BANK OF ALBANIA

PRESS RELEASE
Decisions by the Supervisory Council, 7 February 2018

Publication date: 07.02.2018

 

On 7 February 2018, in addition to the decision to keep the key interest rate unchanged at 1.25%, as well as overnight deposit and overnight loan rates at the Bank of Albania at 0.25 and 2.25%, respectively, the Supervisory Council of the Bank of Albania reviewed and decided to:

  • Approve the de-euroization package to further strengthen the use of the national currency in the financial system.

This package is part of the Bank of Albania’s commitment in the framework of an inter-institutional strategy in this regard, formalized last April, by signing a Memorandum of Cooperation between the Bank of Albania, Ministry of Finance and Economy and the Financial Supervisory Authority.

The approved package includes the policy document on increasing the use of the national currency in the activity of the banking sector and non-banking financial institutions that are supervised and regulated by the Bank of Albania, as well as the measures that will be undertaken this year in accordance with this policy. In principle, this document defines the contribution of the Bank of Albania in the framework of this strategy and the manner the results of this contribution will be assessed. Meanwhile, the measures aim to render the use of foreign currencies less preferable, and also to raise the borrowers’ awareness regarding the risks associated with foreign currency borrowing.

More concretely, the regulatory changes that implement the de-euroization measures include:

a. increasing the required reserve rate for foreign currency liabilities at 12.5% (from 10%) and its decrease for liabilities in lek down to 7.5% (from 10%). For banks, in which the foreign currency liabilities account for more than 50% of total liabilities, only for the value of the positive change, the required reserve ratio in foreign currency is increased to 20%.

b. increasing the minimum regulatory requirement for liquid assets in foreign currency, to 20% of short-term liabilities (from 15%). For liquid assets in lek, the ratio level will remain 15%.

c. raising the awareness of borrowers about the risks associated with foreign currency borrowing. For this purpose, banks are required to propose to the borrower an alternative loan in lek and to accompany the product with a concrete example on how the loan instalment changes in case of a supposed exchange rate depreciation. In addition, banks are encouraged to address the possibility of mitigating the exchange rate risk for the foreign currency borrower in the event that this risk is identified and is accepted by the terms of the contract between the parties.

The instruments adopted in this package will come into force, gradually, within June 2018.

In the framework of the de-euroization package and for assessing the impact of the measures undertaken, the Bank of Albania will publish twice a year a report, which monitors the performance of some financial indicators that reflect the levels of euroization. Depending on the performance of the indicators, the above measures may be supplemented with other measures in the future.

  • Adopt some amendments to the regulation "On electronic payment instruments"

These amendments aim to review the regulatory framework for electronic payment instruments to enable the use of modern technology regarding the ways of communicating the customers the PIN code for bank cards.

The Supervisory Council was also informed on daily functional and operational activities of the Bank of Albania.