PRESS RELEASE
Questions and Answers at the Governor's Press Conference, 01.07.2015

Question - In relation to the Greek crisis and potential implications on the financial system stability in Albania, are there any restrictive measures being implemented on the entities supervised by the Bank of Albania to limit capital outflows towards the Greek financial system, or, in broader terms, to resident entities in Greece? If yes, what are these measures about?

Governor- First, it is important to emphasise that Albanian banks with Greek capital are not exposed to their parent banks or the banking system in Greece. In other words, actually, their exposure is almost zero. Irrespective of this level of exposure, the Bank of Albania has taken some measures.

We have issued an order restricting capital or liquidity transfers to parent banks. In practical terms, cooperation with Albanian banks with Greek capital has been perfect. We have been constantly monitoring them and capital has not been transferred to parent banks. This has been the main measure we have taken.

These banks continue their activity normally and, as I have previously stated, they operate throughout the territory of the Republic of Albania. They are self-financed banks, which means, they do not need funds from parent banks, and are independent in their economic activity. They operate with deposits from Albanian citizens and conduct lending and economic activity in the territory of the Republic of Albania. Concerning the liquidity surplus of these banks, we should note that it is invested neither in the Greek banking system, nor in the Greek public or private sectors.

We find no reason to take measures about capital controls, because the Albanian banking system is consolidated and has liquidity surplus. We have constantly pointed out that the credit/deposit ratio stands at 55%. In other words, there is liquidity surplus. The same situation applies to banks with Greek capital. Our challenge is to return liquidity to the economy and not ensure it. We have had and still have problems with the growth of a healthy demand for loans. This is the main problem facing the Albanian banking system, related to promoting economic growth in Albania, through liquidity surplus.

When talking about liquidity crisis or liquidity measures, they refer to the banking system in Greece rather than the banking system in Albania. We need to clearly distinguish between the two; therefore we emphasise that the banking system in Albania and Albanian banks with Greek capital are secure and stable, because they have liquidity surplus.

Question - What were the points that were not concurred with the IMF, which led to the mission leaving without a joint position on recommendations for the Albanian government?

Governor - This is a question that should be addressed to the Minister of Finance rather than the Governor [of the Bank of Albania].

However, I would say that the Mission had a very fruitful cooperation during these days with the Bank of Albania, Ministry of Finance and Albanian Government. The Bank of Albania is fully compliant with all the topics in the arrangement with the IMF, that is, we have fulfilled all the points and none of them is pending. I will not enter into detail, but everything is in full compliance with the programme and nothing has remained unfulfilled.

About your question, the Government is reviewing the revenues and expenditures levels. This may also stem from overplanning, vis-a-vis the revenues level at the year start. There are no concrete problems; everything is being subject to a study period and will be concluded in the next mission to Albania. The Minister of Finance may explain in more detail, since we have no detailed information. However, we know that the adjustment of the revenues and expenditures is in the process.

Question - When you took measures on capital control, did you have quantitative divergences with the Government on economic growth?

Governor- The measure that I just mentioned has been taken in writing two months ago. As a matter of fact, however, it had been imposed verbally by the Bank of Albania and its Supervision Department before my arrival in office as the Governor. What is important is the fact that Albanian banks with Greek capital are not exposed to their parent banks. Since the situation in Greece is aggravated, to be on the safe side, we have translated this measure in a written measure.

We have no divergences with the IMF and the Government, because the entire programme is under the IMF monitoring and agreement. You heard yesterday the joint statements by the head of the IMF mission, the Minister of Finance and Minister of Economy, and I. Of course, our scenarios, which were also discussed today in Supervisory Council meeting, take into account the implications of the Greek crisis. Everything will depend on further and potential developments in Greece. Nobody can predict precisely the political and social developments in Greece, less so its implications on the Albanian economy.

We hope that an agreement is reached soon, that Greece will leave the crisis situation behind, and that the crisis implications will be insignificant on the Albanian economy. However, we should be clear, direct and transparent with ourselves and the public: a deterioration of the Greek crisis may require the revision of economic growth in Albania. We have been making all the possible calculations for both positive and adverse scenarios; for the moment, we are in full concordance with the IMF and the Government of Albania about economic growth. There is a revising down, which we discussed yesterday. That is, growth will not be 3%, because there is an adjustment, which we are still studying. Unless an extreme negative scenario materialises in Greece, we keep to the same conclusion that economic growth for 2015 will be higher than in 2014, as a result of structural reforms undertaken by the Government and structural reforms in the financial system undertaken by the Bank of Albania.