Questions and answers at the Press Conference, 8 May 2019

Publication date: 08.05.2019


Question: Following your presentation in the Assembly, the Parliamentary Committee on Economy and Finance recommended the drafting of a strategy that would urge banks into granting credit to businesses. What does this strategy include, considering that the meetings with the banks will take place after two weeks?

Governor: As a matter of fact, lending has risen moderately during the recent years. But due to several factors - the exchange rate appreciation (lek portfolio), the write-off of non-performing loans, the outstanding loans have decreased. Excluding these factors, credit increased by 5% in 2018 and by 6% in 2019 Q1. This growth was higher than the GDP growth, which was 4.1% for 2018. Obviously, this is a moderate increase, and we aim to have even higher credit growth in order for it to influence and stimulate the country’s economic growth, employment, wages, etc. 

The Bank of Albania has undertaken several measures, one of which is the plan of measures for the reduction of non-performing loans. The reason this plan was drafted was not only to improve the banks’ balance sheets and financial stability, but primarily to boost lending. This plan was positive and led to a decrease of non-performing loans, from 25% in 2013 to 11% at the end of 2018.

The Bank of Albania has also undertaken many other micro and macro-prudential measures, which have given their contribution. Some of these measures were on the bank capital adequacy ratio and stimulation of lending in relation to capital adequacy, being cautious for the impact of these measures on the liquidity surplus. Bank are encouraged to translate deposits or surplus liquidity into loans for the economy rather than hold them as placements in foreign banks.

We are continuing to monitor all measures, the ones set out in the plan for measures to reduce non-performing loans, as well as macro prudential ones. We have had several meetings with the businesses and the banking sector. Aiming for a prudent lending in the economy, we have closely co-operated with the banking sector.

Also, we should not forget that, over the years, we have had a restructuring of the banking system and recently the number of banks in the system is smaller, as a result of structural changes of banks shareholders. Today we have 12 banks from 16 banks that operated in the system in the previous year. We expect this consolidation process to contribute to the improvement of the financial situation in Albania and boost lending as a result of increased competition, as well as of new shareholders’ strategies.

We are also working on other regulatory changes to boost lending, but in a cautious manner so as to not create more non-performing loans.

In the future, we will closely co-operate with the Albanian Association of Banks and Business Associations in order for lending to continue. It needs to be highlighted that having an economic growth rate of 6% is a good rate to have in a risk situation. Our analysis deems the risk are titled to the downside. Therefore, the banking sector and the financial system need to act carefully, contribute to the country's economic growth, exercise their role and function in lending, and grant creditworthy loans. Thus to grant loans only for serious projects that are bankable. On the other hand, we must also have a sound aggregate demand that comes as a result of the market. Banks are not the only component that contributes to the lending situation. We have to understand that banks are one component, but so is the economy, the market, and projects. Banks finance projects that meet the funding criteria. The better these projects, the better banks response to these projects.

The market has sufficient surplus liquidity, which we are trying to translate in credit for the economy.