Publication Date 26.10.2010
Question – Recently, the Albanian business has made a request related to non-performing loans, requesting the freezing of this type of loans or risky loans for a 12-month period. What is the Bank of Albania’s comment in this regard? Can this request be met and if yes, how?
Governor – Throughout the pre-, during and post-crisis period, the Bank of Albania has been attentively monitoring the lending process, the performance of non-performing loans, the recovery of the lending process and as I mentioned earlier in my speech, the central bank has provided the appropriate stimulus. Consumer price stability and the Albanian banking system’s sustainability have been at the forefront of our agenda. The Albanian banking system weathered the large banking crisis shock and came out sound, well-capitalized, liquid and capable to lend the Albanian economy. Concerning this initiative, we have not been submitted any formal requests yet. The Bank of Albania considers that the bank-business relationship is a business-like relationship. The Bank of Albania has firmly encouraged the process of regulation, provisioning and other restructuring made based on this business-like relationship, on mutual respect and mutual benefit. Therefore, I would say that there is no single formula, but it will continue to be a process guided by mutual business interests and benefits and at the same time having the stable development of lending in Albania in focus.
Question – Remaining at the topic of non-performing loans, what is the stock of this type of loans and is this figure considered a concern for the Albanian economy taking here into account the Bank of Albania’s stance in the Financial Stability Statement where banks are required to evidence default customers?
Question – The Ministry of Finance stated that this week it will issue the Eurobond in the international markets. Do you think this is the right moment given the performance of international financial markets?
Question – Does the fall of demand for business loans represent a concern for the Albanian economy?
Governor – I think that my speech earlier elaborated on these three issues. As regards your first question, I would say that the Bank of Albania has stated that we are approaching the threshold peak of non-performing loans, which varies from one bank to another. This can be also evidenced by the respective adjustments and the real position of banks and firms’ balance sheets. I do not consider the total figure of 13% as the most important concern but we do consider that the peak has been reached. Therefore, we assess that the balance sheet soundness provides opportunities for positive options.
Concerning your second question, I provided my opinion last week following the annual IMF’s visit to Albania. The Albanian economy was assessed quite positively, in fact, at the most positive levels during the entire relationship period with the IMF. Therefore, I consider that this is the proper time to issue the Eurobond. As regards the latter, I have also previously stated that I fully support this initiative and that this will provide a stable stimulus to the Albanian economy. Therefore, I believe time is ripe to issue the Eurobond. It is advisable though that we contribute to creating the required tranquillity during this week so that the Eurobond be issued by the international terms and conditions.
As regards your third question, the Bank of Albania has provided the right stimulus for boosting lending. It does not only limit to advice, but also to a number of regulatory measures that the Bank of Albania has initiated during the pre-, during and post-crisis period to boost lending. Given the specific outlook of the world economy, where the most advanced economies are experiencing hard times with the recovery of credit and the provision of the fiscal stimulus and other stimulus to the main cells of the economy, in our case it is important to provide the right stimulus to promote stable lending. The Bank of Albania is assessing the balances between the IFRS and provisioning in order to create the relevant facilities for boosting lending in Albania.
Question – Do the recent positive developments provide hope for the recovery of economic growth to the pre-crisis level or should we rather consider the 6% figure a matter of the past?
Governor – I do not think it would be wise for the Bank of Albania to provide a figure at this juncture. What we think is that the gap between the potential and actual GDP has been narrowing and we expect it to narrow further in 2011.