BoA raises limit for deposits insurance to cope with possible financial crisis

Tirana, Feb 11 — Global financial crisis has forced Bank of Albania to review the security of Albanian bank deposit. BoA’s Supervising Council decided during a meeting held on Wednesday to approve the guarantee of bank deposits up to 25 million ALL ($250 thousand) at 100%. In other words, if a 2d tier bank goes bankrupt, BoA will compensate its clients 100% for deposits up to 25 million ALL. For all the deposits bigger than 25 million ALL, the compensation will be a percentage of the whole sum. The same amount (the equivalent of 25 million ALL) will be guaranteed for deposits in foreign currencies, mainly in euro and US dollar.
The current minimal guarantee for bank deposits is 3.5 million ALL ($35 thousand dollars). For deposits up to 7 million ALL, half of the deposit gets compensated in full and the remaining half is compensated at 80%. Compensations for deposits bigger than 7 million ALL have regressive percentages.
BoA’s latest decision to raise the guarantee limit of bank deposits reflects the measures taken European Central Bank (ECB). In the 2d half of 2008, ECB increased the level of guarantee for bank deposits in EU for up to 50 thousand euro.
Since October 2002, the Deposits Insurance Agency (ASD) is responsible for the insuring and compensating deposits in the Albanian banking system. According to ASD, the number of bankrupt banks has sharply decreased after the approval of new deposits insurance schemes all over the world and when cases of bankruptcy have occurred, the clients have been protected by deposits insurance funds.
According to law, ASD compensates all deposits for up to 700 thousand ALL, though it leaves uncovered the difference over the 700 ALL. Deposits of up 700 thousand ALL make for 83% of all individual deposits, therefore, the scheme makes for a good insurance cover for all the little clients who are more exposed to risk due to lack of economic information.