PRESS RELEASE
Interview with Gent Sejko, Governor of the Bank of Albania. Klan TV

The agreement between Greece and the European Union mitigates the effects of the Greek crisis in Albania

Question: What is the situation of the financial stability in Albania, in the light of recent developments in Greece? Do you confirm the previous assessments, that the Albanian banking system is immune to the Greek crisis and which are the latest assessments?

Gent Sejko: We confirm the assessments regarding financial stability in the Republic of Albania. The financial stability remains sound, is well capitalised and has surplus liquidity in commercial banks, notwithstanding the situation in Greece. As emphasised previously, banks in Albania have surplus liquidity. Given that, our challenge and objective, as a central bank, in cooperation with the Associations of Banks and commercial banks, consisted in increasing lending to economy, in order to contribute to economic growth in Albania. In this context, we have identified situation of liquidity surplus, which is in contrast to the current situation in Greece, where banks are closed and have introduced capital controls.  I would say that the situation in Greece has affected the commercial banks in psychological but not in economic and financial terms. We have monitored and continue to monitor the situation every day, and have noted an entirely normal situation in our banking system, notwithstanding the situation in Greece. We hope this situation will remain as such in the days to come. I would like to underline the positive news on the agreement between creditors and the Government of Greece. The agreement offers a breathing space not only to banks and the financial system in Greece, but also to the Greek state, population, politics and the whole economic, financial and social situation, notwithstanding the austerity measures.  As far we know, EUR 85 billion is provided to Greece, of which EUR 25 billion will be used to re-capitalise banks. Yesterday, the Greek parliament ratified this Agreement and from the moment of the ratification in the Greek parliament to the ratification in some of EU member state' parliaments, the EU decided to approve a "bridge" loan of EUR 7 billion, aiming at providing a breathing space, and capital support to Greek banks.  We see positive steps, positive movements. The important thing is that the Agreement between Greece and its creditors was reached.  This will certainly provide positive developments in comparison to the "Grexit" scenario. 

When you say that the impact is only psychological, have we had any case of citizens showing fearfulness or uncertainty about the banking system?

Governor Sejko: We are conscious that a large number of Albanian citizens have emigrated to Greece, over several years. May be the figure is not properly precise, but more than 500 thousand Albanian are estimated to live and work in Greece. It would be a naive thing to say there is no psychological impact at all. Absolutely, there is a psychological impact, as these people are in constant contact with their families and the impact of the difficult situation in Greece is reflected in the opinion and psychology of the Albanian citizens. In these days, there have been some withdrawals from the Albanian banks with Greek capital and transfers to other banks. Nevertheless, these withdrawals are insignificant as a ratio to the liquidity and capital of these banks.  Notwithstanding the situation in these days, these banks continue to have a stable situation and surplus liquidity.  That is, the central bank has introduced no limits as to level of withdrawals or capital movements. The Albanian banks with Greek capital have been able to serve, correctly, to their customers. But, I would like to emphasize again, the agreement will calm the situation of parent banks in Greece, which will be also reflected on the overall psychological situation in Albania, and in the activity of banks, which is the most delicate part related to the financial stability. 

Would you say that reaching the agreement may be translated into either a migrants' return or fall in remittances? Also, you have stated in your last statement that, one of the risks may be with regard to trade or return of emigrants or fall in remittances.  Do you still stick to this declaration?

Absolutely, reaching the agreement is a positive step. We are very happy that finally an agreement is reached, first to alleviate the overall situation in Greece, the economic and financial situation there and ultimately the Greek people.  The premises are more positive and the return of emigrants is estimated to be at lower levels, from what might be if the agreement had failed. One could accurately predict if emigrants will return and what their number will be, should the situation in Greece worsen.  It is to be emphasised that the crisis in Greece has started since five years ago. A considerable number of emigrants have returned from Greece during these years. Of course, there could be a slight fall in remittances and a return of emigrants, but the Albanian economy has already faced and has experienced shocks from the Greek crisis.  We consider that the agreement will provide a positive impact on the stability of every emigrant (whether living in Greece, Albania or elsewhere) also on the performance of remittances. However, we have taken all the measures to be prepared in the event of a fall in remittances. 

Related to remittances, is there any figure on the first half of this year?

The data of the first quarter 2015 suggest that remittances, overall, increased. Remittances from some countries have fallen, but overall they were up.  Also, capital inflows were up, mainly attributable to the fact that, a part of capital and deposits from Greece have returned to Albania.  Deposits in the Albanian banking system showed increase in remittances from other countries as well, such as England or Germany. Hence, if we refer to a short-term quarterly period, remittances in Albania increased and in these regard the Greek crisis has had no impact. But in a long-term period, taking into account the "Greek" factor, we consider that remittances might fall. This forecast is corroborated by the difficult economic and financial situation in Greece, which later will be reflected on an increase of unemployment. This will apparently affect the Albanian emigrants as well, as unemployment is reflected in this segment of the society. 

INSTAT previously published the latest data for the first quarter of this year, related to the Gross Domestic Product, an estimated growth of 2.82%. How do you comment this figure?

Governor Sejko: The 2.82% growth rate of the Gross Domestic Product (GDP) is in line with our projections. Our forecast for 3% growth at in 2015, adjusted recently with the IMF Mission at 2.70%, is completely in line with this growth for the first quarter. This is a positive figure for the GDP, showing the economy is moving on a growth track and the structural reforms by the Albanian Government, along with the financial reforms that we have implemented as the Central Bank are providing their results. If we refer to historical trends, the beginning of the year grows at lower rates, while the second half has higher growth. If we had the same historic trend, the economic growth would have been above 2.82%, but, refereeing to the crisis situation in Greece, we shall carefully monitor the latter and will see what this growth will be in the next quarter. It is important that we have a good start regarding the economic growth and an achievement of our objectives, attributable to the structural reforms implemented insofar. 

Does this figure show that our economy is not affected by the crisis, but continues to grow in line with the forecast? 

Governor Sejko: This figure shows that the Albanian economy is in the right direction. Thus, despite the impact from the Greek crisis, we have recorded a growth of around 2.82%. The economic growth would have been higher if there was no impact from the Greek crisis.  Thus, notwithstanding the Greek crisis, our economy continues to grow at a positive pace.

Relate to the recent regulatory amendments by the Bank of Albania, to improve lending and the message to the borrowers, what will these amendments bring about? What is the situation of lending in Albania?

Governor Sejko: Lending increased during the first half of this year as well. We promised at the beginning of year, to increase transparency and review all terms and conditions on the protection of consumer's interests.  The newly adopted Regulation aims at reducing some of commissions and fees of banking services.  We cut the pre-payment penalty applied on both consumer and mortgage loans, with the purpose the consumers, the Albanian borrowers to benefit from the interest rates and commissions. We cut the prepayment penalty on loans from 2% to 1% and within one year to 0.5%. Also, we have reviewed other criteria. The borrowers may withdraw from a credit agreement within two weeks in case of a consumer loan and within one week in case of a mortgage loan, with no consequences. We have reviewed the loan agreement criteria between the bank and the consumer to favour the households.  The whole regulatory review aimed at protecting consumers' interests vis-a-vis the banking services. Obviously, there is a commission on the prepayment of a loan, as the bank itself conducts its business and we cannot zero it, but we have tried to be correct, fair in defending the interests of both parties, mainly of the Albanian consumers. 

In the last meeting of the Supervisory Council, we reviewed the regulation on capital adequacy ratio, in terms of providing breath space to commercial banks, on the investments of the Albanian government securities in foreign currency. In more concrete terms, we changed the weighting rate, from 100% to 50% to provide to the Albanian Government and commercial banks the possibility to take a loan in foreign currency from commercial banks.