BANK OF ALBANIA

PRESS RELEASE
Questions and answers following the joint press conference of the Governor of the Bank of Albania and the Minister of Finance and Economy

Publication date: 07.12.2017

 

 Question: What would be a pressing mechanism and how will the banks be bound? Will the pressing measures affect lending?

Governor: As I pointed out, this is a measure that for large enterprises has entered into force since 2015. Banks, in the framework of respecting risk criteria and their regulations, have started to apply this measure over the years, as part of the formalisation of their internal processes. We do not anticipate that this measure will create any problem in proceeding with the borrowers’ cases.

Of course, this is not a tightening measure, but a formalizing one. It is aimed at normalizing the activity, and we would see it more as an easing measure of the lending process for the banks, since it decreases financing costs and creates equality among borrowers. The idea is that borrowers will present their official financial statements, so they will not work with two standards, but will work with the formal standard. In addition to providing facilities, we expect this measure will contribute positively to crediting, for both the banks and the borrowers, but mainly for banks, since it will be easier to choose qualitative borrowers in the process of lending; in turn, that will contribute to decreasing non-performing loans.

In this light, I will combine both questions into one. We do not see or expect that there will be barriers to lending, since banks have started to apply these measures over the years. Instead, it is in line with our appeal to banks for healthy lending, oriented towards potential sectors of the economy, where there is less risk and more potential and more scope for development.

Minister: One comment regarding this question. Remember that all the anti-formality measures are compatible with one another. I would like to remind you, but also enterprises, that in 2016 we improved the tax administration framework. And, here I want to remind enterprises that we have put a very simple and clear written rule in that law, where enterprises have the right to correct their declarations for the past years at any time, without any penalty. So, think of all that we are saying as a mature and well-thought chain of logical, evolved during the last three years. In 2015, we said that on 1 January 2018, we will have a direct measure, so banks will accept only balance sheets submitted to tax authorities. Meanwhile, during this period, we gave the enterprises the right to auto-correct without any penalties. All these measures, together with what the Governor said, are easing measures that help business to formalize. Informality is a cost for them, a cost for the economy, and a cost for the state budget.

Question: How will this measure be applied on already granted loans or those still in the process? Will borrowers be required to present a new balance every year?

Governor: This is a technical question, so I am obliged to answer according to the concrete process applied by banks during the decision-making for lending. Overall, until now, banks in their analysis require tax declarations, as well as non-official data. Thus, banks have had both official and non-official information in conducting their analysis, as required by decision-making committees. First, it is important that banks take sound decisions for successful lending. Starting from January 2018, banks will refer to tax declarations only for the other categories of enterprises as well. For large enterprises, as I emphasised, it is already being applied, meaning the official data they are supposed to have available. From the supervision and controls we have exercised, we have verified that they have them. This, I reiterate, would provide not only formalization and facilitation for lending procedures, but would also ensure fair competition among enterprises.