Financial Sector Assessment Update : Albania
Although the Albanian financial system withstood the shocks of 2008 global crisis relatively well, it continues to operate in highly uncertain macroeconomic environment, which triggers increased vulnerabilities in the system. The decline in profita...
| Main Authors: | , |
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| Format: | Financial Sector Assessment Program (FSAP) |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/02/19295947/albania-financial-sector-assessment-update http://hdl.handle.net/10986/17769 |
| Summary: | Although the Albanian financial system
withstood the shocks of 2008 global crisis relatively well,
it continues to operate in highly uncertain macroeconomic
environment, which triggers increased vulnerabilities in the
system. The decline in profitability, growing non-performing
loans (NPLs), substantial level of euroization, continued
deleveraging of foreign bank subsidiaries and significant
investments in government bonds in the absence of active
secondary market are the main challenges that banking system
faces. Given strong trade and financial links with euro
area, the financial system and real sector in general are
increasingly vulnerable to external shocks as well. Since
2007 the Bank of Albania (BoA) has introduced several
macro-prudential measures to safeguard financial stability
in the country. Higher risk weights and stricter
loan-to-value and debt-to-income ratios were placed on banks
surpassing twin limits on the rate of credit growth and NPL
levels. A second set of macro-prudential policies was put in
place in late 2011 to limit contagion risks and
international spillovers: (i) foreign bank branches were
converted into subsidiaries; (ii) liquidity regulations were
tightened; and (iii) the regulation on related-party
exposure was enhanced. In addition to that, the risk weights
for unhedged borrowers were increased to 150 percent and a
limit of such loans was set to 400 percent of capital.
Overall, financial reporting legislation in Albania has
improved recently and has a high degree of alignment with
the acquis communautaire of the European Union (EU). |
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