Governor Sejko: Address at the year-end event organised by the Albanian Association of Banks

Publication date: 15.12.2023


Honourable AAB Chairman,

Dear participants,

I am very pleased joining you in this traditional event with executives and colleagues from banking system in Albania. In this very special meeting, together we brief on our successful moments and efforts taking place over the course of the past year. While sharing the best experiences we also set the priorities for 2024.

First, allow me to focus on the overall performance of the Albanian economy.

The year 2023 was positive for the Albanian economy.


Despite the many internal and external challenges we have dealt with, the Albanian economy continued to: grow; generate new jobs; and improve almost all the internal and external balances.

Our forecasts show the economic activity is expected to grow at around 3.5%. In parallel, employment and wages have been rising, inflation has settled clearly on a downward trend, both public and external debt have reduced, the external trade balances have recorded a pronounced progress, and the banking sector’s balance sheets appear sound.


As I have continuously emphasized, this positive performance - both in the Albanian context, as well as in the regional and European one - is not accidental. It has reflected the solid foundations of the economy, the flexibility of the private sector, the response in the right direction and time of public policies, as well as - to a significant extent - the positive contribution of the banking industry.

In this regard, allow me to highlight that - in response to the elevated inflationary pressures, which were and remain a significant risk for the monetary and financial stability of Albania, the Bank of Albania has embarked in a monetary policy normalization drive. Our reaction is neither a reflexive nor a dogmatic action; it originates from a thorough analysis of the economic situation and an internal conviction that price instability jeopardises the economic and financial stability of the whole country, including the balance sheets’ soundness of the banking sector, and endangers damaging all the progress achieved in the last years.


The reaction of our monetary policy, has been a determined one, aimed at establishing the right monetary premises for inflation to return to the target, also a prudential reaction, aimed at generating the lowest impact on the Albanian economy as possible. In addition, it has relied on the periodic updating of analyses and forecasts, as well as it has coordinated with the consolidating side of fiscal policy and the appreciating trend of the exchange rate.

The first results of our response are visible, providing a crucial contribution to the downward trend of inflation. However, with regard to inflation the battle has yet to be won. To this end we remain committed to take all the necessary measures, in a timely manner and with the right intensity, to provide to the Albanian economy a low and stable inflation, a reliable currency to preserve savings, as well as a secure and predictable monetary environment to undertake long-term business plans.



Dear participants,

Banking activity, throughout 2023, increased at a modest rate, around 3%, in terms of total assets and customers’ deposits, which are the primary source of growth. Funds of enterprises in private sector have massively supported this growth. In addition, loans in the domestic currency and real estate loans dominated the growth in credit portfolio. Till September 2023, the credit exceeded the value of ALL 720 billion, while customers’ deposits in banks exceeded the value of ALL 1,556 billion. In this view, the sector appears to have sufficient sources, though it needs to improve the efficiency in the financial intermediation process in economy.

The non-performing loans ratio stood at around 5.1%, but the fact that the provisioning coverage ratio of this portfolio has picked up to 71% (from 67% in the previous year) is positive.


Banking sector improved notably the financial performance over the course of 2023. The indexation of interest rates on banking products, which was faster on loans and securities, while taking place more slowly on customer’s accounts and deposits, had the primary role in the profit growth of this year. In fact, this phenomenon has also occurred in the banking activity across the region and beyond.

The capitalization level of the banking system continued to raise in 2023 as well, to 19.63%, also reflecting the enhancement of regulatory requirements on reserves as a macroprudential tool and resolution reserve (MREL). Both elements have bolstered the resilience and the security of banking system.

We have had quite positive developments in the improvement of the payment infrastructure, supported by the enhancement of the regulatory framework in the field of payment systems. For the second year in a raw, the AIPS Euro system is already continuing to bear its fruits in the banking system and in the Albanian economy. Based on available statistics, the euro-denominated interbank transactions for customers within Albania have lifted by around 42% in the first 11 months of 2023. The benefits for economic actors have gone up significantly, saving the Albanian economy at least EUR 22 million. The employment of the system, in addition to reducing transaction costs, has shortened the necessary time and costs for cash management.

There have been also quite positive developments in the expansion of the use of electronic payments, where with the completion of the Albania National Retail Payments Strategy, the number of electronic payments per capita has almost doubled to 18, against the target of 10 payments. These achievements reflect the coordination of joint efforts, and the proactive approach of the banking system through the significant expansion of the necessary infrastructure and services.

Despite these developments, it is necessary to continue with the same intensity for the timely implementation of projects such as open-banking, as well as your maximum commitment for the instant payment project and up-grade of payment systems. The latter aims at the transition to the ISO 20022 and SEPA communication standards, which will digitalise and modernize the market as a whole and will generate the potential for integration with the European Union markets. Last, but not least, we must further intensify and strengthen the cooperation in the framework of the National Financial Education Strategy implementation. This mechanism is essential for maximizing the expected effects from the measures taken so far in the context of digitalization and financial inclusion.


Dear banking system executives,

The projections on the economic growth in Albania are positive, though the elevated inflation over the course of 2023 has posed many challenges and hardships. To this end, the monetary policy instruments coupled with an effective and visionary collaboration amid all market actors, is the right coordinated and parametrised response in a prudential manner to deal with these challenges.

Following I will address briefly some of challenges laying ahead in 2024.

First, let me re-emphasise that the still soaring inflation may require further monetary policy responses. This reaction, if it will be necessary, should be understood correctly by you and should not be a surprise in your activity.

Second, non-performing loans should remain an important warning signal for all banks. The Bank of Albania warned last year that the rise in the cost of loans bears the risk of an increase in non-performing loans, as long as the solvency of borrowers has not picked up proportionally with the surge in prices. Early stage management of borrowers' problems remains the key to avoiding the accumulation of problematic portfolios, which paralyse the lending process.

In this context, the risk that may come from exposure to real estate - whether through direct financing or the high accumulation of collateral from this category - should be considered. The Bank of Albania, in order to ensure the creation of adequate reserves to cover this risk, has introduced regulatory amendments that require holding a higher amount of capital for speculative financing of real estate. These amendments entered into force at the beginning of 2023. Also, at the beginning of October 2023, the Regulation "On data reporting, identification and monitoring of indicators on lending and investments in real estate" was approved, where banks will start the standardized reporting of these exposures for residential real estate in March 2024. We expect banks to scrupulously implement and interpret in a correct manner the above-sated provisions.

Third, the enhancement in adopting the information technology developments, in a safely manner requires your maximum attention. It became clear during this year, both in theory and practice, the critical importance of the information systems security for banking activity, as well as of all accompanying processes related to the identification of problems in this field, their reporting, resolution and testing. Regardless of the fact that the banking industry as a whole is assessed positively for the quality of these systems, we deem that they need to be strengthened. This requires your continuous engagement and investment in specialized human resources and special technology, which evolve and progress on an ongoing basis. It is important that the engagement in this process is achieved in a conscious way, not only highlighting the advantages offered by new technologies, but also understanding the risks that can accompany their hasty adoption. In this regard, the Bank of Albania will strengthen cooperation with you and the relevant public authorities in the next year to improve the effectiveness and implementation of the legal and regulatory requirements.

Fourth, the shocks we have faced in the last years have evidenced the still insufficient level of development in the primary and secondary markets of securities, as well as the low presence of derivative instruments that offer protection against the exchange rate and interest rates risks. I am confident that we as regulators and you as an industry need to do more in terms of further developing financial product markets. I believe I find your understanding in emphasizing that the development of these markets should be the focus of our agenda in the future.

Fifth, capital requirements (macro-prudential buffers and requirements on regulatory capital instruments and eligible liabilities) will continue to increase in compliance with the regulatory provisions and the respective gradual application programme in 2024. The implementation of these measures, beyond the approximation of our regulatory framework with the EU Acquis, ensures a stronger resilience of banking system above-stated shocks, and the continuation of the provided financial services, already being integrated in the daily life of citizens and enterprises. The consolidation of banking system and the increase in the number of banks with a high share in the banking system impose the differentiated addressing of these banks for mitigating systemic risks and the effects on the money of taxpayers in case of possible crisis in the future. I think that it is important that the higher incomes of this year are used by the banks to increase the medium-term sustainability of the capital indicators and the support of financial intermediation.

In this view, taking advantage of this communication, I find it appropriate to point out that the banking sector has been an important factor of stability in tackling the ongoing challenges of recent years. The banking system has continued to support the Albanian enterprises and households with the necessary funds for boosting consumption and investments, as well as for meeting the working capital needs. All analysts and actors of economic life have recognised and appreciated this contribution.

Looking ahead, allow me to highlight, that the development prospects of Albania remain solid and positive.  Our forecasts suggest the economic activity will continue to grow, both in the medium-and long-term horizon. Moreover, the European integration process offers significant opportunities for making a qualitative step for the economic development of Albania. Inviting you to share this positive vision of development, I recall you to continue to maintain the positive approach towards lending, thus supporting the Albanian economy and especially its critical sectors such as tourism, agriculture, etc., but also ensuring a prudent and sustainable growth of your activity.

Concluding, I reiterate that the Bank of Albania, in fulfilling its function as supervisor and regulator adherent to its mandate, will continue to be your serious and scrupulous supporter and partner, in reinforcing the so far achieved results and in facing together all the difficulties and challenges that may arise, by always offering transparency, cooperation and an objective assessment of your requests and proposals, in every decision making.

I wish you a successful and prosperous new year!