PRESS RELEASE
Interview given by Mr. Ardian Fullani, Governor of the Bank of Albania, to the See - News Agency, on May 9, 2005

Albania plans to wrap up the privatisation of its banking sector by selling the last stakes of 40%, of the Italian-Albanian Bank and the United Bank of Albania. It is expected that the privatisation of will be completed in September, so that by the end of 2005 the Albanian banking sector will go completely private," Fullani told SeeNews in a recent interview.

The Italian-Albanian Bank was set up in 1992 as a result of the co-operation between the European Bank for Reconstruction and Development (EBRD), Banca di Roma and the Albanian finance ministry. The ministry and Banca di Roma hold 40% each.

The United Albanian Bank, former Arab-Albanian Bank, was licensed for operations by the Albanian central bank in 1999. Private banks and individuals hold 60% of the United Albanian Bank.

Also by the end of the year the country's banking sector is very likely to welcome its 17th member.

In February the central bank granted Financial Union Tirana (FUT), Western Union's agent for Albania, Kosovo and Macedonia, a preliminary licence to set up Union Bank. The new financial institution will join Credins and Popular Bank as the third bank fully funded by Albanian capital.

"As a financial institution, Western Union is not a newcomer to the market...The Bank of Albania believes that a new bank of that kind will have a considerable influence on the system of payments, will promote the credit cards development and will encourage competition, - Fullani said.

If granted a final licence, the new bank will focus on providing retail banking services to individuals and small companies, as well as expanding the services offered to Western Union clients. Under Albanian law, a final licence to set up a bank is to be awarded within six months after granting the preliminary one.

Lending Growth

Fullani said that the main challenges that lie ahead for Albania's developing banking sector are its consolidation and expansion countrywide, the introduction of new products and services, the improvement of the payments system, the development of consumer and corporate lending and banking education of the people.

One of the main ways to reduce the share of cash payments in Albania's economy is the promotion of credit cards use.

The task can be fulfilled via the establishment of a modern financial services infrastructure, including a widespread network of automated teller machines (ATM) and point-of-sale (POS) terminals.

Now, few of the country's 16 banks offer debit cards and overdrafts to the population of 3.1 million.

Money in circulation totalled 132.9 billion leks (1.1 billion euro/$1.4 billion) at the end of January. Broad money M3 stood at 514.87 billion leks.

We will create the conditions for clients to substitute cash payments for virtual money.

The main problem is to find the ways and means to encourage lending growth in Albania. The preliminary conditions have to do with institutional changes and regulations and law implementation. Land ownership law and the property rights are paramount.

Plans to boost lending would fail in the absence of adequate legislation, he added.

Price Stability

"Price stability and control over the money market is in the centre of the central bank's monetary policy," Fullani said, adding that the consolidation of the country's macroeconomic indicators had allowed the central bank to gradually cut key repo rate to an all-time low of five percent.

Albania's inflation rate was 2.9% last year. It is expected to be between two percent and four percent this year. Economic growth in Albania was six percent in 2004, projections put it between six percent and seven percent this year.

I think that all the prerequisites do exist for a stable 2005, so that we would be able to prepare another three-year agreement with the International Monetary Fund, - Fullani said.

Albania hopes to complete the Poverty Reduction and Growth Facility (PRGF) programme it signed with the IMF in June 2002. The Fund assigned 28 million Special Drawing Rights (SDR), or close to $42.5 million (33.1 million euro), in 10-year loans at 0.5% annual interest and a grace period of five years and a half.