PRESS RELEASE
Questions and answers at the press conference, 3 October 2018

Question: We already know about the issue of the Euro bond, but we are interested to know its real implications. How will its issue affect the business climate in a time when there are no new foreign direct investments? What is the Central Bank's opinion regarding this?

Governor: We have been also informed on the issue of the Eurobond by the Albanian government. The issue is a success regarding both the value - they offered over EUR 1 billion, although the government needed to raise only EUR 500 million - and the interest rate at 3.5%, as well as the term to maturity. Hence, it may be considered as a successful issue. It is an indicator that the Albanian economy is valued by the international foreign markets. In addition to international institutions such as the International Monetary Fund, the World Bank, the European Commission etc., the Albanian economy has been given a precise value, that is, the value international market placed on the Eurobond with good interest rates, taking into account the current market developments.

We have to understand that the interest rate changes daily in the markets, but this price is a result of two factors. The first factor is the low interest rates in the international markets. The second factor is the positive rating of the Albanian economy; for our Eurobond, the market offered around twice the amount the Government of Albania needed.

The issue of the Eurobond has several positive elements. First of all, it releases liquidity in the Albanian market, allowing the banking system to focus and move toward more lending. It shifts bank's liquidity toward lending, as banks no longer need to invest in the Eurobond. It is also a positive signal for foreign investors as it is an evaluation for the performance of the Albanian economy.

We consider it as a successful transaction. It is important to note that, from our communications with the Ministry of Finance and Economy and from looking at the financial statements of the state budget, the Eurobond will not affect the rise of Albania's debt.

 A part of will be used to pay off an existing debt and the rest will be managed and used in the context of fiscal consolidation. So, the Eurobond will not affect the increase of debt, in the medium and long term. We have an organic law that forces us to move toward fiscal consolidation and continue to reduce the debt level; therefore, we will continue lowering the debt level. In conclusion, the Eurobond is a positive assessment and indicator by the international markets for the Albanian economy.

Question: Regarding the sale and purchase of commercial banks, is the withdrawing of EU-based banks, and the entry of banks which are not from the European Union, an indicator of a good business climate in the country?

Governor: This phenomenon is happening across the whole region, not only in Albania. After the crisis, many European banks, mainly those operating in the euro area that have their subsidiaries in Eastern Europe, have been bound to inject capital, i.e. to increase capital, or to continue with the process of deleveraging or closing down some of their branches or subsidiaries in some countries. This approach follows the tightening conditions set by the European Central Bank. Of course, capital injection has been more difficult. In the absence of the injection of capital, or inability to find additional capital, to increase the capital adequacy ratio, these banks had to leave the region.

We have been analysing this situation for years, so this did not come out of nowhere, we were expecting this to happen. As a regulator of the financial system, we have aimed for this process to be followed with the consolidation of the banking system and it has somehow yielded a positive result as today we have two banks absorbed by existing banks. So, in total today we have 14 banks, from 16 that we had before. This is a positive indicator for our banking and financial system.

On the other hand, we have been cautious and we are also monitoring the developments for those banks that are in the process of withdrawal. But, I want to emphasize that we, as a regulator, the central bank, we do not intervene in the process of selling the shares of banks. It is a free process where banks themselves choose their tendering process to find the best buyer. What I guarantee on behalf of the Bank of Albania is that at the time of applying and submitting a request to the Bank of Albania asking for the change of shareholders, we will strictly respect the legal requirements of our regulations, as we have always done in terms of safeguarding security and financial stability.

I emphasize once again that, in this context, everything is monitored and controlled; we have no surprises. The banking system remains well capitalized, the capital adequacy ratio has further increased due to the high level of bank profitability. The capital adequacy ratio has reached 18% and the banks have liquidity surplus, which we intend to translate into healthy loans for the economy, since, as I mentioned, the Eurobond issue has created more liquidity than the government needs. The banking system's liquidity should be oriented towards healthy lending to the economy, both for households and enterprises.

In conclusion, I emphasize that we are monitoring the process and I guarantee once again that we will strictly comply with the requirements of our law and regulations when approving any new shareholders that will enter the Albanian banking system.