Tbilisi, 04.03.2021.

Press release

The Financial Markets Association has developed a Master Agreement that financial market participants will use to enter into a derivative transaction. This document allows for derivative transactions to be carried out between the parties quickly, without legal risks and at minimal cost.

One of the mandates of the Financial Markets Treasury Association, is to develop such Master Agreements. As soon as the Derivatives Law was adopted in early 2020, the working process on this topic has begun. The National Bank of Georgia and the leading commercial banks operating in the market were involved in the working process. The document is in line with the ISDA International Master Agreement, which in turn is an internationally recognized standard and best practice. In addition, the specifics of the local market and the requirements of the law on derivatives were taken into account. As a result, we have a document that will play a major role in development of derivatives segment and the financial markets in general. By using this Master Agreement, companies will be able to better perform their financial management and reduce risks. Among other aspects, it is important that the Master Agreement creates the concept of netting that regulates the use of this instrument in practice.

The International Swaps and Derivatives Association (ISDA) has actively assisted GFMTA in both the law-making process and the drafting of the Master Agreement, for which we express our gratitude and appreciation to this institution.

Lasha Jugeli, Executive Director of the Association:

“Local Master Agreement and Credit Support Annex is an important step forward in the development of derivatives market. It allows trading in derivatives in the local market to become standardized, more flexible and safe towards significant risks.”

Vice President of the National Bank, Archil Mestvirishvili:

“The National Bank welcomes the steps taken to develop the derivatives market, as a result of which the market should become more efficient and liquid. This will help to better manage interest and fx risks, both in financial institutions and on financial markets in general. "

The importance of the agreements was also emphasized by the representatives of the corporate banks present on the market:

 Kakha Davitaia, Head of Bank of Georgia treasury:

"After the entry into force of the Law on Financial Collateral, Netting and Derivatives, the Bank of Georgia started concluding the Derivatives Master Agreement (ISDA) and the Credit Support Annex (CSA) with several international banks. The implementation of this law enabled the Bank of Georgia to simplify the process of trading in derivatives. The regulation of the local Master Agreement allows the bank to offer derivatives operations to customers on improved terms. The MA will help standardize trade in derivatives between Georgian banks and their customers, which will improve the management of market risk for Georgian companies."

Paata Makharadze, Head of TBC Bank Treasury:

TBC Bank Working Group was actively involved in the development of the Local Master Agreement (ISDA) and Credit Support Annex (CSA). The agreement covers international practice, local market and legal principles. This agreement will contribute to the development of the derivatives market in Georgia. It will enable Georgian banks to conduct derivative operations on the local market under improved conditions and reduce counterparty risks. ”

Peter Werner, Senior Advisor to ISDA:

"ISDA welcomes the publication of the Georgian Master Agreement and credit documentation. These documents are based on global standards for international transactions with OTC derivatives.”

The Master Agreement and credit documentation is published on the website of the Financial Markets Treasuries Association - www.gfmta.ge (See link). The use of this documentation will be freely available to all market participants. Interested parties will be able to endorse the text of this agreement by signing annex containing only few pages, which will greatly facilitate the process and contribute to the standardization of the legal framework.

We thank ISDA for its support in the working process on both the law and the Master Agreement. We would also like to express our gratitude to the financial market participants for their fruitful input in the working group.

For more information, please contact: Georgian Financial Markets Treasuries Association. Email: secretary@gfmta.ge