Greek crisis escalation won’t affect Albania’s banking system, central bank says

Tirana Times
By Tirana Times June 29, 2015 14:21

Story Highlights

  • Albania's central bank governor, Gent Sejko, says the banking system in Albania is immune to possible spillover effects from a possible Greek default and that the Greek banks operating in Albania are liquid and well-capitalized.

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Albania's central bank governor, Gent Sejko, says the banking system in Albania is immune to spillover effects from a possible Greek default. (Photo: Archives)

Albania’s central bank governor, Gent Sejko, says the banking system in Albania is immune to spillover effects from a possible Greek default. (Photo: Archives)

TIRANA, June 29 – As the Greek debt crisis escalates and a possible exit from the eurozone is closer than ever, Albania’s central bank has assured a potential Greek default would not affect Albania or the country’s banking system, where three subsidiaries of Greek banks hold around 16 percent of assets.

Albania’s central bank governor, Gent Sejko, says the banking system in Albania is immune to possible spillover effects from a possible Greek default and that the Greek banks operating in Albania are liquid and well-capitalized.

The message by the Bank of Albania governor comes a time when Greece is on the verge of defaulting on its debts and Greek Prime Minister Alexis Tsipras has called a surprise referendum for July 5 on the latest terms offered by Greece’s creditors.

Banks in Greece are currently closed and will stay shut the entire week after a decision by the Greek government to restrict panic cash withdrawals following the failure of talks with Greek creditors on continuing with the bailout program.

“We have been monitoring so that Greek banks [in Albania] are not exposed to their home country and parent banks. These banks are licensed and operate in Albania as independent banks and any deterioration in the Greek economy would not have any real and powerful impact apart from confidence factors,” Sejko said earlier in an interview with VoA’s Albanian service.

The central bank governor says the Albanian economy has already handled the major impacts of Greece’s six-year recession with a sharp decline in remittances from around half a million migrants in the neighboring country and a sharp cut in trade exchanges, especially exports.

“Greece has a high level of foreign investment in Albania, but Albania’s exports to Greece are low at only 3 percent, which is a factor showing that we are somewhat immune economically,” said Sejko.

As elsewhere in the region, Albanian banks witnessed substantial panic deposit withdrawals in the face of spillovers from instability of global financial markets, which were compounded by concerns about the health of the Greek banking system in the fall of 2008.

Ample liquidity buffers were utilized to meet deposit withdrawals. To boost confidence, deposit insurance limits were raised fivefold to 2.5 million lek (€17,500), and deposits started to recover from the second half of 2009.

Greek banks account for less than one-fifth of Albania’s banking system.

NBG Bank Albania, a subsidiary of the National Bank of Greece, holds 3.3 percent of the total assets in the Albanian banking system.

The two other Greek banks operating in Albania, the Tirana Bank part of Piraeus Bank and Alpha Bank Albania, part of Alpha Bank, hold 7.4 percent and 5.9 percent respectively, according to an IMF report.

The share of assets held by Greek bank in Albania has dropped from an estimated 25 percent in the pre-crisis years to around 16 percent currently.

The situation is also a result of the acquisition of Emporiki Bank by France-based Credit Agricole. The same Albanian unit was recently acquired by U.S.-based NCH Capital Inc, private equity and venture firm.

Analysts in Albania warned last December just before leftist Syriza party formed the new government, Greece’s return to its old drachma currency would have positive impacts in the short run because of the transfer of savings by Albanian migrants to Albania, but it would negatively affect remittances in the long run because of a weaker drachma.

A possible Greek default on its debts and its withdrawal from the eurozone could affect Albania more through financial rather than trade links, the IMF has warned in a report.

Standard and Poor’s, one of the top three credit rating agencies, has recently warned it could downgrade the credit ratings of several South East European countries, including Albania, where subsidiaries of Greek banks hold a considerable share of assets, if the troubles of Greece spill over into their banking systems.

Greece, which is Albania’s second top trade partner and the largest foreign investor, escaped its crippling six-year recession in 2014, but experts estimate that it will take years for Greece to recoup the economic ground during its worst-ever recession that has made its economy around a quarter smaller compared to the onset of recession in summer 2008.

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Tirana Times
By Tirana Times June 29, 2015 14:21