An overview, some assessments prudent to thoroughly supervise the system and to strengthen the regulatory measures. In December 2009, the Supervisory Council approved a new regulation “On liquidity risk management”, which basically changed the definitions of what is considered as liquid assets, by being more conservative. The new regulation on liquidity introduced a regulatory limit for the indicator of liquid assets to short-term liabilities, an indicator that is reported by banks each month on weekly basis and for all currencies should not fall under 20%. In December 2010 this indicator stood at 30.6%, and by currencies was at 42.9% in ALL, 15.6% in EURO, and 23.9% in USD. While the world’s financial system was beginning to experience the first signs of what would later be regarded as one of the worst crises since World War II, Bank of Albania in cooperation with the private banks was projecting new regulatory measures to keep the system intact.
The revival of lending According to Bank of Albania, in the first 6 months of this year, lending to the private sector grew by 11.5%, a rate about 1.5 percentage points higher than that of the second half of last year. Unlike past years, the lending activity shows a higher orientation towards lending in the domestic currency. Credit in Lekë had grown by about 14% until May 2011. Lending performance continues to be affected by the moderate demand for loans, while the banking system has adopted prudent lending practices, keeping credit conditions tight for specific market segments. For example, financing of private consumption through consumer loans remains
Return to stability With all these caution measures, the collapse of Lehman Brothers in September of 2008 transmitted some panic to the market. Customers rushed to the bank counters withdrawing around 15 percent of the deposits. But because the system was liquid there was no sign that banks were in danger. In the first months of 2009, deposits started returning in the system. During the more difficult year, in 2009, the Albanian economy grew by 3.3 percent and accelerated to 3.9 percent in 2010. Similarly, banking sector assets grew by 6.3 percent in 2009 and 11.8 percent in 2010 reaching over 990 billion Lekë or 81 percent of the Domestic Product. The net profit of banks last year was 6.7 billion or 89 percent more than in 2009. RoAA indicator was estimated at 0.72 percent, much higher than that of end of 2009 at 0.42 per cent, while the return per share (ROE) was 7.58 per cent, compared to 4.58 per cent in 2009. Yet, this indicator remains below the 10.3 percent level recorded in 2008-en due to the impact of nonperforming loans.
36 • BANKIERI • www.aab.al
low; the outstanding consumer credit has a very slight annual increase of only 0.4% during the first quarter of 2011. Mr. Gazmend Kadriu, CEO of Union Bank says that consumer loans are hindered to a great extent by the lack of infrastructure such as the shortage of a formal system of addresses. However, experts expect that the revitalization of credit for the remainder of the year shall persist more for businesses rather than for individuals. Good performance of deposits has helped banks have ample liquidity and create more space for their involvement in lending. Nevertheless, even business loans face many barriers. Many bankers highlight the weak governance of businesses and their
often unreliable financial statements, as inhibitors for the lending. “The Albanian Economy is still subject to high informality”, said one of them.
Better lending For many experts, one of the main challenges of the banking system in general shall be lending to good customers. They think that the lessons of the crisis will not be easily forgotten and will serve to hold banks careful to the importance of prudent lending criteria. In fact, some signs of improvement are already visible. In February last year the Government inaugurated a national database of addresses, while from several months now private bailiffs have started to function in the country. The slow execution system has been an old distress for banks; the introduction of the private bailiff is likely to improve the situation. Government has done is part through the establishment of private bailiff, it is now time for the courts to have their say. Mr. Petrit Qarri, from the National Chamber of Bailiff says that generally, on loans involving large amounts the courts tend to be rigid and procrastinate the processes. According to him, this must end quickly because a fast execution system is in the best interest of all. “It would be good for the country, it is good for banks and even for the clients themselves,” says Qarri. Furthermore, some other laws are pushing economy towards its formalization. Transactions greater than 300 thousand Lekë are now obligatory to be carried out through banks, and finally all the businesses are equipped with the fiscal electronic devices and the public administration should now monitor their usage. As the economy becomes more formalized more salaries are paid through banks, financial statements of businesses become more reliable and the chances for credit increase. Yet some experts still prefer to be cautious.