PRESS RELEASE
Questions and answers at the press conference, 6 May 2020

Question: A few weeks ago you and the government signed an order which forced commercial banks to extend the deadline of payments of loans to enterprises and households, by three months. Given the current situation, are you discussing with banks for another extension of loans settlement to both enterprises and households? If so, for how long, and will there be any penalties for borrowers and households? What is the level of instalments postponed so far?

Governor: Currently, the level of instalments postponed by banks due to financial difficulties as a result of COVID-19, until yesterday, was about EUR 2 billion, for 21.000 cases. Banks continue to process the requests and there will certainly be a larger amount of postponed instalments. What I want to highlight is that we have had a very proactive reaction from commercial banks, in regard to the treatment of cases of extended loan instalments due to financial difficulties as a result of the pandemic. Banks are to be thanked for such professional behaviour.

We are constantly evaluating the financial situation of the banking and financial sector and certainly the enterprises’ situation as well. Each and every day we are analysing the figures and the impact that the extension of the deadline of instalments has on the banking sector, and the possibility for another reaction by the Bank of Albania after the first quarter of implementing this measure. Of course, some enterprises will experience greater financial difficulties and some others less, so not all enterprises will be impacted equally. The Bank of Albania is considering a second reaction in terms of regulatory changes to facilitate banks in regard to the restructuring of loans that are in financial difficulties. So, we may help banks to have restructuring even for longer than 3-months or 6-months, but this will be in function of the analysis of the balance sheets and business cycle that certain enterprises have. For instance, tourism and tailoring could be the sectors that will suffer more from this situation and thus need a more proactive restructuring compared to some other sector.

This will always be the subject of the analysis of commercial banks but also ours, as the Bank of Albania. The decision-making that will take place at the end of the quarter will always be in line with banks and enterprises, in order to find the best possible solution for the country's financial stability and to help enterprises. That's all we have to say for now. We are considering decision-making to be in line with the situation and as helpful as possible for both banks and enterprises.

Question: The government has set a sovereign guarantee available to banks to lend a soft loan to enterprises that have liquidity problems. How many enterprises have applied and how many of these entities have benefited?

Governor: The sovereign guarantee to help business is not yet complete. The government is negotiating directly with commercial banks and we will normally see its effect the moment it becomes valid, the moment it will be introduced.

Currently, banks are operating with the first sovereign guarantee that the government has provided for employees' salaries. So far we have about 70 approved cases accounting for the amount of about EUR 8.5 million or ALL 1 billion, but there are currently 300 other applications under review. It is a guarantee that will continue to be elaborated with the banking system.

The second guarantee will come the moment it becomes valid and we will have a more clear idea on what the progress of this guarantee will be.

Question: The IMF and the World Bank predict that the country’s economic growth during 2020 will be -5%. Can the Bank of Albania assess the impact that the pandemic will have on the economy?

Governor: Today's meeting of the Supervisory Council was dedicated to the economic and financial situation, to assess the impact of the situation and the monetary policy stance. As we have previously emphasized, the pandemic’s impact on our economy will be strong; as it will be felt across the globe. All economies, those of the euro area, region, the world, will be strongly impacted and will have a negative economic growth; all predictions say that there will be a recession.

We must keep in mind that this is a temporary situation. We must take measures to make sure that at the time of recovery we are prepared so that the recovery will be as rapid as possible. We need to make sure that the country's financial stability is impacted as little as possible by this situation as this stability is very important. We ought to be careful in order to preserve the supply chain. Simply put, we need to be more cautious so that we get out of the crisis with as little damage and bankruptcy as possible and as a result the recovery will be more rapid.

The Bank of Albania, as a monetary and supervisory and regulatory authority, has two objectives, to maintain monetary and financial stability. To maintain price stability means to safeguard and not affect the well-being of Albanian citizens. To maintain financial stability means to maintain a sound banking sector during the crisis period.

The Albanian economy has previously been disrupted from the earthquake that hit the country, which was addressed and the relevant funds were provided. Despite the shock that the earthquake caused, early in the year we had forecasted an economic growth of 3-4%, but the impact from the COVID-19 worsened the situation. Our forecasts are similar to those of the International Monetary Fund and the World Bank regarding recession levels. The figures change every day, and there is a high forecast uncertainty because it all depends on the progress of the situation.

Summer season is coming soon. Hopefully everything will be better. The opening of the season will be gradual, but such that it will provide an economic recovery during the summer season. In this regard, the tourism sector is key, but the other sectors are also very important. Only time can tell. We are working and we hope for the best.