BANK OF ALBANIA
Interview with Gent Sejko, Governor of the Bank of Albania, Top Channel (TCH) TV
Publication date: 07.12.2016
TCH: The Bank of Albania has proposed to the Parliament a bill on Bank Recovery and Resolution. What does this bill consist in, and what prompted it?
Governor Sejko: The 2008 crisis showed that various countries faced financial crisis and used public funds to cover financial losses incurred by banks that were in difficulty. The purpose of this bill is to avoid the use of taxpayers' money and to use instead a certain fund to be collected by the contributions of financial institutions and to be managed by the Deposit Insurance Agency. The aim for drafting this specific law is to be in line with the relevant EC directive. It, however, does not imply that we have problems with the banking system, as the latter is well capitalised and has ample liquidity. No bank has difficulty and, hence, for the moment, there is no need for this this bill to be used.
TCH: How will this law protect the interests of depositors and citizens?
Governor Sejko: This bill clearly lays down the parameters and criteria when the bank is mismanaged and the recovery and resolution authority would directly intervene to get the institutions facing problems and remedy the defects in management.
TCH: How are deposits performing and what is the situation of the entire banking system?
Governor Sejko: We have noted no problems with regard to the performance of deposit growth. Our financial system has apparently a surplus in liquidity and deposits. The challenge of the Albanian economy is to transpose these funds to sound credits to economy.
TCH: But, there was an upward trend in the non-performing loan portfolio this year. What is the reason?
Governor Sejko: This increase was specifically attributable to two large clients, which had a considerable impact on the financial system. At the same time, I would like to emphasise that the non-performing loans also increased due to a more prudent supervisory work by the Bank of Albania. We have required banks for a more prudent reclassification of portfolios and an increase of provisions. We expect non-performing loans to decrease at the end of year, to ALL 7.2-7.3 billion. At the same time, credit restructuring provided a positive impact in the absolute value, at ALL 7.4 billion. Hence, we expect the non-performing loans rate to improve.
TCH: The reasons on why non-performing loans increased are being discussed extensively. Is the mismanagement of banks one of these reasons?
Governor Sejko: Credit portfolio grew considerably, at 25-30% per year, till 2008 and many risk parameters and criteria were disregarded amid banks competition to generate portfolios, and an overall optimistic period. The non-performing loans we have nowadays mainly derive from this period. Of course, there are also elements of mismanagement. It is unavoidable. That is why the central bank has reflected accordingly. Through our examination reports, we have addressed the problems and we have undertaken the relevant measures.
TCH: Is this credit growth rate sufficient to sustain the economic growth?
Governor Sejko: Economic growth requires a higher but stable lending level, oriented towards serious projects, in order to on the one hand contribute to economic growth and, on the other, to maintaining financial stability and preventing the generation of new non-performing loan portfolios.