Bankieri No. 13 - October 2014

Publication of the Albanian Association of Banks

No. 13, October 2014

Bankieri

PROFITABLE BANKS

an imperative and objective www.aab.al

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Content

Publication of the Albanian Association of Banks

No. 13, October 2014

Bankieri

Bankieri No.13, October 2014 Publication of the Albanian Association of Banks Editor’s Desk Profitable banks. Think positive!

Elvin MEKA Frontline Profitable banks. Is it good or no good?

Silvio PEDRAZZI Lending downward, profits upward?!

Arben MALAJ Journalist corner Increasing bank profits, a prelude to credit recovery?

Ersuin SHEHU

PROFITABLE BANKS

an imperative and objective

PROFITABLE BANKS

an imperative and objective

Bankieri is the official publication of Albanian Association of Banks which mainly focus the Albanian banking industry. Bankieri provide readers with valuable information on the financial industry’s developments in general, and of commercial banks in particular.

Albanian Association of Banks Street ‘Ibrahim Rugova’, SKY TOWER, 9/3, Tirana Tel: ‘+355 4 2280371/2 Fax: +355 4 2280 359 E-mail: bankieri@aab-al.org; www.aab.al

Interview United Bank of Albania - A bank within the framework of moral and ethical values Emina ŠIŠIĆ Banking System Interest Rates - The Complex Equilibrium between deposits and loans Gent SEJKO Deposit insurance - quality steps forward Renis ZAGANJORI Experts’ Forum Banking system and the new VAT law Fatmir KAZAZI Loan sharks - A phenomenon to be considered Besart KADIA ECO Investments in business Alda SHEHU

Editorial Team:

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Editorial Board:

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Ioannis KOUGIONAS AAB Vice Chairman & CEO of NBG Bank Albania

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Christian CANACARIS AAB Executive Committee Member & CEO of Raiffeisen Bank Albania

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Social capital Bank activities

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News First SWIFT Business Forum Albania 2014

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Interview with Mr Michael Formann, Head of SWIFT Austria Rudina Hoxha

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Opinion An overview on Thomas Piketty’s "Capital in the Twenty”-First Century" Erjona Rebi

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Financial Auditoriium Financial education through Junior Achievement Program 40 Rezarta GODO AAB Trainings

Printed by:

Seyhan PENCABLIGIL AAB Chairman & CEO of Banka Kombëtare Tregtare

Economist Corner A weakening Euro or a strengthening Dollar Which scenario lies ahead?

Adrian CIVICI

Tech Topics HeRa - A module for most efficient use of human knowledge, talent, skills and capabilities Dritan MEZINI

Elvin Meka Editor–in-Chief Eftali Peçi Coordinator Junida Tafaj (Katroshi) Collaborator Andis Rado Photographer Design & Layout: PIK Creativ

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Periklis DROUGKAS AAB Executive Committee Member & CEO of Alpha Bank Frédéric BLANC AAB Executive Committee Member & CEO of Societe Generale Albania Bozhidar TODOROV AAB Executive Committee Member & CEO of First Investment Bank Endrita XHAFERAJ Secretary General, Albanian Association of Banks Hysen ÇELA Chairman of Albanian Institute of Authorized Chartered Auditors (IEKA) Adrian CIVICI President & Head of Doctoral School European University of Tirana Spiro BRUMBULLI Chief of Cabinet, Ministry of Finance Enkeleda SHEHI Chairwoman of Albanian Financial Supervision Authority

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Editor’s Desk

Profitable banks Think positive!

In today’s economic landscape of Albania, the presence of profitable banks must be the least discussion point instead it ought to be cheered up, because when banks are making profit, they are stable and successful banks help the economy to thrive and contribute to households well-being.

by Prof. Asoc. Dr. Elvin MEKA1 Editor–in-Chief

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he news about the profit level of the Albanian banking system made the headlines during summer, but not in the sense of logical encapsulating the overall financial results of it, rather it was dressed with astonishment and raised eyebrows. The most quoted question was: How could it be possible for banks, in the frame of current economic developments, to make such “fatty” profits? From a popular and ordinary viewpoint, generating profit in today’s lackluster economic situations may be judged as a bit strange and abnormal, especially for the financial industry, but from a professional standpoint, it is quite relevant and more than welcomed. It is not amazing that banks in Albania realized profits during the first half of 2014, and there are a bunch of technical, business and management arguments, which could easily explain such a fact.

Specifically, if anyone reads between the lines, it is easily understandable that the substantial curb on provisions’ expenses has been the key for such “dramatic” rise in banks’ profits, by reflecting the latest regulatory and fiscal changes in provisions’ calculations. For the time being, the interest income, usually the main driver for any bank’s profit, has played a relatively modest role in this profit “jump”, typically by following a stiff competition between banks for extending new loans and building up their client base, by way of attractive loan interest rates.

In today’s economic landscape of Albania, the presence of profitable banks must be the least discussing issue, as there are several substantial issues, which need to be carefully handled and addressed by some other stakeholders, let alone and beyond banks. We all have to be very attentive about the payday loans and loan sharks, which should not be considered as banks’ competitors, but as a threat to the financial stability and social security, as well as the current modest credit growth and the not-sorosy future for bank credit, especially from businesses. These are real discussing arguments, which will either pinch

the future profits generated by banks, and not only, or push the brake pedal, instead of the accelerator, on the growth of national economy. So, the existence of profitable banks ought to be cheered up, because when banks are making profit, they are stable and successful banks help the economy to thrive and contribute to households’ well-being. Profitable banks mean more direct and indirect jobs within national economy, more tax revenues for government and more social and community programs to be supported.

Profit is the “raw material” for strengthening banks’ capital base, which is one of the main pillars of the stability of the entire financial system, and also being the best guarantee for deposits in Albania.

In a few final words, all of us benefit from profitable bank, either directly or indirectly, so everyone must think positive about this fact and not questioning the existence of profitable organizations within a market economy, even during tight economic situations.

Deputy Dean & Head of Department of Finance, UET-EUT

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Frontline

Profitable banks

Is it good or no good?

Good and fair profits normally trigger a lot of desirable developments, let say a clear positive spiral. On the opposite, lack of profits could induce negative consequences only!

by Mr Silvio PEDRAZZI CEO INTESA SANPAOLO BANK - ALBANIA

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o begin with, when it comes to the fact whether profitable banks within a financial system are a good thing, at all, I would say: “Yes, definitely it is”, and for several different reasons, despite the fact of actual modest levels of credit growth. We have always to take into consideration that any company (no matter being a bank or not) finds its ultimate goal in making profit; the absence or lack of profits can be just a temporary and dangerous situation.

Good and fair profits normally trigger a lot of desirable developments as, for example, a positive attitude toward new investments, increase of employment as well as renewed confidence in the future; let say a clear positive spiral. On the opposite, lack of profits could induce negative consequences only!

Of course, when I think of profitability, I mean “sustainable” and not “one off” profits and, as far as banks are

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concerned, the sustainability is closely related to the increase of a sound lending activity. On that purpose, I’d like to point out we should go deeper in the figures, paying more attention to the actual growth of the “performing loans”, that represent the real and main contribution to the development of the economy; under this point of view data are not satisfactory at all yet.

Main causes and factors driving the rise in Albanian banks' profitability during the last year Looking at the official data, it is evident that, the two main reasons based on which banks are increasing profits are the substantial stabilization in the

level of the “non-performing loans” (even if still at an extraordinarily high level) and the correlated decrease in the “credit provisions”, i.e. the amount of money banks put aside for covering such loans. There is another important factor to be carefully considered, too. During the second half of last year, as well as in the recent months, the yield on Treasury Bills has been constantly dropping, by reaching historical low levels; as we know, given the extremely high liquidity of the banking system, banks have been trying to offset the negative impact on their margins, by easing the lending conditions and thus offering quite lower interest rates for all kind of loans.

Unfortunately, the demand for loans is

The current profitability is very good news for the shareholders, knowing that the expected future expansion can be currently supported by self-produced financial resources. Actually the drawback is that, missing a real need of additional equity resources, shareholders could consider to cash-in dividends just in order to optimize the capital allocation.

still weak, even if slightly improving, and the whole economy couldn’t leverage more than something on such favorable situation. In the medium term, given the forecasted long lasting period of low interest rates, if we will miss a more robust demand, the sustainable profitability of the banking system could be negatively impacted. Moreover, let’s not forget that, in a globalized world, also external events could severely impact the internal situation.

Positive aspects of profitability as a cheaper capital injection alternative… maybe!

I don’t really think that, in the short term, the level of bank capitaliza-

tion could represent an issue for the Albanian banking system. Actually, the additional contribution from the shareholders’ side is not required and, as previously mentioned, the majority of the largest banks have an extremely high level of liquidity and one of the lowest loans-to-deposits ratio in the region. I take the opportunity to stress that this situation is almost unique and makes the system absolutely safe. This fact should be appreciated more than it is actually considered, especially by depositors. Nevertheless, also looking forward, the current profitability is very good news for the shareholders, knowing that the expected future expansion can be currently supported by self-pro-

It should be noted that, banks in Albania are only a part of a bigger system; it is true they are the indispensable backbone of the economy but without a comprehensive and common effort from all the stakeholders their efforts are not enough to boost the recovery, as much as it is needed.

duced financial resources. Actually the drawback is that, missing a real need of additional equity resources, shareholders could consider to cash-in dividends just in order to optimize the capital allocation.

Profit building and positive effects for supporting quality lending for the Albanian economy and businesses It should be noted that, this is a very important consideration. As already mentioned, the profit building and its sustainability is a pre-condition for a steady support of the business through a sound lending activity. Notwithstanding, it is worth pointing out that other pre-conditions are necessary and complementary. Albanian entrepreneurs should be more active in the most promising sectors of the economy as industrial agriculture, tourism, labor intensive manufacturing (in which Albania enjoys a concrete competitive advantage), as well as all export-oriented productions. It is necessary to realize that some sectors that perhaps had ensured in the past big, quick and easy profits are not as such anymore.

In addition, as a matter of fact, the need to compete with other advanced and developed countries, i.e. in a European perspective, requires an enhanced business environment, which is able to attract foreign high-value investments and technologies. In this light, a more transparent, efficient and sound comprehensive framework is strongly advisable, including the legislative and judiciary systems. Under these circumstances, all the ongoing reforms and the announced ones are more than welcome for the financial system and for the whole economy.

In short, what I mean is that banks in Albania are only a part of a bigger system; it is true they are the indispensable backbone of the economy but without a comprehensive and common effort from all the stakeholders their efforts are not enough to boost the recovery, as much as it is needed.

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Frontline

Lending downward, profits upward?!

Down to its core, banking does not consist simply in securing the maximum profit, but achieving the most sustainable profit. A sustainable profit results from a sustainable loan-making process, and this is exactly the necessary condition to achieve the sustainable economic growth.

by Prof. Asoc. Dr. Arben MALAJ Lecturer Department of Economics Faculty of Economy TIRANA UNIVERSITY

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he financial system’s development is often attributed by researchers a quite significant impact on economic development itself. Such impact is outlined lending quality, the allocation of savings and other sources of lending to the most successful projects. A high lending quality helps to increase the competitiveness level of the economy. In case of poor lending quality the positive effect on the economy erodes, as savings are allocated to projects with low productivity and high risk of return. In the economic literature there is a widely accepted opinion and also supported by empirical studies, that the level of lending to economy is first indicator, an economist needs to assess its health.

Also, it is a well-grounded fact that the first symptoms of a banking crisis are the noticeable differences between credit (lending) growth rates and economic growth, respectively. This difference distorts the assets’ price in the economy,

as the aggregate demand is artificially increased whereas the aggregate supply is small or shrinking. Such relationship is displayed at inflating prices during the boom period, while the bubble outbreak corrects market price distortions. During this period, the level of non-performing loans increases, lending starts to stagnate until a standstill, whereas the decreased demand, then-fed by lending, causes a deep and accelerated price fall, which transforms the expected high profits into substantial and instant losses. This chain reaction effect hurts both borrowers and lenders, where the latter are "victims" of their own, rather than of other factors.

The experience of countries with high absorption potentials of financial resources shows that businesses or individuals who focus their activities on low productivity entrepreneurships, have a higher probability to end up in a position of failing to pay back loans. In the frame of our economic reality, it is concluded that lending activity, during the last two years, has sailed in very shallow waters, by being in negative terms during the past 10 months, as well as by decreasing, each month, by an average of 2 per cent. In July 2014, according to the latest data by Bank of Albania, the

total stock of bank loans increased by 0.5 per cent, as compared to July 2013, thus feeding hopes for a possible revival of lending, during future months1.

The private business has been, by far, the main contributor to the growth of total loan stock during this period. The level of non-performing loans, until the second quarter of 2014, reached 24.6 per cent, a decrease by 0.02 per-

The faster pace of drop in deposit interests, compared to loan interests is viewed as an "indirect subsidy" from depositors for losses caused by the mismanagement of banking activity. The best guarantee of a sustainable level of bank profits is the support they provide to the economic growth, through increased credit and improving its quality, rather than some pure arithmetical calculations of short-term profits. http://www.bankofalbania.org/web/Statistics_Entry_230_2.

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php?kc=0,3,0,0,0

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centage points and 0.33 percentage points, compared to the first quarter of 2014, and the second quarter of 2013, respectively 2. These facts reveal the need to improve the quality of lending.

During the second quarter of 2014 the banking system recorded a profit 261.3 per cent higher, as compared to the same period of last year, but when compared with previous quarter, the increase was only 20.4 per cent, or about ALL 3.9 and ALL 0.9 billion, respectively3. Net profit, by the end of second quarter amounted to ALL 5.4 billion.

Experts argue about factors causing such unusual increase, but what are the real factors, affecting it and how much sustainable they will be? Getting a clear response require some in-depth studies

by Bank of Albania, other experts and scientific research centers. According to some hands-on analysis it seems that there are several factors which have contributed to reach such a level of profit by commercial banks, during 2014. Thus, net interest income has positively affected banks’ financial results, by increasing 9.7 per cent (y.o.y) and 102.4 per cent (q.o.q). In annual terms, such increase was driven primarily by a sizeable decrease in interest expenses (29.2 per cent), rather than an increased interest income (- 9.3 per cent). These figures reflect the easing monetary policy, pursued by Bank of Albania, which has reduced the key rate just 10 times, since mid-2011, to 2.5 per cent, down from 5.25% at that time. This policy has led to a drop in interest rates on deposits and loans. Because of tightening bank lending policies, the drop in loan interest rates was not in tandem, thus hindering an efficient transmission of monetary policy, as in case of deposits. It should be noted, however, that improving the transmission mechanism of monetary policy onto the real economy is not an easy task for many central banks throughout the world.

On the other hand, the evidenced stabilization in non-performing loans has resulted in a drastic reduction in provision expenses, which are positioned at the lowest level since 2005, so being the key factor that has led to increased bank profits. They scored an annual decline of 94.3 per cent, or a decrease of approximately ALL 7.4 billion.

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We must admit that the growth rate of bank profit during 2014 was impacted by quite a few factors, directly related to the success of commercial banks, but in this regard, an in-depth analysis to identify baseline factors affecting bank profit rates, is a must.

Such expenses were significantly eroding banks' profits, during several years in a row. In fact, from a medium-term perspective, it is easily analyzed that, during 2014, banks experienced some corrections in provisions’ deformation, rather than a sustainable improvement in bank profits’ level. A non-permanent factor contributing to the uncommon bank profit increase during 2014 may be also the legal clarification of fiscal principles of provisions’ calculation.

In conclusion, we must admit that the growth rate of bank profit during 2014 was impacted by quite a few factors, directly related to the success of commercial banks, but in this regard, an in-depth analysis to identify baseline factors affecting bank profit rates, is a must. Also, it should be mentioned that the analyzed time period is short; it spans from 2013 to 2014, only. Extending the time period in concern and conducting a thorough analysis is quite indispensable, as the growth rate of bank profits during 2014 are by far higher

than the credit growth rate, during the same period. The challenges faced by the banking system remain bold and complex and its profit indicators must be based more upon expanding credit activity and its respective quality. Benefits reaped from factors not directly related to banking activity, such as a reduced cost of money by the central bank, should not go primarily to improve their balance sheet; instead they must fuel the expansion of credit activity. The faster pace of drop in deposit interests, compared to loan interests is viewed as an "indirect subsidy" from depositors for losses caused by the mismanagement of banking activity. The best guarantee of a sustainable level of bank profits is the support they provide to the economic growth, through increased credit and improving its quality, rather than some pure arithmetical calculations of short-term profits.

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http://www.bankofalbania.org/web/Statistical_Report_

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http://www.aab.al/al/statistics.php.

June_14_7114_2.php?kc=0,27,0,0,0

Journalist corner

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uring the first half of 2014, banks recorded a profit of ALL 5.4 billion, the highest historical record per se, ever scored for any first half year. Certainly, breaking such a record of profitability sounds a bit surprising, when putting it within the context of actual times, but this result is not related to the system’s performance during the first half of the year, only. If we read carefully the sector’s P&L statement, it is clearly understood that provisions’ balance is the heavyweight, as the banking system spent only ALL 445 million during the first half, not to mention that during the first quarter such item recorded positive results, with a total of ALL 1.3 billion in provisions’ reversal to banks’ equity. Reducing the burden of provisioning leads to a logical conclusion that the record profits of this half year relates to an important milestone: the stabilization of non-performing loans rate, stationed near the 24 per cent level for about a year in a row.

Given that the outstanding credit to economy, during this period, has been declining, then problem loans are by far less, in nominal value. According to AAB statistics, in June 2014, the stock of loans with over 90 days

In the light of price component, and even from the borrower’s viewpoint, loans are at bargain rates now, when compared with those of several years ago.

Although monetary policy is not fully transmitted and reflected to loan rates, their trend is clearly downward.

Increasing bank profits, a prelude to credit recovery?

It should be mentioned that, even during the crisis period, the majority of banks continued to expand their loan portfolio, even with double-digit rates. This shows that when applying a more upbeat and dynamic approach, loan opportunities do exist, even in times of modest economic growth. in arrears reached ALL 134.4 billion, about 2.6 per cent less, when compared to the same period a year ago. Therefore, the key to increasing profits is practically pressing a bit hard the brakes on non-performing loans.

It is also believed that, the new rules adopted by Bank of Albania to facilitate loan restructuring, in the frame of boosting lending package as approved last year, have produced a positive impact on banks’ balance sheets.

On the other side, it should be noted that, the banking system has managed to maintain adequate levels of net interest income, despite the overall credit (loan) contraction. Hence, a helpful hand seems to be a diversified asset structure, where investments in securities make up a sizeable share of assets, about 30 per cent, thus coming next to loans. Another element that kept banks afloat has been the significant growth of other components within profit structure, during recent years, especially Forex activities.

The impetus for lending A banking system with positive results and healthy balance sheet is definitely a strong pillar of support for a country's economy.

The crisis caused a sharp drop in credit growth, going even in negative territory, in mid-2013. Now, businesses and households expect a more active role of banks in financing, but this is not that easy, given that the issue at hand is not Albanian-based rather, it is virtually global. A prudential approach by banks was understandable, in terms of a deteriorating real economy, but according to

banks, even the credit demand by private sector has been pale and most importantly, not at required or expected quality. Nevertheless, things are moving forward, as lending in July returned to positive growth rates on an annual basis, following a 12-month decline. According to Bank of Albania, the bank loan portfolio increased by 0.5 per cent, compared to July 2013. Although modest, such increase marks a turning point. Today, the banking system more than interested at crediting the economy, considering that yields of government securities, almost the only alternative financial investment, have reached historical minimum levels. In the light of price component, and even from the borrower’s viewpoint, loans are at bargain rates now, when compared with those of several years ago. Although monetary policy is not fully transmitted and reflected to loan rates, their trend is clearly downward. According to Bank of Albania, the average interest rate for new loans in ALL, for all maturities, was 8.95 per cent in the first half of 2014, down from 10.9 per cent of the first half of last year.

This means that the cost of new investments in the economy is lower. Now it’s the right time for both businesses and banks, to show entrepreneurship and courage. It should be mentioned that, even during the crisis period, the majority of banks continued to expand their loan portfolio, even with double-digit rates. This shows that when applying a more upbeat and dynamic approach, loan opportunities do exist, even in times of modest economic growth.

by Mr Ersuin SHEHU www.aab.al

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Interview

United Bank of Albania A bank within the framework of moral and ethical values Partnership commitment gives added value to the investment project and goes beyond a pure lender-debtor relationship aspect. If practiced strictly according to the contract, it means additional security for successful realization of the project, which better protects the interests of both the bank and the client.

customer needs and offer personal-touch service, so we build on that existing asset.

Mrs Emina ŠIŠIĆ Chief Executive Officer UNITED BANK OF ALBANIA

BANKIERI: What are the real operational and strategic challenges for UBA, as a small bank of the Albanian banking system?

The global economic crisis has had an enormous impact on all the players in Albanian banking market regardless their size, resulting with high level of non-performing loans. A sluggish economy and slow real estate market mean weak loan demand and low interest rates, both factors that compress the net interest margin. Running a small bank under these circumstances is a very challenging task. Competition in the market is very high, especially in terms of loan and deposit interest rates and also in products and technology. Our banking operations have to be carried out leaner and under more complex compliance regulations.

Despite increased banking competition, in UBA we are commited to apply a value-driven credit culture. Credit quality is our highest priority, and the earnings pressure in this highly competitive environment, where high-lending quality opportunities are scarce, will not push us toward an immediate-performance culture. As a small bank we try to be flexibile and more responsive to

BANKIERI: Could you prescribe UBA’s most striking and unique feature in the Albanian banking market?

UBA is doing business based on Islamic banking principles, all within the framework of the Albanian banking legislation. The Islamic banking principles emphasize moral and ethical values, and all financial relationships have been participatory in nature. Partnership share of both the client and the bank in investment projects is defined before signing the financing agreement. By being partner in the project, bank not only provides its portion of investment funds, but also takes care that the project has been run and completed as per the contract. Partnership commitment gives added value to the investment project and goes beyond a pure lender-debtor relationship aspect.

If practiced strictly according to the contract, it means additional security for successful realization of the project, which better protects the interests of both the bank and the client.

BANKIERI: How could you describe Bank’s activity for the current year 2014?

This year, the bank has been diligently working to address loan problems, raise capital and restructure its balance sheet. We can see improvements in problematic loans collection, and intensification of lending activities. Our activities were also focused on improvement and strengthening

of corporate governance and the organizational structure of the bank. As much as any other businesses, banks have to keep up with changes in the digital era. We have prepared for development of new technology platforms which will enable our customers, especially those located out of our geographical reach, to consume bank’s products and services. We paid special attention to both in-house training programs and customized workshops and seminars for our employees in order to enable them to gain expertise on the job and learn more about Islamic finance.

BANKIERI: What are your bank’s main objectives and targets for the near and distant future?

The operational plan for the year 2015 and the strategic plan for the five-year period underline a differentiation strategy, based on Islamic banking, by offering our products to different customer segments who would like to do banking based on partnership principles.We will be also working on enhancement of the level and quality of our services and introduction of new distribution channels, with particular focus on retail banking.

The increase of the capital by our main shareholder, Islamic Development Bank, which is a reputable, Triple “A”-rated financial institution, shall enable further business expansion, increase of the market share and customer base, as well as opening new outlets in the Albanian market.

This should result in increase of bank revenues, with the positive impact on both return on equity and return on assets ratios.

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Banking System

Interest Rates

The Complex Equilibrium between deposits and loans Optimizing liquidity and asset & liability management have been a real challenge for all commercial banks, active in todays’ financial markets. Liquidity is very important indeed, but profitability is what it really counts at the end.

by Mr Gent SEJKO Deputy CEO & Head of Retail Banking Division SOCIETE GENERALE ALBANIA

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s an integral part of a developing country economy, the Albanian Banking System has gone through fluctuating macroeconomic situations, during the last couple of years, positively affected by measures undertaken from Bank of Albania to boost the national economy and investments. Specifically, the drop of the base rate down to historical levels could be pointed out, which has directly impacted the commercial banks’ policies.

Today, almost all banks have significantly decreased their deposit rates, both in local and foreign currency. This may be considered not only as a good sign, because it shows a stable and healthy liquidity situation in Albania, but also as a huge opportunity for businesses and individuals. Lower deposit rates mean lower cost of funds, and this means enabling banks to be more flexible on loan pricing, by applying lower loan rates.

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Furthermore, the deposits’ growth and the stable liquidity situation, that characterized most of banks, have transmitted their own positive effect. Surely, being over liquid comes with a cost for banks, but on the other side it creates security and guarantee for depositors, as important points during todays’ uncertain times.

In the light of these facts, optimizing liquidity and asset & liability management have been a real challenge for all commercial banks, active in todays’ financial markets. Liquidity is very important indeed, but profitability is what it really counts at the end.

But let’s treat deposit and loans separately and in this case let’s start the analysis from loans. It has been a while since almost all banks have entered into a real race, especially when it comes to interest rates. In the quest for acquiring as much business as possible from an almost fully-saturated market, the commercial banks have competed stiffly with each other through going lower and lower with the loan rates, thus creating a big pool of opportunities for individuals and businesses to take advantage from this situation. Surprisingly, the response from the market has not been as expect-

ed, actually far away from it. Uncertainty and over prudence have led to a certain hesitation among customers, who have been quite skeptical in their investment decisions, thus impacting directly and adversely the loan demand. As a result, lack of investments has led to longer waiting time, eventually more savings, so instead of a boost in lending, banks have been faced with a growth in deposits.

Under these circumstances, some other unexpected issues emerged for banks and they were liquidity, inflation and higher costs. On one side the funds collected could not be invested as they

Today, almost all banks have significantly decreased their deposit rates, both in local and foreign currency. Lower deposit rates mean lower cost of funds, and this means enabling banks to be more flexible on loan pricing, by applying lower loan rates.

were budgeted to, while on the other side they were carrying costs that could not be otherwise discharged in the market.

At this point, in order to overcome such unpleasant situation, all banks started to gradually drop their deposit rates and this solution was found helpful, as it does not only decrease the costs, by ensuring stability for banking activity, but also allow them to afford a further lowering of loan rates, thus creating an increasing facilitating ground for individuals and businesses to obtain a loan.

However, this was not just a bank’s problem but has become a problem for the overall Albanian economy, as everything is a shackle of a chain and each of them has an impact on the others. The lack of loan demand and the increase of savings’ appetite means not only less loans and more deposits for commercial banks, but also less investments in the country’s economy, less jobs and a reduced consumption, therefore making a direct negative impact on country’s economic growth. In addition, the debts’ chain between all stakeholders and actors, government to business, business

to banks and partners, has trapped the financial sector under the dilemma: “to lend, or not to lend”. The solution to this equation has become the main challenge for bankers, since the outbreak of the crisis, just 5 years ago.

Therefore, in order to properly deal with this phenomenon, Bank of Albania has intervened systematically, by dropping systematically the base rate and by strongly suggesting that banks be instrumental to further facilitate and boost lending and almost all banks reacted, accordingly. The deposit rates went even lower, in some cases quite close to the floor. Additionally, different loans campaigns were launched by nearly all big banks and the offered rates were the lowest ever. Despite these efforts, there was a very weak response from the market again, and still not a proper reaction from customers; banks were repeatedly facing the same troubling situation with a lot of willing and funds to be invested from their side, but a limited demand from the other side. Should this trend is not about to change, than the next question is: What’s next?

However, the current year has shown, for the first time, some positive signals in the lending activity. There is a slight growth in lending from banks toward all segments of the business clientele, mainly individuals but also to corporate banking, as well. The partial repayment of government debts to large corporates has already given some breath to some large companies, enabling them to repay, at some extent, their bank debts in arrears.

This fact has not only marked a turning point in the business trend and banking activity, but what’s more important, has broken down the “crisis syndrome”, that had seized banking system during the last years. Is that the real turning point into positive economic growth territory?

Maybe it is yet early to judge. Further evolution of the trends until the end of this year, up to the middle of next year, will tell us if we have left the crisis behind and entered into the era of the positive economic growth. Let’s wait and see, by not losing the optimism and continue to be risk taker in the lending activity, as we have successfully proven to be during all these difficult years.

However, the current year has shown, for the first time, some positive signals in the lending activity. There is a slight growth in lending from banks toward all segments of the business clientele, mainly individuals but also to corporate banking, as well. The partial repayment of government debts to large corporates has already given some breath to some large companies, enabling them to repay, at some extent, their bank debts in arrears.

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Me Credins online ju: Vështroni gjendjen e llogarive tuaja.

Merrni informacione të detajuara, përmbledhje apo historikun e lëvizjeve të llogarive, kredive, depozitave apo kartave tuaja.

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Banking System

Deposit insurance, quality steps forward The ADIA's vision to create an effective deposit insurance scheme, aiming at strengthening the depositors’ confidence in the banking system and contributing to country’s financial stability, goes in tandem with its aspirations to create a modern scheme with adequate capacity to fulfill its obligations.

by Mr Renis ZAGANJORI, LL.M. Assistant to General Director ALBANIAN DEPOSIT INSURANCE AGENCY ADIA

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he key role of deposit insurance for the financial stability was one of the many lessons drawn from the financial crisis the world left behind. In general, deposit insurance schemes avoided deposits’outflows and contained panic outbreak among depositors during the crisis period, therefore providing protection mainly for retail deposits. Deposit insurance gives depositors clarity, patience and security, thereby contributing to a country’s financial and banking system stability. Currently, ADIA activity is based on the new law "On Deposit Insurance ", adopted on 22 May 2014, which enables the strengthening and integrated expansion of deposit insurance scheme’s capacities. The necessity for a new law was evidenced within the IMF matrix for financial sector modernization (DPL Matrix), whereas the main innovations in this law were based upon recommendations of World Bank mission and IMF Financial Sector Assessment Program (FSAP)

in Albania in 2013, as well as regulatory changes of European Union’s acquis communautaire.

New amendments for deposit insurance legal framework The ADIA's vision to create an effective deposit insurance scheme, aiming at strengthening the depositors’ confidence in the banking system and contributing to country’s financial stability, goes in tandem with its aspirations to create a modern scheme with adequate capacity to fulfill its obligations. In this context, ADIA is committed to pursue of international best practices and initatives, pertaining to deposit insurance, with regard to legal and regulatory aspects.

In general, the main changes and amendments of the new law consist in improving the overall process of deposit compensation, clarifying relationships with banks and SLAs, increasing autonomy of ADIA, improving financial resources management, as well as determining the coverage level, eligible deposits and insurance premium.

Specifically, the new law clearly separates the deposit compensation process and the ADIA participation with funds’ transfer to the bank being sold or in establishing the bridge bank, thus accomplishing the ADIA’s main objective. Regarding the bridge bank, the prescribed provisions are

consistent with the institutional framework of bank liquidation, where ADIA has a supporting role for Bank of Albania and the liquidator. These include the ADIA rights to make partial and early payments, or to meet its obligation for deposit compensation, by transferring funds to a member bank or a bridge bank. Under these provisions, ADIA supports solutions given by the Central Bank, by applying the criteria of insured deposits level and the lower cost.

As regards the compensation process, the law has revised the deadline for such process and has specified provisions for matching claims of subjects and depositors in any insurance event. Similarly, it has revised the ADIA’s claim priority in reversals, by completing and clarifying the ADIA’s claim right during this process.

With regard to membership in the deposit insurance scheme, the law establishes a parallel procedure of their admission into the scheme with the licensing process conducted by Bank of Albania. In this way, the ADIA function is to verify the entities’ eligibility to comply with deposit insurance requirements, including also their eligibility and compliance during any transformation or changes in their activity. Also, the law provides in particular, some detailed obligations for entities to be a member of the

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scheme, mainly consisting in the obligation to keep and report the electronic data on deposits and depositors, as well as those for public information.

In terms of ADIA functions, the law contemplates detailed functions in compliance with the "principe de specialite" doctrine of the administrative law. On the other hand, a special article sets forth the powers of ADIA, aiming at providing a clear separation of these two concepts. These include: (i) the ADIA financial and functional autonomy, (ii) private law means (an entity’s capacity and the capacity to contract) and (iii) public law means (competence to propose and endorse bylaws and ADIA acts, participation in the compensation and selecting regime for banks and staff employment).

The overall institutional structure is preserved, whereas the operational autonomy is enhanced, simultaneously with ADIA accountability and governance, to minimize potential influence from third parties. An important part in this respect is, inter alia, the approval of ADIA budget by the Managing Board. The law stipulates the ADIA obligation to report to Bank of Albania, Albanian Parliament and Council of Ministers, as a balance for the ADIA enhanced autonomy. Also, it requires ADIA to publish its audited financial statements, along with more detailed and tightened governance provisions, such as the qualifying criteria for ADIA Board members and staff, conflict of interest, confidentiality and legal protection while on duty.

A separate chapter is dedicated to internal financial regime, which covers the prerequisites for ASD risk management activities. The law includes concepts of reserve funds assessment, their potential deficit and measures that could be taken in this regard. Also, specific provisions have been formulated, which guarantee compliance with accounting principles and legal basis. As another quality step ahead, the law specifies the ADIA's obligation to manage, in separate accounts, its funds for deposit insurance paid by banks and SCAs, especially for compensation processes purposes.

The law provides improved means with respect to investment ADIA funds, according to principles of liquidity, security, accountability and rate of return.

Regarding the deposit insurance, the

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an insurance event, within a shorter period of time.

The credit line guarantees ADIA with necessary funds to increase its coverage ratio of insured deposits in the banking system, from 3.7 per cent to 6 per cent.

Furthermore, in terms of insured banks, the fund provides full coverage of two ore banks, compared to ADIA’s current portfolio. Currently, ADIA funds cover 100% of insured deposits in 8 banks, with a coverage ratio of 3.7 per cent of all deposits in the banking system. Through this credit line, ADIA covers 100 per cent of insured deposits at 10 banks, with a covering ratin of 6 per cent of all deposits in the banking system. Moreover, the coverage at four consecutive banks of the system (B3B6) reaches more satisfactory levels (70% -80%). According to basic principles of deposit insurance schemes, these indicators prove the healthy financial situation of the scheme and its compliance with international best practices and standards. Also, the credit line will provide funds in euros, thus serving as a hedge against foreign exchange risk, which could adversely affect the coverage level in case of any insurance event (40 per cent of insured deposits are in foreign currency, 95% of ADIA portfolio is in ALL, whereas deposits are compensated in ALL with the exchange rate at the date of the insurance event).

law makes clarifications about eligible and non-eligible deposits, by harmonizing them with respective provisions found at Banking Act and SCAs Act. Also, the law improves the methodology for insurance premium calculation, by changing the calculating basis from annual to a three-month one, for bank deposits held during last days of each month of the preceding quarter. The advantages of a quarterly versus annual premium are ease of calculation and verification, as well as a continuous tracking of any entity’s deposits progress.

Loan agreement with EBRD On 16 July 2014, ADIA signed a Loan Aagreement with the European Bank for Reconstruction and Development (EBRD), through which ADIA obtains a credit line of EUR 100 million for a 5-year period.

The credit lline aims to provide additional funds, along with ADIA's own funds, to meet legal obligations against depositors, in case of any insurance event. According to the Loan Agreement conditions, this line can be used for direct compensation to insured depositors, or to transfer funds from ADIA to a bridge bank, or purchasing bank, pursuant to legal provisions. Funds from this line will be made available from EBRD within 7 days after ADIA’s request, which allows the latter to meet its obligations to depositors, which may arise from

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Experts’ Forum

Banking system and the new VAT law

Issues to be addressed in the forthcoming instruction, for the law implementation Given that the new law “On Value-Added Tax in the Republic of Albania” is based on the EU directives on VAT, it is necessary that the treatment of financial services be in accordance with the respective EU directives and with the best international practices on VAT on financial services.

by Mr Fatmir KAZAZI Tax Consultant

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he Parliament endorsed, in July 2014 the new law on “On Value Added Tax in the Republic of Albania” (Law no.92/2014 dated 24.07.2014), or shortly called as “New VAT law”, which will come into force from January 1st, 2015. This law marks significant steps forward and contains important improvements and additions, in accordance with the European Union’s Directives on VAT. In my personal opinion, the “New VAT law” provides some clear and complete definitions and provisions about many problems, which do not find any solutions in the existing law.

It was just for the confusion and gaps in the existing law that many conflicts have risen, thus generating administrative and financial high costs for taxpayers and tax administration, as well. Specifically, some of the problems are related to the issue of

“VAT Representatives”, the sale of assets or goods, for which the VAT for purchases has not been credited (reduced), export of services, etc. In other words, the element of “uncertainty”, which is unfortunately present in many law and by-law tax provisions and regulations, has been substantially reduced and shrunk in the new VAT law.

Unclear provisions create uncertainty and unpredictable financial and administrative costs for taxpayers and the state The purpose of this article is not to make evidence about the improvements this law brings into, instead it addresses some particular issues and problems, related to the VAT implementation on financial and banking services and the supplies that are part, or closely associated with these services. The unclear provisions create insecurity for taxpayers and tax inspectors, too. They trigger intentional or unintentional mistakes by taxpayers and tax inspectors, produce an administrative and financial burden for taxpayers, tax authorities, courts, and in some cases, create premises for corruption. Certainly, in cases where the law cannot explain the

tax treatment in details, necessary explanations should be given in the related and forthcoming Instruction of the Minister of Finance. The taxpayers should clearly foresee the consequences of their actions or omissions that arise from provisions of the Law and the Instruction.

In this context, I think that the VAT application on financial services, especially in relation to the components or supplies that are part of, or are closely

Questions to be answered on VAT on financial services 1. Is the VAT applicable (through VAT Reverse Charge) on the following supplies, received from non-resident companies?

2. Does it make any difference if the non-resident supplying company is resident in any EU member state?

3. How would the VAT reverse charge and the payment of VAT occur in cases when the VAT is applicable? www.aab.al

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related to financial services, are not prescribed in details within the law. Consequently, a detailed prescription is necessary in the Instruction of the Minister of Finance, expected to be introduced for implementation of the new VAT law, which is under drafting process. Should these problems be not addressed in this instruction, then the taxpayers (banks) will implement the law based on previous experience, on multinational group’s practices to which they belong to, and/or on consultancy received by experts and consulting companies. In such cases, the tax inspectors, presumably being oriented toward increasing the state tax revenues through “discoveries” during tax audits, or based on any interpretation or explanation received during the audits or during tax periods, much after the entry into force of the law, may estimate, at their discretion, additional tax dues and related penalties. In other words, discretionary judgments, or such technical documents will have an ex post facto, or retroactive effect and will generate a long process of tax penalties and appealing procedures, which have high costs for taxpayers, tax authorities and the judiciary system. Additionally, taxpayers feel insecure and cannot make accurate predictions about fiscal consequences of their business transactions.

Also, in cooperation with Albanian Association of Banks, the experiences of EU member states, or other countries’ experiences that are in the process of EU membership, could be analyzed, in order to consolidate a sustainable and clear VAT treatment approach, in accordance with best international practices.

Questions to be answered and addressed In practical terms, I would like to bring to attention some questions, which are not found or do not get a clear answer in the new VAT Law, and as I mentioned above, they should necessarily be treated in the VAT Instruction, as per following: 1. Is the VAT applicable (through VAT Reverse Charge) on the following supplies, received from non-resident companies? Such examples include: • Services related to the development of banking systems, through which support and implement bank transactions, financial deposits’ administration, operations though accounts, financial transfers, etc.; • Services for the maintenance of the above-mentioned banking systems; • Royalties (payments for the right to use intellectual properties, licenses and patents), related with the banking system; • REUTERS services, SWIFT and other similar services related to the implementation of banking operations; • Services related to financial operations through debit and credit cards (Master card, Visa Card, American Express, etc.); • Services related to the supply, maintenance and management of ATMs; • Specialized services for e-banking operation; • Other services related to bank data processing, or other banking operations.

2. Does it make any difference if the non-resident supplying company is resident in any EU member state?

3. How would the VAT reverse charge and the payment of VAT occur in cases when the VAT is applicable?

In my personal opinion, supplies such as: SWIFT, REUTERS services, operations with debit or credit cards (Master Card, Visa Card, American Express, etc.), supply and maintenance services of electronic transfer systems that enable financial transactions of cashing, payments, deposits, loans etc., should be excluded from VAT, as part of the financial services which are VAT exempted by the law. In other words, the recipient shall not apply for VAT reverse charge, in relation to these services, when supplied by a non-resident company. Meanwhile, services like: trainings, management services, financial and business consulting, technical assistance, royalty payments, related to the right to use licenses and patents, sale and ATM maintenance, etc., are VAT taxable services, and when supplied by non-resident companies, the Albanian company (the bank), as the recipient of the service, shall be responsible for VAT reverse charge and for VAT declaration and payment.

Surely, without pretending that I have analyzed and studied in details the above transactions or other similar ones, and moreover, their VAT treatment, I would like to emphasize that as the new VAT law is fully based on the EU Directives, therefore, it is necessary that the VAT treatment of financial services must be done in accordance with respective EU directives on financial services. Also, in cooperation with Albanian Association of Banks, the experiences of EU member states, or other countries’ experiences that are in the process of EU membership, could be analyzed, in order to consolidate a sustainable and clear VAT treatment approach, in accordance with best international practices.

It must be emphasized that the purpose of this article is to raise and discuss the issues and not to make any recommendations, or otherwise find the correct solutions of such issues.

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Experts’ Forum

Loan sharks

A phenomenon to be considered Such a phenomenon requires elevated attention of all stakeholders across the Albanian financial system, even beyond it, as its effects and consequences are not simply an opportunity cost, or of financial nature, but instead they are of a substantial social nature and security.

of 2008 – 2009. To illustrate the revival

by Mr Besart KADIA, PhD Candidate of such phenomenon we could use the UK data, where the industry funding Executive Director payday loans amounted to GBP 4 bilFOUNDATION FOR ECONOMIC FREEDOM lion in 2012, from GBP 100 million in FLE 2004. According to studies conducted in UK, about 38% of respondents who sought funding through payday loans, oan sharks are those persons or had borrowed from other family memgroups of persons who lend mon- bers, too. On the other hand, the survey, ey but are not licensed by the state conducted by Bank of Albania in 2013 and therefore are illegal subjects. In fact, with over 1,210 individuals surveyed in loan sharks are better known as a defor- 16 districts of the country, showed that mation in financial markets that occurs the ratio of consumers who receive bank in times of crisis, as well as for high in- loans is almost the same as that of the terest rates that they require from bor- informal debt, or the debt that is not rerowers. Usually the parties enter into a corded as such, but that is often a cause short-term lending agreement, mainly for social conflicts. The two main goals, with low-income consumers, who find Bank of Albania lists for borrowing, difficult to borrow from banks. Al- are: purchasing and repairing a propthough the amounts they borrow are erty and the essential consumer goods. small, let say 100 - 200 Euros, the effec- Specifically, the survey concludes that, tive rate of return actually ranges from in approximately 40% of borrowing cases, households have used the formal 300% to 3,000%!

Despite these high costs customers sources (banks and non-bank financial use this informal sector of the market, institutions) and in the rest of 60%, the as they do not have a fix job, have lost informal sources (individuals and bortheir job, or have delays in receiving sal- rowing directly from stores). The main aries, etc. All these concerns get bolder household borrowing purpose remains when an economy goes through a severe "consumption", with 32% of cases. It economic crisis, such as the global crisis should be noted that families who have

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declared "a decline in solvency" quote, in 48% of cases, "the decline in household income", as its main reason.

Given that informal lending is not observable, and therefore, we have no data, the information obtained from the above observation raises some concerns about the financial markets in Albania.

Often informal markets for lending are not seen as parallel market of the economy, instead they are seen as an outcome of lending pressure and contraction in the formal system. What is evidenced in Albania is that lending penetration, i.e. the total debt-to-GDP has remained around 40% of GDP, which is among

At a time when the economic growth is below potential, when there are multimillion dollar public works still unpaid, and when loan requirements are tightened significantly, could it be the case for loan sharks to have displaced, or replaced, the banking sector, en masse?

the lowest rates in the region, whereas non-performing loans are among the most the highest in the region. Joseph Stiglitz writes, among other things, that financial market failures are caused by high cost and lack of full information.

However, transaction costs give only a partial explanation the presence and importance of financial intermediaries and the indirect finance in the functioning of financial markets.

Another reason is the information asymmetry, i.e. one party in a financial transaction has less (or more) information than the other party. For example, under a loan contract, the borrower has more information about the risk of the project which is being financed, than the individual who gives the loan. The information asymmetry creates a problem, either before or after the contract’s signing. In the frame of high risk perceived for granting the loan, due to lower rates of economic growth and high levels of non-performing loans, banks have reduced the pace of loan-making process during recent years, thus fueling maybe involuntarily, the lending process outside the banking system. To avoid the problem of adverse selection, the problem that arises from information asymmetry before the transaction (signing the contract), the lenders are based upon "client's reputation in the market", where the family and social networking guarantees the borrower’s reliability. This process is usually quick

and without high initial cost.

At a time when the economic growth is below potential, when there are multimillion dollar public works still unpaid, and when loan requirements are tightened significantly, could it be the case for loan sharks to have displaced, or replaced, the banking sector, en masse?

Also, another question arises in this regard: does such informal system exist in parallel with the banking system, or it could be possibly intertwined with the latter, in one way or another?

Banks in Albania are making strenuous efforts to find a difficult balance between maintaining quality lending standards and avoiding a tightening in extremis of requirements for their customers. In fact, the Bank of Albania’s periodic surveys about credit to business show that banks’ tightening policies, during the past two quarters, have been increasing. The even more worrying fact about the long-term economic growth is that, the loan standards (requirements) were tightened for investment purpose loans, whereas those for the purpose of funding the working capital, were relaxed. Under the conditions of tightening loan-making procedures, various business associations in the country have often raised the concern of a flourishing informal financing, as an alternative to the banking system in Albania.

Hence, the banks’ main focus on their asset management cannot ignore and circumvent what happens with

In the frame of high risk perceived for granting the loan, due to lower rates of economic growth and high levels of nonperforming loans, banks have reduced the pace of loan-making process during recent years, thus fueling maybe involuntarily, the lending process outside the banking system. To avoid the problem of adverse selection, the lenders are based upon "client's reputation in the market", where the family and social networking guarantees the borrower’s reliability.

loan sharks, who despite operating on boundaries of the financial system, may be associated, perhaps indirectly but not only, with the banking system. Surely, such a phenomenon requires elevated attention of all stakeholders across the Albanian financial system, even beyond it, as its effects and consequences are not simply an opportunity cost, or of financial nature, but instead they are of a substantial social nature and security.

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Experts’ Forum

Business ECO Investments ProCredit Bank employs an active approach by informing, encouraging and supporting financially various efficient projects, in the business sector, because business as well as ECO investments support and help the sustainable development of our country’s economy.

by Ms Alda SHEHU Head of Environment Unit PROCREDIT BANK

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very business undertaking consumes electricity to ensure production or service continuity. Lack of financial support as well as modest investments in machinery or production lines, at the onset of economic activity for Albanian businesses, have often led to an abusive use of power and higher operational costs for companies, not to mention the impact of pollution on the environment - because not all business equipment and machineries, used in many industrial processes, are highly efficient.

The machineries that many businesses use during the first stage of their activity are often second-hand ones and purchased after a multi-year use at industries of exporting countries.

Today, a growing number of businesses are pondering the need to be more productive, along with reducing operational

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costs, to provide quality goods and services, to expand customer network and thus increasing their business’ profitability. Businesses, by reducing monthly operating costs, are more likely to make further investments in their own economic operations. Also, those businesses which invest in ECO products improve their company’s image, as a business that invests in quality and cares for the environment.

ProCredit Bank has launched ECO loan, as a special financial service, in the frame of environmental standards, the bank promotes and supports during its own daily financial activity. This financial service is focused not only in supporting new efficient technologies, invested in the business sector, but also in providing technical and financial consulting, as an added value of this service. ECO loan includes financing the Energy Efficiency and Renewable Energies measures, as well as financing other environment-friendly investments.

Today, the Albanian market is becoming increasingly competitive and therefore businesses must be headed towards machinery automation and stateof-the-art technologies, aiming to have a

more sustainable and long-term development. ECO investments in businesses are diverse and vary by different business sectors (manufacturing, services, etc.), or by type of investments (equipment, machinery, building, business, etc.)

Manufacturing businesses that provide consistent quality in the market and, at the same time, a competitive price, will be those businesses that invest in new and efficient technologies. By replacing existing machineries with new efficient production lines (which consume less energy for the same working hours), businesses in the manufacturing sector will reduce not only operational costs, but also improve processes and working conditions,

The effect of ECO technology in businesses goes beyond energy saving, so saving it is not an aim per se, instead it is an important contributor for country’s economic growth and social development.

thus earning competitive advantage in the domestic market, and not only. Investment opportunities are numerous, for example: a bakery or patisserie, will save up to 30% electricity, should it replace old ovens with new efficient ones.

In the retail sector, for example supermarkets, by investing in efficient refrigerators and in efficient central heating and cooling systems, they could save up to 20-30 per cent electricity, and at the same time, improve their internal conditions and comfort. In the service sector, like restaurants, by using (investing) efficient thermo insulation materials for buildings, they could ensure comfortable conditions for their clients. A thermo insulated building preserves cool air during summer and heat in winter, thus achieving an energy saving up to 50 per cent. Using devices with Class A energy efficiency label, just halves the energy consumption, compared to the same devices of Class G energy efficiency. Given that the transportation sector is one of the main contributors of polluting gases’ emissions, the bank supports all investments in vehicles that use efficient and environment-friendly fuels.

ProCredit Bank also supports and funds the use of renewable energy sources, such as: solar, water, biomass etc. For example, in the tourism sector where electricity costs are significant, the installation of solar panels for water heating provides a reduction of electricity costs ranging at 70 – 80 per cent. Albania has very favorable climate for installing solar panels for hot water. This leads to a significantly reduced energy cost, as the electricity is substituted for solar energy.

In addition to solar panels, the biomass use is also increased (biomass is an organic composition - wood, grain, agricultural waste products such as: fruit and olive seeds, wheat grain, etc., which can be used as an energy source), as for example in the case of stoves or furnaces, using "pellets".

ProCredit Bank goes beyond supporting energy efficiency measures and renewable resources, by supporting even environment - friendly investments, such as: investment for recycling various ma-

terials, waste management, investments for land, air and water protection, filters for clean air and water, etc. ProCredit Bank employs an active approach by informing, encouraging and supporting fi-

nancially various efficient projects, in the business sector, because business as well as ECO investments support and help the sustainable development of our country’s economy.

Since 2009, ProCredit Bank has incorporated and optimized relevant service structures, to ensure the best exspertize ever in the country, to finance new technologies in business. The positive performance in the market for efficient equipments in Albania has helped our bank to establish contact points for prospective suppliers of ECO efficient products.

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Economist Corner

A weakening Euro or a strengthening Dollar

Which scenario lies ahead?

It is crystal clear that the more stronger the Euro against the Dollar, the more reduced will be the prices of oil, gas, minerals, etc., which translates into more lower inflation and serious deflationary threat, which risks to confront the Eurozone with Japanese deflationary disease in the late 90s.

by Prof. Dr. Adrian CIVICI President & Head of Doctoral School EUROPEAN UNIVERSITY OF TIRANA EUT - UET

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he actual reality and our daily activity are witnessing a sharply increasing interest and attention about the exchange rate performance of major currencies, such as: Euro or US Dollar. It is the “bread and butter” not only for banks or exchange bureaus, but instead a significant number of economic and financial stakeholders and businesses check and ask for the exchange rate of these currencies several times a day, especially the ALL sustainability against their respective fluctuations. Basic financial and monetary knowledge and culture is becoming an increasingly indispensable decision-making tool, and also is transformed into a certain kind of knowledge and information, which cannot be absolutely neglected or treated as something theoretical or a luxury of experts in this field.

Many individuals and economic entities have borrowed in Euros, while their

earnings are in Lek, therefore they are very interested about the ALL/Euro exchange rate, since the price of their debt depends substantially on its respective fluctuation. Naturally, a weakening Euro lowers the price of their loans, while a strengthening one makes them more expensive. Traders, whether importers or exporters, are naturally interested about Euro and US Dollar’s depreciation or appreciation, in order to orientate their purchases and sales to the more favorable markets of Euro or US Dollar zones.

The weakening of Euro and the Dollar strengthening seems to be influenced by another factor: since the beginning of 2013, when the Eurozone began to show signs of a post-crisis stabilization and create more confidence, it was poured into numerous large investments, thus increasing the pressure on the common currency to depreciate.

The weakening of Euro favors imports, by making them cheaper as compared to ALL, while a strengthening of US Dollar makes imports more expensive, by appreciating exports positively.

The last 20-22 years have shown more than once that the geography and orientation of import – export, even in Albania, is significantly affected by the strengthening or weakening of the two base (reserve) currencies, the Euro and the US Dollar. As the result of a “strong" euro and a relatively "weak" US Dollar, during recent years, the US Dollar-based countries or markets have been the most favorite ones for Albanian traders and business community, thus causing, to a certain extent, a reduction of the specific weight of Euro-based trades, in relation to the "dollar zone" trades or goods, that are traded in US Dollars. This is conditioned by the fact that, despite improvements made during recent years, our trade balance is still overwhelmed by imports from the Eurozone. In this context, we must, from now on, pay more attention and start thinking about increasing our exports’ competitiveness, thus making clear markets’ differentiation: imports from markets and countries with weaker currencies and exports

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to countries or areas with stronger currency.

Finally, in this view, it should be mentioned the fact that Albania is part of countries with a high Euroization level, although the country is not a EU member or part of Eurozone, nor it does use the Euro as its official currency, as in case of Kosovo and Montenegro. Approximately 30-35% of prices in Albania (for residential apartments, shops and facilities services, cars, school fees, building materials, ferry tickets, raw materials, etc.), are quoted and settled in Euros (relatively less in US Dollars), thus being an important factor in setting the price level, orienting the purchasing power, consumption level, the structure of bank deposits and loans, to end up at the small or large business level, many individuals or subjects are running and handling do, by selling and purchasing different currencies, depending on the profit realized from such business. In this sense, it seems quite of interest making an analysis, or giving some comments, on current performance and the expected relations between two major currencies, Euro and US Dollar, as well the respective effects such "clash" between them, in relation to the Albanian Lek (ALL).

Beyond the domestic macroeconomic and structural factors that may affect the ALL strength or weakness, the appreciation or depreciation of major currencies is substantially reflected in the exchange rate between ALL/EUR, ALL/USD, or ALL/GBP. Surely, actual disciplines and institutions that study the financial and monetary problems, deem the medium and long-term assessments about the exchange rate as difficult, if not impossible, however, specific analyses, debates and predictions about its main trends, seem to be more acceptable.

During the past six months, the European common currency, Euro, has entered into a strong downward curve, in relation to the US Dollar, by trading, in end- September, at the rate EUR/USD 1.25 – 1.27, down form from the rate EUR/USD = 1.38, in May 2014. Such depreciation was not verified, at least over the last 15 months. So, what is happen-

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ECB is starting to establish a correlative link between low inflation levels in the Eurozone, weak economic growth and the strong euro, which means that one of the important instruments that will used in months or years to come, to cope with the risk of deflation and to stimulate the economic growth, will be "weakening the euro".

ing to the Euro and what explains the decrease of its purchasing power, or the opposite, the increasing power of the US Dollar is merely conjectural, or tells for a more sustainable trend? Analysts and the financial and monetary experts explain this trend, and above all, its stability or transience, through some key following components: First, the strengthening effect of the US economy and the changing course of FED monetary policy. The main indicators of US economy have been stable and in a continuous improvement, for some months in a row. Institutions like: IMF, OECD, etc., estimate that the GDP of the United States, for 2014 and 2015 is expected to grow by 2.1 - 3.1%, while the maximum forecasted figure of Eurozone is ranging at 0.8 - 1.1%.

The same can be said about the unemployment rate. During the last months the unemployment rate in UD dropped below 6.2%, whereas in Europe it is at 11.5%. FED, following a dynamic poli-

cy, called "quantitative easing", through which it increased the monetary base by 467%, over five years since 2008, thus stimulating lending and consumption, currently has walk away from it, into the opposite direction. Now that economic growth has made a comeback, the FED is changing course, by applying a more restrictive monetary policy (called "tapering"), through which it aims to stabilize the value of dollar, by reducing the monetary base with about USD 85 billion, from end-October 2014, and by announcing a progressive increase of base interest rate, starting from June 2015.

Consequently, the yield of the US sovereign bonds, currently at 2.5%, is found far more attractive than German Treasury Bills (1%) or French ones (1.3%).

All this provides the effect of a strengthening Dollar against the Euro, while many monetary analysts estimate that this factor will continue to be present for many months to come. But the weakening of Euro and the Dollar strengthening

Monetary analysts and specialized agencies of financial markets estimate that, through the TLTRO program (Targeted Long-Term Refinancing Operations) European banks will be able to be credited with approximately EUR 400 billion, which are expected to go in favor of recovery and development of the European economy.

seems to be influenced by another factor: since the beginning of 2013, when the Eurozone began to show signs of a post-crisis stabilization and create more confidence, it was poured into numerous large investments, thus increasing the pressure on the common currency to depreciate.

Secondly, a new course pursued by the ECB. The central objective of ECB's monetary policy, in the area of monetary policy, has always been the control of the inflation rate and price stability, but during recent months, ECB has started to be a bit more flexible in relation to this target, by being attentive to the exchange rate of Euro against other currencies, such as the US Dollar, British Pound, Japanese Yen, Chinese renminbi, etc. Needless to go up to the institutional evidence of such "second goal", ECB and its President, Mr Mario Draghi, have been openly expressed, in many cases, in favor of the importance and attention that must be paid "to the

euro exchange rate and its power against other major currencies".

In this way, it seems that, directly or indirectly, the ECB is starting to establish a correlative link between low inflation levels in the Eurozone, weak economic growth and the strong euro, which means that one of the important instruments that will used in months or years to come, to cope with the risk of deflation and to stimulate the economic growth, will be "weakening the euro". In fact, if we consider that most of the raw materials that are imported to Europe are quoted on the exchanges in dollars, it is crystal clear that the more stronger the Euro against the Dollar, the more reduced will be the prices of oil, gas, minerals, etc., which translates into more lower inflation and serious deflationary threat, which risks to confront the Eurozone with Japanese deflationary disease in the late 90s. This is why the ECB does not attempt to conceal its stance in favor of a weaker Euro against Dollar, that’s

why the ECB lowered the key interest rate for Euro, in September 2014, from 0.15% to 0.005%, while simultaneously announcing the commencement of a special program of securitized asset and bond purchases, ABS (asset-backed securities), in order to facilitate the flow of new loans to the European economy.

Also, the ECB launched its new program of "new 4-year refinancing operations for European banks", the first tranche of which was activated on 18 September 2014. Monetary analysts and specialized agencies of financial markets estimate that, through the TLTRO program (Targeted Long-Term Refinancing Operations) European banks will be able to be credited with approximately EUR 400 billion, which are expected to go in favor of recovery and development of the European economy. A direct consequence of all these operations will be a further weakening of Euro relative to the US Dollar, for months and perhaps years to come. According to analysts of some of the most important European and American banks, the above-cited actions and objectives converge naturally to the conclusion that: "the weakening trend of Euro and the strengthening one of Dollar it is not a temporary and conjectural, but rather a more stable and long-term, at least for a 2-3-year period.

Assessments and projections for them go further to 2015, when there are projections for an EUR/USD exchange rate at 1.00 - 1.25, while during the period 2016-2017, based upon the fact that the European economy and its economic growth is not expected to experience a considerable boom, the EUR/USD exchange rate could drop further to 1.00 - 1.15, or even to a parity of 1 USD = 1 Euro, by 2017.

Euro is expected to be in a weakening trajectory for the coming months, in relation to British Pound, as the British economy by leaving behind the fear of any Scotland’s secession, seems more solid than that of the Eurozone, while the Bank of England has indicated that during the first six months of 2015 it may begin changing the course of its monetary policy, to increase the interest rate for the British Pound.

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Social capital

CREDINS BANK

BKT

TRA.KU fest The Credins Bank became one of the key supporters and promoters of this festival, which promoted the values of and the beautiful Albanian traditions through certain events, such as: academic conferences, traditional celebrations, visits (sightseeing), artistic concerts and many other activities, which were organized under the auspices of Ministry of Youth and Social Welfare and the Ministry of Urban Development and Tourism.

The reconstruction of summer resort in Velipoja is over Banka Kombëtare Tregtare organized through Facebook a campaign, by which every sharing of the dedicated account number to this event, the bank donated specific amount, which in total were used for the construction of The Summer Resort in Velipoja.

This resort, which was built during ‘60, is ready to welcome visitors from all the orphanages, throughout the country.

Credins Bank supports the healthcare in Albania Under the slogan “Credins Bank supporting the healthcare in Albania”, it was the turn of Shkodra regional hospital to enjoy the bank’s support, following those for Durrësi and Vlora regional hospitals. Such an initiative of Credins Bank will continue by providing further support for other important hospital centers, aiming at upgrading the hospitalization service in our country.

Credit Agricole

Multicultural Festival in Berat Banka Kombëtare Tregtare supported the multicultural festival held in Berat, from 21 - 23 August 2014. The Festival, a three-night event, included 12 artistic activities, aiming at promoting cultural legacy and values of Berat.

“Music Festival”, for the first time in Albania Crédit Agricole Bank - Albania, as a permanent partner in promoting art and culture throughout the country, has supported the organization of “Music Festival”, a massive activity held for the first time in Albania. This event came through the cooperation of French Alliance in Tirana, Embassy of France, Credit Agricole Bank and other partners.

Under the slogan “Make music”, such internationalized activity encourages amateur musicians to voluntarily play music in streets, squares and public areas. The festival in Albania was held in the cities of Korça, Elbasan and Tirana, concluding with a great concert in “Scanderbeg” Square. This festival is designed to return to a tradition, for the coming years, and to be added to the country’s artistic events calendar.

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Social capital

First Investment Bank

Intesa Sanpaolo Bank

Student’s Credit Card Over a six months period, Fibank’s personnel carried out a number of informative presentations at premises of public and private universities’ auditoriums, with regard to credit cards, specifically tailored for students. Fibank has also invited students to visit bank offices and to attend the internship programs there.

“Student’s credit cards” product has the main objective to inform the new generation over the opportunities offered by these means of payments and to establish a strong relationship between this generation and banks.

Beer Festival in Korça Intesa Sanpaolo Bank - Albania participated with its ecological stand at the Beer Festival in Korça,from 13-17 August. During this event, numerous gifts were distributed to visitors, by transmitting the message of revitalizing the city’s tradition, as the city where the Albanian beer was produced for the first time. The festival, already a 8-year old tradition, was visited by approximately 80 thousands people. The preservation and development of tradition and culture, in full accordance with the touristic and economic development strategy of the region, is part of the Bank Social Responsibility in all places where it operates.

VENETO BANKA

Multicultural Festival in Berat The Multicultural Festival, in the 2400 old year city of Berat, was organized to enhance and promote Agro-tourism and the cultural events in the frame of the city’s economic development. The bank participation in the Agro Fair with its wooden stand, branded lamps and aprons distributed to all visitors and participants, reinforced the commitment to sustainable development even through the usage of ecological and multifunctional materials. This event reaffirmed the historical, cultural, ethnographical, architectonical values of the region, as well as its religious tolerance as a considerable potential for touristic and economic development.

Veneto Banka and “Neranxi” Culinary Institute Veneto Banka has decided that its development policies must have the priority to support youngsters with vocational education, by providing them with material basis, and is continuing to make a real contribution in professional improvement of new generation, by creating cooperating opportunities with successful enterprises.

Supporting sport The bank was one of financial supporters of Beach Volley National Championship, organized by the Albanian Federation of Volleyball, in cooperation with Himara and Saranda Municipalities.

Veneto Banka and Lions Club Tirana The story of Rushani family in Fitore village of Novoselë commune, Vlorë, is really heartbreaking. Lion Club Tirana, Mr Gjergj Liqejza, Consul of Austria in Shkodra and Veneto Banka, responded to the appeal in media by the parents of two paralyzed children, Amarildo and Klodjan, and provided them with electric wheel chairs.

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Societe Generale Albania celebrates 150th anniversary of Societe Generale Group and 10th Anniversary of Bank Societe Generale in Albania

Raiffeisen Bank Supporting Korça regional hospital Raiffeisen Bank has continued its support even in Korça, by sponsoring the reconstruction of the main entrance of Korça Regional Hospital. The inauguration ceremony was attended by Mr Petrika Tollkuçi, Regional Director of Health Insurance Service, Mr John McNaughton, Board Member for Retail Banking of Raiffeisen Bank, Mr Ardit Konomi, Prefect of Korça District, the Mr Ilirjan Pendavinji, Member of Parliament, as well as physicians and nurses form this institution. In his speech, Mr McNaughton, said: “Raiffeisen Bank will continue to support further the revitalization of this sector”.

Kuçova’s Municipality to give the name “Raiffeisen Bank” to the main street of the city The Municipal Council of Kuçova Municipality decided that the main street of the city to bear the name: “Raiffeisen Bank”, as a token of gratitude for the bank.

On this occasion, an inauguration ceremony was organized, in which Mr Bardhyl Gjyzeli, city mayor, Mr John McNaughton, Board Member of Raiffeisen Bank, and representatives of other institutions in the city, took part.

On the 3 September, Societe Generale Albania organized a gala dinner to celebrate the 150th Anniversary of Societe Generale Group and its 10th Anniversary of Bank Societe Generale Albania. With special participation of employees, business partners, client representatives and certain institutions, this dinner was a special occasion to celebrate together.

Societe Generale has been present over these years by financing projects that symbolize modern world and has supported millions of private clients, households, small, medium and big enterprises throughout the world in their various projects.

Sponsoring the reconstruction of Employment Office in Gjirokastra Raiffeisen Bank, in cooperation with the Ministry of Youth and Social Welfare and the National Service of Employment, has financed the reconstruction of Employment Office in Gjirokastra. The inauguration ceremony was attended by Mr Christian Canacaris, General Director of Raiffeisen Bank, Mr Erion Veliaj, Minister of Youth and Social Welfare, businesses representatives and several organizations, operating in this sector.

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News

SWIFT: “20 years in Albania, 20 years of partnership” First SWIFT Business Forum Albania 2014

T

he Albanian Association of Banks, in collaboration with SWIFT Austria and CIS, organized the First Business Forum - Albania 2014 with the topic: “20 years in Albania, 20 years of partnership”. The forum, held on 17 September in Sheraton Hotel, Tirana, was attended by representatives of commercial banks in Albania, Bank of Albania, Ministry of Finance, non-bank financial institutions, utility companies, etc. Commercial banks in Albania are users of SWIFT platform for 20 years now, and the infrastructure of country’s payment systems is built upon this platform.

In her opening speech, Ms Endrita Xhaferaj, AAB Secretary General, emphasized the importance of organizing such forum, for the first time in Albania, which is being organized every year in many countries worldwide. Mrs Najada Xhaxha, Head of AAB Payments Committee and SWIFT User Group Chairperson in Albania mentioned the mutual benefits, for both banking system and SWIFT, during these years of cooperation, as well as the new challenges and opportunities for the future.

The forum continued with presentations from the representatives of SWIFT Austria

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and CIS, who introduced their products.

Representatives from the Bank of Albania and the Ministry of Finance held presentations on the development of payment systems in Albania, the participation of these Institutions in the SWIFT network during these years of partnership, and the impact from the usage of this platform.

The second section was divided into four parallel presentation sessions, where solutions that SWIFT offers to all the partners (banks, governmental institutions, other financial institutions, utilities, etc.), were introduced.

Interview with Mr Michael Formann, Head of SWIFT Austria

By Ms Rudina Hoxha

How did you find the Swift Business Forum held lately in Tirana? In what respect was this Forum useful for Albania?

My impression it was an event very much worthwhile to be repeated, hopefully in a regular interval. Events like this make sure that local communities get involved in the global discussions held in the SWIFT community.

From your perspective, how does the SWIFT Compliance Roadmap looks like for 2014?

In a nutshell, I fully believe we are on track and have progressed a lot over the past 18 months. Nevertheless, still there is way to go, especially in the context of KYC for correspondent banking. It is great that with Erste Bank Group and Raiffeisen International we have players involved who play a very important role in our region in CEE. How do you find the payments system infrastructure in Albania? Do you have any practical insights on it?

To my knowledge it is a very robust and scalable setup that has been implemented.

It uses all of the highly resilient and efficient messaging channels we have created especially for adoption in Real-Time-Gross-Settlement Systems. And I am also aware that BoA is always keeping in touch with latest developments on our side.

Given the present financial crisis, what is a real boost for the securities?

Unfortunately there is no golden bullet, but what I have witnessed when travelling the region, a sound financial system is just a starting point. We normally see a steeper increase in GDP and other KPIs when also the state/government makes sure, that people get tax benefits when e.g. investing in pension funds to secure their well being for later.

How can Albania support the standardization and cooperation among the CEE countries in order to address better the issues we are facing in this changing and challenging environment?

This is a process that is already ongoing.

I regularly meet a number of Albanian colleagues when speaking at conferences in the region, but also current technolo-

gy makes sure that knowledge sharing is much easier compared to just a few years in the past.

In your view, to what extent is Albania on the road to establishing itself as a financial good reference point in comparison with the other CEE countries?

Not sure if each and every country requires at being a reference point, though I strongly believe it is very beneficial to try hard to be competitive and fight to be amongst the best in class. From a technical point I believe a lot of good homework has been done. From an economical point of view there is still some mileage left‌ I still cannot understand why e.g. the tourism industry has not developed much stronger; I am personally a big fan of Albania, its very well educated people and the amazing nature.

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NJE BOTE MUNDESISH REALE KREDI & PAKETA PER BIZNESIN E VOGEL

SHUME SHERBIME ME PAK KOSTO www.intesasanpaolobank.al Call Center 08006000 (Falas) 4 22 76 000 36Tel: +355 Bankieri www.aab.al Cel: +355 (0) 692080903

Opinion

An overview on Thomas Piketty’s Capital in the Twenty -First Century" When the rate of return on capital exceeds the rate of growth of output and income, […] capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. (Thomas Piketty)

by Ms Erjona Rebi PhD Candidate in Economics

I

n the summer of 2014, the book of French economist Mr Thomas Piketty: "Capital in the Twenty-First Century", came into the limelight, out of many books published around the world. This book made numerous headlines in the international arena, driven by issues it address, the writing style and the new approach it brings into lines.

Getting lots praises, but criticism too, it has become one of the world’s bestsellers, as it recalls the debate of Karl Marx’s "Capital" into the current issues of our time, where wealth concentration and the deepening disparity between different classes of society has become more severe and more evident than before.

The main idea Mr Piketty conveys throughout this book is that the inequality in wealth distribution will be raised further, either in USA or in Europe, as long as the rate of return on capital is greater than the rate of eco-

nomic growth. The result of such reality will be the wealth concentration, which will be accompanied by an increasing inequality between different social classes and consequently, will lead to social and economic instability.

To address this problem, Mr Piketty proposes in his book the use of progressive tax on capital/wealth, which would prevent that the wealth could be under control of just a few people.

Through statistical arguments and facts throughout the book, Mr Piketty shows that inequality is not accidental, but rather it is a feature of capitalism, which can be held back only through state intervention. As long as this state of affairs does not change, the democratic regime in the world will be under threat. The author shows that the upward trend of inequality was becoming steep by early years of the twentieth century, but events such as: World War II and the Great Depression destroyed many of the existing assets and wealth, in particular those of country’s elite.

There were just these events that spurred governments to undertake measures for

wealth redistribution and income distribution, particularly after World War II. The rapid economic growth that came later made the inherited wealth less important. Meanwhile, the author argues that the world today has returned to sharp inequality of the late nineteenth century, where economies are commanded and dominated not by talented people, but by family dynasties and inherited wealth, which is increasingly strengthening and piling up.

Along with many supporters, there are many critics on this book, who think that the indicators, selected by Mr Piketty to make a judgment about capital, are evasive. Such indicators are significantly affected by the financial evaluation of capital in the market and do not consider its productive use.

Even more arguable and debatable is the proposal to introduce the progressive tax, as a solution in this regard.

Despite these criticisms, "Capital in the Twenty-First Century" is an interesting book that must be read and surely time will be its best judge in the future.

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Tech Topics

HeRa

A module for most efficient use of human knowledge, talent, skills and capabilities Because of large numbers of employees, spread of branches on different locations and high turnover of employees, the Banking system needs to have centralized solutions for the management of employee data and information.

by Mr Dritan MEZINI Executive Director DM CONSULTING

D

M Consulting Services (DMCS), as Business Support Organization (BSO), was established in 2005 to provide clients with top-quality, innovative, reliable, cost effective, and time-saving business, Human Resources and IT solutions. The main areas of DMCS expertise consist of the following: 1. HR Management, Recruitment and Training, 2. IT Solutions and Services, 3. Web & e-commerce Solutions and Services, 4. Outsourcing, 5. Management Consulting. DM Consulting is composed of a team of professional experts in the main areas of Human Resources, web development, e-business, e-commerce, online marketing with education and experience in Albania, regionally and internationally.

Additionally, the above-mentioned expertise, when intertwined with in-

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formation technology, are transformed into products and services which help businesses at facilitating the processes where they are involved, including: Human Resources (HRMIS); Customer Relationship Management (CRM), Applicant Tracking System (ATS); Online Portals; SME Turn-key solutions; IT Audit; IT Strategy, Feasibility Study, IT Assessment, IT Consultancy, IT MIS, Project Management and e-commerce Training. DMCS is focused on designing high quality and unique web designs and e-commerce to help the customers trigger makes us improve radically the productivity and the success rate of their business. Human Resources are considered as a crucial element in developing a successful and competitive business, because it allows companies to increase their productivity through better use of their human capital. DMCS’s HR Management Consulting Services are designed to help businesses improve organizational activities, employee productivity, and administration.

HeRa Modules HERA product life cycle development includes modules representing the path to solutions of the main requirements submitted by clients as following: • Organizational Structure • Human Resources (Dossier, Contract, Leave) • Payroll • Training Management • Recruitment online • Reporting System • Administrative Management • Security (pass card) • Help module • Warranty and Maintenance • Inter departmental relationship Benefits of implementing HeRa • Increased Productivity • More efficient administration • More operational opportunities • Reduced labor requirements • Superior managerial decision making • Reduced costs • Superior control

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Main Services of Human Resources Field DMCS is dedicated to provide the best possible solutions to all its clients, whether they are big established companies, small businesses or qualified individuals looking for opportunities to develop and advance their professional careers. Our main services in the field of human resources are: • Recruitment and Executive Search, • Employee Assessment Services, • Training and Development, • HR Consultancy Services, • Career Coaching, • Employment portal: www.duapune.com In the meantime, DMCS have just launched the new version of the employment portal (duapune.com) ver 3.0, which is much functional and offers new services for the employers and jobseekers, as per the following: Standard CV format, Advanced Search, Internal Communication, Social Media Integration and Multiple documents upload.

IT Solutions and Services DMCS has provided IT strategies for a large range of SME in the areas of information system implementation, e-commerce, digital marketing and the

integration of IT strategy and processes with the core business strategy of the organization. We provide a comprehensive set of IT solution and services to extract structured data to improve decision-making, financial management, regulatory compliance and customer service.

HRMIS – HeRa Product The Human Resource Management Information System is by no means a new phenomenon – on the contrary, HRMIS technology has been around for years.

Only recently, however, have companies begun to realize the serious benefits such systems have to offer. Nearly every business can stand to gain something in the realm of efficiency and operational cohesion, and HR information software is designed to provide exactly those improvements. These systems collect, store and analyze the characteristics, actions and the performance of employees (including future and former employees) also other pertinent information (e.g. job, position data, salaries) for management decision making.

Meanwhile, the banking system because of large numbers of employees, spread of branches on different locations and high turnover of employees, need to have centralized solutions for the management of employee data and infor-

mation. Because of lack of automated systems for the information of employees, absence of generated analytical reports and lack of streamlined processes, the banking sector very frequently has not been able to generate strategic approaches to human resources, by automating the processes and reports.

Based on this identified gap and strong need for intervention especially on this sector, DM Consulting Services, in consortium with Komptel Project Engineering, have conceived and moderated the HRMIS, so called HeRa, that has been tailored to provide a full service and accurate for companies that have a large number of employees and to whom the implementation of this product would be very beneficial especially on cost and strategic plans terms. HeRa enables the most efficient use of human knowledge, talent, skills and capabilities in order to achieve the objectives of organization. Moreover it offers the possibility to be used in many companies or branches at the same time, each with its own rights & users. It consists of typical HR integrated modules which helps the HR personnel for a lot of aspects and offers to them the possibility to be efficient on their work for the benefit of the company.

These modules are the results of product life cycle management such as analysis, design, development/customization, implementation and testing and training. Basing on the needs of the clients and companies, the product undergoes customized solutions and modules reformatting. The HERA represents a robust, tested and proven business management product, already implemented successfully for the last years at Kosovo Energy Corporation (KEK) over 8,000 employees, Radio Television of Kosovo (RTK) over 600 employees, Raiffeisen Bank Kosovo (RZB) over 500 employees, Central Bank of Republic of Kosova, Kosova Government, ProCredit Bank of Kosova, and several public utilities enterprises in Albania, such as Water Companies in DurrĂŤs, Lezha, Saranda and Fier.

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Financial Auditorium

by Ms Rezarta GODO

Executive Director JUNIOR ACHIEVEMENT OF ALBANIA

A

lbania and the Albanian market is being faced with numerous challenges of development, competition, European integration and globalization in general, which is raising the awareness of respective stakeholders regarding the importance of orientating the society towards a pragmatic and rational approach, either in terms of education, learning with practical knowledge and experience, or choices for the professional career. It seems that teachers, parents and youngsters are moving away from the education and graduation standard in most preferential disciplines with undisputable prestige, but over exhausted, which lead to oversaturation and high unemployment. Currently, parents and youngsters seem to be increasingly attracted by study fields and choices signaled by the market, technology, or society’s growing needs, and what is meant is the employment and the guarantee to yield results from investment made in

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Financial education through Junior Achievement Program education. Parallel to such rational and well-targeted approach, is the awareness about the importance of economic independence and proper management of money, since the early age. When young people are still at school years and economically dependent on their families, they need, since their childhood, to understand the value of money, the efforts and difficulties to obtain it, with the aim to achieve the desired independence, self-security and to compete successfully in the market. Specifically, if young people aspire to manage and run commercial companies’ departments, they must first be able to manage themselves, especially personal finances.

Junior Achievement (JA) Program, is applied in 150 secondary schools throughout the country, and is in its third year of its life in Albania, thanks

to initial funding of Albanian-American Development Foundation (AADF). It puts young people in situations where they experience in practice the core of finance. They are challenged and practices in several aspects, including knowledge about financial terminology, cost-benefit analysis, raising the initial capital investment through shareholders, setting financial goals (manufacturing-sales- net profit), preparing simple financial statements (inflows-outflows), etc. Beyond youth-centered learning and their practice, JA provides also the "mentors", who help young people to digest and understand finance, as well as identify solutions to increase revenues, by avoiding or minimizing possible risks. Mentors represent a value in educating young people with knowledge about entrepreneurship, business and finance, according to JA

program. Especially mentors who are professionals in the banking industry illustrate some best practices in managing personal finance, by referring savings deposits (savings as a key learning concept for young people), investments through bank loans, etc. Specifically, young people are acquainted not only with practical concepts and ways to exercise proper financial management, but also with legal and financial responsibilities and obligations, associated with various undertakings, such as: investing through bank loans.

A quality financial education helps substantially in preparing youngsters for the labor market. Surely, they will not necessarily be professional financiers, but rather individuals prepared to know the value of money, manage their coffers meticulously, and earn respect for what they have managed to save, or gain, thanks to their efforts as individuals and young professionals with work ethic, clear objectives, healthy ambitions, and with a

sense of scrupulosity, that conveys trust in them.

Given the importance of early preparation of Albanian youths with practical knowledge of doing business and baseline financial knowledge, the future employers are increasingly aware about the importance to contribute to well-education of young Albanians. Specifically, some of the largest banking institutions in the country have contributed significantly in youth education, through JA's, by way of financial knowledge of their mentors, including Raiffeisen Bank and ProCredit Bank. Meanwhile, Credins Bank will contribute this year with some 47 mentors, a very significant intellectual investment for JA program youngsters at various schools throughout the country.

Alpha Bank and Tirana Bank will also contribute with their mentors in Tirana and other districts. Mentors and JA's subject content will focus, inter alia, on a careful selection of young people, market analysis and market needs’ assessment,

knowing clients and their expectations, setting the competitive price, identifying and competitive advantages in the market, assessing the short and long term consequences of different decision-making (comparative analysis), learning the pillars of a business plan, setting different objectives, conducting a research for potential competitors in the market, regular and correct registration of any financial transaction, evidencing every purchase-sale act, completing various forms, including sales orders, etc. Apart from such exercises, youngsters deepen financial and non-financial knowledge, by preparing action plans and strategies with techniques that lead to lasting success and sustainability.

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AAB Trainings

Training on “IT for non IT-ers�

AAB, in collaboration with the Albanian Institute of Internal Auditors (AIIA), organized on 15-16 September a training course, which was designed for Financial, Information Technology and Internal Auditors, IT Security and Information Security Officers. This intensive, two-day seminar outlined the concepts of information technology, necessary to understand the audit concerns in the IT environment. The training course was attended by 15 participants.

Training on HR Strategic Management AAB, in collaboration with WIFI Albania, organized on 18 - 19 September a training course on HR Strategic Management. The training aimed to equip the participants with personal skills and specialist knowledge, required for a successful HR practitioner. The course aimed at providing the opportunity that newly acquired skills and experience could be conveyed straight back to the workplace. The training was attended by participants of 6 member banks.

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Seminar organized in collaboration with ICC Albania AAB organized together with ICC Albania two seminars, delivered by Mr. Andrle Pavel, Secretary of ICC Czech Republic Banking Commission and Member of ICC Banking Commission.

The seminar on 15 September on “ICC Trade Finance Rules” was a practical seminar on international payment and security instruments and financing with special focus on new developments in open account trading area.

SWIFT celebrates the 20th Anniversary in Albania SWIFT Community Albania organized on 16 September 2014 a dinner party, supported by CIS, to celebrate the 20th Anniversary of SWIFT in Albania. On this occasion, the SWIFT Community Albania awarded Mrs. Lindita Bendo from Intesa Sanpaolo Bank, Mr. Valer Miho from Bank of Albania and Mr. Alke de Boer from Swift for their contribution and devoted work towards the modernization of Albanian Payment Systems, by being the first persons engaged in this project in Albania.

The second seminar of 16 September on “INCOTERMS Rules 2010”, defined the responsibilities of buyers and sellers for the delivery of goods under sales

contracts. In total, these two trainings were attended by 23 participants of 7 member banks.

The seminar of 17 September on “Trading Frauds in an uncertain economic climate” was organized in collaboration with ICC Commercial Crime Services based in London and was delivered by Mr. Michael Howlett, Deputy Director of IMB and a Director of ICC Commercial Crime Services and Mr. Dave Cuckney, IMB Manager. The seminar was attended by 16 participants.

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