Speech held by the Governor of the Bank of Albania, Mr. Ardian Fullani, at the reception of the Albanian Association of Banks with bankers and representatives of banks operating in Albania

Publication date: 18.12.2009


On the occasion of 2009 year-end, the Albanian Association of Banks held a reception with bankers and representatives of banks operating in Albania. With invitation from the Albanian Association of Banks, the Governor of the Bank of Albania, Mr. Ardian Fullani, addressed a speech to the participants.

You will find below the speech held by the Governor of the Bank of Albania on this occasion.

Dear bank executive managers,

Dear colleagues and friends,

It is a pleasure to be here with you today, to celebrate the anniversary of the Albanian Association of Banks. It coincides with year-end and as such, it provides an additional reason to analyse the performance of the Albanian banking system over this year and the contribution of the Association in this regard.

In general, this period has had its ups and downs; however, it has witnessed a remarkable progress of the Albanian banking sector, which has become the main engine of our country’s economic growth.

Let me start by highlighting some of the main elements that show the progress of the Albanian banking sector over these years. The banking sector, which dominates the financial sector in Albania, has been moving from a sector with 3 banks, where all of them were state-owned and suffered various inefficiencies, into a sector that nowadays counts 16 banks, all in private hands, where the foreign capital dominates.

In the course of this time the banking sector has expanded its activity, accounting for 77% of the country’s GDP, has raised the number of branches, has increased its products to the public and has improved their quality, thus rendering a significant contribution to the country’s economic development. At the same time, the entrance of well-known European banking groups from Greece, Austria, Italy and France, has been associated with episodes of consolidation in the banking industry.

Higher standards have been adopted for a better governance of banks and for more transparent relationships with the public. During these years, the banking sector has been considerably profitable and has operated in compliance with the regulatory and supervisory framework in terms of capital and liquidity. The Board of Directors and shareholders have been prompt in introducing the necessary measures to maintain a sound financial situation and support their banks’ expansion with additional capital. The supervisory work of the Bank of Albania has pursued and monitored the development of the banking sector along this time, in an effort to adopt the best international standards in the area.

But of course, nothing is absolute. The banking industry has been faced with a number of issues, many of which are part of our financial sector’s development phase towards its consolidation, towards the development of the economy and the society. We have been discussing these issues in many other occasions, but I could not help mentioning the importance of having good risk management frameworks, balanced expansion of activity, clear and transparent procedures, and many other issues.

However, I would like to reiterate the importance of a sole element that incorporates all of them: the good governance. For the management team of a bank, it means:

· Professionalism, or the ability to make the right business decisions after balancing the risks and benefits;

· Dedication, or the ability to instil a hard-working environment in the institution;

· Responsibility, or the ability to achieve the objectives in a qualitative manner;

· Vision, or the ability to adopt a long-term view in projecting your institutions performance; and

· Accountability, or the ability to establish an efficient system of checks and balances for the processes and structures at your institutions.

These elements, which are a must for the management philosophy, should be endorsed by the entire staff as its normal work culture. Certainly, we all agree that these issues should be further improved in our banking sector.

Dear friends,

During 2009, our banking sector faced a unique and challenging situation. The international financial and economic crisis affected considerably the public confidence in our banking sector. It showed how sensitive to financial shocks our social environment is. It also showed how important is to be prepared for the worse. Financial crises are the most difficult to be managed and their consequences need a long time to be absorbed.

Indeed, thanks to the liquidity of the banking sector, the support of the shareholders and the measures of the Bank of Albania, the banking sector has overcome the situation caused by deposit withdrawal at year-start. We have certainly left behind the short-term shock, but the skies are not yet clear. To manage the liquidity situation, you were forced to cut short on the lending supply. This has coincided with more pronounced difficulties in the real sector of the economy, which in turn, has affected the demand for credit. We are now facing a deterioration of credit portfolio quality, which is going to weigh on your financial result over the medium run.

The Bank of Albania acknowledges and supports the efforts of the banking sector to early recognize and quickly provision the non-performing loans. We urge you to keep exercising the necessary caution when assessing the credit quality. On the other hand, you must support your clients and continue lending to good borrowers, since this is beneficial to your clients, to you and to the whole economy. I will keep stressing this to you, because I do believe that there are real opportunities for you to do this in competitive terms, particularly for loans denominated in the national currency. The Bank of Albania will continue to provide the necessary support, by maintaining the liquidity flow, in order to satisfy your needs. Lending requires more work and analysis, not only off-site but also on site. It requires an in-depth knowledge and pursuit of the client and the market. But it is vital to bank balance sheets and to the country’s economic activity.

The international financial crisis impact on our banking sector should serve as a lesson we must learn for the future. As we have also mentioned in our recent publications, you should carry out a process of re-assessment of your development objectives and models for the future, so as to ensure a consistent, stable, and profitable activity.

Furthermore, you must develop policies and structures that improve your capacity to act under unusual circumstances and maintain “business as usual” for the most important areas. The Bank of Albania is now working with the goal to support this process, in due time and after proper consultations with you, by introducing changes to the regulatory and supervisory framework. With broader consideration, and following the changes to the supervisory standards at European level, we must work together to ensure a more balanced, risk-averse and stable financial market and institutions’ activity in the future. I want to express my belief that the banking industry in Albania will be an active actor in meeting these objectives.

Let me now conclude with a sincere wish for a happy and successful New Year to you, your families and the institutions you manage! To the Association of Banks, I wish that the New Year represents yet another period of meaningful progress and achievements!

Thank you!