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Albanian Banking System

Macro-Prudential Supervision Lessons learned from the crisis Hilda Shijaku Financial Stability Department. Albanian Banking System. Banks operating in the market: 14 banks 2 branches of foreign banks Activity: universal banking. Major operations: Deposits Loans Placements

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Albanian Banking System

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  1. Macro-Prudential SupervisionLessons learned from the crisis Hilda Shijaku Financial Stability Department

  2. Albanian Banking System • Banks operating in the market: • 14 banks • 2 branches of foreign banks • Activity: universal banking. • Major operations: • Deposits • Loans • Placements • Treasury Bills & Government bonds • Other foreign securities

  3. Albanian Banking System • Proprietorship: Foreign capital – strongly prevailing Domestic capital – slightly taking over

  4. Albanian Banking System

  5. Albanian Banking System Presence of foreign banks: • Helped building of the entire system • Know-how brought in the country • Widely spread banking services (geographically) • New products offered • Supported the economic growth

  6. Basel II • Not fully implemented • Pillar I – not implemented • Presently working on the implementation of Standardized Approach • Pillar II – partially implemented. • No regulatory framework in place. • Actions taken in conform to the supervisory principles • Pillar III – Partially implemented • There is a regulatory framework in place for publication of information

  7. Lessons learned from the crisis • Crisis imported • First impact – confidence of the public • Second impact – real economy • Impact on banking system • Deposit withdrawal • Liquidity drainage • Decreased lending • Increased NPL • Impact on economy

  8. Effects on banks balance sheets • Initial state • Dep withdrawal • How much dependent on mother banks?? • Stress tests • Information and risk management systems not in place • New regulation on liquidity management • Credit growth • Npl • change in structure • But only gradual • Capital adequacy

  9. FSI

  10. The authorities response • Formal Measures taken • Liquidity provided to banks through the use of reserve requirement (from 20% to 40%) • Limited exposure to banks’ related parties (from 20% to 10 %) • SC decision to stop dividend distribution of the 2008 and 2009 profit • Decrease of the monetary policy rate ( 1% in January and October) • Change in the auction form (BoA providing liquidity at a fixed rate) • Increased deposit insurance coverage • Requirements • Improvement of risk management practices • Decisions based on prior analysis and stress-testing • Maintain good level of capital adequacy at any time • Continue lending policy to avoid pro-cyclical effects • Smooth the impact on exchange rate regime

  11. Lessons learned from the crisis • Evidenced weaknesses • Loose credit requirements in good times • risk management practices, structures & policy partially implemented • High exposure to foreign currency lending • Poor attention to macro developments

  12. Lessons learned from the crisis • Strength • High liquidity • Good capitalization • Low exposure to foreign markets • Good support from mother banks

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