PRESS RELEASE
Questions and answers at the Governor's press conference on 16 December 2015

Question: About the inter-ministerial plan on the solution of non-performing loans problem in Albania, could you tell us what its current stage is? A few days ago, at the Parliamentary Committee on Economy and Finance You said that the Bank of Albania, in collaboration with commercial banks, has already identified a number of companies with non-performing loans. Which of these companies will be subject to bankruptcy and which of them to restructuring? Can we have a number for each category? What type of companies are they?

Governor: The inter-institutional plan consists in regulatory and legal amendments to facilitate the work of commercial banks in addressing the non-performing loans. Overall, the plan encourages the banks to restructure the portfolios for those businesses that have positive projections for the future; on the other hand, it orientates banks to pursue legal solutions for businesses, whose portfolio is considered as without hope of restructuring, implying the execution of collateral and implementation of other more radical measures, applicable in such cases. I would rather not focus on details ss this plan has been explained many times.

The one thing I would like to say, however, is that this plan of measures has provided the first effects, driving in practice to the fall of the non-performing loans ratio at around 20.5% from 25%. The write off of non-performing loans from banks' balance sheet is one of the components of this plan. It should be emphasised some loans are subject to restructuring by banks, notably large corporate loans. These efforts will contribute to the further decline in non-performing loans.

In practice, the non-performing loans ratio is a share in per cent of the non-performing loans to total credit. Thus, the latter will increase and the ratio of non-performing loans will improve. A positive development in this regard, as I emphasised in the statement, is the growth of credit in October, which cleared from the effect of loan written offs, was 1.8%. The performance for November and December is yet to be verified. However, referring to the seasonal model, we expect an increase of credit in these two months, which would in turn decrease the non-performing loans. Meanwhile, in Bank of Albania knowledge, the commercial banks are intensively working to restructure the non-performing loans portfolio.

Regarding your comments on the reporting at the Parliamentary Committee on Economy and Finance, on the non-performing loans, in fact I would rather not exactly contest the interpretation of media, but I would like to take advantage of this opportunity to clarify something. It is not for the Bank of Albania to decide, which company must be subject to bankruptcy and which must not. Commercial banks and the association of banks will have to decide. Banks, upon their independent and operational decision-making judge and assess the cases. The Bank of Albania, through the implementation of the rules and regulatory initiatives, contributes, coordinates and monitors the process, but the final decision is up to the banks. In practice, that is what I have explained at the Parliamentary Committee on Economy and Finance. I did not say that we have exactly decided which will go bankrupt and which will not. It was mainly a conclusion of the media.

To sum up, the banking system is positively and optimistically considering the restructuring of non-performing loans, whenever it is possible.

Question: The budget will be voted tomorrow at the Parliament, while the Bank of Albania provided its proposals a few days ago. Do you agree that the budget should be approved tomorrow, at the shape that it has now plus your consultations? Adding here proposals on the fiscal budget still under discussions, or about free professions, etc. Have you asked for any discussion with the groups of interest about a final solution regarding these professions?

Governor: The Bank of Albania reported to the Parliamentary Committee on Economy and Finance its remarks and assessments regarding the budget for 2016. The Bank of Albania has emphasised that its main attention or concern regarding the budget for 2016 relates to the budget deficit. Since the budget for 2016 envisages a consolidated fiscal policy and considers the reduction of the budget deficit and debt levels, we consider it a positive element, on the right direction. We have provided our opinions and recommendations to the Government and the Ministry of Finance related to expenditures and their allocation. I would like to emphasise that, in principle, the Bank of Albania looks at the basic monetary and economic parameters and we note a prudential addressing of spending and revenues in the budget of 2016. The Government drafts and implements the budget at more detailed terms.

I re-emphasise that for as long as we see a consolidated fiscal policy, which is in line with our accommodative monetary policy, the debt level is falling and within the parameters laid down in collaboration with the International Monetary Fund, the Bank of Albania deems that the budget for 2016 is an acceptable one.