Questions and answers at the press conference on 4 November 2020

Publication date: 05.11.2020


Question: What is the stance of the Bank of Albania on the possibility of another package for the pandemic, aiming to postpone loan instalments again? Would it be welcomed by the banks?

Deputy Governor: With the moratorium that decided on the postponement of payments of loan instalments, the Bank of Albania aimed to facilitate the payments of borrowers who were temporarily in a difficult position. Their ability to pay was compromised. On the other hand, knowing that this problem is systematic and can continue for a long time, the Bank of Albania has tried to help commercial banks with liquidity so that they are ready to accommodate all the rules decided on deferring or restructuring loans. In the current context, we believe that the moratorium was a short-term instrument that actually achieved its objectives. The Bank of Albania is very carefully observing the epidemiological behaviour of the pandemic and its consequences, so in case of their deterioration, of course, it will remain open to discuss any reasonable and objective request, always in close and intensive cooperation with Albanian Association of Banks.

Question: Enterprises in general, and small ones in particular, have had reserves on the benefit of the sovereign guarantee, due to the high requirements from banks for them focused mainly on collateral at a time when they are in difficulty. What is the central bank's comment on these concerns?

Deputy Governor: The sovereign guarantee is in fact a financial instrument elaborated by the government in close cooperation with banks and the Albanian Association of Banks. Each of the parties in this agreement has its own objectives to achieve and we believe that these objectives are in favour of increasing well-being and macro-financial stability and are problem-oriented. However, in the conditions of a pandemic, the sovereign guarantee should serve to meet the objective of the government, to minimize as much as possible the consequences of the pandemic on the economy, but also to meet the requirements and conditions that banks have in terms of their risk criteria. So, it is an established and institutionalized relationship between these two institutions on the condition that both of these institutions, in cooperation, help to avoid as much as possible the consequences of the pandemic.

Question: Do you support banks tightening lending standards for enterprises seeking to invest?

Deputy Governor: The role of the Bank of Albania is defined as a guarantor of the stability of the financial system and in this function the Bank of Albania uses its supervisory instruments to ensure the stability and proper functioning of it, particularly regarding the banking system. But on the other hand, banks are independent entities which have a plan of their own, have operational independence, and decide autonomously on their lending terms and conditions. Banks' objectives are built on the expectations they have in a given economic and financial environment, in order to have the best supply and to lend in the easiest way possible. Thus, the Bank of Albania has a mediating and facilitating role in this approach for a stable and functional financial and banking system.

Question: You have stated that the Bank of Albania will take unconventional measures if necessary to overcome the pandemic. If these steps were necessary, what would be the first measure you would take?

Deputy Governor: The Bank of Albania has repeatedly stated that the further and sudden deterioration of the situation would naturally require a review of the easing side of monetary and fiscal policy, i.e. the economic policies. In our case, we have prepared a contingency plan which will be activated in case of a deterioration of the situation, but it also depends on the form of the impact that the pandemic may have on the economy. All these contingency plans are coordinated and consulted with our international partners such as the IMF.

We have emphasized that quantitative easing operations are welcome and would help increase liquidity and stabilize interest rates. If necessary, these unconventional measures will be used.

Question: The government next year has projected to borrow in the domestic market the amount of ALL 49.9 billion. Can this loan be realized in the financial market of Albania, and would it affect the liquidity of banks?

Deputy Governor: In fact, the domestic financial market has accommodated during 2020 a request similar to the amount mentioned in the question. If we look at the balance sheets of the banking sector I think that they are capable of accommodating such an amount. However, we as a central bank recommend that care should be taken on the timely distribution of this funding and on the most equitable monitoring of its use in the economy.

Question: How much is at risk the economic performance in the case of a second lockdown due to the pandemic?

Deputy Governor: Actually, from recent epidemiological developments of the virus in society, a second lockdown of the economy would only occur if there was an urgent need to control the spread of the pandemic and to protect our health system from an overload. So, if it happened, obviously the consequences on the economy would be negative. The growth rate and the employment indicators, the financial situation, they would all deteriorate. However, without it happening we cannot say how strong this negative shock would be, but it is certain that the strength of this negative shock on the economy would depend on the duration, the technical modalities of the lockdown but also on the economic policies that would accompany this decision to have a second lockdown or a partial lockdown of the economy.

Question: How did the distribution of the sovereign guarantee 1 and 2 go? How much has been the disbursement so far and how many entities have applied?

Deputy Governor: We can say that sovereign guarantees, like sovereign guarantee 1 and 2, have been successful and have been used by enterprises. According to data obtained from the Association of Banks, there are about 560 enterprises that have benefited from the disbursement of funds to finance salaries through the sovereign guarantee 1 in the amount of around EUR 52 million. Whereas, regarding sovereign guarantee 2, it results that 200 borrowers have applied and have benefited a total value of around EUR 51 million.