Speech by the Governor of the Bank of Albania, Mr. Ardian Fullani, held at the Round Table discussions on the creation of a Credit Information Bureau

Publication date: 28.04.2006


Distinguished participants,

Ladies and gentlemen,

First of all I would like to thank the FSVC for their contribution in organizing this meeting. I also thank USAID, the American Embassy, the International Monetary Fund, the World Bank, commercial banks and all other participants for being here today in this round table.

We are all aware of the growth rates of the lending activity by the Albanian banking system during the recent years. During 2005, the outstanding credit increased 57.6 billion leks (1) or 82 percent, from 19.3 billion or 38 percent in 2004.

Expansion of sound lending is certainly positive for the economic development of the country. What consists sound lending, is very much linked with the ability of the credit institutions (especially banks) in making thoughtful lending decisions, based on a good and solid analysis of the borrower (in a micro perspective) and on well designed and realistic business development goals. Tightening competitive business environment, rapid expansion of credit through introduction of new loan products and the targeting of new borrower categories, the need to, at least, maintain the profit margins and the market share, make it difficult to find the right balance between goal achievements and the quality of the decision-making in the lending activity. Hence, the importance of strengthening the risk management capacities and the prudential requirements, especially in the area of lending, is urgent in a time of rapid developments.

In this regard, the Bank of Albania appreciates the attention banks are paying to credit portfolio quality. On our side, we also have increased our efforts for a prudential and constant supervision in terms of credit risk management.

As in many other things, the quality of information, upon which decisions are made, is paramount. In the lending activity, the information about borrower's history is critical to minimise the risk of credit activity. The difficulty to get the right information, caused by the increased number of borrowers and the diversity of their categories, is somehow balanced by the developments in the information technology area. So there exist the need and the means to establish a centre for collecting and disseminating credit information for each borrower of the banking system. Such institution would help in enhancing the soundness of banking sector by reducing risk associated to credit expansion. I think this is the right the time to establish this information bureau considering the high growth rates of lending and the requests of both the banks and of the Bank of Albania, as the supervisory authority, for qualitative decision-making and loan performance.

In addition, the so-called Credit Information Bureau will reduce the evaluation cost and the time of processing applications for loans; will reduce the probability of extending soon-to-become nonperforming loans and will increase credit quality

So far, there have been considerable and constant efforts made by the Albanian Bankers' Association for creating a Credit Information Bureau, but for various reasons the process has not finalised. To overcome many of the technical and structural problems encountered in this process, Bank of Albania has decided to take a more prominent role in this initiative and set up this bureau, initially, as a unit under its structure. According to this project, the establishment of this bureau, the collection of data into a centralised register, the information management and the provision of the service of giving information to banks, will be mandatory and carried out by the Bank of Albania. Such project, does not exclude other similar ones, run by the banks themselves.

This centre will serve banks for a better management of credit portfolio and its risk, and will provide to the Bank of Albania an important tool for carrying out more complete analyses of the banking system in general and of the risk-related issues in particular. The establishment of such a function at the Bank of Albania also fulfils the actual need of banks for credit information management, through guaranteeing its accuracy, confidentiality and reliability.

I am confident that banks, as the main beneficiaries of this facility, will support us for a successful accomplishment of this project.

Thank you.

(1) - While the outstanding credit in ALL has grown by ALL 17.5 billion or 128 percent, the one in foreign currency marks a rise of ALL 40.1 billion or 71 percent.