique subscription model that combines a
bundle of financial products and services with exten-
sive non-financial offerings, such as exclusive face-to-
face and group meetings, seminars and workshops
with market-leading specialists in various areas, as well
as special offers from our partners. Around 30% of our
MSME legal clients are Business Club members.
In order to reward innovation and creativity, as well as
encourage entrepreneurs, we have established several
renowned annual events:
• The Annual Business Award Ceremony, estab-
lished back in 2015, aims to identify outstanding
businesses in Georgia, help them develop, gain
publicity and recognition and inspire other en-
trepreneurs. This year, the event was organized in
partnership with EFSE and Forbes Georgia and
attached 41.3 million views in media, while top of
mind awareness reached 70%1. Over the years, the
ceremony has attracted more than 3,000 business-
es from various fields.
• The Annual Apps Challenge, which was first es-
tablished in 2020. This year, 40 teams entered the
competition with unique and innovative app ideas,
for the chance to become one of three winners and
receive funding to bring their ideas to life.
Additional support for startups and rural enterprises
Since 2017, we have run Startuperi, a start-up orient-
ed project offering full-scale support to companies in
an early stage of development. The programme aims
to foster entrepreneurship by providing easily acces-
sible funding, media & PR support, free educational
programmes and conferences, as well as partnerships
with large companies in Georgia. The outstanding
portfolio of the programme is comprised of 493 active
loans, in the total amount of GEL 196.9 million as of 31
December 2021.
In order to foster business development in rural areas
and help to create new job opportunities, we are ac-
tively supporting local businesses by providing afford-
able finance. We partnered with three government pro-
grammes, “Produce in Georgia”, “Host in Georgia” and
“Preferential Agro Credit”, to support agricultural and
hospitality businesses. The programmes offer lowered
interest rates through governmental subsidies. In 2021,
we disbursed 2,096 loans in the amount of GEL 530.0
million within these programmes.
OUTLOOK
Going forward, we will stay focused on providing our
clients with a superior customer experience, simplify-
ing and digitalizing our products, increasing our pres-
ence in the small micro sub-segment in the regions,
further developing our subscription model, as well as
remaining the best business supporter in the country.
1 Based on survey conducted by an independent research
company, ACT
45
TBC BANK MANAGEMENT REPORT 2021 46
TBC BANK MANAGEMENT REPORT 2021 47
TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
CORPORATE & INVESTMENT BANKING
Corporate &
Investment
Banking
Real Estate
Energy & Utilities
Hospitality & Leisure
Food Industry
Construction
Trade
Healthcare
Automotive
Agriculture
Individual
Oil & Gas
Services
Financial Services
Transportation
Other
48
Our goal is to be the number
one trusted strategic partner
for large enterprises and high
net worth clients by helping
them to grow and prosper. We
distinguish ourselves by sector
specific, tailor-made solutions
as well as strong industry and
product expertise, which are
the key value drivers for our
clients.
George Tkhelidze
A WELL-DIVERSIFIED LOAN
PORTFOLIO WITH A STRONG
PRESENCE IN ALL MAJOR SECTORS
OF GEORGIAN ECONOMY
5.5%
1.3%
1.4%
2.1%
2.4%
3.0%
3.1%
3.1%
4.2%
4.8%
9.1%
21.0%
16.4%
10.1%
12.5%
OVERVIEW Over the past decades, TBC Bank’s CIB business has been a leading provider of corporate and investment banking solutions in Georgia, helping businesses to optimize their funding structure and effectively man-age their risks. We hold the number one market posi-tion across all major products including loans, depos-its and trade finance products. We offer a full suite of lending and transactional products, advisory services in managing and structuring complex transactions, leading trade finance capabilities, strong sector exper-tise across all major industries of the economy, as well as additional financial resources via partnerships with International Financial Institutions and government programmes. Since January 2021, we have integrat-ed our wealth management (WM) business into our CIB business in order to better serve our clients with a combined offering, as the majority of our high net worth individuals are shareholders and C-level execu-tives in our CIB clients. During 2021, we continued to expand our business and attract new large and medium corporate borrow-ers operating in different industries. As a result, our gross loan book amounted to GEL 6,548 million, up by 19.5% year-on-year on a constant currency basis, while the deposit portfolio stood at GEL 7,379 million, up by 33.1% year-on-year without the FX effect. Over the same period, the corporate guarantees and letters of credit portfolio amounted to GEL 1,939 million, broadly stable at constant currency basis. In terms of profitabil-ity, our net profit in the CIB segment amounted to GEL 380.7 million. More information about the financial performance of the CIB segment is provided in the financial review section on pages 72-78.TBC BANK MANAGEMENT REPORT 2021 39.1%
38.6%
48.0%
40.5%
49.6%
7,000
1 Based on data published by the National Bank of Georgia as of 31 December 2021; in this context, corporate refers to legal entities.
2 Out of which 4,340 are corporate clients and 2,660 Wealth Management clients.
49
2021 HIGHLIGHTSCIB LOAN MARKET SHARE1CIB DEPOSITS MARKET SHARE1CIB LOAN SHARE IN TOTAL PORTFOLIOCIB DEPOSIT SHARE IN TOTAL PORTFOLIOCIB GUARANTEE AND LETTER OF CREDITS MARKET SHARE1NUMBER OF CUSTOMERS2OUR MAIN STRATEGIC PRIORITIES IN 2021 Corporate bankingImproved client coverage modelIn 2021, we revised our business model to ensure more focused coverage of our corporate clients and created three separate, dedicated divisions: strategic clients (top 50 groups of related companies), large and medium sized corpo-rates (industry teams) and vulnerable clients. The new structure enabled us to better tailor our offerings to the needs of different customer groups and proactively manage our credit risk. As a result, the share of large and medium sized customers in our CIB portfolio increased by 5.7 pp to 38.1%, while our NPL ratio in CIB improved by 1.0pp and amount-ed to 1.4% by the end of 2021. Increased focus on transaction bankingWe also set up a new dedicated team to manage non-lending business covering FX transactions, deposits, cash management solutions and other non-lending products, with specific product expertise and sales capabilities, in order to better serve our CIB customers and diversify our non-interest income streams. One of the initiatives rolled out by this team includes the introduction of new bulk cash deposit machines to our branches, which provide a fast and secure way of depositing large amount of cash to bank accounts. By the end of 2021, we have already installed 38 new machines in our branches and clients’ premises. Going forward, we are planning to add 12 more machines and expect to collect at least GEL 500 million in incremental cash from corporate clients per year. In 2021, the volume of FX transactions from corporate clients amounted to GEL 14,266 million, up by 52% year-on-year, while cash management volumes from corporate clients increased by GEL 934 million or 23.5% year-on-year and amounted to GEL 4,906 million.Commercial Excellence Transformation Programme We achieved good progress in our commercial excellence transformation project, which was launched last year. In 2021, the project resulted in an additional c. GEL 10 million net banking income and reduced time spent on back office tasks by 15%. Within the scope of this project, an advanced IT tool was developed that provides a 360 degree view on each client, based on industry benchmarks, publicly available and internal data. It also calculates customer profitability and con-ducts simulation analysis. As a result, our bankers are able to better understand and capture the potential of existing and target clients and use this information in account planning, customer profitability management, decision-mak-ing, and negotiations with clients. TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
CORPORATE & INVESTMENT BANKING CONTINUED
Investment Banking – TBC Capital
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 a leader in investment, brokerage and corporate 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 corporate transactions. TBC Capital is also a
shareholder in the Georgian Stock Exchange and contributes to the development of its infrastructure and the integra-
tion of the domestic capital market into international markets.
Staying active on bond markets
In 2021, TBC Capital maintained its leadership position in terms of total bonds issued on the Georgian market. As the
economy rebounded from the pandemic, we conducted several milestone transactions including acting as a Joint
Lead Manager, together with a number of leading international investment banks, on two Eurobond placements: US$
500 million by Georgian Railway and US$ 75 million Additional Tier-1 Capital Bonds by TBC Bank and as a Co-Man-
ager on US$ 500 million Eurobond issued by Government of Georgia.
On the local market, TBC Capital acted as Sole Arranger for GEL 35 million bond placement by Nikora Trade and as
a Joint Lead Manager on US$ 12 million placement by Lisi Lake Development. TBC Capital was also active in private
bond placements and acted as Sole Arranger on US$ 31 million private bond placement for TBC PLC as well as three
private bond placements for EBRD and FMO. As a result, the public and private corporate, as well as government
bonds issued by TBC Capital during the year accounted for 52%1 of total bonds issued.
In addition, this year, TBC Capital introduced a new real estate advisory service and already closed two deals with the
total value of c. US$ 26.4 million.
LISI
EBRD
NIKORA
JSC TBC BANK
TBC BANK GROUP PLC
US$ 12,000,000
3 YEAR
PUBLIC PLACEMENT
6.50 %
GEL 87,000,000
3 YEAR
PRIVATE PLACEMENT
3M TIBR
GEL 35,000,000
3 YEAR
PUBLIC PLACEMENT
3M TIBR + 3.50 %
US$ 75,000,000
ADDITIONAL TIER ONE
PERPETUAL BONDS
US$ 31,000,000
3 YEAR
PRIVATE PLACEMENT
DECEMBER 2021
PLACEMENT AGENT
NOVEMBER 2021
LEAD MANAGER
NOVEMBER 2021
PLACEMENT AGENT
OCTOBER 2021
JOINT LEAD MANAGER
AUGUST 2021
PLACEMENT AGENT
GEORGIAN RAILWAY
LISI
FMO
GEORGIA
US$ 500,000,000
7 YEAR
PUBLIC PLACEMENT
4.00 % GREEN NOTES
GEL 157,500,000
1.5 YEAR
PRIVATE PLACEMENT
3M TIBR
GEL 34,000,000
5 YEAR
PRIVATE PLACEMENT
NBG 3M CD
US$ 500,000,000
5 YEAR
PUBLIC PLACEMENT
2.75 %
JUNE 2021
JOINT LEAD MANAGER
JUNE 2021
LEAD MANAGER
MAY 2021
LEAD MANAGER
APRIL 2021
CO-MANAGER
Enhancing our research services
TBC Capital’s research division provides access to comprehensive data and analytical insights for large corporate
borrowers and investors. Its coverage comprises regular macro, sectoral, equity market, and fixed income updates
as well as in-depth analytical reports on significant developments and events. This year, the research division con-
tinued to provide corporate borrowers and investors with regular updates on the recovery of the Georgian economy
through its regular, weekly, monthly and quarterly publications and online events. In addition, it successfully launched
50
TBC BANK MANAGEMENT REPORT 2021
AWARDS
• Best Treasury and Cash
Management Bank
in Georgia 2022
• Best Trade Finance Provider
in Georgia 2022
• Best Foreign Exchange
Provider in Georgia 2022
• Best Private Bank
in Georgia 2022
• Best Investment Bank
in Georgia 2021
Global Finance
• Best Private Bank
in Georgia 2021
PWM and the Banker magazines
coverage of equity markets and provided the audi-
ence with weekly updates on developments in glob-
al equity markets. Furthermore, our research division
closely monitored the recovery of the tourism and real
estate sectors through its monthly sector watch se-
ries. Overall, in 2021 TBC Capital published more than
200 publications. The full list of reports is available at
www.tbccapital.ge.
The coverage of our reports continues to increase both
locally and among international investors and analysts.
Our macro updates are also broadcast on a regular ba-
sis via local business media online channel. Moreover,
in 2021 TBC Capital started to produce regular vid-
eo updates on some of the most important research
findings and economic developments to diversify its
format of content. In addition, throughout the year we
organized several large-scale online conferences for
our customers, covering challenges and trends in the
Georgian economy from a macro as well as a sectoral
perspective. In 2021, TBC Capital became research
contributor to Bloomberg and Refinitiv, targeting wider
international audience interested in Georgia.
Private Banking - TBC Wealth Management
TBC WM is Georgia’s leading wealth management
franchise, serving around 2,700 resident and non-res-
ident high net worth clients. We offer a wide range of
personalized banking, investment and insurance prod-
ucts that are carefully designed to meet the individual
financial goals of our customers and maximize their
wealth. In addition, our clients benefit from 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
high net worth clients from Israel and offers fast and
efficient consulting services on the ground.
In 2021, we rebranded TBC VIP to TBC Wealth Man-
agement and launched a dedicated WM webpage
(www.tbcwm.ge) for our existing and potential clients,
which provides comprehensive information about our
operations. In addition, we introduced a new product
– Visa Infinite, Visa’s most elite card, exclusively for
WM clients. Considered a symbol of recognition, the
prestigious Visa Infinite provides clients with comfort
and bespoke benefits, both in Georgia and across the
world.
1 Based on internal estimates
51
TBC BANK MANAGEMENT REPORT 2021 ENTRÉE -
CASE STUDY
The Georgian bakery network “Entrée” has been
present in the Georgian market since 2008 and
has emerged as one of the country’s most suc-
cessful fast casual dining concepts in recent
years. We became Entrée’s partner in 2011 and
have stood by their side since then. In summer
2021, with our support, Entrée opened a new
facility in Notting Hill, London and serves cus-
tomers with Georgian cuisine along with French
dishes. This is our second cooperation with En-
trée; the first was in 2015, when Entrée success-
fully launched its first café abroad in Baku.
OUR BUSINESS MODEL 53
TBC BANK MANAGEMENT REPORT 2021 BUSINESS REVIEW
MAJOR SUBSIDIARIES
TBC Pay
We aspire to become the
largest payments provider
in Georgia by further
strengthening our digital
capabilities as well as
diversifying and fine-tuning
our services. Additionally, we
plan to become the largest
payments aggregator in
Georgia by implementing
open banking capabilities.
c. 4,205
+40% YoY
54
TBC Pay is a leading payments provider in Georgia offering individuals and businesses convenient pay-ment solutions. TBC Pay is a wholly owned subsidiary of TBC Bank and has been operating since 2008. TBC Pay offers a wide range of services including utility payments, mobile top-ups, loan repayments and mon-ey transfers through its wide and easily accessible dis-tribution network.TBC Pay mainly services its customers via c. 4,205 self-service terminals conveniently distributed across the country. These terminals allow customers to con-duct a range of payments instantly on a 24/7 basis, us-ing both cash and cards. In addition, TBC Pay operates a website (www.tbcpay.ge), along with a mobile app, which of-fers a simple and engaging interface. In 2021, we also added international cards to our digital payments channels. Overall, in 2021, the number of payments conducted through digital channels increased by 49% year-on-year, while number of active digital users reached c. 51,000. For businesses with large cash operations, TBC Pay offers cash management services, in the form of spe-cialized cash boxes. After depositing cash into these boxes, the sum is automatically transferred to the company’s bank account. The cash boxes are secured through a strong authorization process. In order to support the increased scale of business, the company is streamlining its processes and implement-ing new technologies. In 2021, TBC Pay successfully completed agile transformation in its IT department and started to roll it out in other departments as well. In addition, the company began implementing an enter-prise-wide software, which is planned to be launched next year. Over 2021, the volume of transactions conducted through self-service and cash management terminals as well as digital channels grew by 40% to GEL 5,636 million. Over the same period, net commission income reached GEL 38 million, up by 15% year-on-year, while EBITDA amounted to GEL 23 million, up by 8% year-on-year. 2021 HIGHLIGHTSNUMBER OF SELF-SERVICE TERMINALSGEL 5.6 blnVOLUME OF PAYMENT TRANSACTIONSTBC BANK MANAGEMENT REPORT 2021 TBC Leasing
Our aspiration is to further
strengthen our leading market
position via developing
tailored solutions, as well as
dedicated digital offerings.
In addition, our priority is to
increase the share of green/
renewable and energy efficient
projects.
77%
2,265
GEL 254 mln
1 Based on internal estimates
55
TBC Leasing, a wholly-owned subsidiary of TBC Bank, was established in 2003 and has since become a lead-ing leasing services provider in the Georgian market. TBC Leasing serves both individuals and business clients, offering them a full range of leasing solutions and advisory services, including financial leasing, oper-ating leasing, sale and leasebacks tailored to custom-ers’ needs. TBC Leasing serves its retail customers at its service centers and at partner vendors’ sales points. As for business clients, TBC Leasing actively leverages TBC Bank’s digital channels and branches.As of 31 December 2021, our leasing portfolio stood at GEL 254 million and remained broadly stable on a con-stant currency basis. 88% of the portfolio was related to legal entities, with strong positions in the construction, service and manufacturing sectors. The remaining 12% of the portfolio originated from individual clients and consisted of new and used cars, with respective shares in the total retail portfolio of 51% and 49%. In 2021, net profit of TBC Leasing amounted to GEL 11.6 million.TBC Leasing continues its active engagement in fi-nancing of green, renewable and energy efficient as-sets. Over the past three years, our green leasing port-folio increased by 57% and amounted to GEL 5 million. In 2021, the company launched a PV solar panel grant programme in cooperation with the Green for Growth Fund (GGF), EU4Energy and Finance in Motion, which enables legal entities as well as individuals to signifi-cantly decrease the design and installation costs of solar panels. In January 2021, Fitch credit rating agency maintained TBC Leasing’s existing long term credit rating of BB-, which is the highest credit rating among Georgia’s non-banking institutions, and, in April 2021, revised the outlook of the credit rating from Negative to Stable. This credit rating will increase TBC Leasing’s credit-worthiness and helps us to attract new creditors and lower the cost of funding. During 2021, the company successfully raised additional funding of US$ 30 mil-lion, in the form of senior loans, from Development Financial Institutions as well as International Financial Institutions. Finally, we remain dedicated to raising awareness among the Georgian population regarding the bene-fits of leasing solutions, as the Georgian leasing market is still highly underpenetrated with a leasing to GDP ratio of just 1%1.2021 HIGHLIGHTSMARKET SHARE 1NUMBER OF CUSTOMERSLEASING PORTFOLIOTBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR COLLEAGUES
Our
Colleagues
Engaged and happy
colleagues are key to our
successful and sustainable
development. We are
committed to providing
a safe and inclusive work
environment with equal
opportunities for learning and
career advancement
66%
85%
19%
35%
56
TBC BANK MANAGEMENT REPORT 2021OVERVIEW We aspire to be most desired employer in the coun-try, attracting and developing top talent, nourishing our corporate values and keeping our employees engaged and motivated in order to support the Group in achiev-ing its ambitious strategic goals. We also work closely with each business division in order to better under-stand their needs and assist them in overcoming their individual challenges. In the post-pandemic world, more and more compa-nies are moving towards remote or hybrid working conditions. We were one of the first companies in Georgia to allow all our back-office employees to work remotely. Our HR campaign “work from where you want” was very well received by our employees and today the vast majority of our back-office employees work outside the office. Importantly, this initiative not only resulted in improved employee satisfaction levels, but also increased efficiency across the Group. In order to maintain close contact with our employees in this new digital reality, our senior management regularly holds online meetings with employees to update them regarding the Group’s achievements and future plans, and address any concerns that they might have. In addition, we continue to expand our agile working practices to the wider organization in order to become even more flexible and efficient in today’s fast chang-ing environment. For more information about our HR practices, please refer to pages 84-109 of our Sustainability Report, which is available at www.tbcbankgroup.com.OUR MAIN STRATEGIC PRIORITIES Talent acquisition and developmentOur goal is to attract the best talent on the market, with the support of an extensive selection process, tailored to the specific needs of each position and role. We ac-tively monitor the labour market both in Georgia and abroad, to maintain a pool of prospective qualified tal-ents for key roles including but not limited to: finance, business, tech positions and other. This year we launched a talent management pro-gramme, which aims to identify top talent within the company and support their development. Within the 2021 HIGHLIGHTSEMPLOYEE NET PROMOTER SCORE1EMPLOYEE HAPPINESS INDEX2INTERNAL PROMOTIONS WOMEN IN MIDDLE MANAGERIAL POSITIONS3 scope of this programme, we introduced an exten-
sive leadership programme for middle management
in partnership with a leading international training
company. This programme includes four modules: a
strategic mindset, managing change, cross-functional
trust, and leadership. Going forward, we plan to intro-
duce tailored development programmes for selected
candidates and offer targeted rotations to expand the
required skill sets.
In order to support our highly digital business model,
we have increased our focus on building strong tech-
nical capacity in-house. Currently, around 600 of our
workforce at the Bank are IT specialists. Our initiatives
in this regard include establishing an IT academy in
2019, which offers courses in front-end and back-end
development, Android and IOS mobile development,
as well as user experience research and strategy. This
programme is free of charge for selected candidates
and is run by experienced staff members and leading
professionals from relevant fields. Since its establish-
ment, we have trained up to 580 people and recruited
230 people. In addition, we have strengthened our IT
team with international expertise by hiring leading spe-
cialists from abroad. We also plan to introduce special
development programmes and career maps for our IT
specialists in order to ensure a high retention rate.
For low-level positions, we run a wide-scale internship
programme to attract the best students from Geor-
gia’s leading universities. After successful completion
of a one-year internship, the brightest candidates are
offered employment in various departments, includ-
ing finance, risks, corporate, marketing, IT and data
analytics. Overall, since its establishment back in 2011,
we have recruited up to 500 students within this pro-
gramme.
We offer competitive remuneration packages to our
employees, which are comprised of a fixed salary,
performance based bonuses and a benefits package,
which includes medical insurance, critical disease and
life insurance, 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, as well as extra day-offs for
employees with three and more children.
Since 2011, we operate TBC Academy, which pro-
vides a wide range of learning programmes to our
employees. During 2021, more than 1,000 employees
participated in various courses such as business de-
velopment, banking, change management, leadership,
financial analytics and many more. In addition, we
provide financial support to our employees to attend
various external courses and gain international certi-
fications such as MBA, CFA, FRM, ACCA and others.
Furthermore, we run mandatory training for all employ-
ees of the bank in the areas such as code of conduct
and ethics, information security, environmental issues
and operational risks.
Performance management
Through our effective performance management sys-
tem, we strive to promote a growth mindset, boost em-
ployee productivity and reinforce a feedback culture.
Our performance management system 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 constructive dialogue are important
parts of our performance appraisal system and have
been incorporated into middle management’s KPIs
starting from 2021.
We use different assessment systems for front and
back office staff, depending on the positions held.
We assess our back office staff with the manage-
ment by-objectives (MBO) system, a personnel man-
agement technique where managers and employees
work together to set, record and monitor goals for the
financial year. Goals are written down annually and are
continually monitored by managers to check progress,
including semi-annual direct feedback from supervi-
sors. 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
organization.
For our middle managers, as well as employees who
are part of the agile structure, we also run a 360-de-
gree feedback system that provides each employee
with the opportunity to receive performance feed-
back from his/her supervisor, peers and subordinates.
360-degree feedback allows our employees to under-
stand how their performance is viewed by others; it
also helps them to identify their strengths and weak-
nesses and develop new skills. This year, 360-degree
feedback was extended to other roles as well.
For front-office employees we use a target-based per-
formance assessment system, wherein performance is
linked to specific KPIs, including quantitative and qual-
itative components. Within the target-based system,
employees are assessed monthly, quarterly or annually
depending on their positions.
1 Employee Net Promoter Score was measured in October 2021
by an independent consultant for the Bank’s employees.
2 The index was measured in July 2021 for the Bank’s employ-
ees by an independent consultant.
3 Branch managers, division and department heads, as well as
directors of the Group’s subsidiaries.
57
TBC BANK MANAGEMENT REPORT 2021 58
TBC BANK MANAGEMENT REPORT 2021 59
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR COLLEAGUES CONTINUED
Employee engagement and motivation
Our goal is to create a value driven organization, in
which employees share the same values and are led
and driven by the common mission “to make life eas-
ier” for our customers. We also strive to create a fami-
ly-friendly environment, in which employees can bet-
ter balance their family and work.
Our key initiatives in this regard are as follows:
• Our CEO plays an important role in promoting our
corporate culture through active, regular communi-
cation about our core values in-person and online.
• Top management regularly conducts online meet-
ings with employees to keep them up-to-date
on the Group’s strategy, performance and recent
achievements. Staff have an opportunity to ask
questions and share feedback. In addition, we con-
duct an open dialogue with our staff via a Facebook
group, in which we regularly share the Group’s
achievements, as well as success stories of individ-
ual employees.
• We also strive to create a positive and collaborative
working environment by offering maximum flexi-
bility to back office employees in terms of working
hours and remote working conditions. In addition,
our agile structure supports open communication
between various teams and encourages employee
empowerment.
• We care for our employees’ development and en-
courage them to actively participate in internal se-
lection process for higher grade positions. In 2021,
the promotion rate in the bank was around 19%.
• To accurately measure our employee satisfaction
and engagement levels, we run an annual feedback
survey in partnership with leading international uni-
versities and research firms. The results of the sur-
vey are thoroughly analyzed and presented to the
management board to plan future actions.
In 2021, we developed a gender policy, which provides
clear guidance for ensuring the proactive and con-
sistent integration of gender equality in all aspects of
the Group’s work, inside the Group, in the marketplace
and in the community at large. The ultimate goal is to
achieve gender equality, develop TBC’s own approach
to integrating a gender perspective in company’s work
and apply gender equality principles when working
with stakeholders and partners. The full policy is avail-
able at our www.tbcbankgroup.com. We have also
developed a KPI and action plan at the Bank level to
increase the number of women in middle managerial
positions from the current level of 36% to 40% by 2023.
In 2022, we will expand our approach to other subsid-
iaries of the Group and work on elaboration of separate
action plans.
To demonstrate our commitment to this course, since
August 2021, TBC has become a signatory to the UN
Women Empowerment Principles (WEPs)1.
SUPERVISORY BOARD
4
5
5
2
2
3
2019
2020
2021
SENIOR MANAGEMENT
Equality and diversity
6
6
We have created a sustainable and successful busi-
ness 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 in which 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 flex-
ible for them. Furthermore, we support them to have
the same access to learning, development and job op-
portunities.
We put a special emphasis on promoting and support-
ing women in their careers.
5
1
1
1
2019
2020
2021
Female
Male
1 For more details about these principles please refer to
www.weps.org
60
TBC BANK MANAGEMENT REPORT 2021 MIDDLE MANAGERIAL POSITIONS1
ALL EMPLOYEES
5,493
4,917
4,681
204
204
115
101
99
185
2,299
2,451
2,624
2019
2020
2021
2019
2020
2021
Female
Male
We have a good mix of people comprised of employees with extensive work experience and young and bright tal-
ents 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.
AGE DIVERSITY STATISTICS OF 2021
3%
10%
39%
48%
Under 29 years
30-39 years
40-49 years
Over 50
1 Branch managers, division and department heads, as well as directors of the Group’s subsidiaries
61
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR COLLEAGUES CONTINUED
ETHICAL STANDARDS, RESPONSIBLE CONDUCT AND SAFETY AT WORK
In order to gain customers’ and partners’ trust and successfully do our business, we have to ensure that the behavior
of our employees and our business decisions are in line with the highest standards of ethics.
As we are a part of a community and have diverse stakeholders, every decision we make impacts employees, custom-
ers, business partners, other stakeholders and society as a whole. The Group’s code of ethics is a “moral compass”
assisting us with our decision-making framework. It serves as a guidance for our team on ethical conduct and for
making the right decisions in specific circumstances.
For many years, TBC has been promoting ethical conduct in all its activities. We have invested time and energy in
identifying non-ethical and dishonest behavior risks and creating prevention mechanisms.
We have in place a set of internal policies and procedures and we closely monitor their execution. These policies lead
to greater awareness of unacceptable behavior and promote a ‘speak up’ culture in which all employees feel listened
to and protected when reporting any suspected misconduct. These policies and procedures consist of the following:
• Code of Ethics;
• Code of Conduct;
• Anti-Bribery, Anti-Corruption and Prevention of the Facilitation of Tax Evasion Policy;
•
• Human rights policy.
Incident response policy;
These policies apply to all employees of the Group and can be found on our IR website at www.tbcbankgroup.com.
The Compliance Department regularly conducts employee training sessions in order to raise awareness and high-
light the importance of anti-corruption, anti-bribery and ethical and human rights 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 2021.
62
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR CUSTOMERS
Our
Customers
As a customer-centric
company, we strive to provide
our customers with a superior
experience by offering
them relevant, innovative
and affordable products
and services through our
convenient and flexible
distribution channels.
1 September 2022. As of 31 December 2021, we have
disbursed 425 mortgages with a total amount of GEL
49.1 million under this programme.
In order to ensure the safety and well-being of our cus-
tomers and employees, our branches and offices are
equipped with all the necessary safety measures in line
with the recommendations of the World Health Orga-
nization and National Center for Disease Control and
Public Health of Georgia. In addition, we ran extensive
awareness campaigns and introduced various incen-
tives to encourage vaccination among our employees.
By the end of the year, around 85% of our employees
were vaccinated or were scheduled to get a vaccine.
CUSTOMER SATISFACTION COMES FIRST
Providing an unparalleled customer experience and
ensuring the satisfaction of all of our customers is one
of our core values. First and foremost, we treat our cus-
tomers fairly by providing them with full information
regarding our products and services, inform them of
significant risks and give advice with the client’s best
interests in mind. Our Code of Ethics, which is available
at www.tbcbankgroup.com, defines TBC’s expecta-
tions in terms of transparency and fairness in our rela-
tionships with our customers.
In case our customers are left unsatisfied with any as-
pect of our service, they may file a complaint through
various channels, including call centers, branches,
internet bank or the website www.tbcbank.ge. Com-
plaints are discussed and addressed by customer
support and complaint management groups, who an-
alyze each complaint, prepare recommendations and
63
TBC BANK MANAGEMENT REPORT 2021MEETING THE NEEDS OF OUR CUSTOMERS We operate an advanced omni-channel distribution model, which allows our customers to conduct their banking operations seamlessly and is comprised of a wide network of modern, customer-centric branches, award-winning internet and mobile banking platforms, contemporary payment infrastructure as well as a call center. Our services are available even in remote areas of the country through our online banking, which also en-ables fully digital onboarding for retail and MSME cus-tomers. As Georgia is still largely a cash-based society, especially in the regions, the availability of self-service terminals and ATMs is also essential for fostering finan-cial inclusion.In the post-COVID world, the demand for digital solu-tions has remained high. Therefore, we have continued to enrich our digital offerings with more innovative products and services. In 2021, we launched an end-to-end fast consumer loans disbursement process in our mobile banking, which allows our customers to receive loans online. In addition, we upgraded our online lend-ing platform www.tbccredit.ge, giving more flexibility to our clients. Furthermore, we implemented “open banking” for both retail and business clients, which en-ables them to check the balances on accounts opened in other Georgian banks, as well as receive analysis of their income and expenses via our online banking. For more information regarding our new digital services, please see the Business review on pages 36-55.While digitalization remains one of our top priorities, we also make sure to keep our branches as accommo-dating and comfortable as possible. For this reason, in 2021 we began remodeling our branches, creating a more open and inviting atmosphere in order to facili-tate communication with less formality. More informa-tion regarding our new branch concept is given in the retail section of the Business review on pages 36-41. Equally important is the provision of affordable financ-ing to our clients. For this purpose, we have run a large-scale start-up support programme since 2017. For more information, please refer to our MSME section on pages 42-47. In addition, since September 2021, we have enrolled into the governmental programme of subsidized mortgages. This programme offers interest payment subsidies on mortgages up to GEL 200,000, issued to families with three or more children, or fam-ilies with a child born between 1 September 2021 and tory trainings and testing for all employees of the
bank. In addition, we run different simulations on
regular basis, in order to prepare our employees for
various real life situations and threats.
• We operate a 24/7 customer hotline, which ad-
dresses our clients’ concerns in a timely manner.
In addition, we help our customers to develop safe
banking habits, by regularly informing them regard-
ing the risks of phishing and other fraudulent activi-
ties via social media and digital channels.
In addition to our layered defense system, we have
cyber insurance policy in place, covering all rele-
vant cyber, privacy and multimedia liabilities and
expenses of TBC in order to manage contingen-
cies and recover from possible serious disruptions.
•
TBC Bank has not experienced any material informa-
tion security breach in the last three years.
We are fully compliant with the National Bank of Geor-
gia’s cyber security requirements, such as the Cyber
Security Framework Document, which is based on the
National Institute of Standards and Technology (NIST)
Cyber Security Framework. In 2021 we also adopt-
ed Payment Service (PSD2) Directive (EU) 2012/2366,
which further aligned our operations with international
and local best practices and enabled us to offer open
banking capabilities to our clients.
In November 2021, the Bank achieved ISO 27001 cer-
tification of our Information Security Management
System. Furthermore, in December 2021, Ernst &
Young Tbilisi office conducted two audits, assessment
against Cyber Security Management Framework and
assessment against SWIFT CSCF for the Bank. As a
result, no critical findings and major non-compliances
were identified during these exercises. Cyber Security
Management Framework is defined by National Bank
of Georgia.
Equally important is protecting our customers’ privacy
and data integrity. We only process personal data for
specific business purposes and do so lawfully, fairly
and in a transparent manner. Our clients are provid-
ed with information regarding the processing of their
data and are informed of their rights, which they may
exercise through defined communication channels.
Our Global Data Protection Policy is in line with ap-
plicable laws imposed by Georgian government and
also meets certain relevant requirements of EU Gen-
eral Data Protection Regulation (GDPR). The full policy
is available on our IR website www.tbcbankgroup.com.
OUR STAKEHOLDERS
OUR CUSTOMERS CONTINUED
address the people responsible. Clients are notified of
the outcome of their complaints in due course.
In order to evaluate the quality of our services, we con-
duct various external surveys and request feedback
from our clients on regular basis. Collecting this data
allows us to analyze our performance and set goals
for continuous improvement. In addition, we conduct
internal surveys of different scopes across various di-
visions of the Bank. These internal surveys help us to
further pinpoint issues on a more detailed level and
address them more thoroughly.
In 2021, we launched an innovative Customer Experi-
ence Appetite and Pain Management project accross
the Bank. This project envisages three-week work-
shops, in which each team selects the metrics to best
evaluate its customer service and rates its performance
against these metrics in order to assess their current
progress and find further areas of improvement. Fur-
thermore, the project helps to determine problematic
or “pain” areas for the customers. Once these problems
are identified, they are assigned to the people respon-
sible, who are tasked with resolving them. We believe
that this project will bring our customer experience to
a new level.
WE TAKE CUSTOMER INFORMATION SECURITY
AND DATA PRIVACY SERIOUSLY
With the rise of digitalization, it is more and more cru-
cial for us to ensure that our customers’ personal infor-
mation is well-secured. For this reason, we constantly
fine-tune our cyber security measures and procedures
in order to stay well ahead of any data security threats
and risks. Our cyber security procedures are regulated
by an Information Security Policy.
We operate a dedicated Information Security Depart-
ment, which reports to the Chief Risk Officer and the
Information Security Steering Committee. The latter
was established in order to improve information secu-
rity and business continuity management processes
as well as minimize information security risks.
In order to prevent and mitigate various cyber securi-
ty risks, we have several dedicated tools and control
mechanisms in place:
• The Security Operations Center continuously
monitors unusual occurrences across the organiza-
tion’s network in order to detect potentially nega-
tive incidents and respond to them effectively.
• The Data Leak Prevention System automatically
identifies data leakage, blocks the process and no-
tifies a responsible person.
• We conduct an annual, full-scale information and
cyber security threat assessment against regional
and international best practices, and we regularly
perform cyber-attack readiness exercises among
our employees.
• To further increase our employees’ awareness of
cyber security risks, we annually conduct manda-
64
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR COMMUNITY
Our
Community
We are committed to
creating a better future for
our community by rolling
out large-scale, high impact
projects in the following areas:
business development, youth
support and the preservation
of cultural heritage.
accounting for around 85% of the total spent during
the year. This year, as part of our ESG strategy, we set
a specific target for social impact procurement, which
should amount to at least GEL 5 million by the end of
2023. For more details, please refer to our ESG strategy
on pages 24-35.
For more information about our supply chain manage-
ment, please refer to pages 148-151 of our Sustainability
Report available at www.tbcbankgroup.com.
SUPPORTING THE YOUNG GENERATION
We aspire to support our young generation in their pro-
fessional development through various initiatives and
projects:
•
“TBC Scholarship” is one of our largest social re-
sponsibility projects, which was introduced in 2018
and aims to discover and support young talents.
Since the launch of the project, TBC has supported
350 talented youth in receiving proper education
and advancing their professional development.
This year, 45 more people joined the programme.
The project participants include artists, athletes,
scientists and inventors.
• Since 2019, TBC Bank has sponsored the Tbilisi
International Book Festival, the largest event in the
country in the book sector bringing together writ-
ers, publishers and readers. This year, the 23rd Tbili-
si International Book Festival was held.
• For the last seven years, TBC Bank has been the
main partner of the “Leonardo da Vinci” Young Re-
searchers and Innovators Annual Competition for
high school students. The purpose of the compe-
65
TBC BANK MANAGEMENT REPORT 2021ENCOURAGING MSME BUSINESS DEVELOPMENT AND ENTREPRENEURSHIPTBC distinguishes itself through advocacy and sup-port for 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 un-employment and boosts economic growth. We assist businesses through the provision of both financial and non-financial support, including: easing access to cap-ital, sharing knowledge and expertise, and developing products and services specially customized for busi-ness needs. For this reason, in 2021, TBC partnered with international organizations for the following initiatives:• TBC Bank has been a crucial contributor to US-AID’s new initiative of establishing the Grace Hop-per Award, which intends to recognize and inspire more Georgian women in the information and communication technology (ICT) industry. This year, several female startup representatives were recognized for their outstanding performance in the ICT field. TBC Bank helped the development of the project via a large scale communications cam-paign, awarded winners in two categories (emerg-ing leader and tech startup), and provided skills and business development opportunities specifically tailored to the needs of the award winners.• TBC Bank has signed a memorandum with UNDP Georgia to support early-stage social entrepre-neurs, to empower young people and improve access to finance in the regions. This programme focuses on educating students in the field of so-cial entrepreneurship and offers them a ten-month training course to implement their own business ideas. TBC Bank provided monetary awards, as well as media and marketing support.For more information about our business support pro-grammes, please refer to our MSME section on pages 42-47. PRIORITIZING LOCAL BUSINESSES AMONG OUR SUPPLIERSWe are committed to responsible purchasing practic-es and work with companies that uphold our values and comply with our procurement standards and code of ethics. Furthermore, we prioritize local suppliers1 in order to support Georgian businesses. In 2021, around 90% of the Bank’s suppliers were Georgian companies, OUR STAKEHOLDERS
OUR COMMUNITY CONTINUED
tition is to popularize STEM among students and
help them develop creative thinking and practical
skills. TBC Bank provides marketing support for the
competition, allocates its facilities, and awards the
winners. Since the beginning of the partnership,
TBC Bank has awarded 24 students.
• Furthermore, we run several academies for stu-
dents in different fields, such as IT and Risk, in order
to help them master professions that are in high de-
mand. All courses are offered free of charge and are
run by experienced staff members. We also contin-
ue to run TBC Camp, a programme that was estab-
lished 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 inten-
sive online lectures, trainings and the preparation
of real investment cases in selected companies,
which are presented to a panel of judges. Selected
teams are awarded special prizes.
• This year, TBC launched a new subscription model
“TBC Z”, which is tailored to the specific needs of
the young generation and includes student cards
with special benefits, cashbacks and various dis-
counts. For more details, please refer to the retail
section of our Business review on pages 36-41.
PRESERVING CULTURAL HERITAGE
TBC has always played an active role in preserving
Georgian heritage. Our major current projects include
the following:
• Since 2003, TBC has been the major sponsor
of the Saba Literary award, which is the most im-
portant literary event in the country. This year,
up to 300 books were reviewed and the win-
ners were revealed in ten categories. We also run
www.saba.com.ge, the
largest online platform
for Georgian electronic and audio books, which
was established in 2012 and provides access to
over 6,700 audio and electronic books to around
380,000 users.
• Our cooperation with the Georgian National Mu-
seum and Vani Archeological Museum, one of the
first archeological museums in the Caucasus re-
gion, started in 2019. We support the museums in
presenting national treasures in modern and digital
formats to the public. This year, the Vani Archeo-
logical Museum, together with TBC Bank, hosted
a unique archeological exhibition from the Pompeii
Archeological Park.
• We have been promoting Georgian textile in coop-
eration with the Art Palace of Georgia since 2020.
The project aims to give new life to the tradition-
al and historical textiles of Georgia that were worn
centuries ago. This year more than 1,000 items were
created by new startups and designers.
• This year we supported a new project, which aims
66
to further promote the Georgian textile, as well as
support women in the rural communities. Adjarian
embroidery is a part of dowry tradition in the re-
mote mountainous villages of a Georgian region
Adjara. This craft was created and mastered by the
local women, who have passed it down to genera-
tions for centuries. Within the scope of this project,
a documentary film was created as well as exhibi-
tion and a panel discussion were held to popularize
this lesser-known tradition.
• The Georgian Fonts Competition “Georgian -A”
was launched in 2017 and aims to adapt the Geor-
gian alphabet to the modern world in order to
spread and popularize it both inside the country
and abroad. Within the framework of the competi-
tion, the participants are requested to develop new
Georgian fonts, with the winning fonts being digi-
talized with TBC’s support. Since the launch of the
project, about 350 fonts have been developed and
30 have been digitalized.
SUPPORTING UKRAINIAN PEOPLE
We would like to demonstrate our support to the
Ukrainian people over the recent events. TBC is in-
volved in a number of initiatives in this regard. We have
waived the fees on international bank transfers from
TBC Bank to Ukraine. We have also set up a local bank-
ing account, which allows our customers to make do-
nations to the Ukrainian charity fund. On its part, TBC
has allocated GEL 200,000. In addition, we facilitate
delivery of humanitarian aid to Ukraine.
1 Local suppliers include Georgian resident companies that sell
locally produced, as well as imported goods or services.
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR ENVIRONMENTAL MANAGEMENT SYSTEM
Our Environmental
Management System
As the largest financial
institution in the country, we
believe that we can make a
positive contribution towards
tackling the climate change
and accelerating transition to a
low-carbon economy.
CALCULATION OF GREENHOUSE GAS (“GHG”)
EMISSIONS
Since banking is not a high-polluting activity, the imple-
mentation of an internal EMS to address the Group’s
consumption of resources is not expected to have a
significant impact on the surrounding environment.
However, TBC Bank has reviewed all the operation-
al activities, procured items, and outsourced services
that it can control (present and planned), and has iden-
tified all the material environmental aspects relevant to
the business. These are sub-categorised into indirect
and direct environmental aspects, analyzed based on a
comprehensive scorecard, and managed accordingly.
TBC Bank has established a comprehensive internal
environmental system to manage and report its GHG
emissions within the Group and is committed to re-
ducing its GHG emissions by closely monitoring its
consumption of energy, water and paper. The guide-
lines for documenting environmental data were devel-
oped 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.
67
TBC BANK MANAGEMENT REPORT 2021TBC Bank has a comprehensive Environmental Policy in place, which governs our Environmental Manage-ment System (“EMS”) within the Group and ensures that we comply with applicable environmental, health and safety and labour regulations, use sound environ-mental, health and safety, and labour practices, and take reasonable steps to make sure that our customers also fulfill their environmental and social responsibil-ities. Our Environmental Policy is fully compliant with Georgian environmental legislation and follows inter-national best practices (the full policy is available at www.tbcbankgroup.com). Our Environmental and Social Risk Management (ESRM) team is comprised of three full-time employ-ees and is part of the SME and Corporate Business Credit Risk Department, which reports directly to the Chief Risk Officer. Our ESRM team is responsible for overseeing the operation of our EMS across the Group. It also provides assistance to our subsidiaries on envi-ronmental and social issues and conducts trainings on a regular basis. The ESRM team reports environmental management plans and results to the Environmental Committee on a quarterly basis. Our EMS is based on four pillars: • Internal environmental activities;• Environmental and social risk management in lend-ing; • Sustainable finance; and • External communications.Since 2020, the Bank has held ISO 14001:2015 certifica-tion, which serves as testament that our EMS is in full compliance with international standards.In 2021, TBC Bank released its second full-scale Sus-tainability Report, which was prepared in reference to Global Reporting Initiative (GRI) standards and helps the company to understand its role and influence on sustainable development issues such as climate change, human rights and social welfare. OUR STAKEHOLDERS
OUR ENVIRONMENTAL MANAGEMENT SYSTEM CONTINUED
Total GHG emissions (CO2) (tonnes) and KPIs
Scope1**
Fuel Combustion (heating, vehicles,generators)
Scope2
(Electricity consumption)
Scope3
(International flights)
Total emissions (tCO2)
Total emission per full time employee (tCO2/pp)
Water consumption per employee (m3/pp)
Printing paper per person in reams
* The data is given for the Bank only
** Scope 1 :
2019*
1,897
1,088
564
3,549
0.57
14.40
19.62
2020
2,970
1,524
106
4,600
0.65
10.72
13.46
2021
2022 KPI (increase)
3,102
1,499
18
4,619
0.60
9.54
13.50
Below 4%
Below 2%
-
Below 3%
Below 3%
Below 1.5%
Below 0.4%
a. 1,505 CO2e emissions in tonnes (from combustion of fuel (NG) from owned operation and facilities of TBC Bank) in 2021 compared to 1,609 CO2e
in 2020 and 1,318 CO2e in 2019.
b. 1,500 CO2e emissions in tonnes (from owned vehicles of TBC Bank) in 2021 compared to 1,285 tCO2e in 2020 and 491 tCO2e in 2019.
c. 97 CO2e emissions in tonnes (from owned generators of TBC Bank) in 2021 compared to 76 tCO2e in 2020 and 88 tCO2e in 2019.
Scope 1 - In 2021, this indicator increased by 4% compared to 2020 on the Group level (versus the 2021 target level of
6% reduction). On standalone basis, the Bank managed to reduce it by 6% (93,000 CO2kge) year-on-year. However,
this positive impact was offset by increase of fuel consumption by the vehicles of our subsidiary companies.
Scope 2 – In 2021, total electricity consumption of the Group remained broadly stable year-on-year (compared to the
2021 target level of 5% reduction), while the Bank managed to reduce it by 7% (around 95,800 CO2kge) over the same
period .
Scope 3 - Due to the COVID-19 pandemic, business flights decreased by around 83% compared to 2020.
Overall, total emissions remained broadly stable in 2021 compared to 2020 levels, while total emission per full time
employee decreased by 8% over the same period, compared to the 2021 target level of 5% reduction.
In 2021, the water consumption per employee decreased by 11% year-on-year compared to the 2021 target level of 5%
reduction, while usage of printing paper remained broadly the same.
Calculation methodology
To calculate the GHG inventory, we took following steps: we set the organizational boundaries, established the oper-
ational scope, and developed a structured approach for data collection and the calculation of carbon dioxide (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 applica-
ble to the business. In preparing 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 report 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 natural 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 conversion factor for National
IPCC emission factors for electricity (tCO2*/MWhe) was used.
Scope 3 includes emissions from air business travels (a short haul, a medium haul, a long haul and an international
haul); it should be noted that information on the travel class was considered and an “economy class” conversion factor
has been used for the emissions calculation from the following link: www.atmosfair.de.
68
TBC BANK MANAGEMENT REPORT 2021 ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT IN LENDING
We are committed to ensuring that our customers fulfill their environmental and social responsibilities. For this pur-
pose, we have Environmental and Social Risk Management (ESRM) Procedures in place, which are fully integrat-
ed into the credit risk management process and ensure that appropriate, risk-based, sector specific, environmental
and social risk assessment is applied to our commercial lending activities. Our procedures incorporate appropriate
consideration of IFC’s Performance Standards and EBRD’s Performance Requirements. This approach enables us to
effectively manage credit and reputational risks that could arise from the environmental and social non-compliance
by our clients.
We closely screen and assess our business portfolio distribution in terms of environmental and social risk categories
and strive to reduce the share of impactful industries. 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.
BUSINESS LOANS PORTFOLIO BREAKDOWN BY E&S CATEGORIES
A category
0.3%
0.3%
High
Medium
Low
30.0%
29.1%
11.1%
9.8%
2021
2020
58.6%
60.8%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
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 customer’s [assent/cer-
tification/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 num-
ber, generally site-specific, largely reversible, clearly evident at the time of the assessment, and readily 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.
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.
In addition, we strive to make a positive contribution to the development of private companies and assist them in
proper management of environmental and social risks related to their business activities. In case we identify any
non-compliance with local legislative requirements and/or TBC’s standards, we develop an Environmental and Social
Action Plans (ESAP) for our clients to assist them in enhancing their environmental performance and closely monitor
its implementation.
69
TBC BANK MANAGEMENT REPORT 2021 OUR STAKEHOLDERS
OUR ENVIRONMENTAL MANAGEMENT SYSTEM CONTINUED
GREEN LENDING DEVELOPMENT
We acknowledge the importance of sustainable lending and are actively involved in developing a standardized ap-
proach to sustainable finance, including energy efficiency, renewable energy and resource efficiency financing for
our retail and business clients. TBC is a leading partner in Georgia in local renewable energy financing, including
hydropower stations.
In 2021, TBC Bank became the first commercial bank in the Caucasus region to receive accreditation by the Green
Climate Fund (GCF). The accreditation will enable the Bank to have direct access to GCF funding to finance projects
for adaptation to, and mitigation of, climate change and contribute to combatting climate change in Georgia.
This year, we also conducted local market research to determine TBC’s green criteria, which have been adapted to
the Georgian reality, and developed Green Lending Procedures. This research was done in cooperation with the
Green for Growth Fund (GGF) Technical Assistance Facility, represented by Finance in Motion GmbH, and was fi-
nanced by the European Union under the EU4Energy Initiative. These procedures will help the Bank to identify green
and environmentally friendly initiatives and encourage private companies to move to sustainable investment in their
businesses, thus contributing to climate change mitigation.
During 2021, our sustainable portfolio achieved 761,446 CO2kg/a in CO2 savings according to the date provided by
our green facility fund providers. Over the same period, our renewable energy portfolio impact (avoided GHG emis-
sions) amounted to 9,455 kg/a according to the estimates of the external consultant under the Green for Growth Fund
(GGF) Technical Assistance Facility represented by Finance in Motion GmbH financed by the European Union under
the EU4Energy Initiative.
OUR SUSTAINABLE PORTFOLIO BREAKDOWN
2%
6%
9%
Renewable Energy (RE)
Youth Support
Energy Efficiency (EE)
Women in Business (WiB)
83%
Note: Our sustainable loan portfolio includes energy efficiency, youth support and women in business loans financed by special purpose funds re-
ceived from IFIs, as well as loans financing renewable energy, which include all hydro power plants financed by the Bank
SUPPLY CHAIN MONITORING
As one of the largest purchasers in the country, we acknowledge and understand the social, economic and envi-
ronmental impact of our procurement decisions and operations as well as our requirements towards suppliers. In
2019, we developed an Environmental and Social Risk Management Questionnaire in order to screen suppliers. We
also regularly assess our long-term contractor companies’ environmental and social risks. In case we identify any
non-compliance with our E&S standards, our ESRM team develops implementation Environmental and Social Action
Plans (“ESAPs”) for each company and monitors their implementation
70
TBC BANK MANAGEMENT REPORT 2021 RAISING ENVIRONMENTAL AWARENESS AMONG TBC EMPLOYEES
We believe that raising environmental awareness among our employees is vital for the effective implementation of
EMS and to encourage new eco-friendly ideas and initiatives within the organization.
For this purpose, we actively run various Environmental and Social training programmes, which include:
“Welcome” training;
•
• Training for new employees;
• E&S training for credit staff;
• Annual mandatory online EMS e-learning course for all staff, followed by a self-evaluation test; and
• Mandatory on-boarding training.
In 2021, 95% of all staff, including senior management, successfully passed an online course and a self-evaluation test
about TBC’s EMS.
To ensure effective communication, video materials were created that briefly describe TBC’s environmental man-
agement system.
EXTERNAL COMMUNICATION
TBC pays significant attention to external communication about E&S matters with existing and potential customers
and other stakeholders. The feedback and recommendations received from our stakeholders and other interested
parties enable us to continuously improve our E&S performance.
Our grievance mechanism enables any interested party to provide complaints with regards to E&S issues via our
website www.tbcbank.com.ge. All complaints are thoroughly analysed and addressed in a timely manner. In 2021, no
such complaints were received.
TBC Bank also takes an active part in raising awareness of renewable energy, climate change adaptation and green
financing opportunities in Georgia. For this purpose, in partnership with the European Bank for Reconstruction and
Development (EBRD)’s Green Economy Financing Facility programme (GEFF), we organized a Green Economy forum
and also participated in the Annual Sustainable Finance Forum organized by GreenPact, discussing green finance
practices with regional and local banks.
71
TBC BANK MANAGEMENT REPORT 2021 FINANCIAL REVIEW
Financial Review
Income Statement Highlights
In thousands of GEL
Net interest income
Net fee and commission income
Other operating non-interest income
Total credit loss recovery/(allowance)*
Operating income after expected credit and non-financial asset
impairment losses
Losses from modifications of financial instrument
Operating expenses
Profit before tax
Income tax (expense)/credit
Profit for the period
2021
995,792
224,887
177,229
21,034
1,418,942
(1,726)
(454,993)
962,223
(119,278)
842,945
2020
(as restated)
Change YoY
827,699
168,779
118,585
(356,381)
758,682
(41,015)
(385,469)
332,198
5,062
337,260
20.3%
33.2%
49.5%
NMF
87.0%
-95.8%
18.0%
NMF
NMF
NMF
* Certain amounts do not correspond to 2020 Consolidated Statement of Profit or Loss and Other Comprehensive Income as they reflect the re-
classification made by the management between net impairment of non-financial assets and administrative and other operating expenses. For more
information, please refer to the note 2 of the financial statements.
Balance sheet and capital highlights
In thousands of GEL
Total assets
Gross loans
Customer deposits
Total equity
CET 1 capital (Basel III)
Tier 1 capital (Basel III)
Total capital (Basel III)
Risk-weighted assets (Basel III)
Key Ratios
ROE
ROA
NIM
Cost to income
Cost of risk
NPL to gross loans
NPL provision coverage ratio
Total NPL coverage ratio
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total CAR (Basel III)
Leverage (Times)
72
31-Dec-21
31-Dec-20
Change YoY
24,039,512
22,398,962
16,954,553
15,200,515
14,884,145
3,590,055
2,759,894
3,379,414
4,102,927
12,634,295
2,830,180
1,911,233
2,385,181
3,137,912
20,217,629
18,301,477
7.3%
11.5%
17.8%
26.8%
44.4%
41.7%
30.8%
10.5%
2021
26.3%
3.7%
5.0%
32.5%
-0.3%
2.4%
99.2%
174.6%
13.7%
16.7%
20.3%
6.7x
2020
Change YoY
12.9%
1.7%
4.7%
34.6%
2.4%
4.7%
85.6%
159.4%
10.4%
13.0%
17.1%
7.9x
13.4 pp
2.0 pp
0.3 pp
-2.1 pp
-2.7 pp
-2.3 pp
13.6 pp
15.2 pp
3.3 pp
3.7 pp
3.2 pp
-1.2x
TBC BANK MANAGEMENT REPORT 2021 NET INTEREST INCOME
In 2021, net interest income amounted to GEL 995.8 million, up by 20.3% YoY, whereby interest income and interest
expense increased by 12.2% and 4.8%, respectively.
The YoY increase in interest income was primarily related to an increase in interest income from loans, which was
related both an increase in the gross loan portfolio of GEL 1,754.0 million, or 11.5%, and a rise in loan yield of 0.1 pp. The
upper loan rate was due a shift of the portfolio composition towards GEL loans.
The increase in interest expense was primarily related to an increase in interest expense from deposits, which was
due to an increase in the respective portfolio of GEL 2,249.9 million, or 17.8%. Over the same period, the cost of depos-
its declined by 0.2 pp. In addition, the change in the liability structure towards deposits (from 65% as of 31 December
2020 to 73% as of 31 December 2021, as mentioned above) had a positive effect on the cost of funding. As a result, the
cost of funding decreased by 0.4 pp YoY and stood at 4.4% in 2021.
In 2021, our NIM stood at 5.0%, up by 0.3 pp YoY.
In thousands of GEL
Interest income
Interest expense
Net gains from currency swaps
Net interest income
NIM
NON-INTEREST INCOME
2021
2020
Change YoY
1,863,077
1,660,838
(895,428)
(854,089)
28,143
995,792
5.0%
20,950
827,699
4.7%
12.2%
4.8%
34.3%
20.3%
0.3 pp
Total other non-interest income increased by 39.9% YoY and amounted to GEL 402.1 million in 2021. The YoY growth
was driven by a strong rebound across all categories, further amplified by a gain from sale of one of our investment
properties in the amount of GEL 26.3 million in 2Q 2021 (the gain from this transaction is included in other operating
income).
In thousands of GEL
Non-interest income
Net fee and commission income
2021
2020
Change YoY
224,887
168,779
33.2%
17.3%
NMF
39.9%
Net gains from currency derivatives, foreign currency operations and translation
124,194
105,855
Other operating income
Total other non-interest income
CREDIT LOSS ALLOWANCE
53,035
12,730
402,116
287,364
Total credit loss allowance in 2021 amounted to GEL 21.0 million. This significant decrease on a YoY basis was driven
by improved performance across all segments in 2021 and by a high base in 2020, due to the reflection of COVID-19
impact on the credit loss allowances.
In thousands of GEL
Credit loss recovery/(allowance) for loans to customers
Credit loss recovery/(allowance) for other transactions*
Total credit loss recovery/(allowance)*
Operating income after expected credit and non-financial asset
impairment losses*
Cost of risk
2021
43,176
(22,142)
21,034
1,418,942
-0.3%
2020
(as restated)
Change YoY
(330,811)
(25,570)
(356,381)
758,682
NMF
-13.4%
NMF
87.0%
2.4%
-2.7 pp
* Certain amounts do not correspond to 2020 operating income after expected credit and non-financial asset impairment losses as they reflect the
reclassifications made by the management between net impairment of non-financial assets and administrative and other operating expenses. For
more information, please refer to the note 2 of the financial statements.
NMF – no meaningful figures
73
TBC BANK MANAGEMENT REPORT 2021
OPERATING EXPENSES
In 2021, our total operating expenses expanded by 18.0% YoY.
In 2021, the increase in our operating expenses was mainly driven by staff costs, due to higher performance related
costs, including management’s variable compensation. At the same time, the increase in administrative and other
expenses across the board was due to low base in 2020 and increased business activities.
The cost to income ratio stood at 32.5%, down by 2.1 pp YoY.
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
2021
(255,747)
-
(70,622)
(128,624)
(454,993)
32.5%
2020
(as restated)
Change YoY
(206,887)
(2,600)
(64,068)
(111,914)
(385,469)
34.6%
23.6%
-100.0%
10.2%
14.9%
18.0%
-2.1 pp
* Certain amounts do not correspond to 2020 operating expense figures as they reflect the reclassifications made by the management between net
impairment of non-financial assets and administrative and other operating expenses. For more information, please refer to the note 2 of the financial
statements.
NET INCOME
In 2021, our record high profitability was driven by strong income generation across all categories, as well as strong
performance on asset quality side.
As a result, our ROE stood at 26.3%, ROA stood at 3.7%.
In thousands of GEL
Losses from modifications of financial instruments
Profit before tax
Income tax (expense)/credit
Profit for the year
ROE
ROA
FUNDING AND LIQUIDITY
2021
(1,726)
962,223
(119,278)
842,945
26.3%
3.7%
2020
Change YoY
(41,015)
332,198
5,062
337,260
12.9%
1.70%
-95.8%
NMF
NMF
NMF
13.4 pp
2.0 pp
In 2021, we utilized excess liquidity generated in 2020 and our liquidity coverage ratio, as defined by the NBG was
115.8%, above the 100% limit, while the LCR in GEL and FC stood at 107.7% and 120.8% respectively, above the respec-
tive limits of 75% and 100%.
As of 31 December 2021, NSFR stood at 127.3%, compared to the regulatory limit of 100%.
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 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-21
31-Dec-20
Change YoY
100.0%
127.3%
101.3%
6.7x
100.0%
75%*
100.00%
115.8%
107.7%
120.8%
100.0%
126.0%
100.7%
7.9x
100.0%
n/a
100.0%
134.2%
132.2%
134.9%
0.0 pp
1.3 pp
0.6 pp
-1.2x
0.0 pp
NMF
0.0 pp
-18.4 pp
-24.5 pp
-14.1 pp
* In May 2021, NBG restored the NBG GEL LCR limit, which was temporarily removed for one year
74
TBC BANK MANAGEMENT REPORT 2021FINANCIAL REVIEW CONTINUED
REGULATORY CAPITAL
On a YoY basis, the Bank’s CET1, Tier 1 and Total capital adequacy ratios increased by 3.3 pp, 3.7 pp and 3.2 pp, respec-
tively. This increase was mainly driven by strong net income generation, the issuance of an AT1 Bond in November
2021 in the amount of USD 75 million, and by local currency appreciation, which was partially offset by an increase in
the loan book.
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
LOAN PORTFOLIO
31-Dec-21
31-Dec-20
Change YoY
2,759,894
3,379,414
4,102,927
1,911,233
2,385,181
3,137,912
20,217,629
18,301,477
11.7%
13.7%
14.0%
16.7%
18.4%
20.3%
7.4%
10.4%
9.2%
13.0%
13.7%
17.1%
44.4%
41.7%
30.8%
10.5%
4.3 pp
3.3 pp
4.8 pp
3.7 pp
4.7 pp
3.2 pp
As of 31 December 2021, the gross loan portfolio reached GEL 16,954.6 million, up by 11.5% YoY or by 17.3% on a con-
stant currency basis. The proportion of gross loans denominated in foreign currency decreased by 5.7 pp YoY and
accounted for 53.7% of total loans, while on a constant currency basis the proportion of gross loans denominated in
foreign currency was down by 3.4 pp YoY and stood at 56.0%.
As of 31 December 2021, our market share in total loans stood at 38.8%, down by 0.2 pp YoY, while our loan market
share in legal entities was 39.1%, up by 0.5 pp over the same period, and our loan market share in individuals stood at
38.6%, down by 0.8 pp YoY.
In thousands of GEL
Loans and advances to customers
Retail
– Retail loans GEL
– Retail loans FC
CIB
– CIB loans GEL
– CIB loans FC
MSME
– MSME loans GEL
– MSME loans FC
31-Dec-21
31-Dec-20 Change YoY
6,265,507
3,580,468
2,685,039
6,547,741
2,188,776
4,358,965
4,141,305
2,082,204
2,059,101
5,846,274
3,007,482
2,838,792
5,831,871
1,599,857
4,232,014
3,522,370
1,559,127
1,963,243
7.2%
19.1%
-5.4%
12.3%
36.8%
3.0%
17.6%
33.5%
4.9%
11.5%
Total loans and advances to customers
16,954,553
15,200,515
The comparative numbers for 2020 do not correspond with the numbers disclosed in 2020 report, since they include re-segmentation effects as de-
scribed in note 28 of the financial statements, with the exception of standard annual re-segmentation.
75
TBC BANK MANAGEMENT REPORT 2021 Loan yield
– Loan yield GEL
– Loan yield FC
Retail Loan Yield
– Retail loan yield GEL
– Retail loan yield FC
CIB Loan Yield
– CIB loan yield GEL
– CIB loan yield FC
MSME Loan Yield
– MSME loan yield GEL
– MSME loan yield FC
2021
10.2%
15.1%
6.5%
11.5%
16.1%
6.1%
9.0%
13.7%
7.0%
10.2%
14.9%
6.0%
2020
Change YoY
10.1%
15.2%
6.7%
11.5%
16.5%
6.6%
8.6%
13.2%
7.0%
10.2%
14.9%
6.3%
0.1 pp
-0.1 pp
-0.2 pp
0.0 pp
-0.4 pp
-0.5 pp
0.4 pp
0.5 pp
0.0 pp
0.0 pp
0.0 pp
-0.3 pp
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation.
LOAN PORTFOLIO QUALITY
On a YoY basis, total par 30 improved by 0.6 pp. The decrease was mainly driven by the Retail segment on the back
of write-offs of the unsecured loans and strong performance of the mortgage portfolio.
Our NPL ratio improved by 2.3 pp YoY and amounted to 2.4%. The recovery was observed in all segments, mainly
driven by resumed repayments on COVID-19 restructured loans.
Par 30
Retail
CIB
MSME
Total loans
31-Dec-21
31-Dec-20 Change YoY
2.2%
0.6%
4.0%
2.0%
3.5%
1.0%
3.7%
2.6%
-1.3 pp
-0.4 pp
0.3 pp
-0.6 pp
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation.
Non-performing Loans
31-Dec-21
31-Dec-20 Change YoY
Retail
CIB
MSME
Total loans
2.5%
1.4%
4.0%
2.4%
5.8%
2.4%
6.5%
4.7%
-3.3 pp
-1.0 pp
-2.5 pp
-2.3 pp
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation.
NPL coverage
31-Dec-21
31-Dec-20
Provision Coverage
Total Coverage
Provision Coverage
Total Coverage
Retail
CIB
MSME
Total
157.0%
56.8%
68.0%
99.2%
222.7%
126.4%
155.5%
174.6%
102.4%
77.1%
66.4%
85.6%
170.3%
148.0%
150.5%
159.4%
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation. In addition, in 2021 the management changed collateral
coverage methodology and applied a more conservative approach. The total NPL coverages for 2020 have been recalculated per updated method-
ology.
76
TBC BANK MANAGEMENT REPORT 2021FINANCIAL REVIEW CONTINUED
COST OF RISK
The total cost of risk for 2021 stood at -0.3%, driven by improved performance across all segments in 2021 and by a
high base in 2020 due to the reflection of COVID-19 impact on the credit loss allowances.
Cost of risk
Retail
CIB
MSME
Total
2021
0.4%
-1.0%
-0.2%
-0.3%
2020
3.8%
0.6%
3.0%
2.4%
Change YoY
-3.4 pp
-1.6 pp
-3.2 pp
-2.7 pp
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation.
DEPOSIT PORTFOLIO
The total deposits portfolio increased by 17.8% YoY across all segments and amounted to GEL 14,884.1 million, while
on a constant currency basis the total deposit portfolio increased by 23.1% over the same period. The proportion of
deposits denominated in foreign currency was down by 3.2 pp YoY and accounted for 62.8% of total deposits, while
on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 1.6 pp YoY
and stood at 64.4%.
As of 31 December 2021, our market share in deposits amounted to 40.4%, up by 3.2 pp YoY, and our market share in
deposits to legal entities stood at 40.5%, up by 6.0 pp over the same period. Our market share in deposits to individ-
uals stood at 40.3%, up by 0.8 pp YoY.
In thousands of GEL
Customer Accounts
Retail
– Retail deposits GEL
– Retail deposits FC
CIB
– CIB deposits GEL
– CIB deposits FC
MSME
– MSME deposits GEL
– MSME deposits FC
31-Dec-21
31-Dec-20
Change YoY
5,629,823
1,492,325
4,137,498
7,378,552
2,970,310
4,408,242
1,564,150
761,493
802,657
4,975,661
1,236,594
3,739,067
5,778,914
1,890,889
3,888,025
1,368,490
661,941
706,549
13.1%
20.7%
10.7%
27.7%
57.1%
13.4%
14.3%
15.0%
13.6%
17.8%
Total Customer Accounts*
14,884,145
12,634,295
* Total deposit portfolio includes Ministry of Finance deposits in the amount of GEL 511 million and GEL 312 million as of 31 December 2020 and 31
December 2021, respectively.
The comparative numbers for 2020 do not correspond with the numbers disclosed in 2020 report, since they include re-segmentation effects as de-
scribed in note 28 of the financial statements, with the exception of standard annual re-segmentation.
Deposit rate
– Deposit rate GEL
– Deposit rate FC
Retail Deposit Yield
– Retail deposit rate GEL
– Retail deposit rate FC
CIB Deposit Yield
– CIB deposit rate GEL
– CIB deposit rate FC
MSME Deposit Yield
– MSME deposit rate GEL
– MSME deposit rate FC
2021
3.4%
6.7%
1.5%
2.2%
4.9%
1.3%
4.3%
8.5%
2.0%
0.8%
1.4%
0.2%
2020
Change YoY
3.6%
6.5%
2.0%
2.6%
5.3%
1.7%
4.4%
8.1%
2.5%
0.9%
1.6%
0.3%
-0.2 pp
0.2 pp
-0.5 pp
-0.4 pp
-0.4 pp
-0.4 pp
-0.1 pp
0.4 pp
-0.5 pp
-0.1 pp
-0.2 pp
-0.1 pp
The comparative ratios for 2020 do not correspond with the ratios disclosed in 2020 report, since they include re-segmentation effects as described
in note 28 of the financial statements, with the exception of standard annual re-segmentation.
77
TBC BANK MANAGEMENT REPORT 2021
RATIOS
Ratios (based on monthly averages, where applicable)
2021
2020
Profitability ratios:
ROE
ROA
Cost to income
NIM
Loan yield
Deposit rate
Cost of funding
Asset quality & portfolio concentration:
Cost of risk
PAR 90 to Gross Loans
NPLs to Gross Loans
NPL provision coverage
Total NPL coverage**
Credit loss level to Gross Loans
Related Party Loans to Gross Loans
Top 10 Borrowers to Total Portfolio
Top 20 Borrowers to Total Portfolio
Capital & liquidity positions:
Net Loans to Deposits plus IFI*** Funding
Net Stable Funding Ratio
Liquidity Coverage Ratio
Leverage
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total 1 CAR (Basel III)
26.3%
3.7%
32.5%
5.0%
10.2%
3.4%
4.4%
-0.3%
1.2%
2.4%
99.2%
174.6%
2.4%
0.1%
6.9%
10.6%
101.3%
127.3%
115.8%
6.7x
13.7%
16.7%
20.3%
12.9%
1.7%
34.6%
4.7%
10.1%
3.6%
4.8%*
2.4%
1.5%
4.7%
85.6%
159.4%
4.0%
0.0%
7.9%
12.1%
100.7%
126.0%
134.2%
7.9x
10.4%
13.0%
17.1%
*The Group enters into swap agreements denominated in foreign currencies with a view to decrease cost of funding. Respective interest effect is
presented within net interest income, but has not been previously included in the cost of funding ratio calculation. As the contracts reached significant
volume, the Group revisited the presentation of effects in the cost of funding ratio and decided to include interest effect from swap agreements in the
calculation of cost of funding. The change was made retrospectively and ratios of previous periods have also been restated.
** In 2021 the management changed collateral coverage methodology and applied a more conservative approach. The total NPL coverage for 2020
have been recalculated per updated methodology.
*** International Financial Institutions
The ratio definitions are given on pages 267-268.
78
TBC BANK MANAGEMENT REPORT 2021FINANCIAL REVIEW CONTINUED MATERIAL EXISTING AND EMERGING RISKS
Material Existing and
Emerging Risks
The emergence of the COVID-19 pandemic has en-
hanced 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
uncertainties 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 perfor-
mance being affected by risks and uncertainties oth-
er than those listed below. More details regarding risk
management practices can be found on pages 88-103.
At the time of writing this report, there is uncertainty
around the war in Ukraine, its potential impact is sum-
marized in the emerging risks section.
The Supervisory Board has undertaken a robust as-
sessment 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. Based
on the review and analysis the Supervisory Board con-
firmed that they have a reasonable expectation of the
Group’s viability over the next three years up to 1 Janu-
ary 2025 and that the Group will be able to continue its
operations and meet its liabilities as they fall due over
the three year period from 1 January 2022 to 1 January
2025.
PRINCIPAL RISKS AND UNCERTAINTIES
1. Credit risk is an integral part of the Group’s busi-
ness activities
Risk description
Credit risk is the greatest material risk faced by the
Group, given the Group is engaged principally in tra-
ditional lending activities. The Group’s customers in-
clude legal entities as well as individual borrowers.
Due to the high level of dollarization in Georgia’s fi-
nancial 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 in-
cludes 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 unfa-
vorable macroeconomic conditions. These risks are de-
scribed in more detail as a separate principal risk.
COVID-19 has increased uncertainty and caused signif-
icant economic disruptions in many sectors, particularly
in the hospitality & leisure, real estate management and
development sectors. Such economic disruptions run
the risk of deteriorating the financial standing of bor-
rowers and increase the Group’s credit risk.
Risk mitigation
A comprehensive credit risk assessment framework is
in place with a clear division of duties among the par-
ties involved in the credit analysis and approval process.
The credit assessment process differs by segment, 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 deci-
sion-making process for smaller retail and micro loans
is largely automated. The rules for manual and automat-
ed underwriting are developed by units within the risk
function, which are independent from the origination
and business development units. The credit scoring
and underwriting models are developed by an inde-
pendent Credit Modelling team, within the risk function
and the developed models are then validated as well by
another independent Model Risk Management team,
also from the risk function. In the case of corporate and
medium-sized business borrowers, the loan review pro-
cess 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, identify
weaknesses in the credit portfolio and outline solutions
to make informed risk management decisions.
Monitoring processes are tailored to the specifics of in-
dividual segments, as well as encompassing individual
credit exposures, overall portfolio performance and ex-
ternal trends that may impact the portfolio’s risk profile.
Additionally, the Group uses a comprehensive portfolio
supervision system to identify weakened credit expo-
sures and take prompt, early remedial actions, when
necessary.
79
TBC BANK MANAGEMENT REPORT 2021 The Group’s credit portfolio is highly diversified across
customer types, product types and industry segments,
which minimizes credit risk at the Group level. As of 31
December 2021, the retail segment represented 37.0%
of the total portfolio, which was comprised of 65.6%
mortgage and 34.4% non-mortgage exposures. No
single business sector represented more than 9.4% of
the total portfolio at the end of 2021.
Collateral represents the most significant credit risk
mitigation tool for the Group, making effective col-
lateral 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 2021, 77.3% of the
Group’s portfolio was secured by cash, real estate or
gold. A sound collateral management framework en-
sures that collateral serves as an adequate mitigating
factor for credit risk management purposes.
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 about the depreciation of the
local currency, GDP growth, sectoral growth, unem-
ployment, inflation, changes in real estate and com-
modity prices, changes in interest rates, and loan and
deposit portfolio developments. The Bank carries out
intensive financial monitoring to identify borrowers’
weakened financial and business prospects in order to
offer them a restructuring plan that is tailored to their
individual needs.
2. The Group faces currency-induced credit risk due
to the high share of loans denominated in foreign
currencies in the Group’s portfolio
Risk description
A potential material GEL depreciation is one of the
most significant risks that could negatively impact
portfolio quality, due to the large presence of foreign
currencies on the Group’s balance sheet. As of 31 De-
cember 2021, 53.7% of the Group’s total gross loans
and advances to customers (before provision for loan
impairment) were denominated in foreign currencies.
The income of many customers is directly linked to
foreign currencies via remittances, tourism or exports.
Nevertheless, customers may not be protected against
significant fluctuations in the GEL exchange rate
against the currency of the loan. The US$/GEL rate re-
mained volatile throughout 2021, with the average cur-
rency exchange rate of GEL weakening by 3.6% year-
on-year. The GEL remains in free float and is exposed
to many internal and external factors that in some cir-
cumstances 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 for-
eign currencies in the Group’s portfolio. The vulnerabil-
ity to exchange rate depreciation is monitored in order
to promptly implement an action plan, as and when
needed. The ability to withstand a certain amount of
exchange rate depreciation is incorporated into the
credit underwriting standards, which also include sig-
nificant currency depreciation buffers for unhedged
borrowers. In addition, the Group holds significant cap-
ital against currency-induced credit risk.
Given the experience and knowledge built through re-
cent 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 the
local currency. In addition, under the NBG’s responsible
lending regulations, unhedged retail borrowers are re-
quired to have much conservative Payment-to-Income
(PTI) and Loan-to-Value (LTV) thresholds.
The Bank has set a strategy to decrease the share of
foreign currency loans in total portfolio. Annual tar-
gets have been defined in the medium-term strategy,
gradually decreasing the foreign currency share. The
Assets and Liabilities Committee (ALCO) is closely
monitoring the achievement of these targets.
3. The Group’s performance may be compromised by
adverse developments in the economic environment
Risk description
A potential slowdown in economic growth in Georgia
will likely have an adverse impact on the repayment
capacity of borrowers, restraining their future invest-
ment and expansion plans. These occurrences would
be reflected in the Group’s portfolio quality and profit-
ability, and would also impede portfolio growth rates.
Negative macroeconomic developments could com-
promise the Group’s performance in various ways,
such as exchange rate depreciation, a spike in interest
rates, rising unemployment, a decrease in household
disposable income, falling property prices, worsening
loan collateralization, or falling debt service capabilities
of companies as a result of decreasing sales. Potential
political and economic instability in neighboring coun-
tries and its main trading/economic partners could
negatively affect Georgia’s economic outlook through
worsening current and financial accounts in the bal-
ance of payments (e.g. decreased exports, tourism in-
flows, remittances and foreign direct investments).
The exogenous nature of the COVID-19 shock implies
the potential for a quick recovery compared to con-
ventional business cycles. While the observed restart
80
TBC BANK MANAGEMENT REPORT 2021MATERIAL EXISTING AND EMERGING RISKS CONTINUED was certainly expected, the Georgian economy has
rebounded at a speed that exceeded initial expecta-
tions, with real GDP increasing by 10.4% year-on-year,
according to the preliminary data of the National Sta-
tistics Office of Georgia (Geostat), as opposed to 4.7%
- estimated at the beginning of the year. Economic
growth was also up by 2.9% compared to the 2019 level.
Importantly, this growth was broad based and was
reflected in all sources of inflows as well as in domes-
tic demand. The latter was fueled by a reversal of the
shock amplifier (low credit and high savings of foreign
currency in 2020), pent-up demand coupled with low
US$ deposit yields, a stronger GEL, and the impact
of eased lockdowns. Stronger domestic demand was
also reflected in higher imports of goods.
By the end of 2021, annual inflation remained elevated
at 13.9%, because of a low base effect a year ago, due to
state subsidies on utilities.
In 2021, the NBG again intervened significantly on the
FX market, mostly in the first half of the year. Over the
course of the year, the NBG increased its policy rate
from 8.0% to 10.5%.
For more details on the developments in the Georgian
economy in 2021, please refer to the economic over-
view section on pages 12-15.
Risk mitigation
To decrease its vulnerability to economic cycles, the
Group identifies cyclical industries and proactively
manages its underwriting approach and clients with-
in 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 and neighboring countries to identi-
fy early warning signals indicating imminent economic
risks. This system allows the Group to promptly assess
significant economic and political occurrences and
analyze their implications for the Group’s performance.
These implications are duly translated into specific
action plans with regards to reviewing underwriting
standards, risk appetite metrics or limits, including the
limits for each of the most vulnerable industries. Ad-
ditionally, the stress testing and scenario analysis ap-
plied during the credit review and portfolio-monitoring
processes enable the Group to evaluate the impact of
macroeconomic shocks on its business in advance.
Resilience towards a changing macroeconomic en-
vironment is incorporated into the Group’s credit un-
derwriting standards. As such, borrowers are expected
to withstand certain adverse economic developments
through prudent 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 exist-
ing stress testing practices. This included more thor-
ough and frequent monitoring of the portfolio as well
as stress testing, to ensure close control of changes
in capital, liquidity, and portfolio quality in times of in-
creased uncertainty.
4. The Group faces the risk of not meeting the min-
imum regulatory requirements under the increasing
capital requirement framework, which may com-
promise growth and strategic targets. Additionally,
adverse changes in FX rates may impact capital ad-
equacy 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 re-
quirement, combined buffers (systemic, countercycli-
cal and conservation buffers) and Pillar 2 buffers.
The initial regulation included a phase-in schedule that
gradually introduced the buffer over a four-year period.
In response to the COVID-19 pandemic, the NBG im-
plemented certain countercyclical measures related to
capital adequacy requirements, temporarily decreas-
ing conservation and two-thirds of CICR buffers and
postponing the phase-in schedule for pillar 2 buffers.
The Bank has restored all released buffers since July
2021, lifting any restrictions on capital distribution.
The NBG outlined a new schedule for the gradual in-
troduction of pillar 2 buffers, with the phase-in of con-
centration risk and Net GRAPE buffers beginning in
March 2021 and due to be fully introduced by March
2023.
In December 2021, the systemic buffer increased from
2.0% to 2.5%, as previously planned. The Bank’s capital-
ization as of December 2021 stood at:
•
•
13.7% for CET 1 with an updated regulatory mini-
mum requirement of 11.7%;
16.7% for Tier 1 with an updated regulatory mini-
mum requirement of 14.0%; and
• 20.3% for Total capital with an updated regulatory
minimum requirement of 18.4%.
The ratios were well above the respective regulatory
minimums.
In 2021, the NBG proposed amendments in the CICR
buffer calculation methodology. According to the new
methodology, which will be effective from March of
2023, current fixed CICR rate (75%) will be flexible in
the range of 40% to 100% depending on the share of
foreign currency loans in total portfolio: the lower is the
share, the lower will be the CICR buffer requirement.
GEL volatility has been and remains a significant risk to
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 ad-
equacy ratios, respectively.
81
TBC BANK MANAGEMENT REPORT 2021 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 min-
imum 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 action, when
needed.
5. The Group is exposed to regulatory and enforce-
ment action risk
Risk description
The Bank’s activities are highly regulated and thus face
regulatory risk. The NBG can increase prudential re-
quirements across the whole sector as well as for spe-
cific institutions within it. Therefore, the Group’s prof-
itability and performance may be compromised by an
increased regulatory burden.
The NBG sets lending limits and other economic ratios
(including, inter alia, lending, liquidity and investment
ratios) in addition to mandatory capital adequacy ratios.
Under Georgian banking regulations, the Bank is re-
quired, among other things, to comply with minimum
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 parent 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 regu-
lated financial services products, including leasing and
brokerage services.
The Group takes all necessary steps with the intention
of ensuring compliance with relevant legislation and
regulations. The Group is also subject to financial cov-
enants in its debt agreements. For more information,
see pages 245-250 in the Group’s Audited Financial
Statements.
Risk mitigation
The Group has established systems and processes to
ensure full regulatory compliance, which are embedded
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 manage-
ment of regulatory compliance risk. The Group’s Risk
Committee is responsible for regulatory compliance at
the Supervisory Board level. In terms of banking regula-
tions 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 consulta-
tion period that allows all lending institutions to provide
feedback and adjust their business practices.
6. The Group is exposed to concentration risk
Risk description
The Group has large individual exposures to sin-
gle-name borrowers whose potential default would
entail 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.
The Group’s maximum exposure to the single largest
industry (Real Estate) stood at 9.4% of the loan portfolio
as of 31 December 2021. At the end of 2021, exposure
to the 20 largest borrowers stood at 10.6% of the loan
portfolio.
Risk mitigation
The Group constantly monitors the concentrations of
its exposure to single counterparties, as well as sectors
and common risk drivers, and introduces limits for risk
mitigation. As part of its risk appetite framework, the
Group limits both single-name and sector concen-
trations. Any considerable change in the economic or
political environment in Georgia or in neighbouring
countries would trigger the Group to review of the risk
appetite criteria to mitigate the emerging risk of con-
centration. Stringent monitoring tools are in place to
ensure compliance with the established limits. Due
to the increased uncertainty caused by the COVID-19
pandemic, close monitoring was carried out consis-
tently, based on macro expectations, to estimate the
performance of our top 20 corporate borrowers.
In addition, the Bank has dedicated restructuring
teams to manage borrowers who face financial dif-
ficulties. When deemed necessary, clients are trans-
ferred to such teams for more efficient handling and,
ultimately, to limit any resulting credit risk losses. The
NBG’s new capital framework introduced a concentra-
tion buffer under Pillar 2 that helps to ensure that the
Group remains adequately capitalised to mitigate con-
centration risks.
7. Liquidity risk is inherent in the Group’s operations
Risk description
While the Group currently has sufficient financial re-
sources available to meet its obligations as they fall
82
TBC BANK MANAGEMENT REPORT 2021MATERIAL EXISTING AND EMERGING RISKS CONTINUED 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 signifi-
cantly 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
interventions, or debt restructurings in a relevant indus-
try) could influence the price or the availability of fund-
ing for companies operating in any of these markets.
The Group was in compliance with the minimum li-
quidity requirements set by the NBG, which include
the Liquidity Coverage Ratio (LCR) and the Net Stable
Funding Ratio (NSFR). As of 31 December 2021, the net
loan to deposits plus international financial institution
funding ratio stood at 101.3%, the liquidity coverage ra-
tio at 115.8%, and the net stable funding ratio at 127.3%.
These figures are all comfortably above the NBG’s
minimum requirements or guidance for such ratios.
In May 2021, the NBG restored the NBG GEL LCR limit
(>=75%), which had been removed for one year as one
of countercyclical measures implemented in relation
to liquidity requirements as a result of COVID-19.
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 ad-
equate liquidity to withstand significant withdrawals
of customer deposits, but the unexpected and rapid
withdrawal of a substantial amount of deposits could
have a material adverse impact on the Group’s busi-
ness, 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 outlin-
ing the risk indicators for different stress scenarios and
respective action plans. The liquidity risk position and
compliance with internal limits are closely monitored
by the Assets and Liabilities Management Committee
(ALCO).
Due to its high liquidity position in foreign currency, the
Bank made prepayments of some IFI resources in the
amount of US$ 237.4 million in late 2020 and through-
out 2021. In addition, over the same period the Bank
performed a cost-optimization process and attracted
cheaper resources from FIs.
8. Group’s income is heavily reliant on Net Interest
Income
Risk description
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 regula-
tions 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 exogenous
to the Group and is derived from both local and inter-
national markets.
In 2021, the NIM increased by 0.3pp year-on-year to
5.0%, driven by an increase in loan yields, a decrease
in the foreign currency (FC) cost of fund and optimi-
zations in wholesale funding, further accompanied by
increased loan larisation.
The Bank manages its exposure to interest rate risk, fol-
lowing the NBG IRR regulation introduced in Septem-
ber 2020. As of 31 December 2021, GEL 4,148 million
in assets (18%) and GEL 2,180 million in liabilities (11%)
were floating in GEL currency, whereas GEL 8,054 mil-
lion of assets (34%) and GEL 761 million of liabilities (4%)
were floating, related to the LIBOR/Euribor/FED/ECB
rates. The Bank was in compliance with the Economic
Value of Equity (EVE) sensitivity limit set by the NBG at
15% of Tier 1 capital, with the ratio standing at 2.9% by
31 December 2021.
Risk mitigation
In 2021 the Bank used excess liquidity to redeem costly
institutional funding and negotiated the reduction of
long-term funding margins, thereby aiding the gains in
NIM. The Bank continues to focus on fee and commis-
sion income growth to safeguard from possible margin
compressions on lending and deposit products in the
future.
To meet the asset-liability objectives and manage the
interest rate risk, the Bank uses the high quality invest-
ment securities portfolio, long-term funding and deriv-
ative contracts.
9. The threat posed by cyber-attacks has increased
in recent years and continues to grow. The risk of po-
tential cyber-attacks, which have become more so-
phisticated, may lead to significant security breach-
es. Such risks change rapidly and require continued
focus and investment
Risk description
No cyber-security breaches have happened at the
Bank in recent years. Nonetheless, the Group’s rising
dependency on IT systems increases its exposure to
potential cyber-attacks.
83
TBC BANK MANAGEMENT REPORT 2021 Risk mitigation
In order to mitigate the risks associated with cyber-at-
tacks and ensure clients’ security, the Group continu-
ously updates and enhances its in-depth security strat-
egy, which covers multiple preventive and detective
controls ranging from the data and end-point comput-
ers 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 cy-
ber security threat analysis is performed, taking into
consideration the relevant regional and sector specific
perspectives. Also at least once a year, a presentation is
given to the Risk Committee of the Supervisory Board,
with a deep dive into the information security matters.
At least once every two years, as part of this analysis,
an external consultant is contracted to assess the effi-
ciency of our capabilities against industry best practic-
es and real world cyber-attack scenarios. This analysis
gives the Group a broad overview as well as detailed
insight, which help to further enhance its 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.
Our employees play a crucial role in information secu-
rity. As a result, annual 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 gov-
erns information and cyber security to ensure that rel-
evant risks are at an acceptable level and that continu-
ous improvement of the management processes are
achieved.
Disaster recovery plans are in place to ensure business
continuity in case of need.
Since the beginning of the COVID-19 pandemic, the
Group has activated secure remote working policies,
which ensure that homeworking environments are
protected against relevant cyber-threats while the se-
curity team provides effective oversight of teleworking
channels. Although there has been a noticeable in-
crease in phishing attempts against employees, there
have been no major incidents. The Security Operation
Center and Threat Hunting teams have successfully
adopted effective remote collaboration and commu-
nication tools and practices.
In 2021, the Bank achieved ISO 27001 certification of
its information security management system. That
demonstrates that the Bank is following robust infor-
mation security practices effectively, in order to protect
its information and information systems from different
types of threats. TBC Bank has not experienced any ma-
terial information security breach in the last three years.
In December 2021, Ernst & Young Tbilisi office con-
ducted two audits, assessment against Cyber Securi-
ty Management Framework and assessment against
SWIFT CSCF for the Bank. As a result, no critical
findings and major non-compliances were identified
during these exercises. Cyber Security Management
Framework is defined by National Bank of Georgia,
which is based on NIST Cyber Security Management
Framework.
10. External and internal fraud risks are part of the
operational risk inherent in the Group’s business.
Considering the increased complexity and diversifi-
cation 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 involv-
ing 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, none of which had a
material impact on the Group’s profit and loss state-
ment. As a result of the COVID-19 pandemic, the threat
of fraud and the rapid growth in digital crime has been
exacerbated and fraudsters are adopting new tech-
niques and approaches to exploit various possibilities
to illegally obtain funds. Therefore, unless properly
monitored and managed, the potential impact can be-
come 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 mit-
igate 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, such as risks related to anti-banking cam-
84
TBC BANK MANAGEMENT REPORT 2021MATERIAL EXISTING AND EMERGING RISKS CONTINUED paigns, increased cases of phishing and other cyber-
crimes, as well as risks associated with the digitalization
process, such as digital service interruptions affecting
digital bank, ATM and payment terminal operations.
However, none of the aforementioned risks is unique
to the Group.
Risk Mitigation
To mitigate the possibility of reputational risks, the
Group works continuously to maintain strong brand
recognition among its stakeholders. The Group fol-
lows all relevant internal policies and procedures to
minimize the impact of direct/indirect reputational
risks. The Group monitors its brand value through pub-
lic opinion studies/surveys and by receiving feedback
from stakeholders on an ongoing basis.
Dedicated internal and external marketing and com-
munications teams are in place, which actively monitor
media coverage on a daily basis. These teams monitor
risks, develop scenarios and create respective contin-
gency plans. The Group tries to identify early warning
signs of potential reputational or brand damage in or-
der to both mitigate and elevate it to the attention of
the Supervisory Board before it escalates.
The Communications and Cyber-security teams con-
duct extensive awareness-raising campaigns on cy-
ber-security and financial literacy, involving the media,
the Banking Association of Georgia and Edufin (TBC’s
in-house financial education platform) aimed at mitigat-
ing and preventing cyber threats and phishing cases.
12. The Group faces the risk that its strategic initia-
tives do not translate into long-term sustainable val-
ue for its stakeholders
Risk Description
The Group may face the risk of developing a business
strategy that does not safeguard long-term value cre-
ation in an environment of changing customer needs,
competitive environment and regulatory restrictions.
In addition, 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 and thereby compromise its
capacity for long-term value creation.
Please see the Group’s main strategic priorities in our
business strategy and key performance indicators sec-
tion on pages 18-23.
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 as-
sesses business performance from different perspec-
tives, concentrating its analysis on key trends and mar-
ket practices, both in 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 analyses and
monitors the metrics used to measure strategy execu-
tion, and in case of any significant deviations, it takes
corrective or mitigation actions.
13. The Group is exposed to risks related to its ability
to attract and retain highly qualified employees
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 chang-
ing business environment, the Group needs to foster
an “Agile” culture and equip employees with the nec-
essary skills. In addition, the COVID-19 pandemic has
created additional HR challenges in relation to safe-
guarding employees’ health and wellbeing, maintain-
ing high efficiency levels, strong internal communica-
tion and a strong corporate culture.
Risk Mitigation
The Group pays significant attention to human capi-
tal management strategies and policies, which include
approaches to the recruitment, retention and devel-
opment of talent, and offers competitive reward pack-
ages to its employees. The Group has also developed
and implemented an “Agile” framework that aims to in-
crease employee engagement and satisfaction. More-
over, 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 a range of
courses for employees in different fields.
To ensure the maintenance of an effective internal
communication system whilst working from home, we
enhanced different digital channels to engage with our
employees. Regular management meetings are con-
ducted 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 en-
hance our corporate culture, the Bank’s internal Face-
book 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.
85
TBC BANK MANAGEMENT REPORT 2021 EMERGING RISKS
Risk mitigation
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 fol-
lowing risks have the potential to increase in signifi-
cance over time and could have a similar impact on the
Group as the principal risks.
The Group actively employs stress testing and other
risk measurement and monitoring tools to ensure that
early triggers are identified and translated into specif-
ic action plans to minimize the negative impact on the
Bank’s capital adequacy, liquidity, and portfolio quality
in times of increased uncertainty.
1. The Group’s performance may be compromised by
adverse developments in the region, in particular the
war in Ukraine
Risk description
While inflows to the Georgian economy are quite di-
versified, the country is still vulnerable to geopolitical
and economic developments in its region. In particular,
the Russian invasion of Ukraine and the consequent
sanctions imposed on Russia have an adverse impact
on the Georgian economy.
As of 2021, Ukraine and Russia’s share of Georgia’s ex-
ports, remittances, tourism, and FDI inflows amount-
ed to around 21%. Specifically, Ukraine and Russia
accounted for 7% and 14% of exports, 4% and 18% of
remittance inflows, and 15% and 12% of total tourism
inflows, respectively. Ukraine and Russia’s share of FDI
exposure was lower at 1% and 6%, respectively, mainly
comprised of reinvested earnings from previous waves
of FDI. Importantly, over half of Georgia’s exports to
Russia and Ukraine are re-exports, while around 50%
of tourism and remittance inflows from these countries
are spent on imports. These factors decrease the over-
all net negative impact from lost inflows. At the same
time, the adverse spillover effect from Georgia’s other
economic partners should also be taken into account.
Before the Russian invasion of Ukraine, TBC Capital
estimated that the Georgian economy would grow
by around 6.0% in 2022, 5.5% in 2023 and 5.0% in 2024
– close to its trend rate of around 5.2%. According to
the World Bank’s projections1 as of January 2022, the
Georgian economy was forecast to grow by 5.5% and
5.0% in 2022 and 2023, respectively. In fact, the Jan-
uary growth data released by Geostat shows a very
strong growth momentum. Although the 18.0% real
YoY expansion was mainly on the back of a low base
effect, growth was also strong at 4.4% when compared
to January 2020, before the pandemic started, and
much higher than in prior months when looking at the
same, consistent measurement. However, taking into
account Georgia’s vulnerability to developments in
Ukraine and Russia, there will be adverse implications
for the growth outlook, as well as for the other macro
variables, which may also negatively affect the Bank’s
capital adequacy, liquidity and credit risk.
2. The Group is exposed to the risks arising from cli-
mate change
Risk description
The risks associated with climate change have a
physical impact, arising from more frequent and se-
vere weather changes, and a transitional impact that
may entail extensive policy, legal and technological
changes to reduce the ecological footprint of house-
holds and businesses. For the Group, both of these
risks could materialize through the impairment of asset
values and deteriorating creditworthiness of our cus-
tomers, which could result in a reduction of the Group’s
profitability. The Group may also become exposed to
reputational risks as a result of its lending to, or other
business operations with, customers deemed to be
contributing to climate change.
Risk mitigation
The Group’s objective is to act responsibly and man-
age the environmental and social risks associated with
its operations in order to minimize negative impacts on
the environment. This approach enables us to reduce
our ecological footprint by using resources efficiently
and promoting environmentally friendly measures in
order to mitigate the effects of climate change.
The Group has in place an Environmental Policy,
which governs its Environmental Management Sys-
tem (“EMS”) and ensures that the Group’s operations
adhere to the applicable environmental, health and
safety and labour regulations and practices. We take
all reasonable steps to support our customers in ful-
filling their environmental and social responsibilities.
The 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 management procedures to identify, assess, man-
age and monitor environmental and social risks. These
procedures are fully integrated in the Group’s credit
risk management process. Our Environmental Policy
is fully compliant with Georgian environmental legis-
lation and follows international best practices (the full
policy is available at www.tbcbankgroup.com). For the
detailed information on the Environmental Manage-
ment System, please refer to pages 67-71.
86
TBC BANK MANAGEMENT REPORT 2021MATERIAL EXISTING AND EMERGING RISKS CONTINUED To extend the Group’s positive impact on the envi-
ronment and climate change mitigation, by the end of
2021, the Bank introduced the Green Lending Frame-
work within the organization, which will encourage
private companies, as well as individuals to run their
businesses energy and resource-efficiently and more
eco-friendly.
In order to increase the understanding of climate-re-
lated risks on the Bank’s loan portfolio, the Bank per-
formed a high-level sectoral risk assessment, since
different sectors might be vulnerable to different cli-
mate-related risks over different time horizons. The
risk assessment focuses on economic sectors such
as energy, oil and gas, metals and mining, tourism, ag-
riculture, food industry, healthcare, construction and
real estate. According to the maturity structure of the
loan portfolio, the largest part of assets is distributed
in the time horizons that are much shorter that the im-
pacts of climate change, especially of physical risks,
can be materialized in Georgia. On the other hand,
the understanding of climate related risks, which have
longer-term impacts need to be increased in coming
years, therefore, if the bank will have a plausible find-
ings and conclusions, it will further develop the ap-
proach, how to consider climate risks in mitigation.
Furthermore, the Group’s portfolio has a strong collat-
eral coverage with around 77% of the loan book, col-
lateralized with cash, real estate or gold. The collateral
evaluation procedure covers monitoring approach,
therefore, the necessity of changes in collateral values
is identified based on the regular collateral monitoring
process. For more details, please see our ESG strategy
section on pages 24-35.
In June 2021, the Group released its full-scale sustain-
ability report for the year 2020 in reference to Global
Reporting Initiative (GRI) standards. The Global Report-
ing Initiative (GRI) helps the private sector to realize and
understand its role and influence on sustainable devel-
opment issues such as climate change, human rights
and governance. The report is designed for all interest-
ed parties and groups in Georgia as well as abroad and
aims to give them clear, fact-based information about
the social, economic and environmental impact of our
activities in 2020. It presents our endeavours for creat-
ing value for our employees, clients, suppliers, partners
and society as a whole. The Sustainability Report 2020
is available at www.tbcbankgroup.com.
3. The Group’s performance may be affected by the
LIBOR discontinuation and transition
Risk description
There are a number of different types of financial in-
struments on the Group’s balance sheet, each of which
carries interest rates benchmarked to the London In-
terbank Offered Rate (“LIBOR”). LIBOR is also used by
the Group in its risk measurement, accounting and
valuation processes. In 2017, the UK’s Financial Con-
duct Authority (FCA) announced that it has agreed with
LIBOR panel banks to sustain LIBOR until the end of
2021 and called upon financial sector participants to
start working towards a transition to other reference
rates. On 5 March 2021, the FCA announced the dates
that panel bank submissions for all LIBOR setting will
cease, after which representative LIBOR rates will no
longer be available:
•
•
immediately after 31 December 2021, in the case
of all sterling, euro, Swiss franc and Japanese yen
settings, and the 1-week and 2-month US dollar set-
tings; and
immediately after 30 June 2023, in the case of the
remaining US dollar settings.
The majority of the Bank’s US$ floating portfolio is
linked to 6 month US$ LIBOR, while the EUR floating
portfolio is linked to the Euro Interbank Offered Rate
(Euribor), the discontinuation of which was not de-
clared.
The discontinuation of LIBOR and the process of tran-
sition exposes the Group to execution, conduct, finan-
cial 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 actively monitors international and local
transition-related developments to regulate and align
the Group’s transition process with market practice.
On 29 July, 2021 the Alternative Reference Rates Com-
mittee (ARRC) announced its recommendation to use
Term SOFR Rates published by CME Group, Inc. (CME).
The ARRC recommendation allows loan agreements
to use term SOFR in place of LIBOR, either as a replace-
ment for LIBOR (whether pursuant to the operation of
a fallback provision or otherwise) or in new deals. The
interest rate alternatives to US$ LIBOR recommended
previously were backward looking and have met with
tepid acceptance.
The Group formed a steering committee to ensure a
smooth transition away from LIBOR including the ef-
forts to introduce forward-looking term rates linked to
SOFR. The steering committee raises awareness of the
transition, both internally and externally, to ensure that
staff have the necessary knowledge and tools to facili-
tate the transition and that all of the Group’s customers
are treated fairly.
1 World Bank, Global Economic Prospects, January 2022.
87
TBC BANK MANAGEMENT REPORT 2021 RISK MANAGEMENT
Risk Management
OVERVIEW
The Group operates a strong, independent, business-minded risk management system. Its main objective is to con-
tribute to the sustainability of risk-adjusted returns through the implementation of an efficient risk management sys-
tem. The Group has adopted four primary risk management principles to better accomplish its major objectives:
• Govern risks transparently to obtain understanding and trust. Consistency and transparency in risk-related pro-
cesses and policies are preconditions for gaining the trust of multiple stakeholders. Communicating 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 backstop
against excessive risk-taking. Capital adequacy management and strong forward-looking tools and deci-
sion-making ensure the Group’s sustainability and resilience;
• Ensure that risk management underpins the implementation of strategy. Staff responsible for risk management
provide assurance on the feasibility of achieving objectives through risk identification and management. Iden-
tifying 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 and risk based decision making to gain a competitive advantage. Comprehensive, trans-
parent 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 com-
petitive advantage and strategic enabler.
Risk management framework
The Group’s risk management framework incorporates all the necessary components for comprehensive risk gov-
ernance 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 man-
agement and stress testing. The following diagram depicts the risk management framework:
88
TBC BANK MANAGEMENT REPORT 2021 CAPITAL ADEQUACY MANAGEMENT AND STRESS TESTING
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 communi-
cation 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 governance structure ensures adequate over-
sight and accountability, as well as a clear segregation of duties. The Supervisory Board has 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.
89
TBC BANK MANAGEMENT REPORT 2021 1
1
SUPERVISORY
BOARD
RISK
COMMITTEE
AUDIT
COMMITTEE
TECHNOLOGY AND
DATA COMMITTEE
ESG AND
ETHICS COMMITTEE
RISK
COMMITTEE
OPERATIONAL RISK
COMMITTEE
ESG
COMMITTEE
ENVIRONMENTAL
COMMITTEE
The risk governance structure consists of two board levels, including the Supervisory Board and the Management
Board of the Bank. The Supervisory Board has 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 pol-
icies and facilitating internal and external auditor activities. The Supervisory Board also has an ESG and Ethics Com-
mittee, which supports the Supervisory Board in its oversight of the strategy, policies, initiatives and programmes of
the Group in relation to ESG matters, and a Technology and Data Committee, which supports the Supervisory Board
in its oversight of key enablers of the strategy, data and cyber issues, and the company’s IT resources.
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 Committee (ALCO) is responsible for the implementation of asset-liability management pol-
icies. The Management Boards’ Information Security Steering Committee governs information and cyber-security to
ensure that relevant risks are at an acceptable level and that management processes are continuously improved. In
addition, the ESG Committee is established at the Management Board level and takes responsibility for implement-
ing the Group’s ESG strategy and approving its action plans, while the Environmental Committee supervises the
proper implementation and functioning of the Environmental Management System in the Group.
The Supervisory Board and the Bank’s senior management govern risk objectives through the Risk Appetite State-
ment, which establishes the desired risk profile and risk limits. The statement also sets monitoring and reporting re-
sponsibilities and 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, estab-
lishing risk allocation across different segments and activities.
The process of setting and cascading the risk appetite is undertaken in parallel with the business planning process.
The interactive development of business and risk plans aligns the plans by solving risk-return trade-offs in the pro-
cess and increases the feasibility of achieving targets. Supervisory Board level oversight, coupled with the permanent
involvement of senior management in the Group’s risk management and the exercise of top-down risk allocation by
enterprise risk management function, ensures clarity regarding risk objectives, intense monitoring of the risk profile
against the risk appetite, the prompt escalation of risk-related concerns and the establishment of remediation actions.
1 These terms are defined in the glossary on page 266
90
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED 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 transac-
tions, tools and techniques for risk identification, analy-
sis, measurement, monitoring and reporting. The com-
mittees established at operational levels are charged
with making transaction-level decisions as part of a
framework comprised of clear and sophisticated dele-
gations 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 allow the Group to make
informed decisions that are adequately priced and not
to take any risks exceeding the Group’s established
targets. Credit, liquidity, market, operational and other
non-financial risks are each managed by dedicated
teams. The Group’s strong and independent risk-man-
agement structure enables the fulfilment of all required
risk management functions within the second line of
defence by highly skilled professionals, with a bal-
anced mix of credentials in the banking sector in local
and international markets. In addition to the risk teams
subordinated to the Chief Risk Officer, the compliance
department reports directly to the CEO and is specif-
ically in charge of anti-money laundering and compli-
ance risk management. As a third line of defence, the
internal audit department is responsible for providing
independent and objective assurance and recommen-
dations to the Group to promote the further improve-
ment of operations and risk management.
ENTERPRISE RISK MANAGEMENT
A centralised Enterprise Risk Management (ERM) func-
tion 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, an-
alytics 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 re-
sponsibilities and builds capabilities in a centralised
team. The major ERM functions can be summarised as
follows:
• Risk appetite development, cascading and moni-
toring are essential elements of the Group’s strate-
gy. 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.
Various scenario analysis and stress testing meth-
ods are conducted by the Bank to ensure that it
maintains adequate capital in order to withstand
the given stress scenario and remain in a stable fi-
nancial condition;
• Long term capital planning and continuous work
on capital optimisation and analytics are also key
aspects of the Bank’s risk management procedures;
• Development and update of Internal Capital Ade-
quacy Assessment Procedure (ICAAP);
• 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, mea-
sured and governed in an optimal manner within
the Bank, and reported and understood on a con-
solidated basis;
• Estimating expected losses, monitoring and ana-
lytics across various segments and products are
further key features of our strategy;
• All risk metrics are aggregated and analysed to
assess the Group’s risk profile on a consolidated
basis. 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 out-
standing 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. Therefore, the Group dedicates significant
resources to its management.
The major objectives of credit risk management are
to put in place a sound credit approval process for
informed risk-taking and procedures for effective
risk identification, monitoring and measurement. The
Group adopts segment and product-specific ap-
proaches for prudent and efficient credit risk manage-
ment. Therefore, the corporate, MSME and retail port-
folios are managed separately to address the specifics
of individual segments. Corporate and MSME (except
micro) borrowers have larger exposures and are man-
aged on an individual basis, whereas micro and retail
borrowers are managed on a portfolio basis. The major
credit risk functions 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 to assess a bor-
rower’s risk profile. A comprehensive credit risk assess-
ment 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 differentiat-
91
TBC BANK MANAGEMENT REPORT 2021 ed 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 indi-
vidual basis, whereas the decision making process for
smaller retail and micro loans is largely automated. Af-
ter a thorough assessment of borrowers’ requirements,
credit analysts, in the case of corporate borrowers, and
loan officers, in the case of SME borrowers, prepare a
presentation containing certain key information in rela-
tion to the potential borrower and submit it for review
to the business underwriting risk management unit.
An underwriting risk manager ensures that the project
analysis provided by the credit analyst/loan officer is
complete, that all risks and mitigating factors are iden-
tified and adequately addressed, and that the loan is
properly structured. Business underwriting risk manag-
ers specialise in a particular sector to be aware of cur-
rent 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 appli-
cations and approving exposures, with different com-
mittees 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 Su-
pervisory Board Risk Committee. Loan officers submit
the credit applications for retail and micro exposures
to the respective underwriting risk management units.
Depending on the amount of the loan, a loan approval
committee will review the loan request based on spec-
ified limits regarding the risk level of the customer. For
the underwriting of unsecured loans, point-of-sale
loans and credit cards, an income verification process
is performed in line with the regulations on responsi-
ble lending. For decision-making, internal scorecard
models and ratings provided by the credit bureau are
utilized. Different scorecard models are developed
based on the type of product and the borrowers’ seg-
ment, taking into consideration various internal and ex-
ternal data. The performance of scorecard models is
closely monitored to ensure that decisions are in line
with predefined risk limits. The credit scoring and un-
derwriting models are developed by an independent
Credit Modelling team, within the risk function and the
developed models are then validated as well by an in-
dependent Model Risk Management team, also from
the risk function.
Currency-induced credit risk
The Group faces currency-induced credit risk, given
that a large part of its exposure is denominated in for-
eign 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 contin-
ued 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 responsi-
ble lending initiative, which came into force on 1 Jan-
uary 2019, introduced significantly more conservative
PTI and LTV thresholds for unhedged retail borrowers,
further limiting the exposure to currency induced cred-
it risk. Whilst the PTI and LTV thresholds remain con-
servative 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 cred-
it quality deterioration. In addition to the measures in
place throughout the underwriting process, the Group
actively monitors and assesses the quality of loans de-
nominated in foreign currencies through stress testing
exercises and holds sufficient capital buffers against
unexpected losses. In the event of a material currency
depreciation, the Group has tools in place to acceler-
ate its monitoring efforts, identify customers with po-
tential weaknesses and introduce prompt mitigation.
The Bank has set a strategy to decrease the share of
foreign currency loans in portfolio. Annual targets have
been defined in the medium-term strategy, gradually
decreasing the foreign currency share. The Assets and
Liabilities Committee (ALCO) is closely monitoring the
achievement of these targets.
Credit concentration risk
The Group is exposed to concentration risk, defined as
a 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 con-
centration 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 moni-
tored 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
92
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED and the respective economic capital for concentra-
tions of both single name borrowers and sectors us-
ing the Herfindahl-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 collater-
al management one of the key risk management com-
ponents. Collateral on loans extended by the Group
may include, but is not limited to, real estate, cash de-
posits, 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 segments, with
real estate representing a major share of collateral. A
centralised unit for collateral management governs
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 consists of a
policy-making process, a sound independent valua-
tion process, a haircut system throughout the under-
writing process, collateral monitoring (including reval-
uations and statistical analysis) and collateral portfolio
analysis.
The Collateral Management and Appraisal Depart-
ment (CMAD) defines Collateral Management Policy &
Collateral Management Procedures (approved by the
Supervisory Board), purchases an appraisal service that
must be in line with International Valuation Standards
(IVS), acting NBG regulations and internal rules (poli-
cy/ procedures and etc.), authorizes appraisal reports,
and manages the collateral monitoring process (assets
with high fair value are revaluated annually, while statis-
tical monitoring is used for collaterals with low value).
The CMAD uses a mixed quality check scheme for val-
uation: 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 conduct-
ed under the Real Estate Market laboratory (REM lab)
project.
Credit monitoring
The Group’s risk management policies and process-
es are designed to identify and analyse risk in a timely
manner and to monitor adherence to predefined lim-
its 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 mi-
cro developments, identify weaknesses in the credit
portfolio and outline solutions to make informed risk
management decisions. Monitoring processes are tai-
lored 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 Commit-
tee reviews reports relating to the credit quality of the
loan portfolio quarterly. By comparing current data with
historical figures and analysing forecasts, the manage-
ment 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, poten-
tially jeopardizing the repayment of the loan. Dedicat-
ed units manage weakened borrowers across all busi-
ness segments, with collection and recovery strategies
tailored to business segments and individual exposure
categories.
Apart from standard, business-as-usual restructur-
ings that is done across all branches of the bank, the
restructuring unit’s primary goal is to rehabilitate bor-
rowers and transfer exposures back to the performing
category. The sophistication and complexity of the
rehabilitation process differs based on the type and
size of an exposure. Business loans 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 nego-
tiate 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 Bank about their dif-
ficulty with loan repayments. A centralised team mon-
itors 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. Both secured
93
TBC BANK MANAGEMENT REPORT 2021 and unsecured loans are transferred to the internal re-
covery unit, whereas for unsecured loans the Bank also
collaborates with external collection agencies. The
forms of collaboration normally include outsourcing of
agencies’ collection services - when they act on behalf
of the bank while dealing with borrowers, or selling of
specific part of unsecured portfolios to external com-
panies in order to secure immediate cash recoveries.
To recover collateralized loans, a recovery plan is out-
lined that considers the individual borrower’s specif-
ics and may involve loan repayments under revised
schedules or the sale of collateral. Once the exposure
is transferred to the recovery unit, if the Group is un-
able to negotiate acceptable terms with the borrower,
the Group may initiate collateral repossession, which is
usually a standard process with limited legal complica-
tions, and may include court, arbitration or notary pro-
cedures. Qualified incumbent lawyers support the re-
structuring and recovery units to ensure that litigation
and repossession processes are carried out efficiently.
Measurement of Expected Credit Losses
Since January 2018, the Group has been using a pro-
visioning methodology that is in line with IFRS 9 re-
quirements. The methodology makes it possible to
assess loan-loss provisions and allowances accurately
with the incorporation of forward-looking information.
The methodology, along with a corresponding IT pro-
visioning tool, was developed with support from De-
loitte and representatives of the Group’s risk, finance
and IT departments.
The IFRS 9 models are 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) the 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 bor-
rowers across three stages:
• Stage I – the Group classifies its exposures as
Stage I if no significant deterioration in credit quali-
ty has occurred since the initial recognition, and the
instrument was not credit-impaired when initially
recognised;
• 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 finan-
cial instrument is not considered credit-impaired;
and
• Stage III – the exposures for which the credit-im-
paired indicators have been identified are classi-
fied as Stage III instruments.
The ECL amount differs depending on exposure allo-
cation to one of the three stages:
• Stage I instruments – the ECL represents that por-
tion 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 life-
time 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 the existence
of contractual repayment schedules, options for
the extension of repayment maturity and monitor-
ing processes held by the Group affect the lifetime
determination;
• 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 the IFRS 9 models to ensure that the
respective results adequately capture the expected
losses.
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, fac-
tors such as a downgrade in credit ratings or other neg-
ative developments may affect the price or the ability
to access the funding necessary to make payments in
respect of the Group’s future indebtedness.
Liquidity risk is managed by the Financial Risk Man-
agement and Treasury departments and is monitored
by the Management Board and the Assets and Liabili-
ties Management Committee (ALCO), within their pre-
defined 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
commitments, 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
without compromising the Group’s risk profile.
94
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED The Management Board reviews the Liquidity Risk Management Policy, which is then presented to the Risk Commit-
tee and approved by the Supervisory Board.
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 unexpected
current and future cash flows without affecting either its daily operations or its financial condition under both normal
conditions and during a crisis. Liquidity risk is measured by the Bank in accordance with NBG requirements. Addition-
ally, 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 guide-
lines, the ratio applies conservative approaches to the deposit withdrawal rates, depending on the client group’s
concentration. Since September 2017, the Bank has also monitored compliance with the NBG’s LCR limits. In addi-
tion 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. Since October 2019, FC Mandatory Reserves have been considered at 100%
within high quality liquid assets for NBG LCR purposes. In addition, in the same period, NBG lowered FC mandatory
reserves requirements from 30% to 25%. Since July 2021, the NBG regulation on mandatory FC reserve requirement
has been further adjusted, to reflect the decreased share of FC deposits in total deposits. The FC mandatory reserve
requirement will be reduced by 1% for every 2% decrease in the share of FC in total deposits. The initiative will have a
positive effect on the capital adequacy position of the Bank.
In September 2019, the NBG introduced a Net Stable Funding Ratio (NBG NSFR) for funding liquidity risk manage-
ment 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 continuing basis. On a monthly basis, the Bank
monitors compliance with the set limit for the NBG NSFR. As of 31 December 2021, the ratios were well above the
prudential limits set by the NBG, as follows:
Minimum net stable funding ratio, as defined by the NBG
Net stable funding 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-21
31-Dec-20
31-Dec-19
100%
127.3%
100.0%
75%
100.0%
115.8%
107.7%
120.8%
100%
126.0%
100.0%
n/a
100.0%
134.2%
132.2%
134.9%
100%
126.7%
100.0%
75.0%
100.0%
110.1%
83.7%
128.4%
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 its overall
prudential liquidity policy. The plan is designed to ensure that the Group can meet its funding and liquidity require-
ments and maintain its core business operations in any deteriorating liquidity conditions that could arise outside the
ordinary course of business.
Funding and maturity analysis
The Group’s principal sources of liquidity include customer deposits and accounts, borrowings from local and in-
ternational banks and financial institutions, subordinated loans from international financial institution investors, local
95
TBC BANK MANAGEMENT REPORT 2021 interbank short-duration term deposits and loans, proceeds from sales of investment securities, principal repayments
on loans, interest income, and fee and commission income. The Supervisory Board believes that a strong and diversi-
fied 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 concentration for large deposits and sets limits for
deposits by non-Georgian residents in its deposit portfolio.
To maintain and further enhance its liability structure, the Group sets targets for deposits and funds received 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 101.3%, 100.7% and 104.3%, as at 31 December 2021, 2020 and 2019,
respectively.
The management believes that, in spite of a substantial portion of customers’ accounts being on demand, the diver-
sification of these deposits by the 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 about 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-balance sheet
positions arising from movements in market prices. These risks are principally: (a) risks pertaining to interest rate re-
lated 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. Accord-
ingly, the Group’s only exposure to market risk is foreign exchange risk in its “structural book”, comprising 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-balance sheet)
open currency positions and to maintain the latter within 20% of the Bank’s regulatory capital. For the year ended 31
December 2021, the Bank maintained an aggregate balance open currency position of 0.5%.
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 departments 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 Supervisory
Board and its Risk Committee. On a Group-wide level, foreign-exchange risk is monitored and reported 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 2021, 2020 and 2019, the sensitivity
analysis did not reveal any significant potential effect on the Group’s equity:
In thousands of GEL
Maximum loss (VAR, 99% confidence level)
Maximum loss (VAR, 95% confidence level)
31-Dec-21
(1,496)
(1,030)
31-Dec-20
(1,806)
(1,315)
31-Dec-19
(1,234)
(852)
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 between assets and liabilities, as well as
from the re-pricing characteristics of such assets and liabilities. The major part of deposits, and part of the loans of-
fered 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 con-
96
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED tain a clause allowing it to adjust the interest rate on the
loan in case of adverse interest rate movements, there-
by limiting exposure to interest rate risk. The manage-
ment 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 Group employs an advanced framework to man-
age interest rate risk by establishing appropriate Risk
Appetite limits, monitoring compliance with them and
preparing forecasts.
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 (em-
bedded option) risk.
The Group considers numerous stress scenarios, in-
cluding 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 within the Risk Appetite framework ap-
proved by Supervisory Board.
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 in-
vesting 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 2021, the Bank’s interbank exposure was concen-
trated 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 busi-
ness activities, and to meet its regulatory capital re-
quirements under normal or stressed operating condi-
tions. The management’s objectives in terms of capital
management are to maintain appropriate levels of cap-
ital 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 moni-
tored with the involvement of the Bank’s management
to ensure prudent capital management and timely ac-
tions when needed. In 2021, the Group and the Bank
complied with all regulatory capital requirements.
In December 2017, the NBG adopted amendments to
the regulations relating to capital adequacy require-
ments. The changes include amendments to the regu-
lation on capital adequacy requirements for commer-
cial banks, and the introduction of new requirements (i)
on additional capital buffer requirements for commer-
cial 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 purpose of these
amendments is to improve the quality of banks’ regu-
latory capital and achieve better compliance 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 Ba-
sel Committee of Banking Supervision. The amend-
ments included:
•
•
the separation of the 2.5% conservation buffer,
which was previously merged with minimum cap-
ital requirements. The updated minimum regula-
tory capital requirements are 4.5%, 6.0% and 8.0%
for Common Equity Tier 1 capital, Tier 1 capital and
Total regulatory capital, respectively; and
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
countercyclical buffer. The countercyclical buffer can
vary within the range of 0% to 2.5% and will be re-
viewed periodically, based on the prevailing financial
and macroeconomic environment. In addition, the
NBG designated certain commercial banks in Geor-
gia as domestic systemically important banks (DSIBs)
for which individual systemic buffers have been intro-
duced, 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 fol-
lowing 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 Pil-
97
TBC BANK MANAGEMENT REPORT 2021 lar 2 that are based on a supervisory review and assessment 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. Although the net stress test buffer
has been effective since 1 October 2020, it is currently set at 0%. 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 capital should be held through
Tier 1 capital and 100% of the capital should be held through Total regulatory capital.
Temporary Measures
In response to the COVID-19 pandemic, in March 2020, the NBG implemented certain countercyclical measures in
relation to capital adequacy requirements, including postponing the phasing-in of Pillar 2 buffers. According to the
new schedule communicated by the NBG in October 2020, the phase-in of concentration risk and the Net GRAPE
buffers will continue from March 2021 and will be fully introduced by the end of March 2023.
In June 2021, the NBG announced its decision to restore the CICR and conservation buffers. Banks are required to
fully restore the CICR buffer by the end of 2022 and the conservation buffer by the end of 2023. As of 30 June 2021,
TBC Bank was in full compliance with the fully restored minimum requirements and confirmed to the NBG that it
would fully restore temporarily released capital buffers by July 2021, which lifted regulatory restrictions on capital
distributions.
The following table presents the capital adequacy ratios and minimum requirements 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
NON-FINANCIAL RISK MANAGEMENT
Operational risk management
31-Dec-21
2,759,894
3,379,414
723,513
4,102,927
18,091,753
21,981
2,103,895
20,217,629
11.73%
13.65%
13.99%
16.72%
18.38%
20.29%
31-Dec-20
1,911,233
2,385,181
752,731
3,137,912
16,322,524
106,379
1,872,574
18,301,477
7.40%
10.40%
9.20%
13.00%
13.70%
17.10%
31-Dec-19
1,871,892
2,281,706
692,323
2,974,029
13,825,677
15,429
1,749,821
15,590,927
10.40%
12.00%
12.50%
14.60%
17.50%
19.10%
One of the main risks that the Group faces is operational risk, which is the risk of loss resulting from internal and exter-
nal fraud events, inadequate process or products, business disruptions and systems failures, human error or damages
to 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 unavailable to its intended users,
which in turn may jeopardize sensitive information and the financial transactions of the Group, its clients, counterpar-
ties or customers.
Moreover, the Group is subject to risks that cause disruption to systems performing critical functions or business dis-
ruption arising from events wholly or partially beyond its control, such as natural disasters, transport or utility failures
98
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED
etc., which may result in losses or reductions in service
to customers and/or economic losses to the Group.
The operational risks discussed above are also appli-
cable where the Group relies on outsourcing services
from third parties. Considering the dynamic environ-
ment and sophistication of both banking services and
possible fraudsters, the importance of constantly im-
proving 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 man-
agement 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
Management Board ensures a strong internal control
culture within the Group, where control activities are an
integral part of operations. The Supervisory Board sets
the operational risk appetite and the Operational Risk
Committee oversees compliance with the limits. The
Operational Risk Committee discusses the Group’s
operational risk profile and risk mitigation recommen-
dations 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 operation-
al risks, as well as monitoring operational risk events,
risk exposures against risk appetite and material con-
trol issues. The department is also responsible for the
day-to-day management of operational risks, using a
range of techniques that include, but are not limited to:
•
running risk and control self-assessments (RCSA),
which are aimed at detecting possible gaps in op-
erations and processes with the purpose of sug-
gesting appropriate corrective actions;
• collecting internal risk events and conducting root-
cause analyses for further risk mitigation purposes;
forming a unified operational loss database for fur-
ther quantitative and qualitative analysis;
•
• analyzing internal fraud events and monitoring key
risk indicators;
• performing new risk assessments 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 re-
inforced its risk assessment teams and methodologies
to further fine-tune the existing control environment.
The same applies to the set of actions directed to
homogenise operational risk management process-
es 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 opera-
tional 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 concen-
trations due to failures in vendor selection, insuffi-
cient controls and oversight over a vendor and/or
services provided by a vendor, and other impacts
on the vendor;
the Risk and Control Self-Assessment (RCSA) Pol-
icy, which enables the Group to continuously eval-
uate existing and potential risks, establish risk mit-
igation strategies and systematically monitor the
progress of risk mitigation plans. The completion
of these plans is also part of the respective manag-
ers’ key performance indicators;
the Operational Risk Event Identification Policy,
which enables the Group to promptly report on
operational risk events, perform systematic root-
cause analysis of such events and take corrective
measures to prevent the reoccurrence of signifi-
cant losses; and
the Special Operational Risk Awareness Pro-
gramme, which provides regular training to the
Group’s employees 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 Con-
trol 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 ef-
fective execution of the operational risk management
programme. Additionally, the Bank has developed a
bank-wide operational risk registry.
Compliance
The first line of defence is responsible for compliance
risk, strongly supported by the compliance depart-
ment as the second line of defense. The Chief Com-
pliance Officer oversees compliance activities and
reports quarterly to the relevant committee of the Su-
pervisory Board, with a disciplinary reporting line to the
CEO. The Bank’s Compliance Programme provides
99
TBC BANK MANAGEMENT REPORT 2021 Compliance Policies, trainings, risk-based oversight
and ensures compliance with regulatory requirements.
The compliance department manages regulatory risk
by:
• ensuring that applicable changes in laws and regu-
lations are implemented by the process owners in
a timely manner;
• participating in the new product/process risk ap-
proval process;
• conducting analysis of customer complaints, the
operational risk event database, internal audit find-
ings and litigation cases to proactively reveal pro-
cess weaknesses; and
• conducting an annual risk and control self-assess-
ment (RCSA) of the internal processes.
The Compliance Department ensures that all out-
comes of the above mentioned analysis and process-
es are addressed in a timely and appropriate manner.
ology. Overall group-wide residual risks for the year
2021 were assessed as medium. The compliance de-
partment addresses areas of attention in a timely and
proper manner.
As part of its ongoing supervision in 2021, the National
Bank of Georgia (NBG) conducted a complex inspec-
tion of the Bank, covering the period from January
2018 to June 2019. The NBG assessed the Bank’s AML/
CTF measures with regard to client risk classification
and risk-related due diligence measures; the UBO
(Ultimate Beneficial Owner) identification process of
entities with complex ownership structures; the Bank’s
awareness of international transactions; the detection
of suspicious transactions and other processes. The
NBG’s overall assessment of these processes was ad-
equate or mainly adequate and effective. As part of its
findings, the NBG classified two clients as not properly
identified and applied the relevant regulatory penalty
in relation to those two clients.
Anti-money laundering (AML)
Information Security
The Group aims to protect its customers, sharehold-
ers and society from financial crime and any resulting
threat. The Group is fully committed to comply with ap-
plicable EU, UK, Georgian laws and regulations related
to financial crime. It also seeks to meet the respective
industry best standards. The Group has implemented
internal policies, procedures and detailed instructions
designed to prevent itself from being used or involved
in money laundering, financing of terrorism or in oth-
er unlawful activities such as bribery, corruption or
tax evasion. The Group’s AML/CTF compliance pro-
gramme, 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; a customer ac-
ceptance 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
seeks to manage risk in accordance with the risk appe-
tite defined by the Group and promotes a strong risk
culture throughout the organization.
The Group has a sophisticated, artificial
intelli-
gence-based AML solution in place to enable the
AML unit to comply with the Sanctions Policy, monitor
clients’ transactions and identify suspicious behavior.
The AML unit works on constantly improving the soft-
ware to increase operational efficiency and decrease
false-positive alerts.
The Bank performs an enterprise-wide AML Risk As-
sessment annually, in line with the approved method-
In order to manage the risks associated with cyber-at-
tacks and ensure the security of clients, the Group
continuously updates and enhances its in-depth secu-
rity strategy, which covers multiple preventive and de-
tective 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 re-
spond to them effectively.
At least once a year, a full information security and cy-
ber security threat analysis is performed, taking into
consideration the relevant regional and sector specif-
ic perspectives. Also at least once a year, a presenta-
tion is given to the Risk Committee of the Supervisory
Board, with a deep dive into the information security
matters. 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 readi-
ness exercises are performed on a regular basis. These
exercises evaluate the actual position of the Group in
this area and provide a benchmark against internation-
al best practices.
An Information Security Steering Committee has been
established to continuously improve information secu-
rity and business continuity management processes
and minimise information security risks. The commit-
tee has been formed to centralise the information se-
curity function, including physical security, HR security,
data security, IT security and business continuity.
100
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED The Group invests in effective information security risk
management, incident management and awareness
programmes, which are enhanced with automated
tools that ensure acceptable levels of information se-
curity risk within the organisation. Whenever preven-
tive 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 disrup-
tion. Since employees play a crucial role in informa-
tion security, regular mandatory training sessions are
conducted for all employees, comprised of remote
learning courses on security issues, fraud and phishing
simulations, and informative emails to further assist our
employees with information security matters. New em-
ployees are also given this training as part of the induc-
tion process. These measures ensure that employees
are fully aware of their responsibilities and are prepared
for various security threats.
In 2021, the Bank achieved ISO 27001 certification of
its information security management system. That
demonstrates that the Bank is following robust infor-
mation security practices effectively, in order to protect
its information and information systems from different
types of threats. TBC Bank has not experienced any
material information security breach in the last three
years.
In December 2021, Ernst & Young Tbilisi office con-
ducted two audits, assessment against Cyber Securi-
ty Management Framework and assessment against
SWIFT CSCF. As a result no critical findings and major
non-compliances were identified during these exer-
cises. Cyber Security Management Framework is de-
fined by National Bank of Georgia, which is based on
NIST Cyber Security Management Framework.
Model Risk Management
In line with the NBG’s requirements, international regu-
latory guidance and best practices, TBC Bank defines
a model as a quantitative method, system, or approach
that applies statistical, economic, financial, or mathe-
matical theories, techniques, and assumptions to pro-
cess input data into quantitative estimates. A model
has three components: an information input compo-
nent, an information-processing component and a re-
porting component. Model risk is defined as the risk of
adverse consequences (e.g., financial loss, reputational
damage, etc.) arising from decisions based on incor-
rect or misused model outputs.
TBC Bank’s Model Risk Management (MRM) function,
reports directly to Chief Risk Officer, and its policy, ap-
proved by both the Management Board and the Su-
pervisory Board, defines the framework within which it
operates. Two main components of the framework are
governance and validation. MRM acts as a second line
of defence and aims to consistently identify, quantify,
minimize and mitigate model related risks across TBC
Group.
The governance component of the MRM defines the
roles and responsibilities for the entirety of the mod-
el lifecycle. It sets standards and procedures that en-
compass all phases of the lifecycle, from planning and
development through initial validation, model use,
monitoring, ongoing validation and model retirement.
It is also responsible for managing the model inventory
and keeping model risk within the risk appetite.
The validation component of the MRM is responsible
for technical as well as conceptual evaluation of the
model in question, in accordance to the standards and
procedures set by governance. The MRM uses a risk-
based approach during the initial and ongoing model
validation process.
Legal Risk
The Bank’s legal department manages all legal and re-
lated matters concerning the activities of the Bank. 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 counsels, government and regulatory entities;
(ii) issues memos and opinions; (iii) drafts standardized
and individual contracts; (iv) prepares corporate resolu-
tions; (v) provides regulatory updates; and (vi) represents
the Bank in courts, other dispute resolution venues and
before other third parties. The legal team, which com-
prises lawyers with diverse backgrounds and experi-
ence, consists of the following key divisions: regulatory
and legal compliance, corporate, dispute resolution,
legal support and corporate governance teams. Each
division functions within clear and distinct job descrip-
tions corresponding to the relevant knowledge, skill and
capabilities of its members. As part of the Bank’s agile
transformation effort, several lawyers are working with-
in and/or in close cooperation with teams in charge of
specific commercial projects. The department ensures
effective execution of its duties through different pro-
cesses and procedures.
The Bank’s General Counsel manages the legal de-
partment. S/he determines key business objectives for
all legal teams, introduces the policies and vision, and
ensures the effective performance of their duties. The
General Counsel reports to the Management Board, the
Supervisory Board, and their respective committees on
existing legal risks, their mitigation strategies and the vi-
sion for their effective management in the future.
Sustainability Risks
Sustainability risk management is done within a frame-
work of established processes for risk management.
According to our vision, a sustainable bank is a prof-
itable institution that offers adequate, affordable and
need-based services to its clients, treats its employees,
suppliers and all other stakeholders with a high sense
of responsibility, and strongly supports the develop-
101
TBC BANK MANAGEMENT REPORT 2021 1. developing and maintaining policies and proce-
dures to ensure that the respective departments
and individual employees comply with the provi-
sions set out by regulatory provisions, best practic-
es, the Code of Conduct and the Code of Ethics;
2. maintaining liaison with the compliance depart-
ment regarding the administration of policies and
procedures and the investigation of complaints re-
garding the conduct of the department, its manag-
er and/ or its employees;
3. ensuring that the product information provided
to clients by front-line employees is accurate and
complete, and is conveyed (both in written and oral
form) in a simple and understandable way, regard-
less of the level of sophistication of a given client;
4. maintaining records of client conversations and
emails that contain sensitive and sales-related in-
formation, 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 em-
ployees 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 em-
ployees to speak up without fear of punishment.
Specifically, this means setting up processes for
the prevention and detection of conflicts of inter-
est, creating 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,
implement and monitor sales and after-sales activ-
ities. 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
proper conduct is fully integrated into the required
job skills.
ment of society. It is also a technologically advanced
and environmentally aware bank that is trusted by so-
ciety. The sustainability risks are related to the Group’s
different roles as a lender, asset manager, service pro-
vider, purchaser and employer. Of particular interest
in the area of sustainability are risks related to com-
pliance, conduct and digitalization, as well as human
rights, working conditions, the environment, climate
change, financial crime, and information and IT secu-
rity. Sustainable development policies and manage-
ment structures are represented in various policy doc-
uments and management domains.
The Group has developed several thematic policies
and codes that regulate various social and environ-
mental protection issues related to company activity.
They include: the Code of Ethics, the Incident Man-
agement Policy, the Anti-Corruption Policy, the Per-
sonal Data Protection Policy, the Conflict of Interests
Management Policy, Green Purchase Recommenda-
tions etc. In 2021, the ESG Coordination Department
was created in order to support the establishment of
an integrated ESG framework synergizing business,
social, environmental and governance aims. The de-
partment reports to the Chief Risk Officer. For more
details about sustainability management, please see
our ESG strategy section on pages 24-35.
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.
The Group’s employees undertake and perform their
responsibilities with honesty and integrity. They are
critical to maintaining trust and confidence in its oper-
ations and upholding important values of trust, loyalty,
prudence and care.
Additionally, the Group’s management understands
that it bears responsibility for a diversified group of
domestic and international investors, and needs to
embrace the rules and mechanisms of protecting cus-
tomers and maintaining the confidence of investors
and financial markets. The Group’s directors strive to
establish the “tone from the top,” which sets out the
messages describing and illustrating the core compo-
nents 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, human capital,
and operational risk departments cooperate to create
a unified conduct risk management framework and
assist business lines and departments, in the following
ways:
102
TBC BANK MANAGEMENT REPORT 2021RISK MANAGEMENT CONTINUED 103
TBC BANK MANAGEMENT REPORT 2021 104
TBC BANK ANNUAL REPORT AND ACCOUNTS 2021TBC AT A GLANCE Governance
105
TBC BANK ANNUAL REPORT AND ACCOUNTS 2021 CORPORATE GOVERNANCE STATEMENT
Corporate
Governance
Joint Stock Company TBC Bank (the “Bank”) is the
main subsidiary of TBC Bank Group PLC, a company
incorporated in England and Wales and listed on the
premium segment of the London Stock Exchange
The Bank’s Corporate Governance is in compliance
with the requirements of the National Bank of Geor-
gia’s Code on Corporate Governance for Commercial
Banks, dated 26 September 2018, as amended from
time to time (the “Code”). At the same time, the Bank
also complies with the highest standards of corporate
governance as prescribed by the UK Corporate Gover-
nance Code.
In addition, the Bank has in place an effective internal
control system in order to ensure accurate and reliable
financial reporting. The Bank has a well-defined frame-
work of accountability and delegation of authority, as
well as policies and procedures that include financial
planning and reporting; preparation of monthly man-
agement accounts; project governance; information
security; and review of the disclosures within the an-
nual report and accounts from the respective leads,
to appropriately disclose all relevant developments in
the year and to meet the requirements of a true and fair
presentation.
The Supervisory Board ensures that the Bank’s gov-
ernance structure enables adequate oversight and
accountability, as well as a clear segregation of duties.
The involvement of all governance levels in risk man-
agement, the clear segregation of authority, and effec-
tive communications between different entities facili-
tate clarity regarding the strategic and risk objectives,
adherence to the established risk appetite, risk budget
and sound risk management. The centralised Enter-
prise Risk Management (ERM) function ensures effec-
tive development, communication and implementa-
tion of risk strategy and risk appetite across the Group.
The main shareholder of the Bank is TBC Bank Group
PLC, which holds 99.9% of the Bank’s share capital. The
rights of the shareholders are governed by the Law of
Georgia on Entrepreneurs and the Law on the Activi-
ties of Commercial Banks and also set out in the Char-
ter of the Bank publicly available at www.tbcbank.ge.
The Board of Directors of TBC Bank Group PLC (the
“PLC Board”) is the principal decision-making body of
the Bank and is responsible for promoting the Group’s
purpose, culture, values and long term success strate-
gy and the delivery of sustainable value to stakeholders
by. The PLC Board is responsible for establishing and
overseeing the strategic direction of the Bank.
In addition, the affairs of the Bank are supervised by
a Supervisory Board (the “Supervisory Board”) of the
Bank. There is also equivalent committee structure of
the Supervisory Board as the PLC Board’s committees.
There are, therefore, in practice two equivalent super-
visory bodies within the Group represented by the PLC
Board and the Supervisory Board, which are separate
but interconnected together with committees. The
work of the PLC Board, the Supervisory Board and their
respective committees is carefully balanced, dividing
functions according to whether they are supervising
the matters that affect the Group or those concerning
solely the Bank. As a result, the Group’s governance
structure ensures adequate oversight and accountabil-
ity, as well as clear segregation of duties. Composition
of PLC Board and the Supervisory Board including re-
spective committees mirror at both levels in terms of
non-executive membership.
At the date of this report, in line with the “indepen-
dence” criteria set by the NBG Code, the Supervisory
Board comprises comprised of eight independent,
non-executive members: Arne Berggren (Chairman),
Tsira Kemularia (Senior Independent member), Maria
Luisa Cicognani, Per Anders Fasth, Thymios P. Kyriako-
poulos, Eran Klein, Nino Suknidze and Rajeev Sawhney.
The Supervisory Board has established four principal
Committees:
• The Risk Committee focuses on the possible risks
and capital issues of the Bank.
• The Audit Committee deals with the external au-
ditors, internal controls and financial reporting, as
well as, communication with the market and with
the regulators.
• The Remuneration Committee leads the remu-
neration-related issues, such as the right level of
compensation to attract and retain people and bal-
ancing this with the level of compensation that is
acceptable for our stakeholders.
• The Corporate Governance and Nomination Com-
mittee is response for talent management and
nomination and succession planning for the Super-
visory Board and the executive team.
Two new committees, established in 2021, provide fur-
ther support the Supervisory Board in three key strate-
106
TBC BANK MANAGEMENT REPORT 2021 gic areas – technology, ESG Strategy and climate change. The Technology and Data Committee supports the Su-
pervisory Board in its oversight of key enablers of the strategy, data and cyber issues, and the Company IT resources.
The ESG and Ethics Committee ensures that the Bank stays focused on the ESG issues that are key for all our stake-
holders. Both committees started operating in 2022.
The Bank recognises the importance of ensuring diversity and sees significant benefit to our business in having the
Supervisory 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.
There are three female members on the Supervisory Board. In addition, there are a number of talented women in key
positions, who report directly to the CEO of the Bank and other members of the management board within the Bank.
As at 31 December 2021, 17% of Group’s top management and 35% of Group’s middle management roles were per-
formed by females. Moreover, 68% of employees across the Group’s entire workforce were female.
Responsibility statement
The Management Report and Financial Statements have been prepared in accordance with applicable laws and
regulations.
We confirm that to the best of our knowledge that:
• The Group’s (the Bank together with its subsidiaries) and the Bank’s Financial Statements, which have been pre-
pared in accordance with the IFRS standards, give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Bank and the undertakings included in the consolidation taken as a whole;
• The Management Report includes a fair review of the development and performance of the business and of the
position of the Bank and the Group, together with a description of the principal risks and uncertainties they face;
and
• The Management Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and
provide the information necessary for the shareholders to assess the Bank’s and Group’s position, performance,
business and strategy.
This responsibility statement was approved by the Supervisory Board and Management Board:
Vakhtang Butskhrikidze
CEO
28 April 2022
Arne Berggren
Chairman
28 April 2022
107
TBC BANK MANAGEMENT REPORT 2021 SUPERVISORY BOARD BIOGRAPHIES
Joined the Bank in August 2019;
Appointed as Chairman on 1 March 2021
Experience
• Experience in international financial institutions and advising governments
• Board membership and committee chairing experience in other UK-listed
banks
• Experience in investment banking activities and in leading bank restructur-
ings
• Deep understanding of strategic planning and implementation
Arne has worked in the financial services industry for more than 25 years. He has
held several 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. Arne had a leading role
in the handling of the Swedish banking crisis in 1991-93. During the Asian crisis,
he assisted the FRA in Thailand and FSC/ KAMCO in South Korea with the han-
dling of problem assets. During his career, Arne has also served as the CEO of en-
tities outside the financial industry and as an independent non-executive director
at the Turkish asset management company, LBT Varlik Yonetim and Slovenian
bank asset management company, DUBT Ltd.
Current External non-executive appointments
• Board member of Bank of Cyprus
• Board member of Piraeus Bank
Committee membership
• Chair of the Corporate Governance and Nomination Committee
• Member of the Remuneration Committee
Joined the Bank in September 2018;
Appointed as SID on 15 September 2021
Experience
• Deep experience with more than 23 years’ experience across the energy and
petrochemicals industries including regulated commodity trading and finan-
cial services
• Chartered Director with the Institute of Directors in London, UK
• Former member of the British-Georgian Society and former Chair of the
Georgian Community in the UK
• Relevant experience and expertise in information security risk management
Tsira held various roles covering market risk management and commodity trad-
ing at companies including Dynegy Inc. in the US and UK and at Shell Interna-
tional Trading and Shipping Ltd (STASCO) in London. She served in different
managerial roles in M&A and Commercial Finance, Group Treasury and Trading
and Supply in the UK, Moscow and Barbados between 2005 and 2016. From 2016
to 2019, Tsira was the Head of Group Pensions Strategy and Standards at Shell
International Ltd based in London. Since 2019, Tsira is the Head of Internal Audit
and Investigations for Shell’s global Trading and Supply organization, which is the
world’s biggest commodity trading and supply business.
Current External non-executive appointments
• Trustee Director of the British Gas Trustee Solutions Ltd, a closed pension
fund (post British Gas acquisition by Shell)
• Trustee Director, Shell Trustee Solutions Ltd
• Board member of FaRiG ( Friends of Academic Research in Georgia)
Committee membership
• Member of the Audit Committee
• Member of the ESG and Ethics Committee
• Senior Independent Director
• Designated Non-Executive Director for Workforce Engagement
ARNE
BERGGREN
Chairman
TSIRA
KEMULARIA, CDir
Senior Independent
Non-Executive Supervisory
Board Member
108
TBC BANK MANAGEMENT REPORT 2021 Joined the Bank in September 2018
Experience
• Extensive experience in international banking, financial institutions and cor-
porate governance
• Deep understanding of the UK Corporate Governance and directors’ remu-
neration framework
• Strong leadership skills through significant board membership and chairing
experience
• Extensive international strategic advisory experience in emerging and growth
economies
Maria Luisa has extensive experience in the field of banking, financial institutions
and corporate governance. She worked at the European Bank for Reconstruction
and Development (London) 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 Managing Director
of Mediobanca (London). During 2014-16, Maria Luisa served as a non-executive
member of the board of Azimut Global Counseling Srl (Italy) and Azimut Interna-
tional Holding SA (Luxemburg). She has previously served as a Chairperson of
Moneta Money Bank (listed on the Prague Stock Exchange), and in 2020-21 she
was an independent non-executive director of UBI Banca (Italy).
Current External non-executive appointments
• Chairperson of Mobius Investment Trust, an LSE-listed company
• Chairperson of Arafa Holding, listed on the Cairo Stock Exchange
Committee membership
• Chair of the Remuneration Committee
• Member of the Risk Committee
• Member of the Corporate Governance and Nomination Committee
Joined the Bank in July 2021
Experience
• Extensive experience in banking, credit, capital markets and legal
• Significant risk, corporate governance, strategy and structuring experience
• Strong Emerging Markets banking and stakeholder management experience
• Relevant experience and expertise in information security risk management
Eran is an experienced international banker and lawyer who held senior roles over
two decades in leading financial institutions such as Commerzbank, Citibank,
ING Financial Markets and Deutsche Bank across both developed and emerging
markets. Eran accumulated valuable knowledge in capital markets, SME finance,
retail lending, corporate governance, liquidity and balance sheet management,
as well as in risk management, audit and strategy implementation. Currently, he
also serves as a non-executive director and risk committee chair at Privatbank,
the largest bank in Ukraine.
Current External non-executive appointments
• Non-Executive Director and Chair of the Risk Committee at Privatbank,
Ukraine.
MARIA LUISA
CICOGNANI
Independent
Non-Executive Supervisory
Board Member
ERAN
KLEIN
Independent
Non-Executive Supervisory
Board Member
Committee membership
• Chair of the ESG and Ethics Committee
• Member of the Technology and Data Committee
• Member of the Risk Committee
109
TBC BANK MANAGEMENT REPORT 2021 SUPERVISORY BOARD BIOGRAPHIES CONTINUED
PER ANDERS
FASTH
Independent
Non-Executive Supervisory
Board Member
Joined the Bank in July 2021
Experience
• Extensive experience as CEO and senior executive with more than 20 years at
leading financial institutions
• More than 30 years of accumulated experience as an independent non-ex-
ecutive director
• Strong listed company governance, leadership and strategic advisory skills
• Relevant experience in the financial information technologies (Fintech) and
credit management industries across Europe
• Relevant experience and expertise in information security risk management
Per Anders served as a senior executive for 20 years, at the leading North-Euro-
pean bank SEB and as a CEO at SBAB Bank, Hoist Finance and European Res-
olution Capital. Per Anders has deep strategic consulting experience from 10
years at top-tier consultancies McKinsey & Company and QVARTZ (now Bain &
Company). He has been a non-executive director of several financial institutions
in Scandinavia and Greece where was a board member of Piraeus Bank S.A., a
leading listed Greek Bank. In addition, he has extensive professional experience
from having worked in the Nordic and Baltic countries, Germany, Luxembourg,
Slovenia, the UK and Ukraine where he was an advisor to the World Bank and the
Ministry of Finance.
Current External non-executive appointments
• Chairman of Lyra Financial Wealth, a wealth management company
• Chairman of Pepins Group, listed on Nordic GM for SMEs
• Board member of Atle Investment Management/Services
Committee membership
• Chair of the Audit Committee
• Member of the Risk Committee
• Member of the Remuneration Committee
Joined the Bank in November 2021
Experience
• Strong global corporate leadership experience of more than 40 years
• Significant advisory and executive experience with technology and cyberse-
curity companies
• Extensive expertise in personnel management
• Relevant experience and expertise in information security risk management
Rajeev is a corporate growth executive with 40 years’ global experience in digital
technologies, serving across various industry sectors in Europe, North America
and Asia. Currently, Rajeev serves as Executive Chairman and a non-executive
director of OXSIGHT Ltd, a medical equipment developer and an Oxford Uni-
versity spin off. He was formerly a senior advisor to the CEO at global IT services
firm Zensar Ltd in the UK and member of the advisory board at Garble Cloud
Inc., a cybersecurity company in Silicon Valley, USA. Prior to that, Rajeev gained
strong operational experience as President of HCL Technologies and at Mphasis,
a Hewlett Packard company.
RAJEEV
SAWHNEY
Independent
Non-Executive Supervisory
Board Member
Current External non-executive appointments
• Executive Chairman and board member of OXSIGHT Ltd
Committee membership
• Chair of the Technology and Data Committee
• Member of the ESG and Ethics Committee
• Member of the Corporate Governance and Nomination Committee
110
TBC BANK MANAGEMENT REPORT 2021 Joined the Bank in November 2021
Experience
• Strong financial services background
• Extensive experience in major financial services sector transactions and list-
ings as a leading legal counsel
• Strong governance, regulatory and risk management experience, including at
an LSE-listed company
• Experienced at advising companies across a range of sectors, including tele-
communications, pharmaceuticals, energy and commerce
Nino is a business lawyer, with 19 years experience in the Georgian market and
deep expertise in various areas of practice including banking, finance, corpo-
rate, regulatory, competition and capital markets. Currently, Nino is the managing
partner of the law firm Suknidze & Partners LLC. During 2017-20, she served as
general counsel at JSC Bank of Georgia. Before joining the bank, she held vari-
ous positions at the Georgian offices of international law firms Dentons and DLA
Piper for more than 11 years.
Current External non-executive appointments
• Vice President at Georgian Chamber of Commerce and Industry
• Board member at Care Caucasus, a charity organisation in Georgia
Committee membership
• Member of the Audit Committee
• Member of the Remuneration Committee
• Member of the Corporate Governance and Nomination Committee
Joined the Bank in July 2021
Experience
• Extensive experience as an investor, portfolio manager, risk taker and balance
sheet planner
• Experience in balance sheet de-risking and deep operational and gover-
nance restructuring
• Transformation leadership and crisis management spanning across systemic
banks and Fintech
• Strong financial, risk and asset management advisory skills to companies and
government entities
Thymios is an internationally experienced banking executive specialising in op-
erational transformation, balance sheet and risk management, financial engineer-
ing and portfolio management. He serves on the board of the Hellenic Corpora-
tion of Assets and Participations, the Greek sovereign wealth fund, and is Chair of
its Investment and Risk Committee. Thymios was an executive general manager
and chief risk officer of Piraeus Bank S.A, a leading listed Greek Bank, managing
director at Goldman Sachs Inc. in the fixed income currencies and commodities
trading division, and has held board and executive roles in Insurtech, Fintech, fi-
nancial services and management consulting companies.
Current External non-executive appointments
• Board member of the Hellenic Corporation Of Assets And Participations
Committee membership
• Chair of the Risk Committee
• Member of the Audit Committee
• Member of the Technology and Data Committee
NINO
SUKNIDZE
Independent
Non-Executaive Supervisory
Board Member
THYMIOS P.
KYRIAKOPOULOS
Independent
Non-Executaive Supervisory
Board Member
111
TBC BANK MANAGEMENT REPORT 2021 THE BANK’S MANAGEMENT BOARD BIOGRAPHIES
Experience
• Leading banker in the Caucasus and Eastern European region
• Extensive strategic and financial leadership experience of over 25 years
• Robust knowledge and expertise of strategic planning and development,
startup and fintech management, mergers and acquisitions, and equity and
debt capital debt raising and investor relations
Vakhtang has more than 30 years of banking and financial industry experience.
He led the Group from its founding in Georgia in 1992 as a start up to the current
market-leading financial technologies institution. He joined TBC Bank as a Se-
nior Manager in 1993 and became Chairman of the Management Board in 1996.
Since 1998, he has held the position of Chief Executive Officer of JSC TBC Bank .
Vakhtang is a prominent banker in the Caucasus and Easter European region and
has received several prestigious awards, including the Best Banker 2011 award
from the GUAM Organization for Democracy and Economic Developmentand
was named CEO of the Year 2014 for Central and Eastern Europe and the CIS by
EMEA Finance magazine. In March 2019, he won the Special Award for Respon-
sible Capitalism in Adversity from the prestigious FIRST organisation - a multi-
disciplinary international affairs organization, which aims to enhance dialogue
between leaders in industry, finance and government.
Current External non-executive appointments
• Board member of the Association of Banks of Georgia
• Board member of the Business Association of Georgia
• Member of the Visa Central & Eastern Europe, Middle East and Africa (CE-
MEA) Business Council
Giorgi was appointed as Deputy CEO and CFO of JSC TBC Bank in October
2020. He joined the Bank as a Deputy CFO in March 2020.
Giorgi has 25 years global leadership experience in financial services. Before join-
ing TBC, Giorgi was a Director and Head of Capital Risk and Stress Testing at
Natwest Markets N.V. in Amsterdam. Prior to that, Giorgi held a number of key
leadership positions at Barclays Bank in London between 2008 and 2019, includ-
ing as a Director at Barclays Treasury, the Head of Barclays Internal Large Exposure
and the Head of Barclays Central Planning. During his work at Barclays, Giorgi
also served as Barclays Bank PLC Solo Capital and Leverage Management Lead
and the Head of Strategic Planning at Barclaycard UK. In his earlier career, Giorgi
held various senior managerial positions at several Georgian organisations.
Giorgi holds an MBA from the Judge Business School at the University of Cam-
bridge.
VAKHTANG
BUTSKHRIKIDZE
CEO
GIORGI
MEGRELISHVILI
Deputy CEO
Chief Financial Officer
112
TBC BANK MANAGEMENT REPORT 2021 Tornike was appointed to his current role as Deputy CEO of JSC TBC Bank and
Head of Retail in January 2020. Additionally, Tornike is leading the MSME bank-
ing since January 2021. He joined TBC in 2018 as Chief Operating Officer (COO).
Tornike has more than 20 years’ financial services and operations management
experience in Georgia and Central and Eastern Europe. Prior to joining TBC, he
has served as a Deputy CEO and Chief Operating Officer at the Bank of Georgia
Group and served at various other key positions at the same institution before
that. During 2008-2010, Tornike held the position of CFO at BG Bank Ukraine (a
subsidiary of Bank of Georgia). Earlier in his career, Tornike held the position of
the CEO of Aldagi, an insurance company in Georgia, served as the chief finan-
cial officer of UEDC PA consulting and held various managerial positions at BCI
Insurance.
Tornike holds an MBA from the Caucasus School of Business and an executive
diploma from Said Business School in Oxford.
Nino was appointed to her current role as Chief Risk Office of JSC TBC Bank in
2020. Prior to that, Nino held progressively senior positions at TBC after she first
joined the Bank in 2000. Nino was appointed as Deputy CEO of the Bank in 2006,
leading TBC’s retail and MSME businesses at various times. Nino also serves on
the supervisory board of TBC’s key subsidiary TBC Leasing.
Nino has more than 25 years’ financial services and banking experience in Geor-
gia. In her earlier career, Nino held various leadership and managerial positions at
JSC TbilCom Bank and the Barents Group.
Nino holds an MBA from the European School of Management in Tbilisi.
TORNIKE
GOGICHAISHVILI
Deputy CEO
Retail & MSME Banking
NINO
MASURASHVILI
Deputy CEO
Chief Risk Officer
113
TBC BANK MANAGEMENT REPORT 2021 THE BANK’S MANAGEMENT BOARD BIOGRAPHIES CONTINUED
George was appointed to his current role at the Bank in November 2016, leading
the Corporate and Investment Banking businesses. George is also responsible
for the Bank’s Wealth Management and leasing businesses since January 2021.
George first joined TBC in 2014 as Deputy CEO and the Chief Risk Officer.
George has more than 20 years of experience in global financial services. Prior to
joining TBC, he worked for Barclays Investment Bank, where he held the position
of Vice President in the Financial Institutions Group (FIG), EMEA. Before that, he
was an Associate Director in the Barclays Bank Debt Finance and Restructuring
teams. During his career at Barclays in London, George worked on and execut-
ed multiple M&A, debt and capital markets transactions with European financial
institutions. In his earlier career in Georgia, George served as the Chief Executive
Officer at Aldagi, the leading insurance company in Georgia and held progres-
sively senior positions at the same company prior to that.
George is Stanford Executive Program (SEP) graduate, holds an MBA from the
London Business School and a Master of Laws degree (LLM) in International
Commercial Law from the University of Nottingham.
GEORGE
TKHELIDZE
Deputy CEO
Corporate & Investment Banking
Wealth Management
Nikoloz was appointed to his current role as Deputy CEO of JSC TBC Bank in
January 2021, leading Brand Experience, Marketing and Payments. He joined the
Bank in 2014 as the Deputy CEO in charge of Marketing and MSME banking. Ad-
ditionally, Nikoloz has been leading TBC’s digital banking platform, Space, since
2018.
Nikoloz has more than 15 years’ experience in the banking industry in Central Asia,
CEE and Europe. Prior to joining TBC Bank, Nikoloz was the managing director
at Kaspi Bank, a leading retail bank in Kazakhstan. At Bank of Austria, UniCred-
it Group, he served as the senior sales support expert in the CEE retail division,
responsible for Turkey, Kazakhstan, Ukraine and Serbia. At ATF Bank, UniCred-
it Group in Kazakhstan, he was in charge of the retail banking division. Earlier in
his career in Georgia, Nikoloz served as the head of the retail banking division of
Bank Republic Georgia, Société Générale Group, and held several leadership and
managerial positions at Bank of Georgia.
Nikoloz holds an MBA from IE Business School in Spain and a masters degree in
International Economics from Georgian Technical University.
NIKOLOZ
KURDIANI
Deputy CEO
Brand Experience
Marketing & Payments
114
TBC BANK MANAGEMENT REPORT 2021 115
TBC BANK MANAGEMENT REPORT 2021 FINANCIAL
STATEMENTS
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
TO THE SHAREHOLDERS AND MANAGEMENT OF JSC TBC BANK
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Materiality
Group
scoping
Key audit
matters
• Overall Group materiality: GEL 48.1 million, which represents 5% of the
Group’s actual profit before tax.
• Overall Bank materiality: GEL 48.7 million, which represents 5% of
Bank’s actual profit before tax.
• Our scoping was driven by legal entity contribution to profit before
tax and other key financial metrics. We also considered overall cover-
age in assessing the appropriateness of our scoping.
• Audit matter which was of most significance in the audit of the consol-
idated and separate financial statements is:
– Expected credit loss allowance for loans and advances to customers;
118
OUR OPINION In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consoli-dated and separate financial position of JSC TBC Bank (the “Bank”) and its subsidiaries (together – the “Group”) as at 31 December 2021, and the Group’s and the Bank’s consolidated and separate financial performance and consolidat-ed and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, with the requirements of the order N284/04 of the President of the National Bank of Georgia dated 26 December 2018, and with the requirements of the Law of Georgia on Accounting, Reporting and Auditing.What we have auditedThe Group’s and the Bank’s consolidated and separate financial statements comprise: • the consolidated and separate statements of financial position as at 31 December 2021; • the consolidated and separate statements of profit or loss and other comprehensive income for the year then ended; • the consolidated and separate statements of changes in equity for the year then ended; • the consolidated and separate statements of cash flows for the year then ended; and • the notes to the consolidated and separate financial statements, which include significant accounting policies and other explanatory information.BASIS FOR OPINIONWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate 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. IndependenceWe are independent of the Group and the Bank in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. OUR AUDIT APPROACH Overview
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
consolidated and separate financial statements. In particular, we considered where management made subjective
judgements; for example, in respect of significant accounting estimates that involved making assumptions and con-
sidering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management
override of internal controls, including among other matters, consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable
assurance whether the consolidated and separate financial statements are free from material misstatement. Mis-
statements may arise due to fraud or error. They are considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated and
separate financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group and Bank materiality for the consolidated and separate financial statements as a whole as set out in the
table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually
and in aggregate on the consolidated and separate financial statements as a whole.
Overall Group and
Bank materiality
Group: GEL 48.1 million (2020: GEL 23.8. million)
Bank: GEL 48.7 million (2020: GEL 22.7 million)
How we
determined it
5% of annual profit before tax (2020: 5% of the average profit before tax for the last three years).
Rationale for the
materiality benchmark
applied
Profit before tax is a primary measure used by the shareholders in assessing the performance
of the Group and the Bank and is a generally accepted benchmark for determining audit
materiality.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated and separate financial statements of the current period. These matters were addressed in the context
of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
119
Key audit matter
How our audit addressed the key audit matter
Expected credit loss allowance for loans and advanc-
es to customer
Refer to pages 134 to 150 (Significant Accounting Pol-
icies), pages 150 to 154 (Critical accounting estimates
and judgements in applying accounting policies), and
pages 162 to 185 (Note 9 - Loans and advances to cus-
tomers).
We focused on this area as the management estimates
regarding the material financial statement line item of
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 ei-
ther a 12 month period or the remaining life of an asset,
depending on the stage allocation of the individual as-
set. This staging is determined by assessing whether
or not there has been a significant increase in credit
risk (‘SICR’) or default of the borrower since loan orig-
ination. Some of the criteria applied by management
for such an assessment are judgemental and involve
qualitative assessment of borrowers’ creditworthiness.
It is also necessary to consider the impact of different
future macroeconomic conditions in the determina-
tion of ECLs. There is an increased level of uncertainty
in the macroeconomic forecasts due to the impact of
COVID-19 on the economy.
Management has designed and implemented a num-
ber of models to achieve compliance with the require-
ments 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.
Management has also considered the need for incor-
porating post-model adjustments which would cover
the aspects not fully captured by existing models.
We have considered the following to be significant for
the determination of ECL.
– The appropriateness of model methodologies (in-
cluding their ability to reflect the ongoing impact
of COVID-19 through appropriate calibration of
existing assumptions) and critical judgements and
estimates used to determine the expected credit
losses;
– Judgemental criteria applied for identification of
SICR, involving qualitative assessment of borrow-
ers’ creditworthiness relevant to corporate and
SME portfolios;
– Critical assumptions applied in the determination
of loss given default (‘LGD’) and probability of de-
fault (‘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 mac-
roeconomic variables.
We understood and evaluated the design of the key controls over
the determination of ECL allowance and tested their operating ef-
fectiveness. These controls included among others:
– Controls over model performance monitoring, including peri-
odic 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 LGDs, PDs and FLI;
– Controls over key parameters calculation by the calculation en-
gine;
– Controls over regular monitoring of the financial standing of the
borrowers;
– 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 in the design or operating effectiveness of
the above controls. In addition we performed the substantive pro-
cedures described below.
We assessed whether the IFRS 9 ECL model methodologies de-
veloped by management are appropriate, engaging our credit risk
modelling specialists and our industry knowledge. This included an
evaluation of the judgemental criteria set by management for de-
termining whether there had been a SICR (applicable to corporate
and SME portfolios), and the critical judgements and assumptions
applied in determination of LGDs, PDs and FLI. We concluded that
management’s judgements in deriving SICR, 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 vali-
dation (“backtesting” of projected ECL) performed by management
relating to model performance and stability and critically assessed
the monitoring results. The results were interpreted in the context of
COVID-19 circumstances and explanations were obtained for devi-
ations from the expectation. Where relevant, particular assumptions
made in the ECL estimation process were updated to address the
results of backtesting.
We challenged management in respect of the appropriateness of
the macroeconomic models as well as weightings applied to each
macroeconomic scenario. We checked that macroeconomic as-
sumptions and scenario weightings used by the Bank are reason-
able.
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 checked that the PMAs were
recognised where existing models were not able to capture the
emerging risks, and management’s judgements are reasonable.
120
INDEPENDENT AUDITOR’S REPORT CONTINUED How we tailored our Group and Bank audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the con-
solidated and separate financial statements as a whole, taking into account the structure of the Group and the Bank,
the accounting processes and controls, and the industry in which the Group and the Bank operates.
The Group’s banking activities are primarily carried out in Georgia, with small subsidiary operations in two other coun-
tries. The Group’s business activities comprise of four segments for which it manages and reports its operating re-
sults and financial position, namely Retail Banking, Corporate and Investment Banking, Micro Small and Medium
Enterprises (‘MSME’) and Corporate Centre.
The Bank is the largest component of the Group. Its main operations are Retail and Commercial banking, with all
significant operations based in Georgia. Accounting functions and management of the Bank are primarily based in
Georgia, and represents 99% of the group assets and 99% of profit before tax. We also performed other audit pro-
cedures 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. We did not use component au-
ditors for audit of in-scope areas. 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.
OTHER INFORMATION
Management is responsible for the other information. The other information comprises the Management Report (but
does not include the consolidated and separate financial statements and our auditor’s report thereon).
Our opinion on the consolidated and separate financial statements does not cover the Management Report.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the
Management Report and, in doing so, consider whether the Management Report is materially inconsistent with the
consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in
the Management Report, we are required to report that fact. We have nothing to report in this regard.
In addition, we are required by the Law of Georgia on Accounting, Reporting and Auditing to express an opinion
whether certain parts of the Management Report comply with respective regulatory normative acts and to consider
whether the Management Report includes the information required by the Law of Georgia on Accounting, Reporting
and Auditing.
Based on the work undertaken in the course of our audit, in our opinion:
•
•
•
the information given in the Management Report for the financial year for which the consolidated and separate
financial statements are prepared is consistent with the consolidated and separate financial statements;
the information given in the Management Report complies with the requirements of paragraph 6 and paragraph
7 (c), (g) of article 7 of the Law of Georgia on Accounting, Reporting and Auditing;
the information given in the Management Report includes the information required by paragraph 7 (a), (b), (d) – (f)
and paragraph 8 of article 7 of the Law of Georgia on Accounting, Reporting and Auditing.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the consolidated and separate financial state-
ments in accordance with International Financial Reporting Standards, with the requirements of the order N284/04
of the President of the National Bank of Georgia dated 26 December 2018, and with the requirements of the Law of
Georgia on Accounting, Reporting and Auditing, and for such internal control as management determines is neces-
sary to enable the preparation of consolidated and separate financial statements that are free from material misstate-
ment, whether due to fraud or error.
In preparing the consolidated and separate financial statements, management is responsible for assessing the
Group’s and the Bank’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 management either intends to liquidate the Group
or the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting pro-
cess.
121
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that in-
cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs 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 influ-
ence the economic decisions of users taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepti-
cism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated and separate financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forg-
ery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s and the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and
separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group or the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements,
including the disclosures, and whether the consolidated and separate financial statements represent the under-
lying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activ-
ities within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and tim-
ing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical re-
quirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated and separate financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Levan Kankava.
PricewaterhouseCoopers Georgia LLC (Reg.# SARAS-F-775813)
PricewaterhouseCoopers Georgia LLC, I/C 405220611
King David Business Centre, 7th floor,
#12 M. Aleksidze Street, Tbilisi 0171, Georgia
Tel: +995 (32) 250 80 50, www.pwc.com/ge
Levan Kankava (Reg.# SARAS-A-592839)
Tbilisi, Georgia
28 April 2022
122
INDEPENDENT AUDITOR’S REPORT 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
Finance lease receivables
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
Share premium
Retained earnings
Share based payment reserve
Fair value reserve of investment securities measured at fair
value through other comprehensive income
Cumulative currency translation reserve
Net assets attributable to owners
Non-controlling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December 2021
31 December 2020
31 December 2019
6
7
8
9
10
11
13
17
35
35
12
14
15
16
15
18
19
20
23
35
35
21
22
24
36
25
26
27
39
1,595,460
42,237
2,086,113
16,547,185
1,938,196
-
252,340
22,892
84
2,056
442,207
373,892
378,657
58,001
267,406
28,197
4,589
1,601,599
19,690
2,098,506
14,594,269
1,527,268
1,059,946
270,978
68,689
69,762
2,134
161,002
256,646
362,863
49,746
223,577
28,197
4,090
994,479
15,597
1,591,829
12,349,399
985,293
1,021,568
256,660
72,667
25,695
2,173
115,211
247,201
329,529
57,086
159,109
29,459
2,655
24,039,512
22,398,962
18,255,610
2,984,075
14,884,145
120,620
86,302
10,979
1,583,699
15,845
83,623
56,522
623,647
4,485,873
12,634,295
211,242
27
13,084
1,419,513
17,451
59,969
54,588
672,740
3,593,901
10,112,002
95,643
818
18,806
1,213,598
16,979
70,366
59,316
591,035
20,449,457
19,568,782
15,772,464
21,014
521,190
3,117,079
(52,521)
(10,862)
(5,938)
3,589,962
93
3,590,055
24,039,512
21,014
521,190
2,355,105
(73,130)
11,157
(5,261)
2,830,075
105
2,830,180
22,398,962
21,014
521,190
2,016,119
(62,669)
(6,399)
(6,691)
2,482,564
582
2,483,146
18,255,610
The consolidated and the separate financial statements on pages 123 to 263 were approved by the Supervisory Board
on 28 April 2022 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
Giorgi Megrelishvili
Chief Financial Officer
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
123
TBC BANK FINANCIAL STATEMENTS 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
in thousands of GEL
Interest income
Interest income calculated using effective interest method
Other 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 gains from currency derivatives,
foreign currency operations and translation
Net gains/(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
Credit loss recovery/(allowance) for loans to customers
Credit loss recovery/(allowance) for finance lease receivables
Credit loss recovery/(allowance) for performance guarantees
and credit related commitments
Credit loss allowance for other financial assets
Credit loss recovery/(allowance) for financial assets measured
at fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment 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 (expense)/credit
Profit for the year
Other comprehensive (expense)/income for the year
Items that may be reclassified subsequently to profit or loss:
Movements in fair value reserve for investment securities
measured at fair value through other comprehensive income
Exchange differences on translation to presentation currency
Other comprehensive (expense)/income for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Profit is attributable to:
– Shareholders of the Group
– Non-controlling interest
Profit for the year
Total comprehensive income is attributable to:
– Shareholders of the Group
– Non-controlling interest
Total comprehensive income for the year
Note
31 December
2021
31 December
2020 (restated)
31 December
2019 (restated)
29
29
29
29
29
30
30
32
31
9
13
22
12
33
15,16,17
22
34
35
10
1,863,077
1,805,196
57,881
(895,428)
28,143
995,792
378,160
(153,273)
224,887
124,194
11,156
41,042
837
177,229
43,176
236
1,204
(14,461)
2,594
(11,715)
1,418,942
(255,747)
(70,622)
-
(128,624)
(454,993)
(1,726)
962,223
(119,278)
842,945
(22,020)
(677)
(22,697)
820,248
842,929
16
842,945
820,232
16
820,248
1,660,838
1,608,751
52,087
(854,089)
20,950
827,699
290,496*
(121,717)*
168,779
105,855
(624)
13,354
–
118,585
(330,811)
(7,760)
3,238
(13,408)
(1,810)
(5,830)*
758,682*
(206,887)
(64,068)
(2,600)
(111,914)*
(385,469)*
(41,015)
332,198
5,062
337,260
17,633
1,588
19,221
356,481
337,238
22
337,260
356,459
22
356,481
1,435,106
1,387,172
47,934
(670,422)
28,556
793,240
280,618*
(101,492)*
179,126
102,435
169
17,576
632
120,812
(82,030)
582
(2,156)
(7,717)
(291)
(2,743)*
998,823*
(226,008)
(57,319)
(2,105)
(124,184)*
(409,616)*
–
589,207
(43,522)
545,685
(15,175)
241
(14,934)
530,751
545,612
73
545,685
530,678
73
530,751
* Certain amounts do not correspond to the 2020 and 2019 financial statements as they reflect the certain restatements as described in Note 2.
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
124
TBC BANK FINANCIAL STATEMENTS 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
-
-
33,762
(62,840)
(19)
-
(40)
582
22
-
(19)
(80,911)
204
2,483,146
337,260
19,221
17,472
(27,932)
1,013
Share
based
pay-
ments
reserve
Fair value
reserve for
investment
securities at
FVTOCI
Cumu-
lative
currency
trans-
lation
reserve
Retained
earnings
Total
equity
excluding
non-con-
trolling
interests
Non-con-
trolling
interest
Total
Equity
Note
Share
Capital
Share
premium
21,014
–
521,190
–
(33,591)
–
8,775
-
(6,933)
-
1,551,176
545,612
2,061,631
545,612
568
73
2,062,199
545,685
(15,175)
241
-
(14,934)
-
(14,934)
(15,175)
241
545,612
530,678
73
530,751
in thousands of GEL
Balance as of 1 January 2019
Profit for the year
Other comprehensive
(loss)/income
Total comprehensive
(loss)/income for 2019
Share based payment expense
Share based payment recharge
by parent company
Purchase of additional
interest from NCI
Dividends declared
Other movements
27
–
–
-
-
-
-
-
–
–
-
-
-
-
-
–
–
33,762
(62,840)
–
–
-
-
-
-
-
1
-
-
-
-
-
-
-
33,762
(62,840)
-
(80,911)
(80,911)
1
242
244
Balance as of 31 December 2019
Profit for the year
21,014
–
521,190
–
(62,669)
–
(6,399)
–
(6,691) 2,016,119
337,238
–
2,482,564
337,238
Other comprehensive income
Total comprehensive
income for 2020
Share based payment expense
Share based payment recharge
by parent company
Other movements
27
–
–
–
–
–
–
–
–
–
–
17,472
– (27,932)
17,633
1,588
–
19,221
17,633
1,588
337,238
356,459
22
356,481
–
–
–
–
–
–
17,472
(27,932)
–
–
–
(1)
(77)
(158)
1,748
1,512
(499)
Balance as of 31 December 2020
Profit for the year
21,014
–
521,190
–
(73,130)
–
11,157
–
(5,261) 2,355,105
842,929
–
2,830,075
842,929
105
16
2,830,180
842,945
Other comprehensive loss
for 2021:
Effect of change in business
model
Other effects during the period
Total comprehensive
(loss)/income for 2021
Share based payment expense
Dividends declared
Other movements
2
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,609
–
–
(22,020)
(677)
-
(22,697)
-
(22,697)
26,062
–
(48,082)
(677)
–
–
26,062
(48,759)
-
-
26,062
(48,759)
(22,020)
(677)
842,929
820,232
16
820,248
–
–
1
–
–
–
-
20,609
(81,872)
(81,872)
917
918
-
(48)
20
20,609
(81,920)
938
Balance as of 31 December 2021
21,014
521,190
(52,521)
(10,862)
(5,938)
3,117,079
3,589,962
93
3,590,055
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
125
TBC BANK FINANCIAL STATEMENTS 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
in thousands of GEL
Note
31 December 2021
31 December 2020
31 December 2019
Cash flows from/(used in) operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Income/(expense) 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
Finance lease receivables
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) from operating activities
Cash flows (used in) / from 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 from/(used in) investing activities
Cash flows (used in)/from financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Redemption of subordinated debt
Proceeds from debt securities in issue
Redemption of debt securities in issue
Share based payment recharge paid
Dividends paid
Net cash flows (used in)/from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease)/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
29
32
10
10
10
11
11
15
36
36
36
36
36
36
6
6
1,953,538
28,143
(841,066)
361,844
(152,984)
113,043
25,904
(258,274)
(130,891)
(7,100)
1,092,157
1,455,624
20,950
(841,146)
297,030
(129,445)
(92,191)
10,216
(203,247)
(103,274)
(44,285)
370,232
1,359,528
28,556
(657,671)
282,715
(105,207)
79,287
18,356
(198,345)
(132,181)
(68,166)
606,872
390,174
(341,901)
(14,811)
(2,993,309)
(1,059,684)
(2,013,577)
9,493
(229,236)
14,975
139,893
2,606,998
(112,238)
40,277
959,184
(2,010)
(58,914)
33,750
(32,294)
1,457,569
132,679
(5,128)
494,299
(44,268)
26,582
2,702
(1,938)
274,769
10,205
8,432
(1,145,032)
(797,285)
(763,531)
(1,781,816)
1,025,775
287,917
240,603
412,204
165,632
1,598,536
-
-
-
-
(107,544)
20,826
23,639
577,615
1,750,443
(3,337,495)
(12,825)
(12,562)
242,287
-
-
(81,920)
(1,452,072)
(90,866)
(6,139)
1,601,599
1,595,460
694
-
(639,824)
413,038
(153,791)
3,450
13,513
-
410
(613,383)
216,871
(120,677)
13,225
13,681
(672,902)
(432,550)
4,031,812
(3,319,427)
(13,251)
–
31,601
–
(27,932)
–
702,803
82,920
607,120
994,479
1,601,599
1,819,899
(1,392,897)
(6,453)
(104,079)
1,176,049
(14,296)
(62,840)
(80,911)
1,334,472
73,186
(169,924)
1,164,403
994,479
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
126
TBC BANK FINANCIAL STATEMENTS 2021
SEPARATE 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
Investment properties
Current income tax prepayment
Other financial assets
Other assets
Premises and equipment
Intangible assets
Right of use assets
Goodwill
Investments in subsidiaries and associates
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Current income tax liability
Deferred income tax liability
Provisions for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Retained earnings
Share based payment reserve
Fair value reserve of investment securities measured at fair
value through other comprehensive income
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December 2021
31 December 2020
31 December 2019
6
7
8
9
10
11
17
12
14
15
15
16
18
19
20
21
23
35
22
24
36
25
26
27
1,565,400
16,722
2,086,113
16,549,460
1,958,198
-
22,022
-
442,305
321,009
352,743
249,356
56,244
27,502
32,451
1,536,717
13,717
2,098,506
14,611,204
1,547,330
1,059,946
67,812
69,166
173,075
226,892
335,124
210,602
46,699
27,502
33,142
978,870
12,709
1,591,829
12,416,985
983,131
1,021,568
71,801
25,126
119,593
197,904
302,190
152,393
55,571
27,502
33,080
23,679,525
22,057,434
17,990,252
2,757,243
14,932,402
1,539,518
92,613
86,681
10,979
15,845
75,263
54,328
592,333
20,157,205
21,014
521,190
3,043,459
(52,521)
(10,822)
3,522,320
23,679,525
4,230,013
12,746,959
1,381,009
186,487
-
13,083
17,451
52,083
51,215
639,641
19,317,941
21,014
521,190
2,259,159
(73,129)
11,259
2,739,493
22,057,434
3,418,798
10,177,027
1,213,598
58,809
-
18,347
16,978
60,371
58,476
562,060
15,584,464
21,014
521,190
1,933,412
(62,669)
(7,159)
2,405,788
17,990,252
The consolidated and separate financial statements on pages 123 to 263 were approved by the Supervisory Board on
28 April 2022 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
Giorgi Megrelishvili
Chief Financial Officer
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
127
TBC BANK FINANCIAL STATEMENTS 2021 SEPARATE 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 gains from currency derivatives,
foreign currency operations and translation
Net gains/(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
Credit loss recovery/(allowance) for loan to customers
Credit loss recovery/(allowance) for performance
guarantees and credit related commitments
Credit loss allowance for other financial assets
Credit loss recovery/(allowance) for financial assets measured at
fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment losses
Staff costs
Depreciation and amortisation
Provision for provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
Profit before tax
Income tax (expense)/credit
Profit for the year
Other comprehensive (expense)/income for the year:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve for
investment securities measured at fair value
through other comprehensive income
Other comprehensive (expense)/income for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Note
31 December
2021
31 December
2020 (restated)
31 December
2019 (restated)
29
29
29
30
30
32
9
38
12
10
33
22
34
35
1,803,709
(878,444)
28,143
953,408
349,598
(176,028)
173,570
124,879
11,156
86,170
810
223,015
37,633
1,204
(5,979)
2,670
(10,205)
1,375,316
(232,291)
(62,653)
-
(103,668)
(398,612)
(1,726)
974,978
(109,813)
865,165
(22,081)
(22,081)
843,084
1,609,791
(839,830)
20,950
790,911
263,981*
(139,583)*
124,398
108,101
(624)
6,120
-
113,597
(323,651)
3,238
(9,844)
(1,915)
(4,490)*
692,244*
(186,395)
(55,761)
(2,600)
(90,153)*
(334,909)*
(37,131)
320,204
5,264
325,468
1,387,720
(657,579)
28,556
758,697
250,954*
(115,159)*
135,795
103,210
169
15,452
633
119,464
(84,562)
(2,156)
(2,173)
(291)
(1,886)*
922,888*
(205,026)
(50,726)
(2,105)
(101,053)*
(358,910)*
-
563,978
(43,101)
520,877
17,632
(15,933)
17,632
343,100
(15,933)
504,944
* Certain amounts do not correspond to the 2020 and 2019 financial statements as they reflect the certain restatements as described in Note 2.
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
128
TBC BANK FINANCIAL STATEMENTS 2021 SEPARATE STATEMENT OF CHANGES IN EQUITY
in thousands of GEL
Balance as of 1 January 2019
Profit for the year
Other comprehensive loss
Total comprehensive (loss)/income for 2019
Share based payment expense
Share based payment recharge by
parent company
Dividends declared
Other movements
Balance as of 31 December 2019
Profit for the year
Other comprehensive income
Total comprehensive income for 2020
Share based payment expense
Share based payment recharge by
parent company
Other movements
Balance as of 31 December 2020
Profit for the year
Other comprehensive loss for 2021:
Effect of change in business model
Other effects during the period
Total comprehensive (loss)/income for 2021
Share based payment expense
Dividends declared
Other movements
21,014
521,190
(62,669)
(7,159)
1,933,412
2,405,788
Note
Share
Capital
Share
premium
Share
based
payments
reserve
21,014
–
521,190
–
(33,591)
–
27
27
2
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33,762
(62,840)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,014
–
521,190
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,472
(27,932)
–
(73,129)
–
–
–
–
–
20,609
–
(1)
Fair value
reserve of
investment
securities
measured
at FVOCI
8,775
-
(15,933)
(15,933)
–
–
–
(1)
Retained
earnings
1,493,408
520,877
-
Total
2,010,796
520,877
(15,933)
520,877
504,944
–
–
33,762
(62,840)
(80,911)
(80,911)
38
37
–
325,468
–
325,468
–
325,468
17,632
343,100
17,472
–
(27,932)
279
1,065
2,259,159
865,165
-
-
-
865,165
–
(81,872)
1,007
2,739,493
865,165
(22,081)
26,062
(48,143)
843,084
20,609
(81,872)
1,006
17,632
17,632
–
–
786
11,259
–
(22,081)
26,062
(48,143)
(22,081)
–
–
–
Balance as of 31 December 2021
21,014
521,190
(52,521)
(10,822)
3,043,459
3,522,320
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
129
TBC BANK FINANCIAL STATEMENTS 2021
SEPARATE STATEMENT OF CASH FLOWS
in thousands of GEL
Cash flows from operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Income/(expense) 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
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
Cash flows (used in) / from 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
Cash received from capital reductions in subsidiaries and
contributions paid in subsidiaries
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 property
Net cash from/(used in) investing activities
Cash flows (used in)/ from financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Redemption of subordinated debt
Proceeds from debt securities in issue
Dividends paid
Share based payment recharge paid
Net cash flows (used in)/ from financing activities
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 2021
31 December 2020
31 December 2019
29
32
10
10
10
11
11
15
6
6
1,896,294
28,143
(827,586)
347,743
(175,738)
108,379
18,839
(235,399)
(103,865)
(60)
1,056,750
414,144
(2,981,673)
(236,092)
32,810
139,332
2,532,369
(96,287)
39,348
900,701
1,402,828
20,950
(826,633)
270,516
(147,379)
(91,996)
4,803
(182,627)
(80,965)
(44,040)
325,457
(338,835)
(993,187)
(45,601)
6,882
(32,294)
1,499,686
125,129
(459)
546,778
1,310,626
28,556
(663,802)
253,250
(118,969)
79,618
9,543
(178,518)
(110,569)
(68,508)
541,227
(20,393)
(2,042,091)
477
19,332
(1,938)
300,888
3,456
5,019
(1,194,023)
(797,285)
(783,530)
(1,781,432)
1,025,775
412,204
52,593
1,101
-
-
(93,626)
20,609
24,423
645,794
1,692,815
(3,267,884)
(10,797)
(12,562)
236,820
(81,872)
-
(1,443,480)
(74,332)
28,683
1,536,717
1,565,400
287,917
165,632
694
(667)
(639,824)
413,038
(142,367)
4,510
12,849
(681,748)
3,860,292
(3,209,347)
(15,784)
–
–
–
(27,932)
607,229
85,588
557,847
978,870
1,536,717
240,603
1,598,536
5,211
-
(613,383)
216,871
(112,345)
10,140
12,446
(423,353)
1,703,411
(1,270,653)
(6,960)
(104,079)
1,196,422
(80,911)
(62,840)
1,374,390
66,468
(176,518)
1,155,388
978,870
The notes set out on pages 131 to 263 form an integral part of these consolidated and separate financial statements.
130
TBC BANK FINANCIAL STATEMENTS 2021
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
1. INTRODUCTION
Principal activity. JSC TBC Bank (hereafter the “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 regula-
tions. The Bank’s principal business activity is universal banking operations that include corporate, small and medium
enterprises (“SME”), retail and micro operations within Georgia. The Bank is a parent of a group of companies (hereaf-
ter the “Group”) incorporated in Georgia and Azerbaijan; their primary business activities include providing banking,
leasing, brokerage and card processing services to corporate and individual customers. The Bank has been operating
since 20 January 1993 under a general banking license issued by the National Bank of the Georgia (“NBG”). The Bank’s
registered address and place of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia. The Bank was registered by
District Court of Vake and the registration number is 204854595.
The Bank has 147 (2020:149; 2019:148) branches within Georgia.
TBC Bank Group PLC (“TBCG”) is a public limited liability company, incorporated in England and Wales. TBCG held
99.88% of the share capital of JSC TBC Bank as at 31 December 2021 (2020: 99.88%, 2019: 99.88%), thus representing
the Bank’s ultimate parent company. TBC Bank Group PLC’s registered legal address is Highdown House, Yeoman
Way, Worthing, West Sussex, United Kingdom, BN99 3HH. Registered number of TBC Group PLC is 10029943.
The following shareholders directly owned more than 3% of the total outstanding shares of the Group. Other share-
holders individually owned less than 3% of the outstanding shares. As of 31 December 2021, 2020, and 2019 the Group
had no ultimate controlling party.
Shareholders
TBC Bank Group PLC
Other
Total
% of ownership interest held as of 31 December
2021
99.88%
0.12%
100.00%
2020
99.88%
0.12%
100.00%
2019
99.88%
0.12%
100.00%
As of 31 December 2021, 31 December 2020 and 31 December 2019, the shareholder structure of TBC Bank Group
PLC by beneficiary ownership interest was as follows:
Shareholders
Institutional and retail investors
International Financial Institutions
Founders*
Other shareholders**
Total
2021
74.31%
7.84%
14.61%
3.24%
Ownership interest % as of 31 December
2020
74.79%
7.84%
14.64%
2.73%
2019
68.70%
8.04%
16.26%
7.00%
100.00%
100.00%
100.00%
* Founders include direct and indirect ownerships of Mamuka Khazaradze, Badri Japaridze.
** Other includes individual as well as corporate shareholders.
131
TBC BANK FINANCIAL STATEMENTS 2021 1. INTRODUCTION CONTINUED
Subsidiaries and associates. The consolidated financial statements include the following principal subsidiaries:
Subsidiary name
JSC TBC Bank
United Financial
Corporation JSC
TBC Capital LLC
TBC Leasing JSC
TBC Kredit LLC
TBC Pay LLC
TBC Invest LLC
Index LLC
Proportion of voting rights and
ordinary share capital held as of
31 December
2021
2020
2019
Principal place of
business or incorporation
Year of
incorpora-
tion
99.88%
99.88% 99.88%
Tbilisi, Georgia
1992
Principal
activities
Banking
99.53%
99.53% 99.53%
Tbilisi, Georgia
1997 Card processing
100.00% 100.00% 100.00%
Tbilisi, Georgia
1999
Brokerage
100.00% 100.00% 100.00%
Tbilisi, Georgia
100.00% 100.00% 100.00%
Baku, Azerbaijan
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
Tbilisi, Georgia
Ramat Gan,Israel
1999
2003
Leasing
Non-banking
credit institution
2009
Processing
2011 PR and marketing
100.00% 100.00% 100.00%
Tbilisi, Georgia
2011
Real estate
management
Asset
Management
TBC Capital Asset Management
LLC
100.00%
N/A
N/A
Tbilisi, Georgia
2021
The Group has investments in the following associates:
Proportion of voting rights and
ordinary share capital held as of
31 December
Associate name
2021
2020
2019
Principal place of
business or incorporation
Year of
incorpora-
tion
Principal
activities
CreditInfo Georgia JSC
21.08%
21.08%
21.08%
Tbilisi, Georgia
Tbilisi Stock Exchange JSC
Georgian Central Securities
Depository JSC
Georgian Stock Exchange JSC1
28.87%
28.87% 28.87%
Tbilisi, Georgia
22.87%
22.87%
27.70%
Tbilisi, Georgia
2019
Finance, service
Kavkasreestri JSC1
10.03%
10.03%
10.03%
Tbilisi, Georgia
17.33%
17.33%
17.33%
Tbilisi, Georgia
2005
2019
Financial
intermediation
Finance, service
2019
2019
Finance, service
Finance, service
The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries.
The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries and associ-
ates, which are not consolidated or equity accounted due to immateriality. A full list of these undertakings, the country
of incorporation and the ownership of each share class is set out below.
132
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 1. INTRODUCTION CONTINUED
Proportion of voting rights and
ordinary share capital held as of
31 December
Subsidiary name
2021
2020
2019
Principal place of
business or incorporation
Year of
incorpora-
tion
Principal
activities
TBC Invest International Ltd2
100.00% 100.00% 100.00%
Tbilisi, Georgia
2016 Investment Vehicle
University Development Fund2
Natural Products of Georgia LLC2
TBC Trade LLC
Georgia Large Cap Diversified
Credit Portfolio JSC
33.33%
25.00%
33.33%
33.33%
25.00% 25.00%
100.00% 100.00% 100.00%
Tbilisi, Georgia
Tbilisi, Georgia
Tbilisi, Georgia
100.00%
N/A
N/A
Tbilisi, Georgia
2007
2001
2008
2021
Education
Trade, Service
Trade, Service
Asset
Management
Operating environment of the Group. Georgia, where Group’s most activities are located, displays certain charac-
teristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject to
frequent changes and varying interpretations (Note 35). In 2021 the Georgian economy rebounded at 10.4%. While
the restart was certainly expected, the Georgian economy has rebounded at a speed exceeding even the most op-
timistic scenarios. Importantly, the growth was broad based and has been reflected in all sources of inflows, as well
as in domestic demand. The latter was fuelled by the reversal of the excess pandemic period related savings in an
affluent segment being supported by the low USD deposit rates. The credit growth was also strong, while, the fiscal
stance was slightly contractionary on the back of still large, however, much lower deficit than a year ago. At the same
time, Georgia continues to face downside risks to economic growth due to prolongation of the pandemic, internal
and external political tensions, possible military conflicts in the region, as well as undesirable side effects of the Fed’s
sooner-than-expected rate hike.
COVID-19 new cases continue to surge at an unprecedented speed. However, a much less severity of Omicron now
appears to be well confirmed. At the same time, Georgia, among some other region countries, faces vaccination pro-
cess challenges, lagging behind the world average. In 2022, compared with 2021, the growth will much more depend
on the continued recovery in tourism inflows and therefore, the materialization of pandemic related and other risks
could severely restrict economic activity in Georgia, negatively impacting business environment and clients of the
Group.
Management is taking necessary measures to ensure sustainability of the Group’s operations and support its cus-
tomers and employees. There is continuous work on stress testing to better understand possible implications for
the group of certain adverse scenarios. In addition, the Management took additional measures to identify inefficient
processes and further supported the financial condition of the Group through optimisation.
The future effects of the current economic situation and the above measures are difficult to predict and manage-
ment’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-looking in-
formation, 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.
Since February 2022 ongoing political tension in the region escalated as a result of Russian invasion in Ukraine. This
has negatively impacted commodity and financial markets, and increased volatility, particularly with regard to foreign
exchange rates. As a result of sanctions imposed from a number of countries, many companies left Russian market
and as a result ceased providing services and products to Russian Market. There is an expectation of further sanc-
tions and limitations on business activity of companies operating in Russia. To avoid the severe effects on Georgian
economy the Georgian Government has not joined on all sanctions, but the full nature and possible effects of the
imposed restrictions against Russia and Ukrainian economy downturn are yet unknown. However, taking into account
Georgia’s vulnerability to developments in Ukraine and Russia and economic links with these countries, there will be
adverse implications for the growth outlook, as well as, for the other macro variables, which may also negatively affect
the Bank’s capital adequacy, liquidity and credit risks.
1 The Group has a significant influence on Georgian Stock Exchange JSC and Kavkasreestri JSC held as an investment in associates.
2 Dormant
133
TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation. These consolidated and separate financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”) under the historical cost convention as modified by the initial
recognition of financial instruments based on fair value, and by the revaluation of financial instruments categorised
at fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”) and with
the requirements of the Law of Georgia on Accounting, Reporting and Auditing. The principal accounting policies
applied in the preparation of these consolidated and separate financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
Climate Change. The Group as a responsible lender continues to develop its assessment of the potential impacts
that climate change and the transition to a low carbon economy may have on the assets and liabilities recognised and
presented in its financial statements. During the year the Group has performed a high level sectoral risk assessment
as different sectors might be vulnerable to different climate-related risks over different time horizons. On the other
hand, the understanding of climate related risks, which have longer-term impacts need to be increased in coming
years. At 31 December 2021, management specifically considered the potential impact of climate change and the
transition to a low carbon economy on at a high level sectoral risk assessment. See more details outlined in risk man-
agement disclosures in note 37.
Presentation currency. These financial statements are presented in thousands of Georgian Lari (“GEL thousands”),
unless otherwise indicated.
Changes in presentation of the net impairment of non-financial assets. During 2021, the Group reclassified impair-
ment/recovery of non-financial assets from “Administrative and other operating expenses” to “Net impairment of
non-financial assets”. Significant part of any impairment/recoveries recorded are related to repossessed assets and
investment properties. Management believes, that those type of assets are not actively used in daily operations, but
are primarily targeted for sale in future. Considering nature of those expenses/recovery such presentation is more ap-
propriate and would increase understandability and clarity of the Group’s audited consolidated and separate annual
financial statements. The presentation of comparative figures has been adjusted to confirm to the presentation of
the current period amounts:
Effect on consolidated statement of profit or loss and other comprehensive income
In thousands of GEL
Net impairment of non-financial assets
Administrative and other operating expenses
In thousands of GEL
Net impairment of non-financial assets
Administrative and other operating expenses
31 December 2020
(as originally presented)
-
(117,744)
31 December 2019
(as originally presented)
-
(126,927)
Effect on separate statement of profit or loss and other comprehensive income
In thousands of GEL
Net impairment of non-financial assets
Administrative and other operating expenses
In thousands of GEL
Net impairment of non-financial assets
Administrative and other operating expenses
31 December 2020
(as originally presented)
-
(94,643)
31 December 2019
(as originally presented)
-
(102,939)
Reclassification
(5,830)
5,830
Reclassification
(2,743)
2,743
Reclassification
(4,490)
4,490
Reclassification
(1,886)
1,886
31 December 2020
(as restated)
(5,830)
(111,914)
31 December 2019
(as restated)
(2,743)
(124,184)
31 December 2020
(as restated)
(4,490)
(90,153)
31 December 2019
(as restated)
(1,886)
(101,053)
134
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Restatement of cashbacks and incentive payments received for card operations. To further foster clarity of the
consolidated statement of comprehensive income, the Group has re-considered the presentation of cash backs
and incentive payments received from Visa and Mastercard for card operations. The amount of cash backs and in-
centive payments receivable depend on the scale of Groups operations with Visa and Mastercard cards and related
commission expenses paid to them. Management believes, presenting commission expenses made to Visa and
Mastercard net of cash backs and incentive payments received from them, will increase clarity and understandability
of the financial statements and related accounting treatments. As a result of reclassification, management has moved
cashbacks and incentive payments from Visa and Mastercard from “Fee and commission income” to “Fee and com-
mission expense”. The presentation of comparative figures has been adjusted to confirm to the presentation of the
current period amounts:
Effect on consolidated statement of profit or loss and other comprehensive income
In thousands of GEL
Fee and commission income
Fee and commission expense
In thousands of GEL
Fee and commission income
Fee and commission expense
31 December 2020
(as originally presented)
298,496
(129,717)
31 December 2019
(as originally presented)
284,428
(105,302)
Effect on separate statement of profit or loss and other comprehensive income
In thousands of GEL
Fee and commission income
Fee and commission expense
In thousands of GEL
Fee and commission income
Fee and commission expense
31 December 2020
(as originally presented)
271,981
(147,583)
31 December 2019
(as originally presented)
254,764
(118,969)
Reclassification
(8,000)
8,000
Reclassification
(3,810)
3,810
Reclassification
(8,000)
8,000
Reclassification
(3,810)
3,810
31 December 2019
(as restated)
290,496
(121,717)
31 December 2019
(as restated)
280,618
(101,492)
31 December 2020
(as restated)
263,981
(139,583)
31 December 2019
(as restated)
250,954
(115,159)
Business model change. The Group historically used Ministry of Finance (MoF) securities to invest the excess mon-
etary resources and receive interest charges in return of the investment. In majority of the cases the securities were
held till their maturity and the Group has not been engaged in trading activities for profit making purposes. As a result,
according to their business model such securities were classified under hold to collect category and were recorded
as “Bonds carried at amortised cost” in the consolidated and separate statements of financial position.
Towards the end of 2020 Ministry of Finance launched a new primary dealer platform to increase liquidity of the se-
curities, to further encourage the trading of Government notes and develop Georgian securities market. Third party
dealers were established for trading between the Ministry of Finance and investors. The platform was to expand
investor data base and enhance liquidity of secondary market. JSC TBC Bank was given primary dealer status in the
platform that enabled to act as an intermediary between investors and the Ministry of Finance by executing an order
on behalf of investors.
As secondary market became more active, the Group began to monitor beneficial market opportunities and started
selling Ministry of Finance securities in beneficial cases, provided the sale wouldn’t impact significantly the liquidity
position of the Group and would generate strong profit compared to collecting principal and interest till their maturity.
As a result, practices for managing treasury securities changed by the end of 2020.
135
TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Respective change in Management’s processes caused changes in existing business model from hold to collect to
hold to collect and sell. Accordingly MOF securities had been re-classified from “Bonds carried at amortised cost” to
“Investment securities measured at fair value through other comprehensive income” in the consolidated and separate
statements of financial position, with respective effects also accounted in the audited consolidated annual financial
statement of profit or loss and other comprehensive income. According to IFRS 9 requirement the change has been
accounted for prospectively from the reclassification date. The reclassification date represents the first day of the first
reporting period following the change in business model that results in an entity reclassifying financial assets, which
is 1 January 2021. Management believes that such presentation is more appropriate for the nature of the transactions.
Based on business model assessment performed, Management considered respective securities should have been
carried at fair value through other comprehensive income (FVTOCI). Internally performed test of solely payment of
principal and interest (‘SPPI’) had shown, that those securities were held for collection of contractual cash flows and
for selling, where those cash flows represented SPPI, and they were not designated at fair value through profit and
loss (FVTPL). Subsequent period sales recorded during 2021 has also demonstrated respective changes in business
operations of the Group..
Effect on consolidated statement of financial position:
In thousands of GEL
Fair value reserve
Bonds carried at amortised cost
Investment securities measured at fair value through
other comprehensive income
Effect on separate statement of financial position:
Balance as at
31 December 2020
Change in business
model
Balance as at
1 January 2021
11,157
1,059,946
1,527,268
26,062
(1,059,946)
1,086,008
37,219
-
2,613,276
In thousands of GEL
Fair value reserve
Bonds carried at amortised cost
Investment securities measured at fair value through
other comprehensive income
Balance as at
31 December 2020
Change in business
model
Balance as at
1 January 2021
11,259
1,059,946
1,547,330
26,062
(1,059,946)
1,086,008
37,321
-
2,633,338
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 assessing whether the Group has power over an-
other entity. For a right to be substantive, the holder must have 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 investee. Protective rights of other investors, such as those that relate to fundamental changes of in-
vestee’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 deconsolidated
from the date on which control ceases.
Business combinations and goodwill accounting. Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured at the fair value of the consideration, including contingent consid-
eration, given at the acquisition date. Acquisition-related costs are recognised as an expense 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 acquisition date, irrespective of the extent of any
non-controlling interest.
136
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The Group measures the non-controlling interest that represents the current ownership’s interest and entitles the
holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either
at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquired entity. Non-con-
trolling 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 transferred 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, af-
ter 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 contingent consideration ar-
rangements, 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 interests that are
not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group’s
equity.
Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not con-
trol, generally accompanying a shareholding of between 20 and 50 per cent of the voting rights. Investments in as-
sociates are accounted for using the equity method of accounting, and are initially recognised at cost. The carrying
amount of associates includes goodwill identified on acquisition less accumulated impairment losses, if any. Divi-
dends 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 consolidated 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 sepa-
rately, (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 evidence of an impair-
ment of the asset transferred.
Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for
transactions with owners of non-controlling interest. Any difference between the purchase consideration 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.
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influ-
ence, 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 subsequently accounting for the re-
tained 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 previously 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.
137
TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 transactions for the asset or
the liability take place with sufficient frequency and volume to provide pricing information 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 transactions 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 analysed by level in the fair
value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) 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 mea-
surements 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 acquire 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. Transac-
tion costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, bro-
kers 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 expected credit losses.
Accrued interest includes the amortisation of transaction costs deferred at initial recognition 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 state-
ment 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 fi-
nancial instrument so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated future cash payments 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 defaulted (“POCI”) at initial rec-
ognition, 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
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TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 classification 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 clas-
sification of financial assets. Management applied judgement in determining the level of aggregation 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 losses due to credit deterioration are considered consistent
with the “hold to collect” business model. Other sales before maturity, not related to credit risk management activ-
ities, 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 respective 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 assess-
es whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embed-
ded 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 consideration 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 arrange-
ment, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recogni-
tion 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 discussed below:
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 interest rate, for exam-
ple 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 represents prin-
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TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
cipal 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 in-
terest determined using the effective interest method. As an exception to this principle, 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 reason-
able additional compensation for the early termination of the contract, 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 manag-
ing 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 in 2020 in relation to the securities held at amortized cost. Details and subsequent measurement are dis-
cussed in Note 2.
Financial assets impairment - expected credit loss (ECL) allowance. The Group assesses, on a forward-looking ba-
sis, 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 eval-
uating 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 recognition:
• Stage 1: A financial instrument that is not defaulted 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 Stage 2 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. Financial instrument moves back from stage 2 to stage 1
with 6 month cure period in case of loans previously having default flag, while restructured loans remain in stage
2 until the restructured status is removed. In order to remove restructured status, borrower should make at least
12 consecutive payments, unless financial monitoring is performed. Refer to Note 37 for a description of how the
Group determines, on a forward-looking basis, when a SICR has occurred;
• Stage 3: Defaulted assets are transferred to Stage 3 and allowance for Lifetime ECL is recognized. The Group’s
definition of defaulted assets and definition of default is based on the occurrence of one or more loss events,
described further in Note 37.
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 com-
mitments, 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 entirety 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 transfer-
ring 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 modification of contractual cash flows is substantial considering certain factors.
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:
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TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
• 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 interest 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 modifications
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 presented in profit or loss within
losses from modifications of financial instruments. The implication of COVID-19 impact on ECL methodology is de-
scribed in Note 37.
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 liabilities 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 extin-
guished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
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 sub-
stantially 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 denominated in, changes in the type of interest rate, new con-
version features attached to the instrument are also considered. 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 include 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 contractual 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 coun-
tries, 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.
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TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 counterparties held with the
Group, such as loan interest income or principal collected by charging the customer’s current account or interest pay-
ments 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 National Bank of Georgia. Mandatory cash balances with 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 counter-
party 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 calcu-
lated 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 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 perspective,
i.e. instruments that do not contain a contractual obligation to pay cash and that evidence a residual 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 recognition to irrevocably designate an equity invest-
ments 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 advances mon-
ey to purchase or originate a loan due from a customer. Based on the business model and the cash flow characteris-
tics, 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 information
about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation 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 premises and equip-
ment, 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.
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TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Loan commitments. The Group issues commitments to provide loans. These commitments are irrevocable or re-
vocable 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 probable 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 allowance 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 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 report-
ing 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 effectively 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 repurchase 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 receiv-
ables. The corresponding liability is presented within amounts due to credit institutions. The repurchase agreements
are short-term in nature. Investment securities 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 respec-
tively 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 accrued over the life of repo
agreements using the effective interest method.
Securities lent to counterparties for a fixed fee are retained in the 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 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.
Finance lease receivables. 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 finance lease receivables and carried at
the present value of the future lease payments. Finance lease receivables are initially recognised at commencement
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TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(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 in-
come 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 arranging the lease are included in
the initial measurement of the finance lease receivables 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’ approach 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 defaulted. In case of a significant in-
crease 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.
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 con-
tracts 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-collateralised as-
sets”) and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value
(“under-collateralised assets”).
The Group 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 – defaulted exposures.
For stage 1 exposures the Group 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 Group 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 criteria indicat-
ing the borrower’s unlikeness to repay the liabilities.
The Group incorporates forward looking information (FLI) for both individual and collective assessment. For FLI pur-
poses the Group 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 alignment to the consensus
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TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
market expectations. Refer to Note 37 for the description of how the Group incorporates FLI in ECL calculations.
Upside and downside scenarios are defined based on the framework developed by the Bank’s macroeconomic unit.
The Group calculates expected impairment losses for each scenario. In order to come up with the final expected
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 Group recognizes receivables from terminated contracts at the moment
of lease contract termination. These receivables are recognized at amount comprising difference between fair value
of repossessed assets and outstanding balance of finance lease receivables. Receivables are accounted for at AC
less ECL.
Prepayment for purchase of leasing assets. Prepayment for purchase of leasing assets comprises of advance pay-
ments 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 finance lease receivables.
Due to credit institutions. Amount due to credit institutions are recorded when counterparty banks advance money
or other assets to the Group. The non-derivative liability is carried at AC. If the Group purchases its own debt, it is re-
moved 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 customers
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 deben-
tures 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 difference 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 counterparty 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 pur-
pose 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 ac-
counting. Certain derivative instruments embedded in other financial instruments are treated as separate derivative
instruments 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 im-
pairment 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 disposal of an operation within a cash generating
unit to which goodwill has been allocated include the carrying 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.
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TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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, 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 recover-
able 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 esti-
mates 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 premises and
equipment and right-of-use assets is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives as follows:
Asset
Premises
Furniture and fixtures
Computers and office equipment
Motor vehicles
Other equipment
Right-of-use assets
Leasehold improvements
Intangible assets
Useful life
30 – 110 years;
5 – 8 years;
3 – 8 years;
4 – 5 years;
2 – 10 years;
term of the underlying lease;
term of the underlying lease or if not defined, not more than 7 years.
1 – 20 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 asset 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 ap-
preciation, 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 determine the asset’s recoverable amount.
Land included in investment property is not depreciated. Depreciation on other items of investment properties is
calculated using the straight-line method to allocate their cost to their residual values over their estimated 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 re-
pairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is
reclassified to premises and equipment.
146
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 in-
curred to acquire and bring to use the specific software. Development costs that are directly associated with iden-
tifiable 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 and direct overheads of the
software development team. All other costs associated with computer software, e.g. its maintenance, are expensed
when incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 1 to
20 years.
Accounting for leases by the Group as a lessee. 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 between 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 re-
maining 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 determined,
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 eco-
nomic 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 2020 and ex-
tension of this amendment in 2021, respectively. These concessions were recorded as a reduction in the lease liability
and variable 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 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.
Income taxes. Income taxes are provided in the 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 because it relates to transactions that are also rec-
ognised, 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 financial statements
are authorised prior to filing relevant tax returns. Taxes, other than on income, are recorded within administrative and
other operating expenses.
147
TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 differ-
ences on initial recognition of an asset or a liability in a transaction other than a business combination if the transac-
tion, 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 con-
trols the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or oth-
erwise 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 management 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 obli-
gation, and a reliable estimate of the amount of the obligation can be made. Material provisions include provision for
performance guarantees, credit related commitments.
Share capital. Ordinary shares with discretionary dividends are classified as equity. Incremental costs directly attrib-
utable 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 declared after
the end of the reporting period and before the financial statements are authorised for issue, are disclosed in the sub-
sequent 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 income 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 evaluating creditworthiness,
evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing trans-
action 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 origination. 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 defaulted (Stage 3), for which interest income is calculated by apply-
ing the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets that are purchased or origi-
nated defaulted, for which the original credit-adjusted effective interest rate is applied to the AC.
148
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 basis as the ser-
vices are rendered, when the customer simultaneously receives and consumes the benefits provided by the Group’s
performance. Such income includes recurring fees for account maintenance, account servicing fees, account sub-
scription fees, annual plastic card fees etc. Variable fees are recognised only to the extent that management deter-
mines 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 obliga-
tion, 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 trans-
actions, plastic card transactions, merchant fees, fees for cash settlements, collection or cash disbursements, etc.
Foreign currency translation. The Group’s presentation currency is the Georgian Lari. Group’s and the Bank’s func-
tional currency is the Georgian Lari. The functional currency of each of the Group’s consolidated entities is the curren-
cy 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. Foreign 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 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 currency of a
hyperinflationary economy) are translated into the presentation currency as follows:
i. Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end
ii.
of the respective reporting period;
Income and expenses are translated at average exchange rates (unless this average is not a reasonable approxi-
mation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expens-
es are translated at the dates of the transactions);
iii. Components of equity are translated at the historic rate; and
iv. All resulting exchange differences are recognised in other comprehensive income.
After losing control over a foreign operation, the exchange differences previously recognised in other comprehen-
sive 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 translation 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 2021 the closing rate of exchange used for
translating foreign currency balances was GBP 1 = 4.1737 (2020: GBP 1 = GEL 4.4529; 2019: GBP 1 = GEL 3.7593); USD 1
= 3.0976 (2020: USD 1 = GEL 3.2766; 2019: USD 1 = GEL 2.8677); EUR 1 = 3.5040 (2020: EUR 1 = GEL 4.0233; 2019: EUR 1
= GEL 3.2095).
Offsetting. Financial assets and liabilities are offset and the net amount reported in the consolidated statement of
financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an in-
tention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
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.
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.
149
TBC BANK FINANCIAL STATEMENTS 2021 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Share based payments. A share-based payment arrangement is an agreement between the entity and another party
(including an employee) that entitles the other party to receive cash or other assets of the entity for amounts that are
based on the price (or value) of equity instruments (including shares) of the entity or another group entity, or equity in-
struments (including shares or share options) of the entity or another group entity, provided the specified vesting con-
ditions, if any, are met. Under the share-based compensation 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 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-mar-
keting 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. The Bank pays recharge amount to the TBC Bank Group PLC and
the share based reserve is debited correspondingly when treasury shares are purchased by employee benefit trust
(EBT). When portions of a single grant vest on two or more dates the entity applies graded vesting 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
Critical Judgements and Estimates
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and
judgements are continually evaluated and are based on the Management’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 and estimates 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 include following:
Judgements and estimates related to ECL measurement
Measurement of ECLs is a significant estimate that involves determination of methodology, development of models
and preparation of data inputs (details of ECL measurement methodology are disclosed in Note 37). Expert manage-
ment judgement is an also an essential part of calculating expected credit losses.
Management considers the significant management judgements and estimates in calculating ECL as follows:
Judgements used to define criteria used in definition of default. The Bank defines default using both quantitative
and qualitative criteria. Borrower is classified as defaulted if:
• any amount of contractual repayments is past due more than 90 days; or
•
factors indicating the borrower’s unlikeliness-to-pay.
In addition, default exit criteria is defined using judgement as well as whether default should be applied on a borrower
or exposure level. For more details on the methodology please see Note 37.
Judgements used to define criteria for assessing, if there has been a significant increase in credit risk (SICR) which
is defined using both quantitative and qualitative criteria.
Qualitative factors usually include judgements around delinquency period of more than 30 days on contractual re-
payments; exposure is restructured, but is not defaulted; borrower is classified as “watch”.
On a quantitative basis the Bank assess change in probability of default parameter for each particular exposure since
initial recognition and compares it to the predefined threshold. When absolute change in probability of default ex-
ceeds 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 Bank has sufficient number of observations.
150
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
The table below represents the sensitivity analysis of (i) 20% decrease of SICR thresholds (quantitative criteria applied
for retail and micro exposures described above. (ii) 10% increase in total number of stage 2 borrowers.
In thousands of GEL
2021
20% decrease in SICR
thresholds
10% increase in
number of Stage 2
contracts
Increase credit loss allowance
on loans and advances by GEL
2,470.
Change of the Bank’s cost of
credit risk ratio by 2 basis points.
Increase credit loss allowance
on loans and advances by GEL
2,511.
Change of the Bank’s cost of
credit risk ratio by 2 basis points.
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.
Judgements used for calculation of credit risk parameters namely exposure at default (EAD), probability of default
(PD) and loss given default (LGD). The judgements include and are not limited by:
i. definition of the segmentation for risk parameters estimation purposes,
ii. decision whether simplified or more complex models can be used,
iii. time since default date after which no material recoveries are expected,
iv. collateral haircuts from market value as well as the average workout period for collateral discounting.
The table below describes sensitivity on 10% increase of PD and LGD estimates:
In thousands of GEL
2021
2020
2019
10% increase
(decrease) in PD
estimates
10% increase
(decrease) in LGD
estimates
Increase (decrease) credit loss
allowance on loans and advances
by GEL 25,043 (GEL 18,905).
Increase (decrease) credit
loss allowance on loans and
advances by GEL 24,901 (GEL
26,013).
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 (12) basis
points
Change of the Bank’s cost of
credit risk ratio by 18 (19) basis
points.
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 39,900 (GEL 35,129).
Change of the Bank’s cost of
credit risk ratio by 26 (22) 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.
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.
Estimates used for forward-looking macroeconomic scenarios and judgements made for their probability weight-
ings. For forward-looking information purposes the Bank defines three 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.
Estimates applied in differentiating between these three scenarios represent GDP, USD/GEL rate, RE price, employ-
ment levels, monetary policy rate and other macro variables. Under usual conditions, the scenario weights applied
are 50%, 25% and 25% for the base case, upside and downside scenarios respectively. As at 31 December 2021 the
weights applied are 50%, 25% and 25% for the base, upside and downside scenarios respectively, (31 December 2020:
60%, 10% and 30% and 31 December 2019: 50%, 25% and 25%). Based on the changes of the macro environment the
Bank modifies the weightings based on expert judgement..
151
TBC BANK FINANCIAL STATEMENTS 2021 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
The table below describes the unweighted ECL for each economic scenario as at 31 December 2021:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
48,220
112,592
180,003
63,080
403,895
Upside
46,752
104,856
176,638
59,464
387,710
Downside
59,640
122,768
183,600
68,491
434,499
Weighted
50,731
113,101
180,050
63,486
407,368
The table below describes the unweighted ECL for each economic scenario as at 31 December 2020:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
96,039
155,709
240,827
96,351
588,926
Upside
94,607
149,480
238,427
95,496
578,010
Downside
135,188
166,582
245,072
98,329
645,171
Weighted
107,641
159,910
241,825
96,870
606,246
The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 31
December 2021:
Growth rates YoY, %
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment
Monetary policy rate
(EOP, Level)
Baseline
2023
5.5%
3.25
2.1%
1.0%
7.5%
2022
6.0%
3.30
1.6%
1.0%
8.5%
2024
5.0%
3.20
2.6%
0.5%
7.0%
Upside
2023
8.2%
2.87
6.3%
1.7%
2022
7.8%
2.95
4.6%
1.5%
8.0%
6.8%
2024
8.3%
2.80
7.7%
1.3%
6.1%
Downside
2022
4.1%
3.55
-1.6%
0.6%
2023
2.8%
3.55
-2.5%
0.4%
2024
1.7%
3.52
-3.5%
-0.2%
9.4%
8.7%
8.4%
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
Monetary policy rate
(EOP, Level)
Baseline
2022
7.4%
3.1
5.2%
1.0%
7.0%
2021
4.2%
3.2
-3.5%
2.6%
7.5%
2023
5.3%
3.0
7.5%
1.0%
6.5%
Upside
2022
8.3%
2.8
4.6%
1.3%
6.7%
2021
4.9%
3.0
-2.1%
2.8%
7.3%
2023
6.5%
2.7
6.9%
1.3%
6.1%
Downside
2021
2.7%
3.5
-5.7%
2.4%
8.4%
2022
5.2%
3.4
6.3%
0.7%
8.3%
2023
2.6%
3.3
4.2%
0.6%
8.1%
The Bank assessed the impact of changes in GDP growth, unemployment and monetary policy rate variables on ECL
as a most critical estimates applied in ECL assessment.
The sensitivity analysis was performed separately for each of the variable to show their significant in ECL assess-
ment, 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.
152
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
The table below shows the impact of +/-20% change in GDP growth, unemployment and monetary policy variables
across all scenarios on the Bank’s ECL as at 31 December 2021:
in thousands of GEL
Impact on ECL
20% increase
(9,036)
20% decrease
10,359
20% increase
4,805
20% decrease
(4,541)
20% increase
4,045
20% decrease
(3,493)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
The table below shows the impact of +/-20% change in GDP growth and unemployment variables across all scenar-
ios on the Bank’s ECL as at 31 December 2020:
in thousands of GEL
Impact on ECL
20% increase
20% decrease
20% increase
20% decrease
20% increase
20% decrease
(6,973)
7,323
3,899
(3,083)
4,136
(3,234)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
Individual assessment: Individual assessment is mainly used for stage 2 and stage 3 individually significant borrowers.
For selecting individually significant exposures, the management uses the following estimated thresholds above
which exposures1 are selected for individual review: for stage 2 - to GEL 10 million and for stage 3 - GEL 4 million.
Additionally, 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 individual assessment takes into account
latest available information in order to define ECL under baseline, upside and downside scenarios.
Use of post model overlays and adjustments
Below we define what we call post model adjustments or overlays for ECL estimation purposes.
Post model adjustments
We call PMAs specific set of management adjustments to address known model limitations, either in model meth-
odology or model inputs. PMAs are made based on analysis of model inputs and parameters to determine the re-
quired modifications in order to improve model accuracy.
Post model overlays
Post model overlays (PMOs) reflect management judgement that mainly rely on expert judgement and are applied
directly to expected credit losses at an aggregated level.
Once implemented, Post Model overlays and adjustments are re-assessed at each reporting date to determine the
validity of the adjustments. The appropriateness of PMAs and PMOs is subject to rigorous review and challenge.
Post model overlays and adjustments review and approval process goes through same phases as made for ECL pro-
cess governance that is described in note: 37 - under risk governance section.
As a result of Covid-19 pandemic, the Bank applied expert judgement to the measurement of the expected credit
losses in the form of post model adjustments (PMAs). The adjustments made were all in model adjustments, which
means that we made adjustments either to model inputs or its parameters and run the models based on the updated
adjustments. No post model overlays has been processed during the year (2020 nil).
Below, are summarized in model PMAs applied as of YE 2020 and 2021. Total effect of all PMAs amounted to GEL
16,107 thousand and GEL 105,502 thousand for YE 2021 and YE 2020 respectively:
• Default definition: The bank applied additional default criteria to exposures particularly impacted by the pan-
demic-related restrictions. This included exposures that were granted several phases of covid-19 related grace
periods or restructurings. The criteria included lower days past due threshold and deterioration in debt coverage
ratios for those exposures to facilitate the early identification of impaired exposures. PMA was applicable as of YE
2020 and is no longer valid as of YE 2021 as covid-19 related grace periods or restructurings are no longer in place.
• Stage 2 definition: As a result of Covid-19 pandemic, the Bank applied certain PMAs to SICR criteria (significant
increase in credit risk) to facilitate the early identification of increased risk exposures. The criteria is based on the
repayment history of the exposures after the second stage grace period and availability of the recent financial
monitoring information for the vulnerable business borrowers. PMA was applicable as of YE 2020 and is no longer
valid as of YE 2021 as Covid-19 pandemic related grace periods are no longer in place.
1 Total exposure of the bank toward the borrower or group of interconnected borrowers.
153
TBC BANK FINANCIAL STATEMENTS 2021 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
• Loss given default (LGD) – Recovery rate: For YE 2020, in the LGD modelling the Bank reduced the recovery
rates for retail (mortgage, secured consumer & unsecured) and micro exposures in stage 3 to reflect the expect-
ed impact of the pandemic-related restrictions. In 2021, the Bank re-assessed the adjustment and based on the
analysis of recoveries, made certain modifications to PMAs applied as of YE 2020. Mortgage portfolio – recov-
ery rate downward adjustment was totally removed, as based on the analysis observed recoveries managed to
reach pre-pandemic level. Unsecured consumer portfolio, recoveries were improved, however it was still lower
compared to the pre-pandemic level, therefore, recovery rate downward adjustment was maintained, but it was
decreased compared to YE 2020. Adjustments for other portfolios, namely, secured consumer and micro seg-
ments - remained unchanged compared to YE 2020, as material improvement in recoveries were not observed.
• Loss given default (LGD) – Collateral haircut/AWT1: In order to capture an impact of expected real estate price
drop on ECL, downward adjustment to the collateral values was applied for stage 3 SME and stage 3 non-signif-
icant corporate exposures, as of YE 2020. As of YE 2021 the adjustment is no longer incorporated in line with the
updated macro assumptions for real estate price. However, for that particular portfolios (SME, non-significant cor-
porate) the Bank extended AWT (average workout period) from 1 Year2 to 2 years in 2021, in order to reflect delayed
recoveries, observed in 2021, mainly driven by covid-19 pandemic. An adjustment was applied across all stages.
• Full prepayment ratio (FPR): As of YE 2020, the Bank applied downward adjustment to FPR ratio which is used for
exposure at default modeling (EAD). The adjustment was made based on the expectations that full prepayments
will be lower compared to the pre-pandemic levels. In 2021 the Bank analyzed actual prepayments and based on
the analytics either maintained the adjustment or decreased/totally removed it.
• Credit Bureau scores: In December 2020, the Bank has adjusted CB-Score/risk grade as available score did not
reflect respective period creditworthiness of particular exposure due to the Covid-19 related grace periods. As of
December 2021, CB-Score approximation was already removed and the Bank directly uses the CB-Scores pro-
vided by the external credit bureau.
Following Table presents effects of PMAs on ECL. Some of the effects are dependent on each other, therefore the
sum of individual effects of PMAs do not equal to the total effect posted on ECL as a result of PMAs:
In thousands of GEL
Default definition
Stage 2 definition
Loss given default (LGD) – Recovery rate
Loss given default (LGD) – Collateral haircut/AWT3
Full prepayment ratio (FPR):
Credit Bureau scores
2021
-
-
12,835
2,754
512
-
2020
34,304
2,906
45,578
3,116
2,166
17,708
4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
The following amended standards became effective during 2021:
Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual
periods beginning on or after 1 April 2021).
In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from as-
sessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before
30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical
expedient from 30 June 2021 to 30 June 2022.
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.
154
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS CONTINUED
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 replace-
ment 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 instru-
ments to which the amortised cost measurement applies, the amendments require entities, as a practical expe-
dient, 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 neces-
sary 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 mod-
ifications 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-contractually 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 amend-
ments 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 sig-
nificant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result
of IBOR reform.
Libor is the most frequently used floating rate within the Group, as a result, below analysis is primarily concentrated
on Libor change.
Libor Change
On 5 March 2021, the IBA confirmed its intention to cease the publication of GBP, CHF, EUR, and JPY LIBOR (all ten-
ors) and USD LIBOR (one week and two-month tenors) at the end of 2021. The remaining USD LIBOR tenors will be
published by IBA until the end of June 2023. The Bank has not yet re-negotiated the existing contracts in USD LIBOR
and will follow extended timeline. Most Libor benchmarks are expected to transition to respective near risk-free rate
(RFR) benchmarks.
Under these amendments, the changes to the basis for determining the contractual cash flows are reflected by ad-
justing the effective interest rate, as allowed by practical expedient. No immediate gain or loss is recognised. These
revisions of effective interest rate are only applicable when the change is necessary as a direct consequence of inter-
est rate benchmark reform, and the new basis for determining the contractual cash flows is economically equivalent
to the previous basis.
The Group does not have any exposure to GBP, CHF, EUR or JPY LIBOR contracts and has no impact of the cessation.
For EUR floating assets and liabilities, EURIBOR is used as the default benchmark in the Group. For all new contracts,
the rate fallback provisions are in place to avoid future complications in case there will be changes to EURIBOR
benchmark.
In USD, the Group has exposure to Libor, predominantly in contracts with 6 Month USD Libor benchmark.
For the new customer contracts, the plan is to move fully from USD LIBOR to the RFRs in 2022.
1 AWT - average workout period
2 AWT is set to 1 year according to the ECL methodology. As of YE 2020, no changes to the methodology was applied in terms of AWT.
3 As described above, collateral haircuts were applied as of YE 2020. As for the AWT, it was only applicable as of YE 2021.
155
TBC BANK FINANCIAL STATEMENTS 2021 4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS CONTINUED
In the table below is the breakdown by financial statement components yet to transition to the alternative benchmark:
Non derivative
financial
assets
Loans and
advances to
customers
-
Currency
EUR
Cessation
Date
TBD*
Non
derivative
financial
liabilities
Contingencies
and commitments
Derivatives
Subordinated
debt
-
Due to credit
institutions
88,761
Letters of
credit
-
Undrawn
credit lines
-
Derivatives
-
USD
TBD*
USD 30-Jun-23
24,831
26,139
-
-
USD 30-Jun-23
5,432,142
281,604
USD 30-Jun-23
1,460
-
5,484,572
281,604
-
2,858
361,360
30,992
483,971
-
-
1,032
11
4,771
909,315
-
-
-
3,613
-
-
4,771
910,358
3,613
In thousands of GEL
Index
6M Euribor
1M Libor
3M Libor
6M Libor
12M Libor
Total
* To be determined.
Financial risks resulting from the cessation of LIBOR and the development of market liquidity in new Benchmarks will
also affect the Group throughout transition. The differences in Libor and the new benchmark rates will create a basis
risk that we may need to actively manage through appropriate financial hedging. Basis risk in may arise out of the
asymmetric adoption of RFRs across assets and liabilities and across currencies and products. In addition, this may
limit the ability to hedge effectively. Where appropriate, portfolio immunization or cash flow matching strategies will
be used during the transition for risk minimization purposes. The hedging is expected to be done via available interest
rate derivatives for respective RFRs.
The continued orderly transition from LIBOR has been the Group’s key objective through 2021 and were grouped into
two work streams:
1. The development of alternative rate and RFR product capabilities.
2. The transition of legacy Libor contracts.
The Groups initiatives in connection with LIBOR transition include:
Implementing rate fall back provisions, where appropriate;
a.
b. The Group continues to engage with market participants and the regulator to address market-wide challenges
associated with USD LIBOR transition, including the efforts to introduce forward-looking term rates linked to
SOFR;
c. To educate and inform clients on LIBOR transition and the necessity to prepare for the cessation of LIBOR;
5. NEW ACCOUNTING PRONOUNCEMENTS
The Group has not early adopted any of the amendments effective after 31 December 2021 and it expects they will
have an insignificant effect, when adopted, or management is assessing the scale of impact on the consolidated
financial statements of the Group and the separate financial statements of the Bank.
IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 Jan-
uary 2021, deferred to 1 January 2023 by the amendments to IFRS 17).
IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts
using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial per-
formance 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.
156
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods
beginning on or after 1 January 2023).
The amendments include a number of clarifications intended to ease implementation of IFRS 17, simplify some re-
quirements of the standard and transition. The amendments 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 exemp-
tion 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 acquisition
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.
• Contractual service margin attributable to investment services: Coverage units should be identified, considering
the quantity of benefits and expected period of both insurance coverage and investment services, 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 insur-
ance contract, to the extent that the entity performs such activities to enhance 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 contracts and the percentage of claims
on underlying insurance contracts that the entity expects to recover from the reinsurance contract held. This re-
quirement 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 contracts.
• Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts, and
some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial position
in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks using rein-
surance 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; in-
clusion 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.
Transition option to insurers applying IFRS 17 – Amendments to IFRS 17 (issued on 9 December 2021 and effective
for annual periods beginning on or after 1 January 2023).
The amendment to the transition requirements in IFRS 17 provides insurers with an option aimed at improving the
usefulness of information to investors on initial application of IFRS 17. The amendment relates to insurers’ transition to
IFRS 17 only and does not affect any other requirements in IFRS 17. The transition requirements in IFRS 17 and IFRS 9
apply at different dates and will result in the following one-time classification differences in the comparative informa-
tion presented on initial application of IFRS 17: accounting mismatches between insurance contract liabilities mea-
sured at current value and any related financial assets measured at amortised cost; and if an entity chooses to restate
comparative information for IFRS 9, classification differences between financial assets derecognised in the compar-
ative period (to which IFRS 9 will not apply) and other financial assets (to which IFRS 9 will apply). The amendment will
help insurers to avoid these temporary accounting mismatches and, therefore, will improve the usefulness of com-
parative information for investors. It does this by providing insurers with an option for the presentation of compara-
tive information about financial assets. When initially applying IFRS 17, entities would, for the purpose of presenting
comparative information, be permitted to apply a classification overlay to a financial asset for which the entity does
not restate IFRS 9 comparative information. The transition option would be available, on an instrument-by-instrument
basis; allow an entity to present comparative information as if the classification and measurement requirements of
IFRS 9 had been applied to that financial asset, but not require an entity to apply the impairment requirements of IFRS
9; and require an entity that applies the classification overlay to a financial asset to use reasonable and supportable
information available at the transition date to determine how the entity expects that financial asset to be classified
applying IFRS 9.
157
TBC BANK FINANCIAL STATEMENTS 2021 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
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 informa-
tion 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 pro-
vide guidance on how to apply the concept of materiality to accounting policy disclosures.
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7
May 2021 and effective for annual periods beginning on or after 1 January 2023).
The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommis-
sioning obligations. In specified circumstances, entities are exempt from recognising deferred tax when they recog-
nise assets or liabilities for the first time. Previously, there had been some uncertainty about whether the exemption
applied to transactions such as leases and decommissioning obligations – transactions for which both an asset and
a liability are recognised. The amendments clarify that the exemption does not apply and that entities are required
to recognise deferred tax on such transactions. The amendments require companies to recognise deferred tax on
transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual
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 effective 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 intended 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 as-
set is not relevant to this assessment. An asset might therefore be capable of operating as intended 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 allocation 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 determine 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 acquisition, the en-
tity 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.
158
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
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 consolidated financial statements,
based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for
the effects of the business combination in which the parent acquired the subsidiary. 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 differences, 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.
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.
Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effec-
tive 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 complies 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 con-
verting 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 instru-
ment as a separate component of a compound financial instrument.
Amendment to IFRS 4 – deferral of IFRS 9 (issued on 25 June 2020 and effective for annual periods beginning on
or after 1 January 2023).
The amendments to IFRS 4 addressed the temporary accounting consequences of the different effective dates of
IFRS 9 and the forthcoming IFRS 17. The amendments to IFRS 4 extended the expiry date of the temporary exemp-
tion from applying IFRS 9 until 2023 in order to align the effective date of IFRS 9 with the new IFRS 17. The fixed ex-
piry date of the temporary exemption from applying IFRS 9 in IFRS 4 has been deferred to annual reporting periods
beginning on or after 1 January 2023.
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.
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.
159
TBC BANK FINANCIAL STATEMENTS 2021 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)
Correspondent accounts and overnight placements with other banks
Placements with and receivables from other banks with original maturities
of less than three months
2021
2020
2019
831,035
747,195
646,394
134,262
102,289
35,133
630,247
588,343
186,623
45
163,851
126,359
Total gross amount of cash and cash equivalents
1,595,589
1,601,678
994,509
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
(129)
(129)
-
-
(79)
(79)
-
-
(30)
(30)
-
-
Total cash and cash equivalents
1,595,460
1,601,599
994,479
94% of the correspondent accounts and overnight placements with other banks are placed with OECD (The Orga-
nization for Economic Co-operation and Development) banking institutions (31 December 2020: 89%; 31 December
2019: 85%).
As at 31 December 2021 GEL 45 thousand was placed on interbank term deposits with one non-OECD bank and
none with OECD banks (2020: GEL 25,030 thousand with 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 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
2021
69,943
2,117
425,554
1,795
23,766
70,886
2020
–
1,891
417,938
1,896
35,753
–
7
64,985
12,569
367
1,519
13,367
8,343
14
–
897
–
1,858
9,072
53,684
15
354
2019
–
–
66,805
13,816
–
20,286
69,302
–
733
2,970
12,336
375
–
–
Total correspondent accounts and overnight placements with other banks
630,247
588,343
186,623
160
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 6. CASH AND CASH EQUIVALENTS CONTINUED
The credit rating of placements with and receivables from other banks with original maturities of less than three
months stands as follows:
in thousands of GEL
A-
BBB+
BB
B+
Not rated
Total placements with and receivables from other banks with original
maturities of less than three months
2021
2020
2019
–
–
–
–
45
45
–
115,012
163,837
–
–
14
–
1,718
9,629
–
163,851
126,359
The table illustrates the ratings by international agencies Standard & Poor’s and Fitch Ratings. When different credit
ratings are designated by the agencies, the highest designated rating for this asset is used, for those financial insti-
tutions which are not assigned credit ratings country ratings are used. As at 31 December 2021 there were no invest-
ment securities held as collateral against placements with other banks under the reverse repo agreements (2020: nil;
2019: 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 2021, 2020 and 2019. Credit ratings
of placements with other banks with original maturities of more than three months were as follows:
in thousands of GEL
AA-
A+
BBB+
BBB-
BBB
BB
B+
Total placements with other banks
with original maturities of more than three months
2021
–
2020
31
2019
–
13,099
10,908
9,541
21
2,943
–
1,468
24,706
98
2,010
–
5,943
700
–
–
2,493
1,388
2,175
42,237
19,690
15,597
As at 31 December 2021 the Group had two placements, with original maturities of more than three months and with
aggregated amounts above GEL 5,000 thousand (2020: nil; 2019: nil). The total aggregated amount of placements
with other banks with original maturities of more than three months was GEL 28,428 thousand (2020: GEL2,012 thou-
sand; 2019: Nil) or 67.3% of the total amount due from other banks (2020: 4.0%; 2019: 40.8%).
As at 31 December 2021 GEL 13,819 thousand, (2020: GEL 11,744 thousand ; 2019: GEL 11,836 thousand ) were kept on
deposits as restricted cash under an arrangement with a credit card company or credit card related services with oth-
er banks. Refer to Note 41 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 bal-
ances as at 31 December 2021 is GEL 9.9 thousand (2020: GEL 8 thousand; 2019: GEL 9 thousand).
8. MANDATORY CASH BALANCES WITH NATIONAL BANK OF GEORGIA
Mandatory cash balances with the National Bank of Georgia (“NBG”) represent amounts deposited with the NBG. Res-
ident 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 10.5%, (0.25%) and
(0.7%) annual interest in GEL, USD and EUR respectively on mandatory reserves with NBG in 2021 (2020: 8.0%, (0.25%)
and (0.7%) in GEL, USD and EUR respectively; 2019: 9.0%, 1.25% and (0.7%) in GEL, USD and EUR respectively).
In August 2021, Fitch Ratings has affirmed Georgia’s Long-Term Foreign and Local Currency Issuer Default Rating (IDRs)
at ‘BB’. The Outlook was revised to stable from negative. The issue ratings on long-term senior unsecured bonds were
affirmed at ‘BB’. The Country Ceiling Rating was affirmed at ‘BBB-’, short-term foreign and local-currency IDRs at ‘B’.
161
TBC BANK FINANCIAL STATEMENTS 2021 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
Less: credit loss allowance
Stage 1
Stage 2
Stage 3
Total loans and advances to customers
2021
2020
2019
6,547,741
5,690,749
4,660,473
2,153,066
2,011,585
1,884,006
4,112,441
4,141,305
3,942,102
3,556,079
3,169,197
2,948,279
16,954,553
15,200,515
12,661,955
(407,368)
(606,246)
(312,556)
(101,972)
(130,228)
(95,689)
(120,417)
(142,915)
(82,687)
(184,979)
(333,103)
(134,180)
16,547,185
14,594,269
12,349,399
As of 31 December 2021 GEL 16,948,195 thousand of gross loans and advances to customers and GEL 398,735 thou-
sand of credit loss allowance were attributable to the Bank (2020: GEL 15,198,858 thousand and GEL 587,654 thou-
sand; 2019: GEL 12,720,562 and GEL 303,577 thousand).
As at 31 December 2021 loans and advances to customers carried at GEL 843,006 thousand have been pledged to
local banks or other financial institutions as collateral with respect to other borrowed funds (2020: GEL 889,353 thou-
sand; 2019: GEL 474,480 thousand).
Total credit loss allowance includes PMAs amounted to GEL 16,107 thousand and GEL 105,502 thousand for YE 2021
and YE 2020, respectively.
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and ad-
vances 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:
Ɩ For loans, which existed at the beginning of the period, opening exposures are disclosed as transfer amounts;
Ɩ For newly issued loans, exposures upon issuance are disclosed as transfer amounts;
• 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 refer to the net changes in gross carrying amounts, which is loan disbursements less repayments;
• Write-offs refer to write off of loans during the period;
• Foreign exchange movements refer to the translation of assets denominated in foreign currencies and effect to
translation in presentational currency for foreign subsidiary;
• Net re-measurement 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 expectations;
• Re-segmentation refers to the transfer of loans from one reporting segment to another.
In 2021, the Group has reassessed its definition of segments as disclosed in Note 28. Wealth Management business
with high net worth individuals has been transferred from retail to corporate segment and space segment has been
fully transferred from MSME to retail segment due to changes in segment definitions. Other transfers between seg-
ments were primarily due to changes in client size and specifications compared to prior period.
All tables with comparatives below are prepared by the segmentation that was relevant during each prior year.
For presentation purposes, amounts are rounded to the nearest thousands of GEL, which in certain cases is disclosed as nil.
162
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
11,860,559 2,448,126
891,830
15,200,515
130,228
142,915
333,103 606,246
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
(1,734,485) 2,099,936
(365,451)
– to defaulted (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 re-measurement
due to stage transfers,
changes in risk parameters
and repayments1
(366,906) (262,234)
629,140
1,950,513 (1,780,706)
(169,807)
-
-
-
(66,102)
162,746
(96,644)
(83,962)
(39,902)
123,864
143,565
(93,518)
(50,047)
-
-
-
7,369,167
-
-
7,369,167
115,394
-
-
115,394
(2,161,851)
(162,437)
(192,679)
(2,516,967)
22,759
(16,651)
(50,522)
(44,414)
(1,809,284)
(267,445)
(66,207)
(2,142,936)
-
-
-
-
-
-
-
-
(158,517)
(33,483)
122,486
(69,514)
Movements without impact on credit loss allowance charge for the period:
Write-offs
Changes in accrued
interest
Modification
Foreign exchange
movements
-
-
(193,678)
(193,678)
11,271
(3,229)
1,870
5,346
1,930
2,466
9,912
9,742
-
-
-
-
-
-
(193,678)
(193,678)
-
-
-
-
(612,165)
(140,411)
(28,626)
(781,202)
(1,393)
(1,690)
(3,583)
(6,666)
At 31 December 2021
14,512,165 1,933,530
508,858 16,954,553
101,972
120,417
184,979
407,368
1 Movements with impact on credit loss allowance charge for the period differs from statement of profit or loss with amount of recoveries
GEL 44,642 thousands in 2021 (2020: GEL 21,136 thousands, 2019: GEL 33,801 thousands) The amount of recoveries include recoveries
from sale of written off portfolio in the amount of GEL 11.6 million sold In August 2021.
163
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2020
11,551,934
757,094
352,927
12,661,955
95,689
82,687
134,180
312,556
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
(1,834,720) 1,871,883
(37,163)
– to defaulted (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
(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)
Net repayments
(982,755)
(60,770)
(42,984)
(1,086,509)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(45,959)
70,894
186,167
211,102
Movements without impact on credit loss allowance charge for the period:
Write-offs
Foreign exchange
movements
Modifications
–
–
(66,028)
(66,028)
–
–
(66,028)
(66,028)
1,042,872
280,445
59,787
1,383,104
7,038
7,437
24,052
38,527
(15,774)
(5,793)
(1,974)
(23,541)
–
–
–
–
At 31 December 2020
11,860,559 2,448,126
891,830 15,200,515
130,228
142,915
333,103 606,246
164
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2019
9,226,512
791,969
354,101
10,372,582
96,812
95,784
141,534
334,130
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(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)
Net repayments
(1,293,956)
(177,292)
56,480 (1,414,768)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(67,845)
19,033
128,776
79,964
Movements without impact on credit loss allowance charge for the period:
Write-offs
Foreign exchange
movements
–
–
(140,161)
(140,161)
–
–
(140,161)
(140,161)
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
165
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
4,574,134
955,187
161,428
5,690,749
53,995
8,194
45,452
107,641
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(260,069)
331,488
(71,419)
-
(6,701)
12,127
(5,426)
(93,919)
(25,017)
118,936
-
(30,508)
(391)
30,899
461,963
(405,275)
(56,688)
-
27,590
(8,265)
(19,325)
-
-
-
2,604,204
-
-
2,604,204
39,357
-
-
39,357
(1,034,926)
(10,074)
(35,273)
(1,080,273)
(3,172)
102
(16,258)
(19,328)
Net repayments
(414,977)
(82,387)
(32,038)
(529,402)
-
-
-
-
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
-
-
-
-
(55,960)
(10,378)
(12,081)
(78,419)
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
213,296
29,590
6,401
249,287
476
314
2,897
3,687
Write-offs
Changes in accrued
interest
Modification
Foreign Exchange
movements
-
-
(340)
1,988
(3,035)
3,917
719
608
996
(340)
2,870
2,323
-
-
-
-
-
-
(340)
(340)
-
-
-
-
(308,969)
(78,537)
(4,171)
(391,677)
(673)
(393)
(801)
(1,867)
At 31 December 2021
5,743,444
712,548
91,749
6,547,741
24,404
1,310
25,017
50,731
166
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Corporate
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2020
4,434,685
104,409
121,379
4,660,473
39,153
1,969
39,628
80,750
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(750,779)
750,779
–
(57,281)
(14,021)
71,302
20,142
(20,142)
854,821
–
–
–
–
–
–
227
(227)
854,821
14,830
–
(7,395)
7,395
–
(1,394)
(1,307)
2,701
–
–
–
14,830
–
–
(285,949)
(20,839)
(7,919)
(314,707)
(3,328)
(1,915)
(3,800)
(9,043)
Net repayments
(145,390)
16,644
(32,056)
(160,802)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
6,388
1,006
1,974
9,368
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
Write-offs
Modifications
Foreign exchange
movements
21,785
–
–
–
–
(5,380)
(2,541)
(1,758)
(864)
21,785
(5,380)
(5,163)
76
–
–
–
–
–
–
76
(5,380)
(5,380)
–
–
484,641
140,115
14,966
639,722
5,438
1,273
10,329
17,040
At 31 December 2020
4,574,134
955,187
161,428
5,690,749
53,995
8,194
45,452
107,641
167
TBC BANK FINANCIAL STATEMENTS 2021 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Credit loss allowance
Corporate
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2019
2,903,313
138,715
135,261
3,177,289
32,940
4,994
43,571
81,505
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(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)
–
–
–
25,355
–
–
1,638,709
–
–
1,638,709
25,355
–
1,988
(31,192)
(13,862)
(43,066)
(2,544)
(1,064)
(9,094)
(12,702)
Net repayments
(186,958)
(70,285)
(27,812)
(285,055)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(14,698)
(4,398)
1,621
(17,475)
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
Foreign exchange
movements
55,356
711
–
56,067
103,478
5,746
7,305
116,529
176
908
76
175
–
252
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
168
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
2,661,786
631,347
262,946
3,556,079
24,490
46,853
88,567
159,910
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(466,965)
534,711
(67,746)
(71,234)
(94,868)
166,102
570,554
(537,576)
(32,978)
-
-
-
(10,917)
29,516
(18,599)
(14,450)
(10,455)
24,905
36,444
(28,030)
(8,414)
-
-
-
2,023,430
-
-
2,023,430
16,667
-
-
16,667
(522,685)
(44,334)
(33,607)
(600,626)
(688)
(1,613)
(11,988)
(14,289)
Net repayments
(475,809)
(61,832)
(30,299)
(567,940)
-
-
-
-
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
-
-
-
-
(26,678)
(3,534)
32,293
2,081
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(80,868)
6,542
(4,798)
(79,124)
(3,824)
78
(4,898)
(8,644)
Write-offs
Changes in accrued
interest
Modifications
Foreign exchange
movements
-
-
(40,086)
(40,086)
14,130
1,126
1,449
16,705
1,208
369
424
2,001
-
-
-
-
-
-
(40,086)
(40,086)
-
-
-
-
(133,705)
(22,146)
(13,283)
(169,134)
(557)
(581)
(1,400)
(2,538)
At 31 December 2021
3,519,842
413,339
208,124
4,141,305
20,487
32,234
60,380
113,101
169
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2020
2,650,261
204,699
93,319
2,948,279
18,341
18,593
29,211
66,145
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(5,102)
29,155
55,752
79,805
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
Write-offs
Foreign exchange
movements
Modifications
(22,888)
–
–
–
–
(22,888)
(15,696)
(15,696)
(76)
–
–
–
–
(76)
(15,696)
(15,696)
209,565
57,071
22,178
288,814
1,222
2,733
5,600
9,555
(3,222)
(1,432)
(324)
(4,978)
–
–
–
–
At 31 December 2020
2,661,786
631,347
262,946
3,556,079
24,490
46,853
88,567
159,910
170
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2019
2,210,617
193,157
92,820
2,496,594
19,273
22,379
29,362
71,014
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(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)
Net repayments
(333,112)
(42,333)
(14,348)
(389,793)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(11,134)
6,047
26,965
21,878
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(55,356)
(786)
–
(56,142)
(176)
(78)
–
(254)
Write-offs
Foreign exchange
movements
–
–
(28,963)
(28,963)
54,123
6,487
4,798
65,408
–
227
–
(28,963)
(28,963)
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
171
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
1,556,559
267,296
187,730
2,011,585
48,372
66,352
127,101
241,825
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(404,297)
469,103
(64,806)
(107,233)
(99,591)
206,824
319,163
(287,805)
(31,358)
-
-
-
(46,034)
83,035
(37,001)
(22,505)
(25,955)
48,460
57,187
(45,306)
(11,881)
-
-
-
1,410,607
-
-
1,410,607
57,565
-
-
57,565
(408,992)
(55,937)
(87,562)
(552,491)
23,943
(14,452)
(11,487)
(1,996)
Net repayments
(491,278)
(53,145)
29,536
(514,887)
-
-
-
-
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
-
-
-
-
(67,672)
541
94,437
27,306
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(30,782)
491
2,385
(27,906)
3,400
348
2,861
6,609
Write-offs
Changes in accrued
interest
Modification
Foreign exchange
movements
-
-
(151,635)
(151,635)
(1,447)
(1,248)
(4,446)
2,098
437
828
(7,141)
3,363
-
-
-
-
(151,635)
(151,635)
-
-
-
-
-
-
(14,490)
(2,201)
(1,738)
(18,429)
23
230
123
376
At 31 December 2021
1,829,908
237,400
85,758
2,153,066
54,279
64,793
60,978
180,050
172
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2020
1,593,262
216,817
73,927
1,884,006
36,724
52,439
44,793
133,956
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(45,618)
29,130
96,489
80,001
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
Write-offs
Foreign exchange
movements
Modifications
831
–
–
–
–
831
(44,356)
(44,356)
45,457
6,440
4,033
55,930
(5,981)
(1,769)
(758)
(8,508)
–
–
119
–
–
–
437
–
–
–
(44,356)
(44,356)
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
173
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2019
1,641,978
265,687
81,851
1,989,516
42,903
59,245
54,575
156,723
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(38,995)
15,212
91,149
67,366
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
2,583
1,092
572
4,247
Write-offs
Foreign exchange
movements
–
–
(110,243)
(110,243)
14,853
2,122
1,568
18,543
15
–
17
97
–
122
184
296
(110,243)
(110,243)
663
802
At 31 December 2019
1,593,262
216,817
73,927
1,884,006
36,724
52,439
44,793
133,956
174
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
3,068,080
594,296
279,726
3,942,102
3,371
21,516
71,983
96,870
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(603,154)
764,634
(161,480)
(94,520)
(42,758)
137,278
598,833
(550,050)
(48,783)
-
-
-
(2,450)
38,068
(35,618)
(16,499)
(3,101)
19,600
22,344
(11,917)
(10,427)
-
-
-
1,330,926
-
-
1,330,926
1,805
-
-
1,805
(195,248)
(52,092)
(36,237)
(283,577)
2,676
(688)
(10,789)
(8,801)
Net repayments
(427,220)
(70,081)
(33,406)
(530,707)
-
-
-
-
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
-
-
-
-
(8,207)
(20,112)
7,837
(20,482)
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(101,646)
(36,623)
(3,988)
(142,257)
(52)
(740)
(860)
(1,652)
Write-offs
Changes in accrued
interest
Modification
Foreign exchange
movements
-
-
(1,617)
(1,617)
(3,400)
1,321
(72)
516
950
(2,522)
218
2,055
-
-
-
-
-
-
(1,617)
(1,617)
-
-
-
-
(155,001)
(37,527)
(9,434)
(201,962)
(186)
(946)
(1,505)
(2,637)
At 31 December 2021
3,418,971
570,243
123,227
4,112,441
2,802
22,080
38,604
63,486
175
TBC BANK FINANCIAL STATEMENTS 2021 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2020
2,873,726
231,169
64,302
3,169,197
1,471
9,686
20,548
31,705
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(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
Net repayments
(259,511)
(30,916)
(3,620)
(294,047)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(1,627)
11,603
31,952
41,928
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
Write-offs
Foreign exchange
movements
Modifications
272
–
–
–
–
(596)
272
(596)
–
–
–
–
–
–
(596)
(596)
303,209
76,819
18,610
398,638
259
2,994
6,064
9,317
(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
176
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2019
2,470,604
194,410
44,169
2,709,183
1,696
9,166
14,026
24,888
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
(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)
Net repayments
(313,332)
(22,613)
(10,568)
(346,513)
–
–
–
–
Net re-measurement
due to stage transfers,
changes in risk parameters
and repayments
–
–
–
–
(3,018)
2,172
9,041
8,195
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(2,583)
(1,017)
–
–
(572)
(955)
(4,172)
(955)
108,419
12,562
3,220
124,201
Write-offs
Foreign exchange
movements
(15)
–
43
(95)
–
532
(184)
(955)
(294)
(955)
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
177
TBC BANK FINANCIAL STATEMENTS 2021 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The credit quality of loans to customers carried at amortised cost is as follows at 31 December 2021:
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
Stage 1
(12months
ECL)
5,491,018
246,591
5,835
–
5,743,444
(24,404)
5,719,040
1,180,163
542,853
106,892
-
-
1,829,908
(54,279)
1,775,629
3,069,543
328,538
20,890
–
–
3,418,971
(2,802)
3,416,169
2,836,336
673,872
9,634
–
–
3,519,842
(20,487)
3,499,355
31 December 2021
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
4,275
598,209
110,064
–
712,548
(1,310)
711,238
16,309
55,552
138,340
27,199
-
237,400
(64,793)
172,607
78,659
353,765
122,855
14,964
–
570,243
(22,080)
548,163
41,741
250,173
86,859
34,566
–
413,339
(32,234)
381,105
–
–
–
91,749
91,749
(25,017)
66,732
-
-
-
-
85,758
85,758
(60,978)
24,780
–
–
–
–
123,227
123,227
(38,604)
84,623
–
–
–
–
208,124
208,124
(60,380)
147,744
Total
5,495,293
844,800
115,899
91,749
6,547,741
(50,731)
6,497,010
1,196,472
598,405
245,232
27,199
85,758
2,153,066
(180,050)
1,973,016
3,148,202
682,303
143,745
14,964
123,227
4,112,441
(63,486)
4,048,955
2,878,077
924,045
96,493
34,566
208,124
4,141,305
(113,101)
4,028,204
178
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
defaulted)
4,324,191
248,246
1,697
–
4,574,134
(53,995)
4,520,138
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
–
–
–
–
262,946
262,946
(88,567)
174,379
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
262,946
3,556,079
(159,910)
3,396,169
179
TBC BANK FINANCIAL STATEMENTS 2021
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The credit quality of loans to customers carried at amortised cost is as follows at 31 December 2019:
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
Stage 1
(12months
ECL)
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
31 December 2019
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
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
180
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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 19,238 thousand (31 December 2020: GEL 47,933 thousand;
31 December 2019: 109,719 Thousand GEL), accrued interest GEL 4,963 thousand (31 December 2020: GEL 10,584
thousand; 31 December 2019: GEL 27,998 thousand) and accrued off balance sheet penalty GEL 115,371 thousand (31
December 2020: GEL 135,418 thousand; 31 December 2019: GEL 113,855 thousand).
Economic sector risk concentrations within the customer loan portfolio are as follows:
in thousands of GEL
Individual
Real Estate
Hospitality, Restaurants & Leisure
Energy & Utilities
Construction
Food Industry
Trade
Agriculture
Healthcare
Services
Automotive
Transportation
Pawn Shops
Financial Services
Metals and Mining
Communication
Other
2021
Amount
6,407,171
1,591,277
1,350,184
1,095,387
1,041,416
994,780
860,286
838,719
406,608
348,738
309,043
224,066
159,851
112,937
43,132
41,191
1,129,767
%
38%
9%
8%
7%
6%
6%
5%
5%
2%
2%
2%
1%
1%
1%
0%
0%
7%
2020*
Amount
5,948,341
1,460,821
1,368,887
1,078,504
667,904
898,597
708,559
642,024
369,645
268,982
263,276
159,857
168,571
78,923
229,368
46,406
841,850
%
39%
10%
9%
7%
4%
6%
5%
4%
2%
2%
2%
1%
1%
1%
2%
0%
5%
2019*
Amount
5,046,804
1,076,102
988,467
1,089,643
576,923
785,539
616,475
498,783
305,152
212,661
183,912
134,223
203,633
96,430
99,321
43,329
704,558
%
40%
8%
8%
9%
5%
6%
5%
4%
2%
2%
1%
1%
2%
1%
1%
0%
5%
Total gross loans and advances
to customers
16,954,553
100%
15,200,515
100%
12,661,955
100%
* Management has re-visited the logic for disclosing the Economic sector risk concentrations within the customer loan portfolio for 2020 and 2019 year
and corrected any discrepancies identified. As a result, amounts disclosed in the table were amended to reflect more accurate results.
As of 31 December 2021 the Group had 188 borrowers (2020: 157 borrowers; 2019: 125 borrowers) with aggregated
gross loan amounts above GEL 10,000 thousand. The total aggregated amount of these loans was GEL 5,017,758
thousand (2020: GEL 4,562,506 thousand; 2019: GEL 3,669,817 thousand) or 29.6% of the gross loan portfolio (2020:
30.0%; 2019: 29.0%).
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-collateralised as-
sets”) and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value
(“under-collateralised assets”).
181
TBC BANK FINANCIAL STATEMENTS 2021
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The effect of collateral as at 31 December 2021:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and
mediumenterprises
Total
Over-collateralised Assets
Under-collateralised Assets
31 December 2021
Carrying value
of the assets
3,929,725
648,355
3,672,323
3,098,087
Fair value
of collateral
8,578,057
3,117,799
9,877,124
7,035,782
Carrying value
of the assets
Fair value
of collateral
2,618,016
1,504,711
440,118
1,043,218
878,667
23,910
156,248
419,978
11,348,490
28,608,762
5,606,063
1,478,803
The effect of collateral as at 31 December 2020:
Over-collateralised Assets
Under-collateralised Assets
31 December 2020
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
Carrying value
of the assets
4,603,143
869,317
3,703,164
3,114,829
Fair value
of collateral
9,630,768
2,231,778
7,915,172
7,102,534
Carrying value
of the assets
Fair value
of collateral
1,087,606
1,142,268
238,938
441,250
477,701
20,474
158,292
157,047
813,514
Total
12,290,453
26,880,252
2,910,062
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
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
950,847
2,949,426
2,579,002
10,161,731
8,481,849
2,232,728
6,171,802
5,983,285
978,017
933,159
219,771
369,277
310,419
37,658
107,183
164,979
22,869,664
2,500,224
620,239
As at 31 December 2021 loans and advances to customers which were 1. over-collateralised and 2. credit loss allow-
ance was 0, amounted to GEL 1,576,220 thousand (2020: GEL 1,694,328 thousand, 2019: GEL 965,978 thousand).
182
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The effect of collateral by classes as at 31 December 2021 1:
Over-collateralised Assets
Under-collateralised Assets
31 December 2021
in thousands of GEL
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Carrying value
of the assets
271,396
91,525
331,047
10,654,522
-
Fair value
of collateral
310,681
115,404
1,313,628
26,869,049
-
Carrying value
of the assets
Fair value
of collateral
207,788
15,917
253,934
1,861,299
3,267,125
147,871
15,657
138,523
1,176,752
-
Total
11,348,490
28,608,762
5,606,063
1,478,803
The effect of collateral by classes as at 31 December 2020:
in thousands of GEL
Cash Cover
Gold
Inventory
Other
Real Estate
Unsecured and secured solely by
third party guarantees
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
332,438
115,139
753,658
137,749
10,697,040
254,429
12,290,453
358,847
158,008
2,149,849
849,249
23,217,956
146,343
26,880,252
12,937
37,856
24,536
7,960
428,092
2,398,681
2,910,062
39,109
37,946
24,498
20,313
395,398
296,250
813,514
The effect of collateral by classes as at 31 December 2019:
in thousands of GEL
Cash Cover
Gold
Inventory
Other
Real Estate
Unsecured and secured solely by
third party guarantees
Total
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
309,228
140,627
794,209
146,762
8,435,227
335,678
10,161,731
333,329
174,531
2,221,293
1,256,843
18,547,991
335,677
22,869,664
25,299
49,118
33,916
8,558
225,511
2,157,822
2,500,224
35,507
66,943
33,740
11,361
212,902
259,786
620,239
1
In 2020 and 2019 annual financial statements third party guarantees and unsecured loans were separately presented.
183
TBC BANK FINANCIAL STATEMENTS 2021
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
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 2021 are the following:
31 December 2021
in thousands of GEL
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Total
Corporate
Consumer
Mortgage
19
-
8,359
62,463
20,908
91,749
6
-
-
32,281
53,471
85,758
13
-
-
117,443
5,771
123,227
Loans to micro,
small and medium
enterprises
267
294
527
189,533
17,503
208,124
Stage 3 loans presented by segments and collateral classes as at 31 December 2020 are the following:
31 December 2020
in thousands of GEL
Corporate
Consumer
Mortgage
Cash Cover
Gold
Inventory
Other
Real Estate
Unsecured and secured solely by
third party guarantees
Total
21
-
15,991
-
97,824
47,592
161,428
36
1,717
8,909
-
65,645
111,423
187,730
38
-
185
-
273,577
5,926
279,726
Loans to micro,
small and medium
enterprises
47
430
4,250
54
231,925
26,240
262,946
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
Cash Cover
Gold
Inventory
Other
Real Estate
Unsecured and secured solely by
third party guarantees
Total
18
-
9,675
1,245
92,652
17,789
121,379
89
1,289
4,819
-
29,084
38,646
73,927
78
-
13
-
61,918
2,293
64,302
Loans to micro,
small and medium
enterprises
724
400
1,702
50
82,511
7,932
93,319
184
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
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
2021
487,742
431,160
50,792
969,694
2020
737,197
1,602,759
293,205
2,633,161
2019
119,637
82,754
25,513
227,904
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-significant 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 liquidity haircut
and discounted for the period of expected workout time) is larger than the estimated exposure at default, no credit
loss allowance is recognised.
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 857,891 thou-
sand, GEL 564,701 thousand and GEL 595,464 thousand as of 31 December 2021, 2020 and 2019, 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 ad-
vances to customers is disclosed in Note 37. Information on related party balances is disclosed in Note 44.
For the year ended 31 December 2021 amortised cost of loans with lifetime ECL immediately before contractual mod-
ification that was not a derecognition event was GEL 2,110,117 thousand (31 December 2020: GEL 2,805,274 thousand;
31 December 2019: GEL 520,916 thousand). During 2021, gains less losses recognised in profit or loss on modifications
of loans with lifetime ECL that did not lead to derecognition was GEL 205 thousand (2020: GEL 10,411 thousand, 2019:
GEL 978 thousand).
For the year ended 31 December 2021 gross carrying amount of loans that were contractually modified (without
derecognition) in the past when measured at lifetime ECL and which were reclassified to Stage 1 (12 months ECL)
during the current year was GEL 994,526 thousand (31 December 2020: GEL 2,219,539 thousand; 31 December 2019:
GEL 384,174 thousand).
185
TBC BANK FINANCIAL STATEMENTS 2021 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
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
2021
707,253
1,231,024
1,683
-
(2,818)
(2,818)
-
-
2020
666,133
839,839
1,951
21,687
(3,258)
(3,258)
-
-
2019
611,694
330,096
1,596
40,346
(1,438)
(1,438)
-
-
Total investment securities measured at fair value
through other comprehensive
income before
corporate shares
1,937,142
1,526,352
982,294
Corporate shares – unquoted
1,054
916
2,999
Total investment securities measured at fair value
through other comprehensive income
1,938,196
1,527,268
985,293
All debt securities in 2021, 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 stable outlook (as
assigned by Fitch rating agency in August 2021). Latest country rating for Uzbekistan stands at BB-.
70.2% of corporate bonds are issued by triple A rated international financial institutions, 0.4% of corporate bonds are
issued by BB- rated international financial institutions,13.2% of corporate bond are issued at B+ rating, 15.0% of cor-
porate bonds are issued by B and 1.2% by 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 2021 investment securities measured at fair value through other comprehensive income carried
at GEL 383,790 thousand have been pledged with local banks or financial institutions as a collateral with respect to
other borrowed funds (2020: GEL 699,483 thousand; 2019: GEL 696,961 thousand). Refer to Note 19.
As at 31 December 2021 the principal equity investment securities measured at fair value through other comprehen-
sive income are as follows:
in thousands of GEL
Nature of business
Country of registration
GRDC
Property
development
Georgian Stock Exchange
Stock exchange
Other
Total corporate shares
Various
Netherlands
Antilles
Georgia
Various
2021
365
–
689
1,054
2020
365
–
551
916
2019
365
2,111
523
2,999
186
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 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
2021
2020
2019
Carrying amount as of 31 December 2020
Transfer from investment securities measured at amortised cost
due to changes in business model1
Revaluation at transfer date
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
11. BONDS CARRIED AT AMORTISED COST
in thousands of GEL
Ministry of Finance of Georgia treasury bills
Total gross amount of bonds carried at amortised cost
Less: credit loss allowance
Stage 1
Stage 2
Stage 3
Total bonds carried at amortised cost
1,527,268
1,059,946
26,062
2,613,276
797,285
(1,025,775)
(412,204)
(45,696)
185,424
(169,068)
(5,486)
-
440
-
-
-
-
-
-
985,293
763,530
(92,103)
1,005,239
1,781,817
(213,362)
(165,632)
(1,598,534)
17,633
103,516
(93,493)
11,825
(1,481)
(1,820)
(15,156)
74,043
(58,539)
10,087
–
(302)
1,938,196
1,527,268
985,293
29
2021
-
-
-
-
-
-
-
2020
1,062,111
1,062,111
(2,165)
(2,165)
-
-
2019
1,023,474
1,023,474
(1,906)
(1,906)
-
-
1,059,946
1,021,568
1 Refer to note 2 for detailed explanation of changes in business model
187
TBC BANK FINANCIAL STATEMENTS 2021
11. BONDS CARRIED AT AMORTISED COST CONTINUED
The movements in bonds carried at amortised cost are as follows:
in thousands of GEL
Carrying amount as of 31 December 2020
Transfer from investment securities measured at
amortised cost due to changes in business model1
Movement in credit loss allowance due to changes
in business model
Carrying 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
2021
1,059,946
(1,062,113)
2,167
-
-
-
-
-
-
-
-
-
2020
2019
-
-
-
1,021,568
(195,814)
639,825
(413,038)
95,888
(88,224)
–
(259)
-
-
-
653,703
(27,241)
613,383
(216,674)
58,597
(59,222)
13
(991)
1,059,946
1,021,568
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.
As at 31 December 2021 none of the bonds carried at amortised cost have been pledged to local banks or financial
institutions as collateral with respect to other borrowed funds (2020: GEL 843,303 thousand; 2019: GEL 579,142 thou-
sand). Refer to Note 19.
None of the bonds carried at amortised cost as at 31 December 2021, 2020 and 2019 were either overdue or defaulted.
12. OTHER FINANCIAL ASSETS
in thousands of GEL
Derivative financial assets
Receivables from sales of non-financial assets
Receivables on credit card services and money
transfers
Receivable on terminated leases
Advance to promotional service provider
Receivables from plastic card service providers
Investment held at fair value through profit or loss
Receivables on guarantees / letters of credit
Trade receivable
Leasing assets receivables
Rental income receivables
Other
Total gross amount of other financial assets
Less: Credit loss allowance
Total other financial assets
188
2021
199,233
72,650
62,881
46,346
17,681
14,472
11,125
9,766
6,827
2,073
1,349
49,611
494,014
(51,807)
442,207
2020
30,783
19,962
25,227
23,207
15,766
-
17,239
1,943
3,562
2,266
3,243
58,832
202,030
(41,028)
161,002
2019
5,849
32,844
21,895
21,837
14,055
-
-
1,695
4,420
3,866
2,833
36,784
146,078
(30,867)
115,211
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 12. OTHER FINANCIAL ASSETS CONTINUED
As at 31 December 2021, 2020 and 2019, presentation of other financial assets gross carrying amount, except insur-
ance and reinsurance receivables and credit loss allowance by IFRS 9 stages is as follows:
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
184,241
634
17,155
202,030
28,860
–
12,168
41,028
(2,913)
3,125
(212)
(56,547)
-
56,547
118
(10)
(108)
-
-
-
(1,609)
1,609
-
(32,325)
-
32,325
288,584
-
-
288,584
13,197
(27,988)
31,838
(196)
306
(646)
(129)
(2,148)
(30,332)
(305)
3,135
(772)
35,279
(1,547)
-
(31)
(2,867)
(3,172)
-
-
(37)
(3,470)
(3,538)
-
-
-
-
-
-
-
-
13,197
-
-
-
-
-
-
(3,832)
134
7,990
4,292
Other financial assets
in thousands of GEL
At 1 January 2021
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
Foreign exchange
movements
Changes to ECL
measurement model
assumptions
At 31 December 2021
416,687
3,730
73,597
494,014
3,955
1,706
46,146
51,807
1 Refer to note 2 for detailed explanation of changes in business model
189
TBC BANK FINANCIAL STATEMENTS 2021 12. OTHER FINANCIAL ASSETS CONTINUED
Other financial assets
in thousands of GEL
At 1 January 2020
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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*
Foreign exchange
movements*
Changes to ECL
measurement model
assumptions*
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
129,539
25
16,514
146,078
18,207
12,656
30,869
(751)
751
–
(484)
–
484
60
(10)
(50)
–
–
–
145,179
–
–
145,179
10,106
(97,574)
(6)
(1,989)
(99,569)
(401)
7,747
525
(111)
(15)
1,937
259
9,573
769
–
–
–
–
–
103
845
6
1
–
(1)
(4)
5
(4)
(1)
–
4
–
–
–
–
(1)
–
–
(2)
–
–
10,106
(1,848)
(2,250)
–
153
–
256
1,204
2,047
12,168
41,028
At 31 December 2020
184,241
634
17,155
202,030
28,860
*Management has re-visited the logic for disclosing the movement between stages for 2020 and corrected any discrepancies identified. As
a result, amounts disclosed in net repayments, foreign exchange movements and changes to ECL measurement model assumptions were
amended to reflect more accurate results.
190
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. OTHER FINANCIAL ASSETS CONTINUED
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
134,977
74
47,302
182,353
13,145
14
14,935
28,094
(21)
23
(55)
(15)
(2)
70
47
(47)
–
–
–
–
(4)
4
(1)
(15)
4
(4)
–
16
–
–
–
–
105,754
–
–
105,754
21,675
(115,851)
(11)
(30,852)
(146,714)
(16,644)
4,565
–
(1,134)
123
–
1
–
3,431
1,254
1,130
–
–
–
–
31
–
13
–
–
–
21,675
(2,255)
(18,886)
–
–
–
–
(6)
(41)
(16)
Other financial assets
in thousands of GEL
At 1 January 2019
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
Foreign exchange
movements
Changes to ECL
measurement model
assumptions
At 31 December 2019
129,539
25
16,514
146,078
18,206
6
12,655
30,867
The credit quality of Other Financial Assets is as follows at 31 December 2021:
in thousands of GEL
Other Financial Assets risk category
– Very low
– Low
– Moderate
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for SICR)
Stage 3
(lifetime ECL for
defaulted)
416,310
280
97
-
416,687
(3,955)
412,732
-
3,583
147
-
3,730
(1,706)
2,024
-
-
-
73,597
73,597
(46,146)
27,451
Total
416,310
3,863
244
73,597
494,014
(51,807)
442,207
191
TBC BANK FINANCIAL STATEMENTS 2021 12. OTHER FINANCIAL ASSETS CONTINUED
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 ECL for
defaulted)
183,894
261
86
–
184,241
(28,860)
155,381
–
10
624
–
634
–
634
–
–
–
17,155
17,155
(12,168)
4,987
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
defaulted)
129,218
234
87
–
129,539
(18,206)
111,333
1
1
23
–
25
(6)
19
–
–
–
16,514
16,514
(12,655)
3,859
Total
183,894
271
710
17,155
202,030
(41,028)
161,002
Total
129,219
235
110
16,514
146,078
(30,867)
115,211
Impaired receivables include receivables on terminated leases and other receivables for which credit loss allowance
was assessed individually. Receivable’s overdue status is a primary factor for the Group to consider a receivable as
impaired.
As of 31 December 2021 GEL 464,953 thousand of gross other financial assets and GEL 22,648 thousand of credit loss
allowance were attributable to the Bank (2020: GEL 193,220 thousand and GEL 20,145 thousand; 2019: GEL 133,153
thousand and GEL 13,559 thousand).
192
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 13. FINANCE LEASE RECEIVABLES
As at 31 December 2021 finance lease receivables of GEL 262,046 thousand (2020: GEL 271,660 thousand; 2019: GEL
256,660 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
Lease payments receivable at the end
of 2021
Unearned finance income
Credit loss allowance
Present value of lease payments
receivable as at 31 December 2021
Lease payments receivable at the end
of 2020
Unearned finance income
Credit loss allowance
Present value of lease payments
receivable as at 31 December 2020
Lease payments receivable at the end
of 2019
Unearned finance income
Credit loss allowance
* For fair values refer to Note 42.
Present value of lease payments
receivable as at 31 December 2019
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
Due in 5
year or
more
Total
129,836
98,520
55,544
28,065
11,848
6,868
330,681
(32,106)
(3,698)
(19,805)
(3,144)
(9,777)
(1,769)
(4,332)
(699)
(1,460)
(304)
(1,078)
(169)
(68,558)
(9,783)
94,032
75,571
43,998
23,034
10,084
5,621
252,340
132,984
102,136
65,085
31,307
13,922
7,662
353,096
(32,916)
(4,794)
(20,745)
(1,829)
(10,906)
(1,886)
(4,656)
(928)
(1,712)
(425)
(986)
(335)
(71,921)
(10,197)
95,274
79,562
52,293
25,723
11,785
6,341
270,978
147,959
97,959
55,978
25,236
9,333
4,637
(41,969)
(1,430)
(23,467)
(492)
(10,470)
(475)
(3,914)
(222)
(1,089)
(86)
(748)
(80)
341,102
(81,657)
(2,785)
104,560
74,000
45,033
21,100
8,158
3,809
256,660
The table below illustrates the movements in the credit loss allowance of finance lease receivables:
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
2021
10,197
(178)
(236)
9,783
2020
2,785
(348)
7,760
10,197
2019
3,602
(235)
(582)
2,785
193
TBC BANK FINANCIAL STATEMENTS 2021 13. FINANCE LEASE RECEIVABLES CONTINUED
The following table discloses the changes in the credit loss allowance and gross carrying amount for finance lease
receivables between the beginning and the end of the reporting period:
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
171,152
60,769
49,254
281,175
2,914
3,419
3,864
10,197
(27,924)
30,085
(2,161)
(9,135)
(1,952)
11,087
47,278
(38,439)
(8,839)
-
-
-
(181)
193
(12)
(83)
(107)
190
1,318
(1,042)
(276)
-
-
-
109,604
9,178
2,456
121,238
1,589
2,374
559
4,522
(58,654)
(11,429)
(21,386)
(91,469)
(955)
(597)
(3,398)
(4,950)
(36,612)
(4,109)
(4,847)
(45,568)
(3,110)
(1,353)
(1,096)
(5,559)
(1,832)
977
3,161
2,306
-
-
-
(42)
-
(42)
-
-
-
-
(1,843)
(738)
2,794
(61)
(103)
-
(54)
-
(96)
213
in thousands of GEL
At 1 January 2021
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
Foreign exchange
movements
Other movements
Changes due to change in
credit quality
At 31 December 2021
190,767
43,727
27,629
262,123
2,759
3,418
3,606
9,783
194
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 13. FINANCE LEASE RECEIVABLES CONTINUED
As restated
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
205,615
23,799
30,031
259,445
1,999
96
690
2,785
(42,299)
44,590
(2,291)
(26,393)
(1,642)
28,035
5,615
(4,945)
(670)
-
-
-
(330)
415
(85)
(624)
(22)
646
14
(14)
-
-
-
-
85,964
18,654
10,101
114,719
1,258
509
432
2,199
(40,360)
(13,560)
(11,171)
(65,091)
(331)
(63)
(323)
(717)
(22,860)
(9,575)
(8,476)
(40,911)
7,306
3,405
3,559
14,270
(1,436)
-
43
-
136
(1,257)
-
-
-
4
(83)
1,007
-
22
59
-
348
(4)
-
374
(28)
2,417
2,160
5,584
in thousands of GEL
At 1 January 2020
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)*
– to defaulted (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
Foreign exchange
movements
Other movements
Changes due to change in
credit quality
At 31 December 2020
171,152
60,769
49,254
281,175
2,914
3,419
3,864
10,197
* Management has re-visited the logic for disclosing the movement between stages for 2020 and corrected any discrepancies identified. As a
result, amounts disclosed in transfers between stages were amended to reflect more accurate results.
As previously reported
Gross carrying amount
Credit loss allowance
in thousands of GEL
At 1 January 2020
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
Foreign exchange
movements
Other movements
Partial repayment
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
205,532
23,799
30,031
259,362
96
690
2,785
Total
2,785
5,615
(4,945)
(669)
(41,908)
44,590
(2,290)
-
391
14
(13)
-
-
(121)
415
(85)
209
(26,117)
(1,642)
28,035
276
(472)
(23)
646
152
85,964
18,654
10,101
114,719
(40,360)
(13,560)
(11,171)
(65,091)
1,258
(331)
509
(63)
432
2,199
(323)
(717)
-
-
-
-
1,007
2,417
2,160
5,584
6,723
3,405
3,558
13,685
(1,436)
(22,860)
43
(9,575)
135
(8,476)
(1,257)
(40,911)
(357)
(83)
-
22
59
-
348
(4)
-
13
(28)
-
At 31 December 2020
174,716
64,210
43,575 282,502
3,103
3,787
3,956
10,845
195
TBC BANK FINANCIAL STATEMENTS 2021 13. FINANCE LEASE RECEIVABLES CONTINUED
in thousands of GEL
At 1 January 2019
Transfers:
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (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
Foreign exchange
movements
Other movements
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
178,171
10,861
18,372
207,404
2,045
205
1,352
3,602
(5,951)
6,598
(647)
(22,099)
(2,941)
25,040
4,968
(2,972)
(1,996)
–
–
–
138,634
18,663
5,836
163,133
1,319
(55,562)
(4,849)
(10,407)
(70,818)
(38,828)
(2,253)
(9,448)
(50,529)
2,622
3,660
170
522
1,022
2,259
3,814
6,441
(858)
(467)
–
–
(14)
14
(27)
(65)
1
(1)
89
–
92
–
–
–
–
81
1,489
(154)
(1,536)
(2,548)
8
–
–
96
701
242
–
–
–
–
690
2,785
At 31 December 2019
205,615
23,799
30,031
259,445
1,999
All clients from Covid-19 affected sectors, which is in turn determined by TBC Leasing’s credit risk department, using
sector forecasts derived by Group’s macro economists’ team, where these sectors show significant 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. Compared to 2020 year end,
the need for overlays decreased. the group has more clarity related to the repayment capacity of it’s borrowers as and
majority of the borrowers resumed payments after graces.
As at 31 December 2021, credit quality of finance lease receivables is analysed below:
in thousands of GEL
Finance lease receivables risk
category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for SICR)
Stage 3
(lifetime ECL for
defaulted)
161,019
29,748
-
-
-
190,767
(2,759)
188,008
4,397
8,993
15,797
14,540
-
43,727
(3,418)
40,309
-
-
-
-
27,629
27,629
(3,606)
24,023
Total
165,416
38,741
15,797
14,540
27,629
262,123
(9,783)
252,340
196
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 13. FINANCE LEASE RECEIVABLES CONTINUED
As at 31 December 2020, credit quality of finance lease receivables is analysed below:
in thousands of GEL
Finance lease receivables 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
defaulted)
152,660
18,492
–
–
–
171,152
(2,914)
168,238
423
55,260
4,737
349
–
60,769
(3,419)
57,350
–
–
–
–
49,254
49,254
(3,864)
45,390
As at 31 December 2019, credit quality of finance lease receivables is analysed below:
in thousands of GEL
Finance lease receivables 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 de-
faulted)
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
153,083
73,752
4,737
349
49,254
281,175
(10,197)
270,978
Total
175,468
43,835
6,361
3,750
30,031
259,445
(2,785)
256,660
The effect of collateral as at 31 December 2021:
Over-collateralised Assets
Under-collateralised Assets
31 December 2021
in thousands of GEL
Finance lease receivables
Total
Gross carrying value
of the assets
Fair value of
collateral
Gross carrying value of
the assets
Fair value of
collateral
221,676
221,676
366,792
366,792
40,447
40,447
31,842
31,842
The effect of collateral as at 31 December 2020:
31 December 2020
Over-collateralised Assets
Under-collateralised Assets
in thousands of GEL
Finance lease receivables
Total
Gross carrying value
of the assets
Fair value of
collateral
Gross carrying value of
the assets
Fair value of
collateral
218,272
218,272
362,426
362,426
62,903
62,903
51,783
51,783
197
TBC BANK FINANCIAL STATEMENTS 2021
13. FINANCE LEASE RECEIVABLES CONTINUED
The effect of collateral as at 31 December 2019:
31 December 2019
Over-collateralised Assets
Under-collateralised Assets
in thousands of GEL
Finance lease receivables
Total
Gross carrying value of
the assets
Fair value of
collateral
Gross carrying value of
the assets
Fair value of
collateral
228,651
228,651
365,934
365,934
30,794
30,794
22,292
22,292
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
Prepaid insurance of leasing assets
Assets purchased for leasing purposes
Other
Total non-current other assets
Total other assets
2021
2020
2019
255,785
54,730
28,829
8,203
6,624
354,171
10,224
5,229
2,380
120
1,768
19,721
373,892
174,197
39,970
11,450
7,103
2,412
235,132
8,619
7,525
3,461
157
1,752
21,514
256,646
152,134
33,106
31,417
5,016
2,880
224,553
6,321
10,248
3,287
190
2,602
22,648
247,201
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 2021, collateral repossessed for settlement of impaired loans amounted to
GEL 131,917 thousand (2020: GEL 51,043 thousand; 2019: GEL 78,945 thousand).
As at 31 December 2021 repossessed collateral of the bank before impairment is comprised of lands to GEL 12,475
thousand and buildings to GEL 245,875 thousand. (2020: GEL 10,790 thousand and GEL 165,403 thousand, 2019: GEL
15,905 thousand and GEL 142,018 thousand).
With regards to certain repossessed collateral, the Group has granted previous owners a right to repurchase the re-
possessed collateral at prices equal to or higher than the carrying value of the loan at the date of repossession. 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. In some cases prolongation of repurchase right is offered to the own-
ers of the property. As at 31 December 2021, the carrying value of the repossessed collateral subjected to the repur-
chase agreement was GEL 124,687 thousand (2020: GEL 26,309 thousand; 2019: GEL 62,578 thousand).
198
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
in thousands of GEL
Carrying amount as of 1 January 2019
Cost as at 1 January 2019
Accumulated depreciation/amortisation
including accumulated impairment loss
Additions
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/
amortisation on disposals
Carrying amount as of 31 December 2019
Cost as at 31 December 2019
Accumulated depreciation/amortisation
including accumulated impairment loss
Additions
Transfer within premises and equipment
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/
amortisation on disposals
Transfer to Inventory
Transfer to right of use assets
Carrying amount as of 31 December 2020
Cost as at 31 December 2020
Accumulated depreciation/amortisation
including accumulated impairment loss
Additions
Transfers within premises and equipment
Disposals
Effect of translation to presentation currency -
cost
Effect of translation to presentation currency -
accumulated depreciation
Impairment (charge)/reversal
Depreciation/amortisation charge
Elimination of accumulated depreciation/
amortisation on disposals
Carrying amount as of 31 December 2021
Cost as at 31 December 2021
Accumulated depreciation/amortisation
including accumulated impairment loss
Land, premises
and leasehold
improvements
Office
and other
equipment*
Construction
in progress
Total
premises and
equipment
Intangible
assets
Total
162,429
201,740
87,921
214,516
63,719
63,719
314,069
479,975
108,505
164,705
422,574
644,680
(39,311)
(126,595)
-
(165,906)
(56,200)
(222,106)
3,897
3,597
-
-
(5,498)
48
(48)
-
25,061
36
-
(1,439)
(11,345)
75
(45)
43
(5,399)
(22,352)
1,956
8,397
53,903
66,799
120,702
24,945
(3,633)
1,817
-
1,817
-
(1,439)
-
-
-
-
1,817
(1,439)
(4,647)
(21,490)
(479)
(21,969)
-
-
(6)
-
-
123
(93)
37
23
(25)
-
146
(118)
37
(27,751)
(16,281)
(44,032)
10,353
567
10,920
160,982
203,784
86,352
226,947
82,195
82,195
329,529
512,926
159,109
231,048
488,638
743,974
(42,802)
(140,595)
-
(183,397)
(71,939)
(255,336)
8,889
5,365
(2,901)
150
(139)
(2,016)
(5,159)
32,094
-
(4,668)
170
(94)
(1,204)
(20,669)
406
5,222
(395)
(2,842)
162,340
210,034
(39)
(310)
96,854
252,990
26,934
(5,365)
(95)
-
-
-
-
-
-
-
67,917
87,885
155,802
-
(7,664)
320
-
(3)
49
-
(7,667)
369
(233)
(48)
(281)
(3,220)
(25,828)
(676)
(22,742)
(3,896)
(48,570)
5,628
(434)
(3,152)
3
-
-
5,631
(434)
(3,152)
103,669
103,669
362,863
566,693
223,577
318,303
586,440
884,996
(47,694)
(156,136)
-
(203,830)
(94,726)
(298,556)
10,606
2,888
(12,312)
(66)
52
(7,787)
(5,346)
38,097
-
(12,243)
(68)
66
354
(19,823)
8,093
7,925
10,422
(2,888)
(1,693)
-
-
(483)
-
-
59,125
103,226
162,351
-
-
-
(26,248)
(30,080)
(56,328)
(134)
118
(7,916)
(25,169)
(23)
21
(92)
(30,994)
(157)
139
(8,008)
(56,163)
16,018
1,771
17,789
158,468
203,363
111,162
279,130
109,027
109,027
378,657
591,520
267,406
391,334
646,063
982,854
(44,895)
(167,968)
-
(212,863)
(123,928)
(336,791)
*Office and other equipment include furniture and fixtures, computer and office equipment, motor vehicles as well as other equipment
199
TBC BANK FINANCIAL STATEMENTS 2021 15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS CONTINUED
As of 31 December 2021 GEL 352,743 thousand of premises and equipment and GEL 249,356 thousand of intangible
assets were attributable to the Bank (2020: 335,124 thousand and GEL 210,602 thousand; 2019: GEL 302,190 thousand
and GEL 152,393 thousand).
On 10 August 2021, the Bank entered into a sale agreement to dispose of Space platform, which carried out the
Group’s digital banking operations. The disposal was effected in order to support the Groups plan for further expan-
sion. The disposal was completed on 10 August 2021, on which date control of Space platform passed to the Space
International JSC (subsidiary of TBC Bank Group PLC). The carrying value of the assets sold were GEL 24,615 thou-
sand, which was sold for the consideration of GEL 24,615 thousand, having no effect on Group’s consolidated result,
as far as, transaction happened between the two Group companies.
On 18 June 2021, the Group sold land and buildings, where some of its back office functions is currently located, for
cash consideration of USD 25 million. USD 5 million (GEL 16.5 million) has already been received, while the remaining
USD 20 million (GEL 63.2 million) will be received until 30 April 2022. Selling of those assets was part of the Group’s
plan to gradually prepare for relocation to new headquarter, which is in the process of construction. Under the ex-
isting plan the Group will gradually discharge the occupied part of the buildings up until 30 April 2022 and staff will
be distributed to existing offices before the new headquarter will be completed. During this period the property is
being leased back using IFRS 16 exemption for short term leases. Net carrying amount of disposed properties was
GEL 37,416 thousand, out of which net balance disposed from premises and equipment were GEL 5,442 thousand,
while the remaining part was disposed from investment property (Note 17). Net gain on disposal from the sale was
recognised as part of other operating income in the audited annual financial statements of profit or loss in the amount
of GEL 26,294 thousand.
The depreciation and amortisation charge presented on the face of the statement of profit or loss and other compre-
hensive income include depreciation and amortisation charge of premises and equipment, investment properties
and intangible assets.
Construction in progress consists of construction and refurbishment of branch premises and the Bank’s new head-
quarters. Upon completion, assets are to be transferred to premises.
Land and premises of the bank before impairment comprised of land GEL 12,950 thousand and buildings GEL 188,906
thousand (2020: GEL 11,000 thousand and GEL 191,495 thousand, 2019: GEL 25,793 thousand and GEL 219,497 thou-
sand)
16. RIGHT OF USE ASSETS
The Group leases offices, branches and service centres. Rental contracts are typically made for fixed periods of 1 to
15 years.
Leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset be-
comes available for use by the Group.
The right of use assets by class of underlying items is analysed as follows:
in thousands of GEL
Carrying amount at 1 January
Additions of new contracts
Increases in value from substuntial changes in contractual terms
Disposals
Depreciation charge
Carrying amount at 31 December
2021 Premises
2020 Premises
2019 Premises
49,746
5,650
17,549
(1,234)
(13,710)
58,001
57,086
-
8,180
(955)
(14,565)
49,746
60,232
16,571
-
(7,340)
(12,377)
57,086
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 ex-
tension and termination options held are exercisable only by the Group and not by the respective lessor.
200
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 16. RIGHT OF USE ASSETS CONTINUED
Expenses relating to short-term leases and to leases of low-value assets that are not classified as short-term leases
are included in administrative and other operating expenses:
in thousands of GEL
Expense relating to short-term leases
Expense relating to leases of low-value assets
2021
5,325
7,112
2020
5,760
6,990
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
Addition from foreclosure
Disposals
Depreciation charge
Elimination of depreciation on disposal
Impairment charge
Cost as of 31 December
Accumulated depreciation and impairment as of 31 December
Carrying amount of investment properties as of 31 December
2019
7,388
6,154
2019
86,884
(2,588)
84,296
(1,817)
4,914
47
Note
15
2021
73,876
(5,187)
68,689
–
1,874
–
2020
76,521
(3,854)
72,667
–
10,367
–
(42,524)
(13,012)
(13,507)
(749)
1,022
(5,420)
33,226
(10,334)
22,892
(929)
159
(563)
73,876
(5,187)
68,689
(933)
717
(1,050)
76,521
(3,854)
72,667
In 2021, the Group disposed its certain investment properties, out of which most part accounted to the single sale
described in Note 15.
As of 31 December 2021, investment properties comprised of 44 lots (2020: 58 lots; 2019: 63 lots ) of land and 102 build-
ings (2020: 111 buildings; 2019: 111 buildings). The investment property of the bank before impairment comprised of
land GEL 4,834 thousand and buildings GEL 24,222 thousand (2020: GEL 26,703 thousand and GEL 42,723 thousand,
2019: GEL 32,630 thousand and GEL 39,558 thousand) located in Tbilisi and other regions of Georgia with the fair val-
ue amounting to GEL 29,493 thousand (2020: GEL 120,959 thousand; 2019: GEL 123,325 thousand).
For disclosure purposes a latest fair valuation exercise was carried out for investment properties as of 31 December
2021. The valuation was carried out by external valuators who hold a recognised and relevant professional qualifica-
tion and who have recent experience in valuation of assets of similar location and category. In the process of compar-
ison, they have used three comparative analogues (registered sale and/or offer for sale), in which prices were applied
adjustments based on the difference between subject assets and analogues. The fair value of assets has been esti-
mated by using the market and cost approaches due to the market situation, particularly based on a sufficient number
of registered sales and proposals by the date of valuation.
In thousands of GEL
(except for range of inputs)
Fair value as of 31
December 2021
(valuation date)
Valuation
technique
Unobservable
inputs
Range of
unobser-vable inputs
(weighted average)
Land
Buildings
6,214
Sales comparison approach
Price per square meter
0.23 – 1,736 (93)
23,279
Sales comparison approach
Price per square meter
1.1 – 7,738 (971)
Sensitivity of the input to fair value – increase/(decrease) in the price per square metre by 20% would result in in-
crease/(decrease) in fair value by GEL 2,448 thousand/ (GEL 2,705 thousand).
201
TBC BANK FINANCIAL STATEMENTS 2021
17. INVESTMENT PROPERTIES CONTINUED
Where the Group is the lessor, the future minimum lease payments receivable under non-cancellable operating leas-
es, were as follows:
in thousands of GEL
Not later than 1 year
Later than 1 year and not later than 2 years
Later than 2 years and not later than 3 years
Later than 3 years and not later than 4 years
Later than 4 years and not later than 5 years
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
Impairment loss
Carrying amount as of 31 December
Goodwill Impairment Test
2021
29
–
–
–
–
–
29
2020
82
–
–
–
–
–
82
2019
207
230
–
–
–
–
437
2021
28,197
-
28,197
2020
29,459
(1,262)
28,197
2019
29,459
-
29,459
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 Bonaco
CGU Micro
JSC United Financial Corporation
LLC TBC Kredit
Total carrying amount of goodwill
2021
24,166
11,088
7,491
4,791
796
2,567
769
695
–
28,197
2020
24,166
11,088
7,491
4,791
796
2,567
769
695
–
2019
24,166
11,088
7,491
4,791
796
2,567
769
695
1,262
28,197
29,459
The recoverable amount of each CGU was determined based on value-in-use calculations. These calculations 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 stated below.
While assessing the Goodwill for potential impairment in 2020 the Group has identified goodwill generated from
LLC TBC Kredit to be impaired.
202
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 18. GOODWILL CONTINUED
Assumptions used for value-in-use calculations is following:
in thousands of GEL
JSC Bank Republic**
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
CGU Micro
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
LLC Bonaco
Growth rate beyond five years of free cash flow to equity
Pre-tax discount rate
*p.a. means per annum.
**Assumptions related to JSC Bank Republic are similar for all related CGU’s.
2021
2020
2019
5.2% p.a*
17.1% p.a.
5.2% p.a.
12.3% p.a.
5.2% p.a.
12.1% p.a.
-
-
5.2% p.a.
24.6% p.a.
5.2% p.a.
19.7% p.a.
5.2% p.a.
15.1% p.a.
-
-
5.2% p.a.
12.4% p.a.
5.2% p.a.
11.4% p.a.
4.6% p.a.
16.5% p.a.
4.6% p.a.
10.4% p.a.
4.6% p.a.
15.5% p.a.
2.7% p.a.
16.4% p.a.
4.6% p.a.
10.2% p.a.
Pre-tax discount rate used for value-in-use calculations is the assumption to which the recoverable amount is most
sensitive. 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 carry-
ing 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 2,269,542 thousand (2020: GEL 619,250 thousand; 2019: GEL 3,068,466 thousand).
The CGU’s carrying amount would equal its value in use at a discount rate of 41.86% p.a. (2020: 35.49% p.a.; 2019:
39.87% 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. Recoverable amount of Bank Republic
Corporate CGU exceeds its carrying amount by GEL 1,744,639 thousand (2020: GEL 410,824 thousand; 2019: GEL
2,316,056 thousand). The CGU’s carrying amount would equal its value in use at a discount rate of 29.47% p.a. (2020:
30.87% p.a.; 2019: 36.34% 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 amount of Bank Republic
MSME CGU exceeds its carrying amount by GEL 611,733 thousand (2020: GEL 389,641 thousand; 2019: GEL 1,210,045
thousand). The CGU’s carrying amount would equal its value in use at a discount rate of 28.41% p.a. (2020: 35.87% p.a.;
2019: 36.52% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Micro had been 10 per-
centage 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 exceeds its carrying
amount by GEL 510,490 thousand (2020: GEL 370,815 thousand; 2019: GEL 732,567 thousand). The CGU’s carrying
amount would equal its value in use at a discount rate of 29.62% p.a. (2020: 45.25% p.a.; 2019: 29.74% p.a.).
203
TBC BANK FINANCIAL STATEMENTS 2021
18. GOODWILL CONTINUED
If the revised estimated pre-tax discount rate applied to the discounted cash flows of JSC United Financial Corpora-
tion 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 151,060 thousand (2020: GEL 23,116 thousand; 2019: GEL 8,222
thousand). The CGUs’ carrying amount would equal its value in use at a discount rate of 53.79% p.a. (2020: 24.23% p.a.;
2019: 19.53% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of LLC Bonaco had been 10 per-
centage 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 Bonaco CGU exceeds its car-
rying amount by GEL 17,447 thousand (2020: 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 37.49% p.a. (2020: 25.75% p.a. 2019: 49.45% p.a.).
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
2021
2020
2019
181,905
142,752
324,657
43,298*
97,496*
140,794
27,747*
139,267*
167,014
Borrowings from foreign banks and international financial institutions
1,653,245
2,370,656
2,005,900
Borrowing from Ministry of Finance of Georgia
Borrowings from other financial institutions
Borrowings from other local banks and financial institutions
Borrowings from National Bank of Georgia
Total other borrowed funds
Total amounts due to credit institutions
-
-
24,754
981,419
2,659,418
2,984,075
-
58,948
32,185
1,883,290
4,345,079
4,485,873
536
41,456
62,916
1,316,079
3,426,887
3,593,901
* Management has re-visited the logic for disclosing the Due to other banks for 2020 and 2019 year and corrected any discrepancies identified.
As a result, amounts disclosed in the table were amended to reflect more accurate results.
As of 31 December 2021 for the purposes of maturity analysis of financial liabilities (Note 37) the above-mentioned due
to other banks 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
204
2021
2020
2019
577,020
364,121
4,865,920
932,480
4,444,586
3,700,018
14,884,145
504,019
590,426
3,512,078
763,035
3,487,017
3,777,720
12,634,295
616,397
298,177
3,161,526
363,217
2,712,910
2,959,775
10,112,002
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. CUSTOMER ACCOUNTS CONTINUED
State and public organisations include government owned profit orientated businesses. Economic sector concen-
trations within customer accounts are as follows:
in thousands of GEL
Individuals
Trade
Financial services
Services
Construction
Energy & utilities
Government sector
Real estate
Transportation
Healthcare
Hospitality & leisure
Agriculture
Metals and mining
Other
31 December 2021
31 December 2020*
31 December 2019
Amount
8,144,604
1,237,807
1,226,110
718,050
598,856
542,425
480,046
418,062
403,249
194,648
155,778
78,810
32,675
653,025
%
55%
8%
8%
5%
4%
4%
3%
3%
3%
1%
1%
1%
0%
4%
Amount
7,264,737
%
58%
Amount
5,672,685
%
56%
873,995
771,510
526,227
610,321
384,660
647,856
323,547
332,850
131,936
99,770
58,005
18,458
590,423
7%
6%
4%
5%
3%
5%
3%
3%
1%
1%
0%
0%
4%
741,385
351,537
446,876
596,703
322,331
505,494
322,416
308,268
98,294
110,816
50,915
12,264
572,018
7%
3%
4%
6%
3%
5%
3%
3%
1%
1%
1%
0%
6%
Total gross loans and advances
to customers
14,884,145
100%
12,634,295
100%
10,112,002
100%
*Management has re-visited the logic for disclosing the Economic sector risk concentrations within the customer accounts portfolio for 2020
year and corrected any discrepancies identified. As a result, amounts disclosed in the table were amended to reflect more accurate results.
As of 31 December 2021 the Group had 141 customers (2020: 117 customers; 2019: 93 customers) with balances above
GEL 10,000 thousand. Their aggregate balance was GEL 4,754,533 thousand (2020: GEL 3,898,678 thousand; 2019:
GEL 2,872,119 thousand) or 32% of total customer accounts (2020: 31%; 2019: 28%). In 2020 and 2019 annual financial
statements the above disclosure was measured using GEL 3,000 thousand threshold and number of customers us-
ing respective threshold were 454 (GEL 5,630,143 thousand) and 361 (GEL 4,327,035 thousand).
As of 31 December 2021 included in customer accounts are deposits of GEL 28,379 thousand and GEL 109,404 thou-
sand (2020: GEL 4,903 thousand and GEL 94,348 thousand; 2019: GEL 9,555 thousand and GEL 101,615 thousand) held
as collateral for irrevocable commitments under letters of credit and guarantees issued, respectively. The latter is
discussed in Note 38. As of 31 December 2021, deposits held as collateral for loans to customers amounted to GEL
576,261 thousand (2020: GEL 512,637 thousand; 2019: 469,205 thousand).
Refer to Note 42 for the disclosure of the fair value of each class of customer accounts. Information on related party
balances is disclosed in Note 44.
205
TBC BANK FINANCIAL STATEMENTS 2021
21. DEBT SECURITIES IN ISSUE
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Georgian Stock Exchange
Baku Stock Exchange CJSC
Total debt securities in issue
Carrying amount
as of 31 December
2021
Currency
Maturity
Date
Coupon
rate
Effective
interest rate
USD
USD
USD
GEL
AZN
918,504
6/19/2024
5.8%
392,840
228,174
38,532
5,649
1,583,699
10/3/2024
2/4/2027
10.8%
8.9%
3/20/2023 TIBR 3M+3.25%
12.0%
9/23/2023
6.4%
11.4%
9.9%
12.5%
12.4%
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Georgian Stock Exchange
Total debt securities in issue
Currency
USD
USD
GEL
Carrying amount
as of 31 December
2020
966,793
414,216
38,504
1,419,513
Carrying amount
as of 31 December
Coupon
Maturity
rate
Date
5.8%
6/19/2024
10/3/2024
10.8%
3/20/2023 TIBR 3M+3.25%
Effective
interest rate
6.4%
11.4%
12.5%
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Total debt securities in issue
Currency
USD
USD
2019 Maturity Date
6/19/2024
10/3/2024
842,471
371,127
Coupon rate
5.8%
10.8%
1,213,598
Effective
interest rate
6.4%
11.4%
On 28 October 2021, the Bank completed the transaction of USD 75 million 8.894% yield Additional Tier 1 Capital
Perpetual Subordinated Notes issue (“AT1 Notes”) and successfully returned to the international capital markets. The
AT1 Notes are listed on the regulated market of Euronext Dublin and are rated B- by Fitch.
On 23 September 2021 the TBC Kredit completed the transaction of AZN 3 million 2-year 12% named, interest-baring,
paperless, unsecured bonds issue (the “Notes”).
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 3 July 2019 the Bank completed the transaction of a debut inaugural USD 125 million 10.75% yield Additional
Tier 1 Capital Perpetual Subordinated Notes issue (“AT1 Notes”). The AT1 Notes are listed on the regulated 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 un-
secured 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.
206
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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
Balance as of 1 January 2019
Charges less releases recorded in profit or loss
Utilization of provision
Effect of translation to presentation currency
Balance as of 31 December 2019
(Releases)/charges recorded in profit or loss
Effect of translation to presentation currency
Balance as of 31 December 2020
Charges/(releases) recorded in profit or loss
Effect of translation to presentation currency
Balance as of 31 December 2021
Performance
guarantees
4,393
3,069
-
4
Credit related
commitments
5,424
(913)
-
-
7,466
(3,568)
529
4,427
384
(191)
4,620
4,511
330
583
5,424
(1,588)
(212)
3,624
Provision for
other liabilities
and charges
4,000
2,105
(1,104)
-
5,001
2,600
-
7,601
-
-
7,601
Total
13,817
4,261
(1,104)
4
16,978
(638)
1,112
17,452
(1,204)
(403)
15,845
Credit related commitments and performance guarantees: Impairment allowance estimation methods differ
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 clas-
sifies 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 collectively 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 impairment 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.
207
TBC BANK FINANCIAL STATEMENTS 2021 23. OTHER FINANCIAL LIABILITIES
Other financial liabilities comprise the following:
in thousands of GEL
Debit or credit card payables
Trade payables
Liabilities to asset and service providers
of finance leases
Transfers in transit
Derivative financial liabilities
Liabilities related to co-financing of hotels and
restaurants sectors
Payable to deposit insurance agency
Security deposits for finance lease receivables
Prepayments related to guarantees
Other accrued liabilities
Total other financial liabilities
Note
41
2021
28,963
27,307
18,295
15,136
10,216
1,638
1,033
906
516
16,610
120,620
2020
6,408
31,598
10,851
2,156
121,183*
13,771
930
91
1,152
23,102*
211,242
2019
13,259
21,223
25,923
-
20,440
315
549
1,171
879
11,884
95,643
*Management has revisited the classification of margin call deposits balance from one of forward exchange contracts, as far as, it does not represent
the derivative instrument. To improve clarity and understandability of financial statements such deposit has been transferred from derivative financial
liabilities in the amount of GEL 5,270 thousand to other accrued liabilities sub categories within other financial liability note.
As of 31 December 2021 GEL 92,613 thousand of other financial liabilities were attributable to the Bank (2020: GEL
186,487 thousand; 2019: GEL 58,809 thousand).
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
Other
Total other liabilities
2021
45,984
17,046
13,075
7,518
83,623
2020
28,957
12,370
10,390
8,252
59,969
2019
42,017
11,669
11,161
5,519
70,366
All of the above liabilities are expected to be settled within twelve months after the year-end.
25. SUBORDINATED DEBT
As of 31 December 2021, subordinated debt comprised of:
in thousands of GEL
Grant Date Maturity Date
Currency
Outstanding
amount in
original
currency
Outstanding
amount in GEL
Asian Developement Bank
Private lenders
Global Climate Partnership Fund
European Fund for Southeast Europe
Green for Growth Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
European Fund for Southeast Europe
European Fund for Southeast Europe
ResponsAbility SICAV (Lux) Micro and SME Finance
Fund
ResponsAbility SICAV (Lux) - Financial Inclusion Fund
ResponsAbility SICAV (Lux) - Microfinance Leaders
Total subordinated debt
10/18/2016
6/8/2017
11/20/2018
12/21/2018
12/18/2015
12/14/2018
12/14/2018
12/18/2015
3/15/2016
12/31/2026
12/19/2024
11/20/2028
12/21/2028
12/16/2030
12/15/2025
12/14/2028
12/16/2030
3/17/2031
11/30/2018
11/30/2028
11/30/2018
11/30/2018
11/30/2028
11/30/2028
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
50,486
35,304
25,097
20,079
15,189
14,966
14,954
7,594
7,592
5,930
3,115
1,005
156,386
109,427
77,739
62,195
47,048
46,360
46,321
23,523
23,517
18,369
9,649
3,113
623,647
208
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. SUBORDINATED DEBT CONTINUED
As of 31 December 2020, subordinated debt comprised of:
in thousands of GEL
Asian Developement Bank
Private Lenders
Global Climate Partnership Fund
European Fund for Southeast Europe
Green for Growth Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
Subordinated Bond (Private lender)
European Fund for Southeast Europe
European Fund for Southeast Europe
ResponsAbility SICAV (Lux) Micro and SME Finance
Fund
ResponsAbility SICAV (Lux) - Financial Inclusion Fund
KfW
KfW
Micro and SME Finance Leaders
Total subordinated debt
Grant Date Maturity Date
Currency
Outstanding
amount in orig-
inal currency
Outstanding
amount in GEL
10/18/2016
6/8/2017
11/20/2018
12/21/2018
12/18/2015
12/14/2018
12/14/2018
8/31/2018
12/18/2015
3/15/2016
12/31/2026
12/19/2024
11/20/2028
12/21/2028
12/18/2025
12/14/2025
12/14/2028
1/25/2023
12/18/2025
3/15/2026
11/30/2018
11/30/2028
11/30/2018
5/4/2015
6/10/2014
11/30/2018
11/30/2028
5/8/2021
5/8/2021
11/30/2028
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
GEL
GEL
USD
50,438
25,217
25,096
20,079
15,244
14,949
14,941
10,102
7,633
7,631
5,930
3,115
6,737
6,161
1,005
165,266
82,628
82,230
65,789
49,950
48,983
48,956
33,098
25,010
25,004
19,430
10,206
6,737
6,161
3,292
672,740
As of 31 December 2019, subordinated debt comprised of:
in thousands of GEL
Asian Developement Bank
Private Lenders
Global Climate Partnership Fund
European Fund for Southeast Europe
Green for Growth Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
Subordinated Bond (Private lender)
European Fund for Southeast Europe
European Fund for Southeast Europe
ResponsAbility SICAV (Lux) Micro and SME Finance Fund
ResponsAbility SICAV (Lux) - Financial Inclusion Fund
KfW
KfW
Micro and SME Finance Leaders
Total subordinated debt
Grant Date Maturity Date Currency
Outstand-
ing amount
in original
currency
Outstanding
amount in GEL
10/18/2016
6/8/2017
11/20/2018
12/21/2018
12/18/2015
12/14/2018
12/14/2018
8/31/2018
12/18/2015
3/15/2016
11/30/2018
11/30/2018
5/4/2015
6/10/2014
11/30/2018
10/18/2026
12/19/2024
11/20/2028
12/21/2028
12/18/2025
12/14/2025
12/14/2028
1/25/2023
12/18/2025
3/15/2026
11/30/2028
11/30/2028
5/8/2021
5/8/2021
11/30/2028
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
GEL
GEL
USD
50,585
25,218
25,089
20,074
15,305
14,924
14,920
10,101
7,663
7,662
5,935
3,117
6,739
6,162
1,006
145,064
72,317
71,948
57,565
43,890
42,798
42,786
28,976
21,975
21,971
17,020
8,940
6,739
6,162
2,884
591,035
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 balances is
disclosed in Note 44.
In the event of any liquidation and/or significant financial distress with respect to the Borrower, the Lender agrees that
the claims of the Lender in respect of the principal of, and interest on, the Loan and all other amounts payable under
this Agreement shall be subordinated and subject in right of payment to the prior payment of claims of depositors
and unsecured creditors of the Borrower, except for claims which are themselves so subordinated.
209
TBC BANK FINANCIAL STATEMENTS 2021
25. SUBORDINATED DEBT CONTINUED
Unless otherwise agreed with the Regulatory Authority, any voluntary or mandatory prepayment of the Loan or can-
cellation of this Agreement can be made no earlier than five calendar years after the Disbursement Date of the Loan
and shall require the prior written consent of the Regulatory Authority.
The purpose of the Facility is to provide the Borrower with funding to be used by the Borrower as an instrument that
qualifies as Tier 2 Capital to increase its lending capacity and to provide a capital cushion for the Borrower in accor-
dance with the provisions of this Agreement.
26. SHARE CAPITAL
in thousands of GEL
As of 31 December 2019
As of 31 December 2020
As of 31 December 2021
Number of ordinary shares
Share Capital
52,539,769
52,539,769
52,539,769
21,014
21,014
21,014
Each share has a nominal value of GEL 0.4 (31 December 2020: GEL 0.4 per share, 31 December 2019: GEL 0.4 per
share). All issued ordinary shares are fully paid and entitled to dividends.
in thousands of GEL
Dividends payable at 1 January
Dividends declared during the year
Dividends paid during the year:
Dividends payable at 31 December
Dividends per share declared during the year
2021
Interim
-
81,872
(81,872)
-
GEL 1.56
2020
-
-
-
-
-
2019
Ordinary
-
80,911
(80,911)
-
GEL 1.54
On August 11, 2021, JSC TBC Bank’s shareholders agreed on a dividend of GEL 1.56 per share. The dividend was
recorded on August 20, 2021 and on September 7, 2021 shareholders received the payment of the total GEL 81,872
thousand dividends.
In 2020, taking into consideration the unprecedented uncertainty triggered by the COVID-19 outbreak, the Board
of Directors has decided not to recommend a dividend. The decision was approved by shareholders of the Group.
On 19 April 2019, at the annual general meeting JSC TBC Bank’s shareholders agreed on a dividend of GEL 1.54 per
share, based on the 2018 audited financial statements. The dividend was recorded on 28 May 2019 and on 12 July 2019
shareholders received the payment of the total GEL 80,911 thousand dividends.
27. SHARE BASED PAYMENTS
June 2015 arrangement:
In June 2015, the Bank’s Supervisory Board approved management compensation scheme for the top and middle
management which 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 mid-
dle 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, members 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.
210
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27. SHARE BASED PAYMENTS CONTINUED
Service conditions foresee continuous employment until the gradual transfer of the full title to the scheme partici-
pants 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 extended 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 under the entire scheme of 2015-2018. 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 re-
mained conceptually the same and was only updated to reflect the Group’s new structure, whereby TBC Bank Group
PLC distributed its shares to the scheme’s participants, instead of JSC TBC Bank. The respective shares’ value was
recharged to JSC TBC Bank. As a result, the accounting of the scheme did not change in the financial statements.
The share based payment scheme for middle management and other eligible employees continued under existing
terms after 2018, except for vesting conditions that changed from 10%, 10%, 80% to 33%, 33%, 34% for the 3 year peri-
od, starting from 2019.
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 covered 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 considered that as
a grant date. All schemes are equity settled and accounted 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 deferred 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. Starting from 2021, deferred share salary is no longer subject to the deferral and will be vested
immediately upon delivery.
Where applicable, deferred share salary is paid in part under the JSC TBC Bank’s Management Board members
service contract with TBC Bank JSC, with TBC PLC or other Group subsidiaries (as relevant and as applicable). Initial
salaries are set and approved by the Supervisory Board and Board of Directors. The Remuneration Committee assists
both Boards in compensation related matters and makes respective recommendations. Deferred compensation is
subject to the Group’s malus and clawback policies until the shares are vested. 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 compensa-
tion was formally granted, the Remuneration Committee has the right to cause some or all of the deferred compen-
sation 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 committee
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 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 deferred 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.
Annual KPIs are set by the Remuneration Committee at the beginning of each year in relation to that year and ap-
proved by the Board. To the extent that the KPIs are achieved, the Remuneration Committee may recommend to the
211
TBC BANK FINANCIAL STATEMENTS 2021 27. SHARE BASED PAYMENTS CONTINUED
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. 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). Where appli-
cable, deferred share bonus is paid in part under the JSC TBC Bank’s Management Board members service contract
with TBC JSC, with TBC PLC or other Group subsidiaries (as relevant and as applicable).
The number of shares is calculated based on the average share price of the last 10 days preceding the committee
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 cho-
sen to align the Group’s and the Bank’s executive directors’ interests with strategic objectives 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 management of JSC TBC Bank has forfeited 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 remuner-
ation report.
212
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27. SHARE BASED PAYMENTS CONTINUED
Tabular information on the schemes is given below:
in thousands of GEL
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
31 December
2021
31 December
2020
31 December
2019
3,028,818
3,141,541
2,121,129
–
–
–
–
–
–
285,047
471,778
459,751
321,453
528,325
396,525
321,453
528,325
1,613,101
(361,739)
–
(57,058)
–
–
479,580
(428,451)
–
–
Change in estimates of number of shares expected to be granted*
(361,739)
51,129
(57,058)
Change in estimate of number of shares expected to vest based on changes
in share price and exchange rate - 2020 performance
(169,753)
–
Change in estimate of number of shares expected to vest based on perfor-
mance conditions, share price and exchange rate - 2019 performance
Change in estimate of number of shares expected to vest based on perfor-
mance conditions - 2018 performance
Number of shares vested
2015 year award – 80% vesting
2016 year award – 10% vesting
2016 year award – 80% vesting
2017 year award – 10% vesting
2017 year award – 80% vesting
2018 year award – 10% vesting
2019 year award – MM 33% vesting
2019 year award – TM 50% vesting
Number of shares vested
Number of unvested shares at the end of the period
Expense recognised as staff cost during the period (GEL thousand)
–
–
–
–
–
–
(451,251)
(57,102)
(47,401)
(137,779)
(693,533)
2,125,246
19,352
–
–
(71,847)
–
(16,501)
–
–
(413,544)
(105,527)
–
(101,259)
–
–
(620,330)
3,028,818
16,522
(405,573)
(51,693)
–
(61,864)
–
–
–
–
(519,130)
3,141,541
33,857
* The maximum amount is fixed for deferred share compensations for top management, the exact number will be calculated as per policy.
Tax part of the existing bonus system is accounted under equity settled basis.
Staff costs related to equity settled part of the share based payment schemes are recognised in the income state-
ment 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 2021 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 169,753 (31 December 2020: decreased estimated number of shares to vest by
71,847; 31 December 2019: decreased estimated number of shares to vest by 16,501).
In 2019 the Group established employee benefit trust (EBT) Executive Equity Compensation Trustee – Sanne Fiducia-
ry 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 Remuneration committee of the TBC
Bank Group PLC. As at 31 December 2021 the share number held by Trustee was 641,391 (31 December 2020: 778,183;
31 December 2019: 595,380), which represents 1.2% of total outstanding shares (31 December 2020: 1.4%; 31 December
2019: 1.1%).
213
TBC BANK FINANCIAL STATEMENTS 2021 28. SEGMENT ANALYSIS
The Management Board 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 2021 the Group made following re-segmentations:
• Standard annual re-segmentation after which some of the clients were reallocated to different segments – GEL
93,916 thousand of loans and GEL 75,268 thousand of customer accounts were transferred from MSME to Cor-
porate segment.
• Wealth Management business with high net worth individuals has been transferred from retail to corporate seg-
ment in the amount of GEL 141,122 thousand of loans and GEL 2,289,076 thousand of customer accounts due to
changes in segment definitions.
• Space segment has been fully transferred from MSME to retail segment in the amount of GEL 33,709 thousand
of loans and GEL 9,717 thousand of customer accounts due to changes in segment definitions. The underlying
rationale was the composition of product base, offered by Space to its customers. The majority of such products
are consumer, fast consumer and installment loans, which by their nature represent the retail segment.
In the tables below is disclosed the information as of 31 December 2020 and 2019 both with and without re-segmen-
tations effect.
Other transfers between segments were primarily due to changes in client size and specifications compared to prior
period.
The operating segments are determined as follows:
• Corporate – a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which
has been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to
the CIB segment or transferred to the MSME segment on a discretionary basis. In addition, CIB includes Wealth
Management private banking services to high-net-worth individuals with a threshold of US$ 250,000 on assets
under management (AUM), as well as on discretionary basis;
• Retail – non-business individual customers; or individual customers of the fully digital bank, Space;
•
MSME – business customers who are not included in the CIB segment;
Corporate centre and other operations - comprises of the treasury, other support and back office functions, 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 2021, 2020 or 2019.
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 expenses 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 com-
pensated on each deposit based on its currency, duration, type and liquidity requirements. Business segments then
borrow money from corporate 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.
214
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 28. SEGMENT ANALYSIS CONTINUED
A summary of the Group’s reportable segments for the years ended 31 December 2021, 2020 and 2019 is provided
below:
Segment disclosure below is prepared with the effect of 2021 re-segmentations as described above.
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and
other
operations
Total
31 December 2021
Interest income
Interest expense
Net interest gains on currency swaps
Inter-segment interest income/(expense)
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains from currency derivatives, foreign currency
operations and translation
Net gains from disposal of investment securities
measured at fair value through other
comprehensive income
Other operating income
Share of profit of associate
Other operating non-interest income
Credit loss recovery/(allowance) for loans to customers
Credit loss recovery for performance guarantees and
credit related commitments
Credit loss recovery for finance lease receivables
Credit loss allowance for other financial assets
Credit loss recovery for financial assets measured at fair
value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment losses
Staff costs
Depreciation and amortization
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
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
562,014
678,815
384,337
237,911
1,863,077
(278,005)
-
71,408
355,417
112,479
(81,033)
(119,200)
-
(169,947)
389,668
212,922
(38,282)
31,446
174,640
(11,162)
-
(154,827)
218,348
52,811
(33,874)
18,937
(487,061)
28,143
253,366
32,359
(52)
(84)
(136)
(895,428)
28,143
-
995,792
378,160
(153,273)
224,887
57,102
35,942
27,496
3,654
124,194
1,411
-
-
9,745
11,156
2,706
-
61,219
59,743
636
-
(521)
1,096
(7,950)
8,879
-
44,821
(23,742)
877
-
28,373
7,175
28,580
837
42,816
-
41,042
837
177,229
43,176
369
199
-
1,204
-
(3,307)
-
(36)
-
-
-
236
(10,633)
236
(14,461)
1,498
2,594
(1,360)
(2,369)
(11,715)
501,086
582,413
271,672
63,771
1,418,942
(49,009)
(5,258)
(16,394)
(70,661)
(945)
429,480
(48,779)
380,701
6,547,741
7,378,552
(134,138)
(51,480)
(77,593)
(263,211)
(688)
318,514
(32,189)
286,325
6,265,507
5,629,823
(52,956)
(11,626)
(20,384)
(84,966)
(93)
186,613
(21,137)
165,476
4,141,305
1,564,150
(19,644)
(2,258)
(14,253)
(36,155)
-
27,616
(17,173)
10,443
-
311,620
(255,747)
(70,622)
(128,624)
(454,993)
(1,726)
962,223
(119,278)
842,945
16,954,553
14,884,145
3,201,286
178,556
381,201
-
3,761,043
215
TBC BANK FINANCIAL STATEMENTS 2021 28. SEGMENT ANALYSIS CONTINUED
For comparison purposes segment disclosure below is prepared with the effect of 2021 re-segmentations as de-
scribed 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 income/(expense)
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains/(loss) from currency derivatives,
foreign currency operations and translation
Net losses from disposal of investment securities
measured at fair value through other
comprehensive income
Other operating income
Other operating non-interest income
Credit loss allowance for loans to customers
Credit loss recovery/(allowance) for performance
guarantees and credit related commitments
Credit loss allowance for finance lease receivables
Credit loss allowance for other financial assets
Credit loss allowance for financial assets measured at
fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment losses
Staff costs
Depreciation and amortisation
Provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
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
476,649
616,536
321,304
246,349
1,660,838
(230,061)
-
59,132
305,720
84,671
(55,456)
(116,507)
-
(135,612)
364,417
168,320
(43,133)
29,215
125,187
55,911
28,581
(11,057)
-
(121,732)
188,515
37,740
(22,997)
14,743
25,699
(496,464)
20,950
198,212
(30,953)
(235)
(131)
(366)
(854,089)
20,950
-
827,699
290,496*
(121,717)*
168,779
(4,336)
105,855
-
-
-
(624)
(624)
1,855
6,939
57,766
(30,434)
35,520
(205,180)
391
26,090
(95,197)
4,169
(791)
-
13,354
118,585
(330,811)
3,546
(241)
(67)
-
3,238
-
(5,600)
-
(1,476)
(876)
-
-
-
-
(7,760)
(6,332)
(7,760)
(13,408)
(934)
(1,810)
(5)
(3,672)
(795)
(1,358)
(5,830)*
359,332
314,555
133,289
(48,494)
758,682*
(38,223)
(4,460)
(400)
(13,684)
(56,767)
(6,345)
296,220
(19,863)
(108,411)
(45,939)
(2,200)
(68,756)
(225,306)
(23,633)
65,616
23,759
(44,761)
(10,340)
-
(15,836)
(70,937)
(7,153)
55,199
2,337
276,357
5,925,787
5,854,182
89,375
5,846,274
4,975,661
57,536
3,428,454
1,293,222
(15,492)
(3,329)
-
(13,638)
(32,459)
(3,884)
(84,837)
(1,171)
(86,008)
-
511,230
(206,887)
(64,068)
(2,600)
(111,914)*
(385,469)*
(41,015)
332,198
5,062
337,260
15,200,515
12,634,295
3,146,940
176,937
308,480
-
3,632,357
*Certain amounts do not correspond to the 2020 consolidated financial statements as they reflect the certain restatements as described in Note 2.
216
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 28. SEGMENT ANALYSIS CONTINUED
Segment disclosure below is prepared without the effect of 2021 re-segmentations 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 income/(expense)
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains/(loss) from currency derivatives,
foreign currency operations and translation
Net losses from disposal of investment securities
measured at fair value through other
comprehensive income
Other operating income
Other operating non-interest income
Credit loss allowance for loans to customers
Credit loss recovery/(allowance) for performance
guarantees and credit related commitments
Credit loss allowance for finance lease receivables
Credit loss allowance for other financial assets
Credit loss allowance for financial assets measured at
fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment losses
Staff costs
Depreciation and amortisation
Provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
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
462,203
617,125
335,161
246,349
1,660,838
(208,556)
-
34,455
288,102
57,949
(8,698)
(184,738)
-
(59,379)
373,008
206,377
(101,887)
49,251
104,490
(12,020)
-
(125,599)
197,542
26,405
(11,001)
15,404
(448,775)
20,950
150,523
(30,953)
(235)
(131)
(366)
(854,089)
20,950
-
827,699
290,496*
(121,717)*
168,779
51,443
31,561
27,187
(4,336)
105,855
-
-
-
(624)
(624)
1,855
6,901
429
53,298
(29,089)
38,462
(201,652)
27,616
(100,070)
4,169
(791)
-
13,354
118,585
(330,811)
3,546
-
(5,600)
(876)
(241)
-
(1,476)
-
(67)
-
3,238
-
-
-
(7,760)
(6,332)
(934)
(7,760)
(13,408)
(1,810)
(5)
(3,590)
(877)
(1,358)
(5,830)*
358,627
309,001
139,548
(48,494)
758,682*
(34,068)
(4,296)
(400)
(11,968)
(50,732)
(6,345)
301,550
(18,695)
(109,492)
(45,256)
(2,200)
(64,719)
(221,667)
(23,633)
63,701
21,360
(47,835)
(11,187)
-
(21,589)
(80,611)
(7,153)
51,784
3,568
282,855
85,061
5,690,749 5,953,687
4,001,068 7,255,020
55,352
3,556,079
1,378,207
(15,492)
(3,329)
-
(13,638)
(32,459)
(3,884)
(84,837)
(1,171)
(86,008)
–
–
(206,887)
(64,068)
(2,600)
(111,914)*
(385,469)*
(41,015)
332,198
5,062
337,260
15,200,515
12,634,295
3,125,279
189,288
317,790
–
3,632,357
*Certain amounts do not correspond to the 2020 consolidated financial statements as they reflect the certain restatements as described in Note 2.
217
TBC BANK FINANCIAL STATEMENTS 2021 28. SEGMENT ANALYSIS CONTINUED
For comparison purposes segment disclosure below is prepared with the effect of 2021 re-segmentations as de-
scribed 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
Inter-segment interest income/(expense)
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains/(loss) from currency derivatives, foreign
currency operations and translation
Net 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 recovery/(allowance) for loans to customers
Credit loss (allowance)/recovery for performance
guarantees and credit related commitments
Credit loss recovery for finance lease receivables
Credit loss recovery/(allowance) for other financial assets
Credit loss allowance for financial assets measured at
fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment 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
360,688
587,154
291,051
196,213
1,435,106
(148,464)
-
11,216
223,440
49,928
(7,091)
(147,099)
-
(73,263)
366,792
203,391
(84,838)
42,837
118,553
(9,966)
-
(99,022)
182,063
25,787
(9,081)
16,706
(364,893)
28,556
161,069
20,945
1,512
(482)
1,030
(670,422)
28,556
-
793,240
280,618*
(101,492)*
179,126
50,985
30,726
23,087
(2,363)
102,435
-
-
-
169
169
4,322
-
55,307
3,262
(2,691)
-
2,211
(142)
8,204
-
38,930
(81,569)
411
-
(3,545)
-
-
(2,743)
1,082
-
24,169
(3,723)
124
-
(11)
-
-
3,968
632
2,406
-
17,576
632
120,812
(82,030)
-
(2,156)
582
(6,372)
(149)
582
(7,717)
(291)
-
(2,743)*
324,224
436,829
219,328
18,442
998,823*
(36,630)
(2,509)
-
(14,043)
(53,182)
271,042
(29,048)
(132,722)
(45,429)
-
(74,356)
(252,507)
184,322
(17,557)
241,994
166,765
4,904,244 4,896,594
3,920,816
4,811,788
(45,773)
(7,170)
-
(15,021)
(67,964)
151,364
(15,369)
135,995
2,861,117
1,153,349
(10,883)
(2,211)
(2,105)
(20,764)
(35,963)
(17,521)
18,452
931
-
226,049
(226,008)
(57,319)
(2,105)
(124,184)*
(409,616)*
589,207
(43,522)
545,685
12,661,955
10,112,002
2,468,261
190,598
300,992
-
2,959,851
*Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the certain restatements as described in Note 2.
218
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 28. SEGMENT ANALYSIS CONTINUED
Segment disclosure below is prepared without the effect of 2021 re-segmentations 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
Inter-segment interest income/(expense)
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains/(loss) from currency derivatives, foreign
currency operations and translation
Net 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 recovery/(allowance) for loans to customers
Credit loss (allowance)/recovery for performance
guarantees and credit related commitments
Credit loss recovery for finance lease receivables
Credit loss recovery/(allowance) for other financial assets
Credit loss allowance for financial assets measured at
fair value through other comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and
non-financial asset impairment 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
356,654
582,788
299,451
196,213
1,435,106
(166,857)
–
31,352
221,149
49,387
(7,059)
42,328
(152,566)
–
(66,951)
363,271
203,448
(84,870)
118,578
(10,153)
–
(101,423)
187,875
26,271
(9,081)
17,190
(340,846)
28,556
137,022
20,945
1,512
(482)
1,030
(670,422)
28,556
–
793,240
280,618*
(101,492)*
179,126
49,852
30,726
24,220
(2,363)
102,435
–
–
–
169
169
2,952
–
52,804
3,262
(2,691)
–
2,211
(142)
9,563
–
40,289
(77,324)
411
–
(3,545)
–
-
(2,743)
1,093
–
25,313
(7,968)
124
–
(11)
–
-
3,968
632
2,406
–
–
582
(6,372)
(149)
17,576
632
120,812
(82,030)
(2,156)
582
(7,717)
(291)
-
(2,743)*
318,921
438,937
222,523
18,442
998,823*
(36,630)
(2,509)
–
(14,043)
(53,182)
265,739
(29,048)
(131,583)
(45,429)
–
(70,255)
(247,267)
191,670
(18,101)
(46,912)
(7,170)
–
(19,122)
(73,204)
149,319
(14,825)
236,691
4,660,473
3,250,046
173,569
5,053,203
5,672,685
134,494
2,948,279
1,189,271
(10,883)
(2,211)
(2,105)
(20,764)
(35,963)
(17,521)
18,452
931
–
–
(226,008)
(57,319)
(2,105)
(124,184)*
(409,616)*
589,207
(43,522)
545,685
12,661,955
10,112,002
2,451,769
205,433
302,649
–
2,959,851
* Certain amounts do not correspond to the 2019 consolidated financial statements as they reflect the certain restatements as described in Note 2.
219
TBC BANK FINANCIAL STATEMENTS 2021 28. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
Total
2021
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
112,479
2,706
212,922
8,879
52,811
877
115,185
221,801
53,688
(52)
28,580
28,528
378,160
41,042
419,202
115,185
-
220,246
1,555
53,688
-
28,575
(47)
417,694
1,508
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
2020
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
57,949
1,855
59,804
59,804
-
206,377
6,901
213,278
210,986
2,292
26,405
429
26,834
26,834
-
(235)
4,169
3,934
3,934
-
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
centre and other
operations
2019
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
49,387
203,448
2,952
52,339
9,563
213,011
52,311
28
211,531
1,480
26,271
1,093
27,364
27,359
5
1,512
3,968
5,480
5,480
-
Total
290,496
13,354
303,850
301,558
2,292
Total
280,618
17,576
298,194
296,681
1,513
220
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. 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
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
Finance lease receivables
Other assets
Premises and equipment
Intangible assets
Investment properties
Goodwill
Right of use assets
Investments in associates
31 December
2021
31 December
2020
31 December
2019
16,954,553
(407,368)
1,595,460
2,086,113
42,237
15,200,515
(606,246)
1,601,599
2,098,506
19,690
12,661,955
(312,556)
994,479
1,591,829
15,597
1,938,196
1,527,268
985,293
-
84
2,056
442,207
252,340
373,892
378,657
267,406
22,892
28,197
58,001
4,589
1,059,946
69,762
2,134
161,002
270,978
256,646
362,863
223,577
68,689
28,197
49,746
4,090
1,021,568
25,695
2,173
115,211
256,660
247,201
329,529
159,109
72,667
29,459
57,086
2,655
Total assets per statement of financial position
24,039,512
22,398,962
18,255,610
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
2021
31 December
2020
31 December
2019
14,884,145
2,984,075
1,583,699
86,302
10,979
15,845
120,620
83,623
623,647
56,522
12,634,295
4,485,873
1,419,513
27
13,084
17,451
211,242
59,969
672,740
54,588
10,112,002
3,593,901
1,213,598
818
18,806
16,979
95,643
70,366
591,035
59,316
Total liabilities per statement of financial position
20,449,457
19,568,782
15,772,464
221
TBC BANK FINANCIAL STATEMENTS 2021 29. INTEREST INCOME AND EXPENSE
in thousands of GEL
2021
2020
2019
Interest income calculated using effective interest method
Loans and advances to customers
Bonds carried at amortised cost*
Investment securities measured at fair value through
other comprehensive income*
Due from other banks
Other financial assets
Other interest income
Finance lease receivables
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
* 2021 reflects changes in business model of financial securities described in Note 2.
1,601,966
-
185,424
13,491
4,315
1,393,856
95,888
103,516
13,870
1,621
57,881
52,087
1,863,077
1,660,838
(469,873)
(256,746)
(53,338)
(113,146)
(2,325)
(895,428)
28,143
995,792
(402,728)
(288,857)
(55,716)
(104,182)
(2,606)
(854,089)
20,950
827,699
1,225,201
58,597
74,043
27,915
1,416
47,934
1,435,106
(327,154)
(226,899)
(63,693)
(50,248)
(2,428)
(670,422)
28,556
793,240
As of 31 December 2021 GEL 1,831,852 thousand of interest income and GEL 878,444 thousand of interest expense
were attributable to the Bank (2020: GEL 1,630,741 thousand of interest income and GEL 839,830 thousand of interest
expense; 2019: GEL 1,416,276 thousand of interest income and GEL 657,579 thousand of interest expense).
During 2021 interest accrued on defaulted loans amounted to GEL 36,105 thousand (2020: GEL 69,285 thousand; 2019:
GEL 14,372 thousand).
During 2021 capitalized interest expense in the amount of GEL 1,756 thousand (2020: GEL 1,403 thousand, 2019: 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, 2.9% in USD and 1.3% in EUR. (2020: 7.7% in GEL, 3.6% in USD and 1.1% in EUR, 2019: nil)
222
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. FEE AND COMMISSION INCOME AND EXPENSE
Fee and commission income and expense of the Group are as follows:
in thousands of GEL
2021
2020 (restated)
2019 (restated)
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
188,749
108,046
42,125
7,383
2,906
3,259
25,692
378,160
115,998
18,052
6,062
4,628
8,533
153,273
224,887
139,000*
84,366
35,761
8,305
6,200
1,952
14,912
290,496
93,597*
13,041
6,618
4,148
4,313
121,717
168,779
135,015*
81,933
28,738
13,212
5,215
2,841
13,664
280,618
78,752*
13,729
4,731
3,628
652
101,492
179,126
* Certain amounts do not correspond to the 2020 and 2019 financial statements as they reflect the reclassifications as described in Note 2.
Fee and commission income and expense of the Bank are as follows:
in thousands of GEL
2021
2020 (restated)
2019 (restated)
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
185,842
79,617
44,960
13,825
73
3,262
22,019
349,598
124,191
16,143
23,843
4,628
7,223
176,028
173,570
137,011*
59,746
35,761
11,105
6,388
1,959
12,011
263,981
101,065*
11,427
19,225
4,148
3,718
139,583
124,398
131,919*
56,257
28,738
14,884
5,703
2,842
10,611
250,954
85,558*
11,406
14,395
3,628
172
115,159
135,795
* Certain amounts do not correspond to the 2020 and 2019 financial statements as they reflect the reclassifications as described in Note 2.
223
TBC BANK FINANCIAL STATEMENTS 2021
31. OTHER OPERATING INCOME
in thousands of GEL
Gain from sale of investment properties
Gain on disposal of premises and equipment
Gain from sale of inventories of repossessed collateral
Revenues from operational leasing
Revenues from sale of cash-in terminals
Other
Total other operating income
2021
22,933
5,347
3,087
2,300
294
7,081
41,042
2020
1,003
496
1,559
3,172
477
6,647
13,354
2019
938
2,115
2,755
3,046
926
7,796
17,576
In 2021, the Group disposed its certain investment properties and premises, out of which most part accounted to the
single sale described in Note 15.
Revenue from operational leasing is wholly attributable to investment properties. The carrying value of the repos-
sessed collateral disposed in the year ended 31 December 2021 was GEL 48,029 thousand (2020: GEL 22,423 thou-
sand; 2019: GEL 32,306 thousand).
32. NET GAINS FROM CURRENCY DERIVATIVES, FOREIGN CURRENCY OPERATIONS AND TRANSLATION
Net gains from currency derivatives, foreign currency operations and translation for the following years are as follows:
in thousands of GEL
Net gains/(losses) from trading in foreign currencies
Net gains from foreign exchange translation
Net gains/(losses) from derivative financial instruments
Total net gains from currency derivatives,
foreign currency operations and translation
33. STAFF COSTS
Staff costs of the Group are as follows:
in thousands of GEL
Salaries and bonuses
Share based compensation
Other compensation cost
Salaries and other employee benefits
Staff costs of the Bank are as follows:
in thousands of GEL
Salaries and bonuses
Share based compensation
Other compensation cost
Salaries and other employee benefits
2021
113,043
10,862
289
124,194
2021
220,584
19,352
15,811
255,747
2021
198,837
19,352
14,102
232,291
2020
(96,484)
202,331
8
105,855
2020
181,200
16,522
9,165
206,887
2020
161,833
16,522
8,040
186,395
2019
79,287
23,428
(280)
102,435
2019
180,856
33,624
11,528
226,008
2019
160,941
33,624
10,461
205,026
224
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 33. STAFF COSTS CONTINUED
Share based compensation represents remuneration paid in shares and is excluded as non-cash in the consolidated
and separate statements of cash flows.
Breakdown of monthly average number of employees by categories is as follows:
Number of employees of the Group are as follows:
Position
Top Management
Middle Management
Other Employees
Total
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Number of employees of the Bank are as follows:
Position
Top Management
Middle Management
Other Employees
Total
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
2021
-
6
-
295
1,047
6,370
7,718
2021
-
6
-
226
1,000
5,728
6,960
2020
-
6
-
301
1,193
5,869
7,369
2020
-
6
-
225
1,062
5,366
6,659
2019
-
7
5
231
1,341
5,396
6,980
2019
-
7
3
216
1,140
4,935
6,301
34. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
Administrative and other operating expenses of the Group are as follows:
in thousands of GEL
Intangible asset maintenance
Professional services
Advertising and marketing services
Occupancy and rent**
Taxes other than on income
Utilities services
Insurance
Premises and equipment maintenance
Communications and supply
Stationery and other office expenses
Personnel training and recruitment
Transportation and vehicle maintenance
Security services
Loss on disposal of premises and equipment
Loss on disposal of repossessed collateral
Charity
Business trip expenses
Other
2021
2020 (restated)
2019 (restated)
19,131
19,085
17,375
12,437
9,850
8,192
7,999
6,589
5,615
4,431
2,553
2,365
1,787
1,229
598
417
337
8,634
15,504
16,229
17,046
12,750
8,217
6,518
7,640
5,509
5,203
5,322
1,447
1,610
1,822
93
181
1,530
507
4,786*
12,885
19,027
18,344
13,076
6,851
6,800
6,083
9,208
5,555
4,638
2,904
2,027
2,001
937
1,310
1,990
2,163
8,385*
Total administrative and other operating expenses
128,624
111,914*
124,184*
* Certain amounts do not correspond to the 2020 and 2019 financial statements as they reflect the reclassification of net impairment of non-financial
assets as described in Note 2.
**Includes short-term leases, low value leases, VAT and other relevant tax expense on lease contracts recognised under IFRS 16 scope
225
TBC BANK FINANCIAL STATEMENTS 2021 34. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
Administrative and other operating expenses of the Bank are as follows:
in thousands of GEL
Professional services
Advertising and marketing services
Intangible asset maintenance
Occupancy and rent**
Utilities services
Premises and equipment maintenance
Taxes other than on income
Communications and supply
Stationery and other office expenses
Personnel training and recruitment
Insurance
Security services
Loss on disposal of premises and equipment
Transportation and vehicle maintenance
Loss on disposal of repossessed collateral
Charity
Business trip expenses
Other
2021
2020 (restated)
2019 (restated)
19,547
16,621
16,500
9,634
7,852
6,200
5,584
4,553
4,108
2,389
2,214
1,619
1,117
634
583
417
297
3,799
14,968
16,358
13,590
10,372
6,308
5,640
5,148
4,226
5,012
1,345
1,778
1,647
85
442
23
1,488
449
1,274*
17,323
17,491
11,307
9,412
6,576
8,586
3,669
4,682
4,353
2,760
1,292
1,875
938
640
1,270
1,975
2,024
4,880*
Total administrative and other operating expenses
103,668
90,153*
101,053*
* Certain amounts do not correspond to the 2020 and 2019financial statements as they reflect the reclassification of net impairment of non-financial
assets as described in Note 2.
**Includes short-term leases, low value leases, VAT and other relevant tax expense on lease contracts recognised under IFRS 16 scope
Auditors’ remuneration is included within professional services expenses above and comprises:
in thousands of GEL
31 December 2021
Audit of TBC Bank Group and subsidiaries annual financial statements
Review of TBC Bank Group and subsidiaries interim financial statements
Other assurance services
Total auditors’ remuneration
31 December 2020
Audit of TBC Bank Group and subsidiaries annual financial statements
Review of TBC Bank Group and subsidiaries interim financial statements
Other assurance services
Total auditors’ remuneration
31 December 2019
Audit of TBC Bank Group and subsidiaries annual financial statements
Review of TBC Bank Group and subsidiaries interim financial statements
Other assurance services
Total auditors’ remuneration
Audit
1,623
–
–
1,623
1,711
–
–
1,711
1,165
–
–
1,165
Audit
Related
Other
Services
–
480
–
480
–
215
–
215
–
463
–
463
–
–
932
932
–
–
25
25
–
–
864
864
Total
1,623
480
932
3,035
1,711
215
25
1,951
1,165
463
864
2,492
Fees presented in the tables above are exclusive of taxes. For the year ended 31 December 2021, GEL 910 thousands
(included in the table in other assurance services) is attributable to the services in relation to issuance of AT1 Notes in
October 2021.
226
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
35. INCOME TAXES
Income tax credit/(expense) comprise of the following:
in thousands of GEL
Current tax charge
Deferred tax credit
Total Income tax expense/(credit) for the year
2021
121,305
(2,027)
119,278
2020
612
(5,674)
(5,062)
2019
44,690
(1,168)
43,522
Current income tax liability to the regulatory authorities is generally paid on a quarterly basis. The amount is calcu-
lated by dividing previous year current income tax amount by 4 equal portion. In 2021, no prepayments for current
income tax were made as the 2020 resulted in tax loss and there was no current income tax payable. Accordingly, at
the end of 2021 Bank had income tax payable, whilst in 2020 and 2019, income tax asset.
The income tax rate applicable to the majority of the Group’s income was 15% (2020: 15%; 2019: 15%). The income tax
rate applicable to the majority of subsidiaries income ranged from 15% to 20% (2020: 15% - 20%; 2019: 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 15%-20%
2021
2020
2019
15% – 20% 15% – 20% 15% – 20%
545,154
88,419
962,223
144,310
332,198
50,230
Tax effect of items which are not deductible or assessable for taxation purposes:
– Income which is exempt from taxation
– Non-deductible expenses
– Expected effects of change in tax legislation
– Other differences
Total Income tax expense/(credit) for the year
(25,447)
158
343
(86)
119,278
(26,877)
(2,322)
(23,226)
(2,867)
(5,062)
(22,002)
(2,083)
(55)
(20,757)
43,522
Differences between financial reporting framework and statutory taxation regulations in Georgia and Azerbaijan 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% (2020: 15%; 2019: 15%) for Georgia and 20% for Azerbaijan (2020: 20%; 2019: 20%).
Income which is exempt from taxation includes interest income from placements in NBG, Georgian government
Treasury bills and IFI securities. Revaluation of investment securities held at FVOCI did not result in recognition of
deferred tax assets/liabilities (since majority of securities were either tax exempt or were not supposed to be sold
before Estonian model transition date discussed below) and its tax effect was not recognised in OCI. Non-deductible
expenses include penalties paid and charity expenses towards beneficiary which are not registered charity organi-
zations.
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 Jan-
uary 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, mi-
crofinance 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 determined by
the Income Tax Code of Georgia, in the same month they are incurred.
227
TBC BANK FINANCIAL STATEMENTS 2021
35. INCOME TAXES CONTINUED
Deferred tax assets/liabilities are re-measured to the amounts that are estimated to be utilized in the period from 1
January 2021 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
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Tax loss carried forward
Net deferred tax liability
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax liability
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
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Tax loss carried forward
Net deferred tax liability
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax liability
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
Due to credit institutions
Subordinated debt
Other financial liabilities
Other liabilities
Share based payment
Net deferred tax liability
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax liability
1 January 2021
(Credited)/ Charged
to profit or loss
31 December 2021
(3,781)
(18,617)
2,608
(1,684)
(461)
(2,333)
1,368
11,950
(10,950)
2,134
(13,084)
(10,950)
2,619
5,218
1,502
1,316
584
1,411
1,327
(11,950)
2,027
(78)
2,105
2,027
(1,162)
(13,399)
4,110
(368)
123
(922)
2,695
-
(8,923)
2,056
(10,979)
(8,923)
1 January 2020
(Credited)/ Charged
to profit or loss
31 December 2020
(11,363)
(8,822)
4,802
(2,486)
792
(1,800)
2,253
–
(16,624)
2,173
(18,797)
(16,624)
7,582
(9,795)
(2,194)
802
(1,253)
(533)
(885)
11,950
5,674
(39)
5,713
5,674
(3,781)
(18,617)
2,608
(1,684)
(461)
(2,333)
1,368
11,950
(10,950)
2,134
(13,084)
(10,950)
1 January 2019
(Credited)/ Charged
to profit or loss
31 December 2019
(20,748)
2,864
2,317
(3,641)
(70)
(41)
864
663
(17,792)
1,992
(19,784)
(17,792)
9,385
(11,686)
2,485
1,155
70
833
(2,664)
1,590
1,168
181
987
1,168
(11,363)
(8,822)
4,802
(2,486)
–
792
(1,800)
2,253
(16,624)
2,173
(18,797)
(16,624)
228
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
35. INCOME TAXES CONTINUED
In the context of the Group’s current structure and Georgian tax legislation, tax losses and current tax assets of differ-
ent 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.
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 periods pre-
sented. The items of these liabilities are those that are reported as financing activities in the statement of cash flows.
in thousands of GEL
Liabilities from financing activities
at 1 January 2019
Proceeds from principal movement
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities
at 31 December 2019
Proceeds from principal movement
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities
at 31 December 2020
Proceeds from principal movement
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities
at 31 December 2021
Other borrowed
funds
Debt securities
in Issue
Subordinated
debt
Lease
Liabilities
Total
2,872,071
13,343
650,919
60,232
3,596,565
1,819,899
(1,392,897)
5,225
-
122,589
1,176,049
(14,296)
1,140
-
37,362
-
(104,079)
(1,338)
-
45,533
-
(6,453)
383
2,818
2,336
2,995,948
(1,517,725)
5,410
2,818
207,820
3,426,887
1,213,598
591,035
59,316
5,290,836
4,031,812
(3,319,427)
6,851
-
198,956
31,601
-
(2,133)
-
176,447
-
-
(812)
-
82,517
-
(13,251)
236
1,947
6,340
4,063,413
(3,332,678)
4,142
1,947
464,260
4,345,079
1,419,513
672,740
54,588
6,491,920
1,750,443
(3,337,495)
(30,002)
-
(68,607)
242,287
-
2,710
-
(80,811)
-
(12,562)
(191)
-
(36,340)
-
(12,825)
63
18,462
(3,766)
1,992,730
(3,362,882)
(27,420)
18,462
(189,524)
2,659,418
1,583,699
623,647
56,522
4,923,286
* Other non-cash movements represent additions less terminations for finance lease contracts.
**Net interest movement includes interest accrued and interest paid. Interest paid on other borrowed funds, debt securities in issue, subordinated debt
and lease liabilities is included in operating cash flow interest paid caption.
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
information 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. delinquency). 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.
229
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Expected credit loss (ECL) measurement
ECL is a probability-weighted estimate of the present value of future cash shortfalls. An ECL measurement is unbi-
ased 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 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 Group uses is a three-stage model for ECL measurement and classifies its borrowers across three stages: The
Group classifies its exposures as Stage 1 if no significant deterioration in credit quality occurred since initial recog-
nition and the instrument was not defaulted when initially recognized. The exposure is classified 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 depending 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 ma-
turity and monitoring processes held by The Group 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 uses both quantitative and qualitative criteria for the definition of default. The borrower is classified 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 Group additionally applies criteria including but not limited to: Bank-
ruptcy proceedings, significant fraud in the borrower’s business that significantly affected its financial 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 ex-
ceeds 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). Probation 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.
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 Group assess change in probability of default parameter for each particular exposure
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. Quantita-
tive indicator of SICR is applied to retail and micro segments, where the Group has sufficient number of observations.
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:
230
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
• 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 indicator 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 spe-
cific 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.
ECL measurement
The Group utilizes two approaches for ECL measurement – individual assessment and collective assessment. Indi-
vidual assessment is mainly used for stage 2 and stage 3 individually significant borrowers. Additionally, the Group
may arbitrarily designate selected exposures to individual measurement of ECL based on the Group’s credit risk
management or underwriting departments’ decision.
The Group 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 Group may utilize scenario anal-
ysis 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 Group forecasts recover-
able 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 for the non-significant and non-impaired significant borrowers The Group estimates expected credit losses col-
lectively. 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 characteristics of the Group
include but are not limited to: Stage (Stage 1, Stage 2 or Stage 3), type of counterparty (individual vs business), type of
product, rating (external or internal), overdue status, restructuring status, months in default category or any other char-
acteristics 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 multiplications 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:
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 Group allows
for various values of the parameter to be applied to subsequent time periods during the lifetime 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 instruments. It is additionally
adjusted to include effect of reduction in exposure due to prepayments - Namely full prepayment ratio. Full Pre-
payment Rate (FPR) parameter represents the probability that a financial instrument will be fully prepaid during the
particular period to maturity. For the purpose of calculating Full Prepayment Ratio, the Group make the analysis of the
historical data of the contracts fully prepaid until the maturity.
231
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Probability of default (PD)
Probability of default parameter describes the likelihood of a default of a facility over a particular time horizon. It pro-
vides 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 char-
acteristics that drive their default propensity, the PD is modelled differently for Retail and Micro segments and Cor-
porate and SME segments. PD assessment approach is also differentiated for different time horizons and is further
adjusted due to expected influence of macroeconomic variables as forecasted for the period (see ‘Forward Looking
Information” section for further details on incorporation of macroeconomic expectations in ECL calculation). FLI ad-
justment is applied on PD for the three-year period, given the uncertainty involved in the macroeconomic forecasts
for the longer time horizon. 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 generally uses number based approach
of PD model construction, however for the nonhomogeneous portfolios exposure-weighted approach is utilised.
The Group uses different statistical approaches such as the extrapolation of 12-month PDs based on migration ma-
trixes, 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 defaults. For
Stage 1 and Stage 2 financial instruments, the LGD is estimated for each period in the instrument’s lifetime and re-
flects 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, securitization level and availability of historical observations. The
general LGD estimation process employed by the Group 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 each LGD portfolio the Group defines the recovery hori-
zon, since the default date after which no material recoveries are assumed. Recovery horizon is defined by data ana-
lytics and expert judgment. For certain portfolios based on the limitations of observations alternative versions of the
general approach may be applied. For significant corporate exposures, the Group uses the LGD modelling approach
that is based on realized recoveries from historical defaults, adjusted with approximation of future recoveries from
individually assessed defaulted exposures. In order to model LGD for SME and non-significant corporate borrowers,
the Group is estimating recoverable amount directly from the collateral and assumes that no recoveries from cash
is expected. In order to estimate recoverable amount from the collateral the Group is applying respective haircuts
defined for different types of collateral and discounts them using effective interest rate over the realization period. In
addition, at each reporting date, the Group makes the decision which historical data horizon should be used in order
to model recoveries.
Forward-looking information
The measurement of unbiased, probability weighted ECL requires inclusion of forward looking information obtain-
able without undue cost or effort. For forward-looking information purposes the Group defines three macro scenari-
os. 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 external sources – the National Bank of Georgia, Ministry of Finance, Inter-
national 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 Group’s macroeconomic unit.
The Group uses statistical models and historical relationship between the various macroeconomic factors and de-
fault observations to derive forward-looking adjustments. In case these models do not provide reasonable results
232
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
either from statistical or business perspective, the Group may apply expert judgment or use alternative approach.
As at 31 December 2021, the Group uses same approaches as in 31 December 2020. The Group employs statistical
models to derive forward looking adjustment in all segments except for corporate. In corporate segment, due to the
availability of comprehensive borrower-level financial information and insignificance of the statistical models, The
Group uses stress test approach instead. The baseline, upside and downside scenarios were assigned probability
weighing of 50%, 25% and 25%, respectively.
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 Management and further actions for tuning the models and assump-
tions are defined after discussions between authorised persons.
Risk governance
ECL impairment models were developed by internal credit risk governance division with the involvement of exter-
nal consultants. The division runs the models to calculate ECL each month. They are also responsible for model
back-testing, analytics and governance.
Economic scenarios and probability weights are prepared by macro-financial analysis unit. All the assumptions, in-
cluding PMAs and PMOs used in the ECL measurement go through of review and approval process:
• Chief Economist reviews and approves the forward-looking scenarios and respective weights;
•
Internal allowance committee reviews and approves appropriateness of the estimates and judgements as well as
PMAs and PMOs used in ECL measurement on a regular basis; internal committee includes Head of ERM, Heads
of Portfolio Credit Risk Management divisions and CRO, who ultimately approves ECL results as of each reporting
date;
Climate risk. The Group’s largest operations are located in Georgia hence the climate risk overview is done by the
management from Georgian perspective. The Georgia’s 2030 Climate Change Strategy and Climate Action Plan
lays out different policy measures on which TBC Bank based its identification of the potential impact of the pol-
icy measures on different economic sectors. As a summary of the potential impact of the various transition risks
and physical risks identified, the transitional risks in Georgia are low, considering, that trade and services domi-
nate the Georgian economy, the policy measures outlined in the Georgia’s 2030 Climate Change Strategy will
have overall low impact on the economic sectors, especially in short and medium term. The Georgia’s 2030 Cli-
mate Change Strategy takes into consideration that Georgia is a transitional and growing economy, and there-
fore the government strategy is not to impede the growth of the GDP with policy measures and rather to support
a smooth transition where necessary. It is worth noting, that the economic sectors most affected by transitional
risks world-wide such as mining crude petroleum, natural gas and metal ores, manufacturing coke and refined pe-
troleum products are present to the extremely limited extend in Georgia, resulting in a low overall impact of tran-
sitional measures on economic growth, if any. In order to increase the understanding of climate-related risks on
its loan portfolio, the Bank performed a high-level sectoral risk assessment, as different sectors might be vulnera-
ble to different climate-related risks over different time horizons. The maturity structure of the loan portfolio shows
that the largest part of assets is distributed in the time horizons that are much shorter that the impacts of climate
change, especially of physical risks, can be materialized in Georgia. Therefore, the bank has not made any adjust-
ment to the level of provisions purely related to climate risk. On the other hand, the understanding of climate re-
lated risks, which have longer-term impacts need to be increased in coming years, therefore, if the bank will have a
plausible findings and conclusions, it will further develop the approach, how to consider climate risks in provision-
ing. No post model adjustments (PMAs) or Post model overlays (PMOs) have been posted for 2021 in this regard.
233
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Details of climate related risks and steps taken are disclosed in the material existing and emerging risks section of
the annual report.
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 outstanding 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.
Table below includes geographical concentration by country of incorporation. Loans and advances to OECD and
Non-OECD resident customers, as well as to Georgian customers, are issued to the entities most of which are based
and performing in Georgia.
The geographical concentration of the Group’s assets and liabilities as of 31 December 2021 is set out below by coun-
try 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
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
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
987,932
26,174
2,086,113
16,104,160
1,440,168
246,328
439,224
21,330,099
1,131,337
22,461,436
1,325,363
12,805,769
1,578,050
120,343
56,253
109,427
15,995,205
194,364
16,189,569
6,271,867
724,710
2,178,835
593,004
16,033
-
126,415
496,377
-
2,749
1,234,578
-
1,234,578
1,612,336
1,029,719
-
270
-
357,834
3,000,159
-
3,000,159
(1,765,581)
675,323
4,197
14,524
30
-
316,610
1,651
6,012
234
339,061
4,437
343,498
46,376
1,048,657
5,649
7
269
156,386
1,257,344
2,385
1,259,729
(916,231)
165,661
12,317
1,595,460
42,237
2,086,113
16,547,185
1,938,196
252,340
442,207
22,903,738
1,135,774
24,039,512
2,984,075
14,884,145
1,583,699
120,620
56,522
623,647
20,252,708
196,749
20,449,457
3,590,055
1,565,694
2,195,349
234
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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 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
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
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
906,270
6,638
2,098,506
14,111,683
1,206,673
1,059,946
270,632
156,866
19,817,214
1,060,212
20,877,426
2,362,648
10,709,378
1,419,513
210,887
52,923
115,394
14,870,743
86,100
14,956,843
5,920,583
745,511
1,868,011
686,110
13,052
–
131,066
318,682
–
–
3,976
1,152,886
433
1,153,319
2,110,307
911,146
–
340
–
390,941
3,412,734
59
3,412,793
(2,259,474)
746,871
4,678
9,219
–
–
351,520
1,913
–
346
160
363,158
5,059
368,217
12,918
1,013,771
–
15
1,665
166,405
1,194,774
4,372
1,199,146
(830,929)
258,659
8,627
1,601,599
19,690
2,098,506
14,594,269
1,527,268
1,059,946
270,978
161,002
21,333,258
1,065,704
22,398,962
4,485,873
12,634,295
1,419,513
211,242
54,588
672,740
19,478,251
90,531
19,568,782
2,830,180
1,751,041
1,881,316
235
TBC BANK FINANCIAL STATEMENTS 2021
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 coun-
try 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
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
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
692,905
3,530
1,591,829
11,775,027
985,293
1,021,568
255,596
113,535
16,439,283
921,821
17,361,104
1,813,684
8,469,206
1,213,598
96,081
59,316
100,993
11,752,878
100,081
11,852,959
5,508,145
603,910
1,485,032
287,063
12,067
–
166,155
–
–
–
1,431
466,716
27
466,743
1,744,130
733,778
–
316
–
343,861
2,822,085
829
2,822,914
(2,356,171)
232,328
4,476
14,511
–
–
408,217
–
–
1,064
245
424,037
3,726
427,763
36,087
909,018
–
9
–
146,181
1,091,295
5,296
1,096,591
(668,828)
622,646
11,459
994,479
15,597
1,591,829
12,349,399
985,293
1,021,568
256,660
115,211
17,330,036
925,574
18,255,610
3,593,901
10,112,002
1,213,598
96,406
59,316
591,035
15,666,258
106,206
15,772,464
2,483,146
1,458,884
1,500,967
Market risk. The Bank 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. 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 invest-
ments in commodities. Accordingly, the Bank’s exposure to market risk is primarily limited to foreign exchange rate
risk in the structural book.
236
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
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 mis-
matches 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 maintain the later one within 20% of the
Bank’s regulatory capital. As at 31 December 2021, the Bank maintained an aggregate open currency position of 0.5%
of regulatory capital (2020: 3.4%; 2019: 0.5%). 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”) calculation
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. 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 2021
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
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
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
10,245,525
8,088,897
4,420,441
148,875
22,903,738
7,430,412
10,991,513
1,686,875
143,908
(339)
2,914,442
(2,725,047)
(39)
2,814,774
11,826
8,519
4,928
20,252,708
189,017
2,840,047
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
8,730,317
7,990,323
4,555,906
56,712
21,333,258
7,166,701
10,872,233
1,316,382
122,935
19,478,251
224,700
2,861,675
(3,237,938)
61,163
1,788,316
(20,235)
1,586
(5,060)
(90,400)
1,764,607
Monetary financial assets
Monetary financial liabilities
Derivatives
Net position
7,479,851
6,827,012
2,968,554
54,619
17,330,036
5,760,987
8,765,374
1,036,267
103,630
(96,378)
1,950,510
(1,924,856)
56,133
15,666,258
(14,591)
1,622,486
12,148
7,431
7,122
1,649,187
237
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
US Dollar strengthening by 20% (weakening 20%) would increase Group’s profit or loss and equity in 2021 by GEL
2,365 thousand (decrease by GEL 2,365 thousand). Euro strengthening by 20% (weakening 20%) would increase
Group’s profit or loss and equity in 2021 by GEL 1,704 thousand (decrease by GEL 1,704 thousand).
US Dollar strengthening by 20% (weakening 20%) would decrease Group’s profit or loss and equity in 2020 by GEL
4,047 thousand (increase by GEL 4,047 thousand). Euro strengthening by 20% (weakening 20%) would increase
Group’s profit or loss and equity in 2020 by GEL 317 thousand (decrease by GEL 317 thousand).
US Dollar strengthening by 20% (weakening 20%) would increase Group’s profit or loss and equity in 2019 by GEL
2,430 thousand (decrease by GEL 2,430 thousand). Euro strengthening by 20% (weakening 20%) would increase
Group’s profit or loss and equity in 2019 by GEL 1,486 thousand (decrease by GEL 1,486 thousand).
Interest rate risk. Interest rate risk arises from potential changes in the market interest rates that can adversely 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 liabilities.
The biggest share of the Bank’s deposits and the part of the loans are at fixed interest rates, while a portion of the
Bank’s borrowings is at a floating interest rate. In case of need, the Bank also applies for interest rate risk hedging in-
struments 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.
The Group employs an advanced framework for the management of interest rate risk by establishing appropriate
Risk Appetite limits, monitoring compliance with them and preparing forecasts. From September, 2020 the NBG in-
troduced 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 purposes. As of 31 December 2021 the Bank was in compliance with
the regulatory requirement with EVE=2.9%. According to NBG guidelines the net interest income sensitivity under
parallel shifts of interest rate scenarios are maintained for monitoring purposes, while EVE sensitivity is calculated
under 6 predefined stress scenarios of interest rate changes and the limit is 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.
Following main assumptions under NBG IRR Regulation and EBA 2018 guidelines, at 31 December 2021, if interest
rates had been 200 basis points higher, with all other variables held constant, profit would have been GEL 129 million
higher, mainly as a result of higher interest income on variable interest assets (2020: GEL 95 million). If interest rates
at 31 December, 2021 had been 200 basis points lower with all other variables held constant, profit for the year would
have been GEL 40 million lower, mainly as a result of lower interest income on variable interest assets (2020: GEL 31
million).
At 31 December, 2021, if interest rates had been 200 basis points lower, with all other variables held constant, other
comprehensive income would have been GEL 57.0 million higher (2020: GEL 24.0 million; 2019: GEL 9.4 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, 2021 had been 200 basis points higher with all
other variables held constant, Other comprehensive income would have been GEL 60.8 million lower (2020: GEL 35
million; 2019: GEL 9.1 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 sen-
sitivity. 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. When performing Net Interest Income and Economic Value sensitivity analysis,
238
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
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
compliance 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 Com-
mittee.
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 availability 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-balanced 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 anal-
ysis. In 2017, for liquidity risk management purposes National Bank of Georgia 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 liquidity 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.
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 continu-
ous 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 differentiators. 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.
Maturity analysis. The table below summarizes the maturity analysis of the Group’s financial liabilities, based on re-
maining undiscounted contractual obligations as of 31 December 2021 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 indi-
cated by the Group’s deposit retention history.
239
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The maturity analysis of undiscounted financial liabilities as of 31 December 2021 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 swaps and forwards:
– Inflows
– Outflows
Performance guarantees
Financial guarantees
Letters of credit
Other credit related commitments
Total potential future payments
for financial obligations
Less than
3 months
1,439,008
5,307,483
5,467,638
118,915
3,445
5,331
6,736
603,531
606,431
1,596,458
357,896
20,619
1,672,865
From 3 to
12 months
569,512
1,714,014
330,231
1,658
10,329
60,491
109,343
27,350
28,069
-
-
96,112
-
From 1 to
5 Years
1,162,095
1,184,616
850,626
47
42,201
338,052
1,608,370
402,077
408,674
-
-
64,687
-
Over
5 years
7,407
85,094
439,336
-
5,705
478,851
242,651
-
-
-
-
-
-
Total
3,178,022
8,291,207
7,087,831
120,620
61,680
882,725
1,967,100
1,032,958
1,043,174
1,596,458
357,896
181,418
1,672,865
15,999,294
2,892,409
5,257,291
1,259,044
25,408,038
The maturity analysis of undiscounted 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 swaps and forwards:
– Inflows
– Outflows
Performance guarantees*
Financial guarantees
Letters of credit
Other credit related commitments
Less than
3 months
From 3 to
12 months
2,138,399
4,275,412
4,077,900
204,218
3,098
14,388
1,351
2,937,065
3,045,427
1,751,076
318,935
10,820
1,401,539
1,156,117
1,828,748
502,224
6,486
9,029
75,845
59,356
260,379
263,330
-
-
90,559
–
From 1 to
5 Years
2,678,130
1,282,427
619,298
537
35,298
1,474,185
1,407,320
103,181
113,820
-
-
59,463
–
Over
5 years
146,206
53,444
492,887
–
5,849
1,635,830
–
–
-
-
-
-
–
Total
6,118,852
7,440,031
5,692,309
211,241
53,274
3,200,248
1,468,027
3,300,625
3,422,577
1,751,076
318,935
160,842
1,401,539
Total potential future payments for financial
obligations
14,305,498
3,731,315
7,567,297
2,334,216
27,938,326
240
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The maturity analysis of undiscounted 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 swaps and forwards:
-Inflows
-Outflows
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
1,590,089
3,407,952
3,722,452
85,338
4,367
2,351
–
1,241,090
1,249,533
1,458,884
241,124
41,132
1,150,110
616,417
1,658,316
339,114
6,151
12,508
55,182
56,797
415,656
421,347
-
-
19,687
–
From 1 to
5 Years
3,724,084
699,554
250,328
4,917
57,058
1,283,737
1,156,801
160,951
164,099
-
-
48,914
–
Over
5 years
435,233
27,344
142,043
–
11,988
2,330,270
–
-
-
-
-
-
–
Total
6,365,823
5,793,166
4,453,937
96,406
85,921
3,671,540
1,213,598
1,817,697
1,834,979
1,458,884
241,124
109,733
1,150,110
11,712,242
2,769,863
7,228,541
2,946,878
24,657,524
*In 2021 the Management took more conservative approach for the classification of performance guarantees contractual maturities by pulling the
whole contractual amount into the less than 3 months bucket. As far as, contractually (which may differ from behavioral maturity) performance guaran-
tee contracts can be reimbursed at any point in time Management considers that the amended approach will be more prudent for contractual analysis
disclosure. Comparable periods has also been amended respectively to reflect the similar logic (2020: less than 3 months GEL 211,607 thousand, from 3
to 12 months GEL 588,883 thousand, from 1 to 5 years GEL 937,975 thousand and over 5 years GEL 12,610 thousand; 2019: less than 3 months GEL 115,997
thousand, from 3 to 12 months GEL 332,833 thousand, from 1 to 5 years GEL 909,502 thousand and over 5 years GEL 100,552 thousand).
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 balanc-
es 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 as it shows contractual terms
purely and disregard the actual expected behaviour of the instruments. Instead, the Group monitors the liquidity gap
analysis based on the expected maturities. In particular, expected maturities disclosure include customers’ deposits
and contingent liabilities according to their behavioral analysis, while for undiscounted cash flow disclosure purpos-
es, demand deposits and issued guarantees are put in on demand bucket.
241
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
As at 31 December 2021 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
Finance lease receivable
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease 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 2021
Cumulative gap as of 31 December 2021
Less than
3 months
1,595,460
24,791
2,085,709
From 3 to
12 months
From 1 to
5 Years
-
723
-
-
2,943
-
Over
5 years
-
13,780
Total
1,595,460
42,237
404
2,086,113
1,400,962
3,317,830
6,660,667
5,167,726
16,547,185
1,938,196
28,961
435,807
7,509,886
1,419,171
1,166,917
5,261
118,915
3,611
2,337
2,716,212
4,620
3,624
64,196
72,440
-
-
-
1,938,196
62,684
3,021
3,384,258
500,592
104,189
100,349
1,658
9,637
19,042
735,467
-
-
-
155,074
3,379
6,822,063
1,057,079
-
1,328,307
47
38,130
179,963
2,603,526
-
-
-
5,621
-
5,187,531
7,233
13,613,039
149,782
-
5,144
422,305
14,197,503
-
-
-
252,340
442,207
22,903,738
2,984,075
14,884,145
1,583,699
120,620
56,522
623,647
20,252,708
4,620
3,624
64,196
-
-
-
72,440
4,721,234
4,721,234
2,648,791
7,370,025
4,218,537
11,588,562
(9,009,972)
2,578,590
2,578,590
242
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
As at 31 December 2020 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
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease 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
Less than
3 months
1,601,599
11,736
2,098,506
From 3 to
12 months
From 1 to
5 Years
Over 5
years
–
7,954
–
–
–
–
–
–
–
Total
1,601,599
19,690
2,098,506
1,555,791
2,512,138
6,117,467
4,408,873
14,594,269
1,527,268
27,026
23,064
147,348
6,992,338
2,116,091
1,273,664
121
204,218
2,978
11,747
3,608,819
4,427
5,424
100,214
110,065
3,273,454
3,273,454
–
149,132
73,213
1,993
2,744,430
1,007,035
382,857
56,031
6,486
8,680
16,369
1,477,458
–
–
–
–
–
1,527,268
559,823
168,447
11,652
6,857,389
1,322,468
–
1,363,361
538
33,933
258,110
2,978,410
–
–
–
323,965
6,254
9
4,739,101
40,279
10,977,774
–
–
8,997
386,514
11,413,564
–
–
–
1,059,946
270,978
161,002
21,333,258
4,485,873
12,634,295
1,419,513
211,242
54,588
672,740
19,478,251
4,427
5,424
100,214
–
–
–
110,065
1,266,972
4,540,426
3,878,979
8,419,405
(6,674,463)
1,744,942
1,744,942
*Management has re-visited the logic for disclosing the expected maturity analysis for 2020 year and corrected any discrepancies identified. As a
result, amounts disclosed in the table were amended to reflect more accurate results.
243
TBC BANK FINANCIAL STATEMENTS 2021 37. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
As of 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
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease 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
994,479
12,685
1,591,829
From 3 to
12 months
From 1 to
5 Years
Over
5 years
–
-
–
–
2,912
–
–
-
–
Total
994,479
15,597
1,591,829
1,303,715
2,307,064
5,108,649
3,629,971
12,349,399
985,293
122,889
34,448
112,263
5,157,601
1,573,720
1,088,948
–
80,592
–
530
2,743,790
7,466
4,511
100,212
112,189
2,301,622
2,301,622
–
215,711
70,398
2,946
2,596,119
427,794
175,996
56,797
10,133
4,530
–
675,250
–
–
–
–
–
985,293
555,379
148,542
2
5,815,484
1,496,459
-
1,156,801
4,918
46,625
113,278
2,818,081
–
–
–
127,589
3,272
–
3,760,832
95,928
8,847,058
–
–
8,161
477,227
12,685
–
–
–
1,021,568
256,660
115,211
17,330,036
3,593,901
10,112,002
1,213,598
95,643
59,316
591,035
15,665,495
7,466
4,511
100,212
–
–
–
112,189
1,920,869
4,222,491
2,997,403
7,219,894
(5,667,542)
1,552,352
1,552,352
The Management believes that the Group has sufficient liquidity to meet its current on and off-balance sheet obli-
gations.
244
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 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 chang-
es, which can occur frequently. The management’s interpretation of the legislation as applied to the Group’s transac-
tions and activity may be challenged by the relevant authorities. Fiscal periods remain open to review by the author-
ities 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 2021, 2020 and 2019 no material provision for potential tax
liabilities has been recorded.
Compliance with covenants. The Group is subject to certain financial and non-financial covenants primarily related
to its borrowings. Non-compliance with such covenants may result in negative consequences for the Group includ-
ing mandatory prepayment and declaration of default. The Group was in compliance with all covenants as of 31 De-
cember 2021, 31 December 2020 and 31 December 2019.
Group’s financial covenants mainly consist of three major sub-categories. Key covenants within each category and
their compliance status are disclosed below:
Covenant Description
Liquidity
Net stable funding ratio (NSFR)
Liquidity coverage ratio (LCR)
Net loan to deposit and funding ratio
Capital Adequacy
Tier 1 capital ratio
Total capital ratio
Asset Quality
Net problem loans to total capital
Status
Complied
Complied
Complied
Complied
Complied
Complied
Covid-19 pandemic didn’t have major negative effects on the compliance of Group’s financial covenants in 2020,
except for the asset quality ratios. Due to bank’s immediate action to request the waiver from lenders, at the end of
2020 all waivers were granted with the pre-defined validity period. In 2021, as the probability of non-compliance was
relatively high due to unforeseen negative consequences of Covid-19 on Group’s operations, bank continued to work
with the lenders on this matter, with the core objective to either prolong the waivers or amend the asset quality ratios.
Before pandemic, covenants in loan agreements with IFIs incorporated non-performing loans exposures, which has
been composed of restructured loans. As pandemic evolved, the number of restructurings has increased significantly
due to loan repayment grace periods granted to borrowers back in 2020, partially in line with imposed Government
programs. Although, majority of such borrowers remained healthy, the number of restructured loan exposures has still
increased. As a result, the Group has renegotiated the NPL ratio with majority of IFIs, replacing non-performing loans
exposures that included restructured loans, by stage 3 loans according to IFRS 9.
Respective change has been successfully implemented in the vast majority of covenants with IFI’s. Alternatively, for
the two lenders the Group has extended renegotiated compliance terms existing in relation to the asset quality ra-
tios. Apart from asset quality ratios for other financial covenants the Group has sufficient headroom for any potential
violation risks to materialise.
Management of Capital. The Bank manages capital requirements under regulatory rules. The Bank complied with all
its imposed capital requirements throughout the reporting period.
245
TBC BANK FINANCIAL STATEMENTS 2021 38. CONTINGENCIES AND COMMITMENTS CONTINUED
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 commercial letters of credit, that are underwritten
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 collateralised 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 main-
taining 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 2021 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)
Stage 1
1,628,437
170,174
343,536
2,142,147
Stage 2
40,572
208
8,510
49,290
Stage 3
3,856
-
56
3,912
Credit loss allowance for credit related commitments
Stage 1
Stage 2
Stage 3
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
(1,961)
(320)
(734)
(3,015)
2,139,132
(578)
-
(9)
(587)
48,703
(22)
-
-
(22)
3,890
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)
Stage 1
1,222,916
158,131
303,046
1,684,093
Stage 2
165,798
1,464
14,571
181,833
Stage 3
12,825
1,247
1,318
15,390
Credit loss allowance for credit related commitments
Stage 1
Stage 2
Stage 3
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
(3,246)
(376)
(795)
(4,417)
1,679,676
(986)
-
(4)
(990)
180,843
(15)
-
(2)
(17)
15,373
246
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 38. CONTINGENCIES AND COMMITMENTS CONTINUED
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
1,124,862
109,299
240,205
18,548
-
550
1,474,366
19,098
Stage 3
6,700
434
369
7,503
Stage 1
(2,096)
(473)
(1,244)
(3,813)
1,470,553
Stage 2
Stage 3
(514)
-
(2)
(516)
18,582
(182)
-
-
(182)
7,321
The credit quality of contingencies and commitments is as follows at 31 December 2021:
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
Stage 1
(12-months ECL)
31 December 2021
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
1,537,915
86,611
3,911
-
-
1,628,437
(1,961)
1,626,476
167,570
2,604
-
-
-
170,174
(320)
169,854
331,437
12,099
-
-
-
343,536
(734)
342,802
1,794
30,143
7,764
871
-
40,572
(578)
39,994
-
-
208
-
-
208
-
208
1,733
1,367
5,108
302
-
8,510
(9)
8,501
-
-
-
-
3,856
3,856
(22)
3,834
-
-
-
-
-
-
-
-
-
-
-
-
56
56
-
56
Total
1,539,709
116,754
11,675
871
3,856
1,672,865
(2,561)
1,670,304
167,570
2,604
208
-
-
170,382
(320)
170,062
333,170
13,466
5,108
302
56
352,102
(743)
351,359
247
TBC BANK FINANCIAL STATEMENTS 2021
38. CONTINGENCIES AND COMMITMENTS CONTINUED
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
defaulted)
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
1,148
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
248
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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 ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
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
-
-
-
-
434
434
-
434
-
-
-
-
369
369
-
369
Total
1,030,056
97,619
14,935
800
6,700
1,150,110
(2,792)
1,147,318
108,476
823
-
-
434
109,733
(473)
109,260
233,004
7,089
662
-
369
241,124
(1,246)
239,878
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does not neces-
sarily represent future cash requirements, as these financial instruments may expire or terminate without being fund-
ed. Non-cancellable commitments as of 31 December 2021 were GEL 251,903 thousand (2020: GEL 579,915 thousand;
2019: GEL 472,485 thousand).
Performance guarantees. Performance guarantees are contracts that provide compensation in case of another 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 perform the contractual obli-
gation 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 2021 is GEL 1,565,694
thousand and GEL 4,620 thousand (2020: GEL 1,751,041 thousand and GEL 4,427 thousand, 2019: GEL 1,458,884 thou-
sand and GEL 7,466 thousand).
249
TBC BANK FINANCIAL STATEMENTS 2021
38. CONTINGENCIES AND COMMITMENTS CONTINUED
Fair value of credit related commitments were GEL 3,624 thousand as of 31 December 2021 (2020: GEL 5,424 thou-
sand; 2019: GEL 4,511 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
2021
898,178
901,092
220,068
68,840
2,088,178
2020
1,208,199
1,584,878
776,307
62,973
3,632,357
2019
1,155,422
1,203,296
542,303
58,830
2,959,851
Capital expenditure commitments. As of 31 December 2021, the Group has contractual capital expenditure com-
mitments amounting to GEL 104,162 thousand (2020: GEL 14,631 thousand; 2019: GEL 33,723 thousand). Out of total
amount as at 31 December 2021, contractual commitments related to the head office construction amounted GEL
79,004 thousand (2020: GEL 4,853 thousand).
39. NON-CONTROLLING INTEREST
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2021:
in thousands of GEL
United Financial Corporation JSC
Proportion of non-controlling
interest’s voting rights held
0.47%
Profit attributable to
non-controlling interest
16
Accumulated non-controlling
interest in the subsidiary
93
The summarised financial information of these subsidiaries was as follows as of and for the year ended 31 December
2021:
in thousands of GEL
United Financial Corporation JSC
Current
assets
4,173
Non-
current
assets
16,352
Current
liabilities
1,838
Non-
current
liabilities
3,593
Revenue
16,691
Profit
3,113
Total com-
prehensive
income
3,113
Net cash
flows
(626)
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2020:
in thousands of GEL
United Financial Corporation JSC
Proportion of non-controlling
interest’s voting rights held
0.47%
Profit attributable to
non-controlling interest
22
Accumulated non-controlling
interest in the subsidiary
105
The summarised financial information of these subsidiaries was as follows as of and for the year ended 31 December
2020:
in thousands of GEL
United Financial Corporation JSC
Current
assets
5,269
Non-
current
assets
17,803
Current
liabilities
504
Non-
current
liabilities
257
Revenue
14,716
Profit
4,573
Total com-
prehensive
income
4,573
Net cash
flows
676
250
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 39. NON-CONTROLLING INTEREST CONTINUED
The following table provides information for each subsidiary with a non-controlling interest for the year ended as of
31 December 2019:
in thousands of GEL
TBC Leasing JSC*
United Financial Corporation JSC
Proportion of non-controlling
interest’s voting rights held
0.39%
0.47%
Profit attributable to
non-controlling interest
11
62
Accumulated non-controlling
interest in the subsidiary
-
582
* In May 2019 the Group purchased remaining 0.39% shareholding from TBC Leasing JSC shareholders and became 100% owner of the company.
The summarised financial information of these subsidiaries was as follows as of and for the year ended 31 December
2019:
in thousands of GEL
TBC Leasing JSC
TBC Kredit LLC
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities
Revenue
Profit
180,282
172,275
133,198
182,804
29,894
6,861
10,605
14,140
6,238
5,730
4,543
2,221
United Financial Corporation JSC
9,507
8,821
155
435
12,023
4,725
Total com-
prehensive
income
Net cash
flows
6,861
2,221
4,725
719
473
(622)
40. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
As of 31 December 2021, financial instruments subject to offsetting, enforceable master netting and similar arrange-
ments were as follows:
Gross
amounts
before
offsetting
in the
state-
ment of
financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net amount
after offset-
ting in the
statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of
financial position
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
Assets subject to offsetting, master netting
and similar arrangement
Liabilities
Other financial liabilities:
70,501
7,620
62,881
70,501
7,620
62,881
– Payables on credit card services and money
transfers
36,583
7,620
28,963
Liabilities subject to offsetting, master netting
and similar arrangement
36,583
7,620
28,963
-
-
-
-
-
-
-
-
62,881
62,881
28,963
28,963
251
TBC BANK FINANCIAL STATEMENTS 2021
40. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONTINUED
As of 31 December 2020, financial instruments subject to offsetting, enforceable master netting and similar arrange-
ments were as follows:
Gross
amounts
before
offsetting
in the
state-
ment of
financial
position
(a)
25,245
25,245
8,800
8,800
Gross
amounts set
off in the
statement
of financial
position
(b)
Net amount
after offset-
ting in the
statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of finan-
cial position
Financial
instruments
(d)
Cash
collateral
received
(e)
Net
amount of
exposure
(c)-(d)-(e)
18
18
18
18
25,227
25,227
8,782
8,782
–
–
–
–
–
–
–
–
25,227
25,227
8,782
8,782
in thousands of GEL
Assets
Other financial assets:
– Receivables on credit card services and
money transfers
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
As of 31 December 2019, financial instruments subject to offsetting, enforceable master netting and similar arrange-
ments were as follows:
Gross
amounts
before
offsetting
in the
state-
ment of
financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net amount
after offset-
ting in the
statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of finan-
cial position
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
Assets subject to offsetting, master netting
and similar arrangement
Liabilities
Other financial liabilities:
24,139
2,244
21,895
24,139
2,244
21,895
– Payables on credit card services and money
transfers
17,518
2,244
15,274
Liabilities subject to offsetting, master netting
and similar arrangement
17,518
2,244
15,274
252
–
–
–
–
–
–
–
–
21,895
21,895
15,274
15,274
TBC BANK FINANCIAL STATEMENTS 2021NOTES 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 presented 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
2021
2020
199,233
30,783
2019
5,849
(10,216)
(121,183)
(20,440)
189,017
(90,400)
(14,591)
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) condi-
tions 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 ex-
change 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.
253
TBC BANK FINANCIAL STATEMENTS 2021 41. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
In thousands of GEL
Foreign exchange forwards and
gross settled currency swaps:
fair values, at the balance sheet date, of
2021
2020
2019
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
Contracts
with negative
fair value
– USD payable on settlement (-)
(412,621)
(528,905)
(476,671)
(145,313)
(123,836)
(14,480)
– USD receivable on settlement (+)
3,355,801
500,167
360,514
3,123,145
338,080
1,750,746
– GEL payable on settlement (-)
(115,337)
(485,231)
(175,849)
(25,589)
(822)
(204,470)
– GEL receivable on settlement (+)
394,562
205,667
291,022
135,116
108,914
-
– EUR payable on settlement (-)
(3,096,222)
(9,883)
(175,014)
(3,262,892)
(333,796)
(1,616,299)
– EUR receivable on settlement (+)
54,955
326,103
199,968
– Other payable on settlement (-)
– Other receivable on settlement (+)
(1,031)
19,126
(19,165)
(2,904)
1,031
9,717
54,350
-
-
16,048
(1,631)
2,892
9,191
(2,887)
57,759
Fair value of foreign exchange forwards
and gross settled currency swaps
Net fair value of foreign exchange forwards
and gross settled currency swaps
199,233
(10,216)
30,783
(121,183)
5,849
(20,440)
189,017
(90,400)
(14,591)
254
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED 42. FAIR VALUE DISCLOSURES
(a) Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the statement 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:
31 December 2021
31 December 2020
31 December 2019
Level 1
Level 2 Level 3
Total
fair
Value
Carrying
value
Level 1
Level 2 Level 3
Total
fair
Value
Carrying
value
Level 1 Level 2 Level 3
Total
fair
Value
Carrying
value
in thousands of GEL
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
– Ministry of
Finance of Uz-
bekistan treasury
bills
– Ministry of
Finance Treasury
Bills
– Corporate shares
-
-
-
-
-
-
704,435
1,683
1,231,024
-
-
-
-
-
-
–
21,687
–
21,687
21,687
–
40,346
–
40,346
40,346
704,435 704,435
– 664,563
– 664,563
664,563
– 611,000
–
611,000
611,000
1,683
1,683
–
1,950
–
1,950
1,950
–
1,596
–
1,596
1,596
1,231,024 1,231,024
–
838,152
–
838,152
838,152
– 329,353
–
329,353
329,353
-
1,054
1,054
1,054
-
-
916
916
916
-
-
2,999
2,999
2,999
Investment securities measured at fair value through profit and loss
–
–
Foreign ex-
change 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
-
199,233
-
199,233
199,233
–
30,783
–
30,783
30,783
–
5,849
–
5,849
5,849
-
-
11,125
11,125
11,125
–
–
17,239
17,239
17,239
–
–
–
–
–
- 2,136,375
12,179 2,148,554 2,148,554
– 1,557,135
18,155 1,575,290 1,575,290
– 988,144
2,999
991,143
991,143
-
10,216
-
10,216
10,216
–
121,183
–
121,183
121,183
–
20,440
–
20,440
20,440
-
10,216
-
10,216
10,216
–
121,183
–
121,183
121,183
– 20,440
–
20,440
20,440
There were no transfers between levels 1 and 2 during the year ended 31 December 2021 (2020 none, 2019: none).
The description of the valuation technique and the description of inputs used in the fair value measurement for level
2 measurements:
255
TBC BANK FINANCIAL STATEMENTS 2021
42. FAIR VALUE DISCLOSURES CONTINUED
in thousands of GEL
2021
2020
2019
Valuation technique
Inputs used
Fair value at 31 December
Assets carried at fair value
– Certificates of Deposits of NBG, Ministry of
Finance Treasury Bills, Government notes, Cor-
porate bonds
1,937,142
1,526,352
982,295
– Foreign exchange forwards and gross settled
currency swaps, included in due from banks
199,233
30,783
5,849
Total assets recurring fair value measurements at
level 2
2,136,375
1,557,135 988,144
Discounted cash
flows (“DCF”)
Forward pricing
using present value
calculations
Government
bonds yield
curve
Official
exchange rate,
risk-free rate
Liabilities carried at fair value
– Foreign exchange forwards included in other
financial liabilities
10,216
121,183
20,440
Total liabilities recurring fair value measurements
at level 2
10,216
121,183
20,440
Forward pricing
using present value
calculations
Official
exchange rate,
risk-free rate
in thousands of GEL
Assets carried at fair value
2021
2020
2019
Valuation technique
Inputs used
– Investment held at fair value through profit or
loss
11,125
17,239
-
Discounted
cash flows (“DCF”)
– Corporate shares
1,054
916
2,999
Discounted
cash flows (“DCF”)
Total assets recurring fair value measurements at
level 3
12,179
18,155
2,999
Government
bonds yield
curve
Government
bonds yield
curve
There were no changes in the valuation technique for the level 2 and level 3 recurring fair value measurements during
the year ended 31 December 2021 (2020: none; 2019: none).
Sensitivity of the input to fair value – increase/(decrease) in projected cash flows by 10% would result in increase/
(decrease) in fair value by GEL 886 thousand/ (GEL 886 thousand).
Fair value measurement analysis by level in the fair value hierarchy is disclosed in Note 2.
256
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
Financial assets
31 December 2021
31 December 2020
31 December 2019
Level 1
Level 2
Level 3
Total
fair
Value
Carrying
value
Level 1
Level 2
Level 3
Total
fair
Value
Carrying
value
Level 1
Level 2
Level 3
Total
fair
Value
Carrying
value
Cash and cash equivalents
831,034
764,426
Due from other banks
Mandatory cash balances with the NBG
and NBU
Loans and advances to customers:
-
42,237
-
2,086,113
-
-
-
1,595,460
1,595,460
747,195
854,404
1,601,599
1,601,599
646,394
348,085
42,237
42,237
2,086,113
2,086,113
19,690
2,098,506
–
–
–
19,690
19,690
2,098,506
2,098,506
15,597
1,591,829
–
–
–
994,479
994,479
15,597
15,597
1,591,829
1,591,829
–
–
–
–
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
Bonds carried at amortised cost
Finance lease receivables
Other financial assets
Non-financial assets
Investment properties, at cost
Total assets
Financial liabilites
Customer accounts
Due to credit institutions
Other financial liabilities
Subordinated debt
Total liabilities
Debt securities in issue
1,671,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,492,668
6,492,668
6,497,010
2,304,534
2,304,534
1,973,016
4,522,528
4,522,528
4,048,955
4,126,318
4,126,318
4,028,204
-
251,855
231,849
-
-
251,855
252,340
231,849
231,849
29,493
29,493
22,892
–
–
–
–
5,728,134
5,728,134
5,583,107
2,025,055
2,025,055
1,769,759
4,032,243
4,032,243
3,845,233
3,508,881
3,508,881
3,396,170
1,086,008
–
1,086,008
1,059,946
–
–
–
274,402
274,402
270,978
112,980
112,980
112,980
105,628
105,628
68,689
–
–
–
–
4,838,348
4,838,348
4,579,723
1,876,364
1,876,364
1,750,050
3,354,901
3,354,901
3,137,491
2,891,382
2,891,382
2,882,135
990,537
–
990,537
1,021,568
–
–
–
265,165
265,165
256,660
109,362
109,362
109,362
123,324
123,324
72,667
831,034 2,892,776 17,959,245
21,683,055
20,778,076
747,195
4,058,608
15,787,323
20,593,126
19,826,657
646,394
2,946,048
13,458,846
17,051,288
16,411,561
- 9,888,470
4,966,775
14,855,245
14,884,145
–
7,503,114
5,153,793
12,656,907
12,634,295
–
6,490,267
3,633,289
10,123,556
10,112,002
-
-
-
-
-
1,671,435
1,583,699
1,463,830
–
2,986,631
2,986,631
2,984,075
166,926
166,926
166,926
626,503
626,503
623,647
–
–
–
4,490,464
144,645
677,246
–
-
-
-
1,463,830
1,419,513
1,136,297
–
4,490,464
4,485,873
144,645
144,645
677,246
672,740
–
–
–
3,600,318
134,519
594,892
–
–
–
–
1,136,297
1,136,297
3,600,318
3,593,901
134,519
134,519
594,892
591,035
-
-
-
1,671,435 9,888,470
8,746,835
20,306,740
20,242,492
1,463,830
12,815,469
5,153,793
19,433,092
19,357,066
1,136,297
10,819,996
3,633,289
15,589,582
15,567,754
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The fair values in the level 2 and level 3 of fair value hierarchy were estimated using the discounted cash flows valua-
tion 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 instruments 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 required to pay the amount. Amounts due to
credit institutions, subordinated debt and other financial liabilities were moved from level 2 to level 3. 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 2021 (2020: none; 2019: none).
257
TBC BANK FINANCIAL STATEMENTS 2021
43. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
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 2021:
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 FVOCI
Bonds carried at amortised cost
Other financial assets
Total financial asset subject to IFRS 9 measurement
categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
1,595,460
42,237
2,086,113
16,547,185
-
-
231,849
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
-
-
-
-
1,938,196
-
-
-
-
-
-
-
-
210,358
Total
1,595,460
42,237
2,086,113
16,547,185
1,938,196
-
442,207
20,502,844
1,938,196
210,358
22,651,398
-
-
20,502,844
-
-
1,938,196
-
-
210,358
252,340
1,135,774
24,039,512
The following table provides a reconciliation of classes of financial assets with these measurement categories as of
31 December 2020:
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 FVOCI
Bonds carried at amortised cost
Other financial assets
Total financial asset subject to IFRS 9 measurement
categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
1,601,599
19,690
2,098,506
14,594,269
–
1,059,946
112,980
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
–
–
–
–
1,527,268
–
–
–
–
–
–
–
–
48,022
Total
1,601,599
19,690
2,098,506
14,594,269
1,527,268
1,059,946
161,002
19,486,990
1,527,268
48,022
21,062,280
–
–
19,486,990
–
–
1,527,268
–
–
48,022
270,978
1,065,704
22,398,962
258
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
43. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY CONTINUED
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 National Bank of Georgia
Loans and advances to customers
Investment securities measured at FVOCI
Bonds carried at amortised cost
Other financial assets
Total financial asset subject to IFRS 9 measurement
categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
994,479
15,597
1,591,829
12,349,399
–
1,021,568
113,124
Fair value
through other
comprehensive
income
Fair value
through profit
or loss
–
–
–
–
985,293
–
–
–
–
–
–
–
–
2,087
Total
994,479
15,597
1,591,829
12,349,399
985,293
1,021,568
115,211
16,085,996
985,293
2,087
17,073,376
–
–
16,085,996
–
–
985,293
–
–
2,087
256,660
925,574
18,255,610
As of 31 December 2021, 2020 and 2019 all of the Group’s financial liabilities except for derivatives are carried at am-
ortised 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 influence 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 2021, 2020 and 2019) in the
Group or with representatives in the Board of Directors are considered as Significant Shareholders. Their close
family members and related companies with ownership stake of more than 50% are also considered as significant
shareholders.
• The key management personnel include members of the Group’s Board of Directors, the Management Board of
the Bank and their close family members.
Transactions between Group 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 pub-
lished Decree N 26/04 of the Governor of the National Bank of Georgia..
259
TBC BANK FINANCIAL STATEMENTS 2021
44. RELATED PARTY TRANSACTIONS CONTINUED
As of 31 December 2021, 2020 and 2019 the outstanding balances with related parties were as follows:
in thousands of GEL
Contractual
interest rate
Significant
share-
holders
Key mana-
gement
personnel
Immediate
parent
Companies
under com-
mon control
2021
Gross amount of loans and advances to customers
Credit loss allowance for loans and advances to customers
Customer accounts
Guarantees
Other borrowed funds from EBRD
2020
Gross amount of loans and advances to customers
Credit loss allowance for loans and advances to customers
Customer accounts
Guarantees
Other borrowed funds from EBRD
2019
Gross amount of loans and advances to customers
Credit loss allowance for loans and advances to customers
Customer accounts
Guarantees
Other borrowed funds from EBRD
4.0%-36.0%
–
0%-12.5%
–
0.86%-12.85%
4.0% – 33.0%
–
0.0% – 12.5%
–
0.98%–11.09%
24
–
19,460
–
360,889
54
–
16,574
–
411,765*
0.4% – 48.0%
–
0.0% – 10.2%
–
4.5% – 11.55%
77
–
16,418
–
243,040*
12,394
6
23,620
–
–
6,869
4
16,555
–
–
9,624
1
13,098
–
–
–
–
14,614
–
–
–
–
37,275
–
–
–
–
47,426
–
–
–
–
38,870
211
–
–
–
24,441
35
–
99
–
15,991
97
–
The income and expense items with related parties except from key management compensation for the year 2021,
2020 and 2019 were as follows:
in thousands of GEL
2021
Interest income - loans and advances to customers
Interest expense on customer accounts
Interest expense with EBRD
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
2020
Interest income - loans and advances to customers
Interest expense on customer accounts
Interest expense with EBRD
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
2019
Interest income - loans and advances to customers
Interest expense on customer accounts
Interest expense with EBRD
Fee and commission income
Administrative and other operating expenses (excluding staff costs)
Significant
shareholders
Key man-
agement
personnel
Immediate
parent
Companies
under common
control
5
98
36,819
27
–
8
–
29,580*
21
–
7
87
22,826*
123
68
384
673
–
72
431
346
1
–
24
323
620
197
–
342
978
–
1,649
–
–
–
–
7
–
5
–
42
5,814
–
–
–
–
2,324
–
407
–
–
6
–
58
–
–
1,135
–
2
–
* The management has added and separately disclosed the interest expense incurred for EBRD borrowings for current and comparative periods,
considering, the data was incomplete and that the latter represents more than 5% shareholder of the Group. Other borrowed funds from EBRD were
GEL 411,765 thousand and GEL 243,040 thousand as at 31 December 2020 and 2019. Interest expense with EBRD for the year 2020 and 2019 were GEL
29,580 thousand and GEL 22,826 thousand.
260
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
44. RELATED PARTY TRANSACTIONS CONTINUED
The aggregate loan amounts advanced to, and repaid, by related parties during 2021, 2020 and 2019 were as follows:
in thousands of GEL
2021
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
2020
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
2019
Amounts advanced to related parties during the year
Amounts repaid by related parties during the year
Significant
shareholders
Key
management
personnel
Immediate
parent
Companies
under common
control
67
(97)
107
(76)
1,512
(3,146)
5,131
(5,311)
3,750
(8,193)
15,137
(17,747)
–
–
–
–
48
–
–
–
–
–
–
–
As of 31 December 2021, 2020 and 2019 transactions and balances of TBC Bank JSC with its subsidiaries were as
follows:
in thousands of GEL
31 December 2021
31 December 2020
31 December 2019
Gross amount of loans and advances granted to subsidiaries
Customer accounts of subsidiaries
Other Financial Assets
Other Assets
Other Financial Liabilities
Investment in subsidiaries
13,699
48,258
23,515
-
10,830
30,020
28,472
112,665
23,994
112
24,192
31,120
86,518
65,025
22,061
19
22,268
30,426
The income and expense items for JSC TBC Bank with its subsidiaries were as follows:
in thousands of GEL
31 December 2021
31 December 2020
31 December 2019
Interest income
Interest expense
Fee and commission income
Fee and commission expense
Foreign exchange translation gains less losses
Other operating income
Administrative and other operating expense
3,880
5,914
6,572
25,964
-
52,286
7,507
5,278
5,509
25,229
248
-
4,144
771
2,109
5,527
16,471
2,415
54
4,477
223
Compensation of the key management personnel and Supervisory Board members 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
2021
2020
2019
Expense
12,095
–
11,299
23,394
Accrued
liability
–
–
–
–
Expense
7,484
–
11,514
18,998
Accrued
liability
–
–
–
–
Expense
7,376
(1,627)
25,695
31,444
Accrued
liability
–
–
–
–
261
TBC BANK FINANCIAL STATEMENTS 2021
45. EVENTS AFTER REPORTING PERIOD
Since February 2022 ongoing political tension in the region escalated as a result of Russian invasion in Ukraine.
This has negatively impacted commodity and financial markets, and increased volatility, particularly with re-
gard to foreign exchange rates. As a result of sanctions imposed from a number of countries, many companies
left Russian market and as a result ceased providing services and products to Russian Market. There is an expec-
tation of further sanctions and limitations on business activity of companies operating in Russia. To avoid the se-
vere effects on Georgian economy the Georgian Government has not joined on all sanctions, but the full na-
ture and possible effects of the imposed restrictions against Russia and Ukrainian economy downturn are yet
unknown. However, taking into account Georgia’s vulnerability to developments in Ukraine and Russia and
economic links with these countries, there will be adverse implications for the growth outlook, as well as, for the
other macro variables, which may also negatively affect the Bank’s capital adequacy, liquidity and credit risks.
Russian entities have been restricted from having access to the Euro and US$ financial markets includ-
ing removing access to the international SWIFT system and in such a situation this could further impact
the Group’s ability to transfer or receive funds from Russia. At this stage, it is not possible for the Manage-
ment to predict with any degree of certainty the impact of all this uncertainty on the future operations of
the Group. However, Group’s Management believes, the war in Ukraine is non-adjusting event and close-
ly monitors the current economic environment to adjust the Groups performance accordingly where needed.
In March 2022, the Bank obtained the funding resource of EUR 20 million from European Fund for South-
east Europe S.A. (“EFSE”) and USD 50 million from Proparco, with the maturities of 3 and 5 years, respective-
ly. USD 9.2 million from the European Bank for Reconstruction and Development (“EBRD”) and USD 15 mil-
lion from the City Bank, also have been obtained in March 2022, with agreements maturities of 6 months each.
262
TBC BANK FINANCIAL STATEMENTS 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUED
A FULL LIST OF RELATED UNDERTAKINGS AND THE COUNTRY OF INCORPORATION IS SET OUT BELOW
Company Name
JSC TBC Bank
United Financial Corporation JSC
TBC Capital LLC
TBC Leasing JSC
TBC Kredit LLC
TBC Pay LLC
TBC Invest LLC
Index LLC
TBC Invest International Ltd
University Development Fund
JSC CreditInfo Georgia
Natural Products of Georgia LLC
Mobi Plus JSC
Mineral Oil Distribution Corporation JSC
Georgian Card JSC
Georgian Securities Central Depositor JSC
JSC Givi Zaldastanishvili American Academy In Georgia
United Clearing Centre
GRDC
Banking and Finance Academy of Georgia
Swift
Tbilisi's City JSC
TBC Trade LLC
Tbilisi Stock Exchange JSC
Georgian Stock Exchange JSC
Kavkasreestri JSC
TBC Capital Asset Management LLC
Georgia Large Cap Diversified Credit Portfolio JSC
Country of incorporation
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
7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
2 Tarkhnishvili street, 0179, 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
1 Adele Avenue, B-1310, La Hulpe, Belgium
15 Rustaveli Avenue, 0108, Tbilisi Georgia
11A Chavchavadze Ave, 0179, Tbilisi, Georgia
floor 2th block 8, 71 Vazha Pshavela Ave, Tbilisi, Georgia
floor 7th block 10, 71 Vazha Pshavela Ave, Tbilisi, Georgia
6 Bagrationi st. saburtalo, Tbilisi , georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
263
TBC BANK FINANCIAL STATEMENTS 2021 264
TBC BANK MANAGEMENT REPORT 2021OUR ESG STRATEGY CONTINUED ADDITIONAL
INFORMATION
265
TBC BANK MANAGEMENT REPORT 2021 GLOSSARY
Active customers
Clients who have at least one active product or performed at least one transaction during
the last 3 months.
Active retail digital users
Includes unique digital users of TBC Bank, Space app and TBC Pay mobile app, who
logged in at least once for the past 3 months.
Active merchant terminals
Active merchant terminals include POS terminals and e-commerce with at least one
transaction conducted during the month.
Bank
Board
Chairman
Code
Joint Stock Company TBC Bank
Board of Directors of TBC Bank Group PLC
Chairman of the Supervisory Board of Joint Stock Company TBC Bank
The UK Corporate Governance Code
Consumer loans offloading
Consumer loans offloading ratios includes the number of consumer loans disbursed via the
remote channels divided by total number of such loans issued.
Corporate and
Investment Banking segment
Daily active
digital users (DAU)
DAU/MAU
Deposit offloading
ENPS (Employee Net
Promoter Score)
Group
Management Board
Monthly active
digital users (MAU)
MSME (Micro, Small and
Medium) segment
NPS (Net Promoter Score)
Retail offloading ratio
Retail segment
Supervisory Board
TBC Bank
TBC Bank Group PLC
A legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million
or which has been granted facilities of more than GEL 5.0 million. Some other business
customers may also be assigned to the CIB segment or transferred to the MSME segment
on a discretionary basis. In addition, CIB includes Wealth Management private banking
services to high-net-worth individuals with the threshold of US$ 250,000 on assets under
management (AUM), as well as on discretionary basis.
Monthly average number of digital users who logged into our digital channels at least once
per day.
Average daily active digital users divided by monthly active digital users. DAU/MAU is
calculated for the Bank internet and mobile banking only.
Deposit offloading ratio includes the number of time and savings deposits opened via
remote channels divided by total number of such deposits opened.
The employee net promoter score measures employee loyalty and reflects the likelihood of
our colleagues recommending their workplace to their friends and family
Joint Stock Company TBC Bank and its subsidiaries
Management Board of Joint Stock Company TBC Bank
The number of digital users who logged into our digital channels at least once a month
Business customers who are not included in the CIB segment
Net promoter score measures how willing customers are to recommend our products and
services to others.
The retail offloading ratios measures the share of transactions conducted in our remote
channels, that is outside the branches.
Non-business individual customers, including the fully-digital bank, Space
Supervisory Board of Joint Stock Company TBC Bank
Joint Stock Company TBC Bank and its subsidiaries
A public limited company registered in England and Wales. It is the parent company 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. TBC Bank Group PLC is listed on the
London Stock Exchange under the symbol TBCG.
TBC JSC
TBC PLC
Joint Stock Company TBC Bank
TBC Bank Group PLC
266
TBC BANK MANAGEMENT REPORT 2021 RATIO DEFINITIONS
Ratio Name
Profitability
ROE
ROA
Cost
to income
IFRS based
IFRS based
IFRS based
NIM
IFRS based
Loan yields
IFRS based
Deposit rates
IFRS based
Cost of funding
IFRS based
Asset quality & portfolio concetration
Cost of risk
IFRS based
PAR 90
to Gross Loans
NPLs
to Gross Loans
NPL provision
coverage
Total NPL
coverage
Credit loss level
to Gross Loans
Related Party Loans
to Gross Loans
Top 10 Borrowers
to Total Portfolio
Top 20 Borrowers
to Total Portfolio
IFRS based
IFRS based
IFRS based
IFRS based
IFRS based
IFRS based
IFRS based
IFRS based
Capital & liquidity positions
Ratio Type
Ratio definitions
Return on average total equity (ROE) equals net income attributable to owners
divided by the monthly average of total shareholders’ equity attributable to the
JSC’s equity holders for the same period; annualised where applicable.
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.
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).
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 CIB 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 advances to customers; annualised where
applicable.
Deposit rates equal interest expense on customer accounts divided by monthly
average total customer deposits; annualised where applicable.
Cost of funding equals sum of the total interest expense and net interest gains on
currency swaps (entered for funding management purposes), divided by monthly
average interest bearing liabilities; annualized where applicable.
Cost of risk equals credit loss allowance for loans to customers divided by monthly
average gross loans and advances to customers; annualised where applicable.
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.
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.
NPL provision coverage equals total credit loss allowance for loans to customers
divided by the NPL loans.
Total NPL coverage equals total credit loss allowance plus the minimum of
collateral amount of the respective NPL loan (after applying haircuts in the range
of 0%-50% for cash, gold, real estate and PPE) and its gross loan exposure divided
by the gross exposure of total NPL loans.
Credit loss level to gross loans equals credit loss allowance for loans to customers
divided by the gross loan portfolio for the same period.
Related party loans to total loans equals related party loans divided by the gross
loan portfolio.
Top 10 borrowers to total portfolio equals the total loan amount of the top 10
borrowers divided by the gross loan portfolio.
Top 20 borrowers to total portfolio equals the total loan amount of the top 20
borrowers divided by the gross loan portfolio.
Net Loans to
Deposits plus
IFI Funding
Net Stable
Funding Ratio
IFRS based
Net loans to deposits plus IFI funding ratio equals net loans divided by total
deposits plus borrowings received from international financial institutions.
Regulatory
based
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. Calculations are made for the Bank only, based on local standards.
267
TBC BANK MANAGEMENT REPORT 2021 RATIO DEFINITIONS CONTINUED
Liquidity
Coverage Ratio
Regulatory
based
Liquidity coverage ratio equals high-quality liquid assets divided by the total net
cash outflow amount as defined by the NBG. Calculations are made for the Bank
only, based on local standards.
Leverage
CET 1 CAR
(Basel III)
Tier 1 CAR
(Basel III)
Total CAR
(Basel III)
IFRS based
Leverage equals total assets to total equity.
Regulatory
based
Regulatory
based
CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both
calculated in accordance with requirements of the NBG Basel III standards.
Calculations are made for the Bank only, based on local standards.
Tier 1 CAR equals tier I capital divided by total risk weighted assets, both
calculated in accordance with the requirements of the NBG Basel III standards.
Calculations are made for the Bank only, based on local standards.
Regulatory based
Total CAR equals total capital divided by total risk weighted assets, both
calculated in accordance with the requirements of the NBG Basel III standards.
Calculations are made for the Bank only, based on local standards.
Notes to table: IFRS based ratios are calculated using financial information prepared under IFRS standards, while regulatory ratios
are calculated for the Bank only in accordance with local accounting standards.
268
TBC BANK MANAGEMENT REPORT 2021 ABBREVIATIONS
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
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
269
TBC BANK MANAGEMENT REPORT 2021