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ALBANIAN ASSOCIATION OF BANKS. SHOQATA SHQIPTARE E BANKAVE. ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE. ALBANIA Economy and Banking System. by Seyhan PENCAPLIGIL AAB Chairman Budapest, 15 November 2006. ALBANIAN ASSOCIATION OF BANKS. SHOQATA SHQIPTARE E BANKAVE.

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Albania economy and banking system

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAEconomy and Banking System

by

Seyhan PENCAPLIGIL

AAB Chairman

Budapest, 15 November 2006


Albanian economy

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN ECONOMY

ALBANIA - Located in Southeastern

Europe (Western Balkans)

Economic Policy Framework

  • Open Market Economy,

  • No restrictions on profit and capital

    repatriation,

  • No exchange rate restriction, floating exchange rate regime,

  • Albania signed its Stabilization & Association Agreement with the European Union, the first formal step to eventual EU membership (12 June 2006).


Albania main economic features indicators

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMain Economic Features & Indicators

  • Macroeconomic performance of the Albanian economy has been good overall, with sustained growth and low inflation.

  • Annual economic growth has been around 6% during the last 5 years.

  • Domestic demand mainly driven by migrant remittances (EUR 939 million for 2005, or 14% of GDP) which have significant impact on fiscal revenues and expenditures, as well as by other external current transfers, and rapidly expanding financial intermediation & credit.

  • Services, agriculture and industry share were 45%, 22.8% and 13.8%.

  • Investments to GDP ratio reached 24.2 per cent for 2005.


Albania main economic features indicators 2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMain Economic Features & Indicators (2)

  • EU is the main trading partner: 88% of exports and 60% of imports. SEE is the second trading partner: 9.2% of exports and 14.8% of imports.

  • Exports and imports reached EUR 530 million and EUR 2 billion – Net importer

  • …but more than 60% of the current account financed by FDI.

  • FDI for 2005 reached EUR 213 million.

  • Foreign reserves were at EUR 1.2 billion, covering 4.6 months of imports of goods and services.


Albania main economic features indicators 3

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMain Economic Features & Indicators (3)


Albania macroeconomic environment

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMacroeconomic Environment

POLICIES

Moderate rise of consumer prices during 2005 was favored by the fruitful coordination of monetary and fiscal policies.

Fiscal Policy

Prudential implementation of fiscal policies, by observing

the planned parameters of fiscal indicators, has not transmitted excessive inflationary pressures and has contributed to maintaining price stability.

Monetary Policy

Monetary policy of the Bank of Albania has generally had a neutral stance. Lending to the economy has been the main source of monetary expansion during 2005, unlike in the preceding years, when this function had been realized by government borrowing or foreign currency inflows.


Albania macroeconomic environment1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMacroeconomic Environment

Albanian economy experienced significantly higher growth

than other transition.

With the exception of 1997 (following the collapse of the pyramid schemes), however, Albania has consistently outperformed the CEE countries.

Source: IMF

Source: IMF


Albania macroeconomic environment2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMacroeconomic Environment

Economic Growth

Continuous and sustainable economic growth (~6% annually).

Price Stability

Price stability is one the lowest within SEE countries (ranging between 2-4%).


Albania macroeconomic environment3

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMacroeconomic Environment

Income & employment

  • GDP growth has enabled rise of

    income per capita beyond

    USD 2,500 per year, which,

    however, remains among the

    lowest figures of the region.

  • Notwithstanding the ongoing GDP

    growth in years, employment performance reflects a moderate behavior.

  • Unemployment rate reduction continues to be insignificant, either in absolute value or in relative terms.


Albania macroeconomic environment4

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAMacroeconomic Environment

Remittances

  • Albania’s receipts from workers’

    remittances are, relative to GDP,

    among the highest in the world.

  • Remittances are considerably larger

    than exports (1.8 times), foreign aid

    (7.3 times), and FDI (4.7 times).

  • Remittances have significantly lowered the current account deficit and helped Albania build a comfortable level of external reserves.

  • Although the bulk of remittances is still sent through informal channels, the importance of the formal channel has increased significantly in recent years.


Albania economy and banking system

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN

BANKING SYSTEM


Albanian banking system brief history

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Brief History

Genesis

The establishment of Imperial Ottoman Bank (1863) in Albanian territories.

Central banking

Establishment of the National Bank of Albania, jointly with Italian and Austrian banking groups, 4 October 1913.

Mixed Central & Commercial Banking

Establishment of National Bank of Albania (NBoA), 02 September 1925.

Communist era

NBoA was nationalized in 13 January 1945 and the Albanian State Bank (ASB) was established, with both functions as central & commercial bank.


Albanian banking system brief history1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Brief History

Market Economy

Two-tier banking system introduced and Bank of Albania established as the central bank of the Republic of Albania (1992).

To date

Albanian banking system has 17 commercial banks.


Albanian banking system main features

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Features

  • Universal banking system,

  • The dominant sector within Albanian

    financial system, managing more than

    95.5% of total financial assets,

  • Mainly foreign-owned (14 out of 17

    banks are foreign-owned),

  • Almost privately-owned (some minor state shareholdings),

  • A highly concentrated banking system, where top four banks have a share of ~ 73% of total assets.


Albanian banking system main features1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

No

Subjects2

2000

2001

2002

2003

2004

2005

1

Insurance Companies

5

5

5

5

10

1

0

2

Pension Funds

1

1

1

1

1

3

3

Leasing Companies

1

1

1

1

1

2

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Features

Continuous institutional expansion and development…

Other non-bank financial institutions

[1] Subjects licensed by Bank of Albania.

2/ Subjects licensed by Financial Supervision Authority, except for Leasing Companies.


Albanian banking system main features2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Features

More coverage with banking services…


Albanian banking system main indicators

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Indicators

Performance of total assets

Steady growth of banking assets…


Albanian banking system main indicators1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Indicators

Deposits’ growth

Continuous deposit growth – among the highest in SEE countries.


Albanian banking system main indicators2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Indicators

Credit performance

Experiencing a credit boom recently, but credit ratios still low compared to EU and SEE standards.


Albanian banking system main indicators3

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Indicators

Private Sector Loan Structure

Credit Quality

Credit quality improving despite credit boom; retail loans in expansion


Albanian banking system main indicators4

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Main Indicators


Albanian banking system performance indicators

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Performance Indicators


Albanian banking system performance indicators1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Performance Indicators


Albanian banking system exchange rates

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Exchange Rates


Albanian banking system electronic cards

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Electronic Cards


Albanian banking system regulatory framework

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Regulatory Framework

Law no.8365, dt.02.07.1998 “On Banks in the Republic of Albania”.

Main Licensing Requirements for Credit Institutions

  • Banks shall be founded as joint stock companies. No discriminatory restrictions in terms of capital participation and formation.

  • The minimum amount of initial capital required, paid in cash, in respect of a bank, is not less than ALL 700 million (to be raised up to ALL 1 billion);

  • Administrators having a business or professional history for the past 7 years,

  • General executive directors of the bank shall be more than two,

    Licensing Requirements for bank’s branch office

    Similar requirements as those required for Albanian banks.


Albanian banking system regulatory framework1

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Regulatory Framework

Licensing

  • Preliminary approval or deny, within 3 months from the date of its receipt of the application for a license at Bank of Albania.

  • A bank or branch of foreign bank, which has been granted preliminary approval shall, within one year starting from the day of the preliminary approval, request in writing from the Bank of Albania granting of the final license.

    Scope of activity

  • The range of allowed banking & financial activities a bank may offer differs in relation to the level of paid up capital. A bank with a paid-up capital of more than three times of minimum initial capital is eligible to offer the full range of banking services.


Albanian banking system banking supervision

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Banking Supervision

Prudential Banking Supervision

The supervision process is carrying out through the following instruments:

  • Periodic data reporting regarding banking financial indicators, through unified reporting system (reporting various balance and off-balance sheet items, as well as other indicators, as the supervision regulatory framework requires);

  • Ad hoc (special) reporting of various data;

  • On-site (full scale or targeted) examinations;

  • Off-site analysis.

  • CAMELS system is employed during on-site examinations (CAMELS rankings range from “1” – top performance- to “5” – poor performance).


Albanian banking system banking supervision 2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Banking Supervision (2)

Bank of Albania has already approved a set of all necessary and well-detailed rules and regulations, whose implementation help to ensure prudential banking supervision, as follows:

  • Regulation “On Capital Adequacy”,,

  • Regulation “On the amount and fulfillment of minimum initial capital of the allowed activities of banks and branches of foreign banks”,

  • Guideline “On Bank’s Regulatory Capital”,

  • Regulation “On Market Risks”,

  • Guideline “On the Liquidity of the Bank”,

  • Regulation “On Significant Risk Management”,

  • Regulation “On Open Foreign Positions”,

  • Regulation “On Bank Relations with persons related to bank”.


Albanian banking system payment system

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Payment System

The Albanian payment system is run and regulated by Bank of Albania.

Postal service network, part of payment system also, mainly for money transfer ordered by individuals.

Bank of Albania is the operator of two payment systems:

AIPS (Albanian Interbank Payment System), a real-time gross settlement system (RTGS), which processes all interbank big value (equal to or exceeding ALL 1,000,000 (~USD 10,000)) payments (a SWIFT-based Y-copy service, “live” from January 2004).


Albanian banking system payment system 2

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Payment System (2)

AECH (Albanian Electronic Clearing House) System, an automated clearing system, for processing banks’ payments to their clients (small value payments; “live” from 2005). The system is fully integrated with AIPS and the net clearing position is settled daily in AIPS.

Both systems are owned by Bank of Albania.


Albanian banking system future developments challenges

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

ALBANIAN BANKING SYSTEM Future Developments & Challenges

  • Reduction of informal economy,

  • Expansion of banking retail chains and products, more banking service coverage,

  • Introduction of new technology: e-banking,

  • New banking law – February 2006,

  • Full implementation of IAS/IFRS, by January 2008,

  • Increasing the beneficial effects of remittances, by channeling most of them through the financial system.


Contacting aab

ALBANIAN ASSOCIATION OF BANKS

SHOQATA SHQIPTARE E BANKAVE

ALBANIAN ASSOCIATION OF BANKS

Contacting AAB

URL: www.aab.al

E-mail: secretariat@aab-al.org