Is there a case for a further increase of minimal capital in Albania
Author: Erjon Luçi
Printed on: 15.09.2003
Production date: 15.09.2003
Material category : Not Periodic Publications / Working Papers
The proliferation of many new, high-risk banks, as a result of the liberal bank entry policy at the beginning of transition, increased the risk of systemic failures. Even in those CE and SEE countries that relied more on safer foreign competition there have been cases of foreign banks making large losses (e.g. in Hungary) or cases of fraud (e.g. in Poland) (Bonin, et al. 1998). With the privatisation of SOBs the government's implicit insurance of their deposits ceases too, and the possibility of deposit and bank runs became more real. Thus, the regulation and supervision of banks which could reduce the systemic risk in transition became of paramount importance. A systemic failure would discredit all previous banking reforms and it may be very difficult for the banking sector to restore savers and foreign investors confidence.