Main takeaway
The National Bank of Georgia’s latest capital-market overview shows that commercial banks held 71% of locally issued treasury securities at the end of 2025. A previously reported 67% share described an earlier observation, but the year-end figure makes the same structural point even more clearly. Banks provide the government with a stable domestic funding base, yet Georgia’s principal lari-denominated financial market remains heavily dependent on a small group of institutional investors.
| 71% | Commercial banks’ share of local treasury securities at end-2025. Applied to the GEL 11.4 billion market, this equals approximately GEL 8.1 billion. |
Why banks buy government securities
Treasury securities are more than loans to the state. For banks, they are relatively low-credit-risk lari assets that generate income, support liquidity management and can serve as collateral in central-bank operations. In a shallow capital market with few large and readily tradable private securities, government bonds are a natural balance-sheet instrument.
The benefit to the sovereign is equally clear. Domestic banks sustain demand for lari debt, reduce dependence on foreign-currency borrowing and enable the budget to draw more funding from the local market. The Ministry of Finance’s portfolio description reports GEL 35.934 billion in total government debt and GEL 11.771 billion in local-currency debt at end-2025. Its strategic-indicator table reports a 32.4% domestic-debt share and targets at least 35% by 2030.
What the 71% concentration shows
Local treasury securities totaled GEL 11.4 billion, or about 10.9% of GDP, at end-2025. Applying the published 71% share implies bank holdings of roughly GEL 8.094 billion. The National Bank held 11%, the Pension Agency 12%, non-residents 3% and other residents 3%. Banks, the central bank and the pension institution therefore controlled 94% of the market together.
This does not mean that 94% represents direct deficit financing: the figures describe the ownership of outstanding local securities, which can change hands in the secondary market. The economic implication is nevertheless strong. Pricing, demand and liquidity in this segment depend heavily on the decisions of a few domestic institutions.
| 94% | Combined share of commercial banks, the National Bank and the Pension Agency. Non-residents and other residents together accounted for only 6%. |
A stable buyer for the state
High bank participation initially creates stability. Banks have broad deposit funding, recurring lari flows and a continuing need for liquid assets. The state can therefore rely on a comparatively predictable domestic buyer base. Since late 2025, demand at treasury auctions has reportedly exceeded supply by three to five times, according to the Ministry of Finance’s 2027–2030 strategy.
Local borrowing also reduces currency risk: lari depreciation does not mechanically inflate the lari value of lari debt. A functioning government-bond market further creates a sovereign yield curve, without which companies struggle to price their own bonds.
The risk of excessive interdependence
The strength becomes a vulnerability when stable cooperation turns into excessive interdependence. The IMF calls this the sovereign-bank nexus: banks hold substantial public debt while the sovereign relies heavily on banks for financing. If confidence in public finances deteriorates and bond values fall, pressure can migrate onto bank balance sheets. In the opposite direction, a banking crisis can weaken the sovereign through support costs.
This does not imply an imminent crisis in Georgia. Government debt was 34.4% of GDP at end-2025, below the Ministry of Finance’s 40–45% safety range, while interest expenditure equaled 1.6% of GDP. But investor concentration is a separate structural issue: debt can be manageable in aggregate while its market remains tied to a narrow buyer base.
Does this crowd out private credit?
The mechanism is possible, but not automatic. If banks have excess liquidity and private credit demand or borrower quality is weak, a treasury bond may use otherwise idle resources rather than replace a business loan. If government borrowing rises rapidly and yields become particularly attractive, however, capital and liquidity may shift from private borrowers toward sovereign assets.
A 71% ownership share alone is not evidence of declining private credit. Establishing that would require bank sovereign exposures relative to total assets, loan-growth data, lending standards and interest spreads. The share does show that government borrowing costs and issuance volumes matter for bank portfolio allocation—and therefore for the conditions under which companies and households obtain finance.
The deeper weakness: limited secondary trading
The NBG notes that banks, the central bank and the Pension Agency typically hold securities to maturity. This creates stable ownership but limits secondary-market activity. Thin trading makes prices less informative and weakens the sovereign yield curve as a benchmark for valuing corporate bonds.
That produces a paradox: banks help the market grow, while their hold-to-maturity behavior constrains turnover. The 2026 launch of seven Georgian government-bond indices on Bloomberg and ICE is an important infrastructure advance, but indices improve visibility; genuine liquidity requires diverse investors and regular transactions.
What should change
In the assessment of BTU researchers, policy should not seek to reduce banks’ share mechanically. Banks are necessary and natural participants. The better objective is to add other investors faster: retail treasury products for households, more investment and pension funds, long-duration insurance portfolios, better international custody access and a measured increase in non-resident institutional participation.
The Ministry of Finance’s new strategy identifies retail securities and greater non-resident interest as priorities. The balance matters: foreign investors add competition and liquidity but an excessively high share can create sudden-outflow risk during global shocks. A resilient market relies neither exclusively on banks nor on foreign capital; it needs buyers with different horizons and motivations.
Bank dominance is therefore a dependable funding pillar today, not yet proof of a mature capital market. Success would mean a larger and more actively traded market in which banks operate alongside a broad retail, institutional and international investor base. Only then can the government-bond market evolve from a budget-financing channel into a genuine anchor for the cost of capital across Georgia’s economy.
Sources
- National Bank of Georgia – Overview of Georgian Capital Market, Q4 2025
https://nbg.gov.ge/en/media/news/national-bank-of-georgia-publishes-latest-capital-market-overview - Ministry of Finance of Georgia – Government Debt Management Strategy 2027–2030
https://mof.ge/files/download/DMS%2020272030%20GE.pdf/ddaee72e-5bb5-4d84-a1e1-5815a1353701 - International Monetary Fund – The Sovereign-Bank Nexus in Emerging Markets and Developing Economies
https://www.imf.org/en/blogs/articles/2022/04/18/blog041822-gfsr-ch2-emerging-market-banks-government-debt-holdings-pose-financial-stability-risks