Tirana Times
The banking system is a cornerstone of a capitalist society. So is competition. So when a series of complaints by customers over high service and product fees banks charge customers in Albania was backed by a strongly-worded report by the Competition Authority, the issue attracted a lot of attention.
Banks in Albania in 2011 are plenty in number and in diversity, and most of them are part of European or regional networks. However, there are charges their fees in the Albanian market are higher than the regional average, in countries comparable to Albania in size.
The central bank says it can’t tell the secondary private banks what to charge in fees because they are private businesses, operating in a free market. But the Bank of Albania governor did announce some policy changes that could lead to fees being lowered for products and services performed in the local currency.
The government has vowed to tax the banks more if they don’t lower their fees, a practice that might backfire if the banks simply included the added costs in even higher fees. But the government pressure could also have a lowering effect, considering the political pressure on the business banks do with the government itself.
But what about the banks themselves?
The country’s main banking association doesn’t agree with the Competition Authority’s finding. It says the fees are at or below the regional average, and some banks don’t charge fees at all, which means there is choice in the market.
But at the head of Tirana Bank, which is owned by the Greek Piraeus Bank, acknowledged last week the fees they charge for their services and products are high, and promised to reduce them.
The banking system in Albania has come a long way. Back in 1990, there were no private banks in the country. A former foreign embassy employee at the time tells Tirana Times
he had to keep his own savings in the embassy safe in 1991-1992 for lack of a better choice. During the communist regime, those few Albanians who could save anything from their meager wages used the state-owned Saving Bank, but its products were a far cry from those of a modern bank. Earlier money was simply kept in pots, a practice going back to antiquity.
So it is only in the past 20 years or so, particularly in the last decade, that private banks really flourished. And now they are everywhere.
There are currently a few Greek-owned ones like Tirana Bank and Alfa Bank; huge Austrian and Italian banking groups like Raiffeisen and Intesa San Paolo are here too – as are branches of banks for a myriad of other countries – from Malaysia to Germany.
The number of banks and their mother companies is then large and diverse. Despite that, the fees these banks charge are high compared to the region and beyond, and that has caused concern with their clients, the Albanian state and the competition authority.
Another problems is that even though they charge such high fees, the service and premises of many banks leave a lot to desire. People are made to wait a long time for service, often in small spaces.
The question is then if countless banks exist, why are the fees so expensive? Why is the competition mechanism not working when banks are a cornerstone of capitalism?
One explanation is that the banks don’t care too much about competition because most of their profits do not come from their everyday services to the normal customer but rather through the services and loans they provide to the government.
The other explanation is they are simply trying maximize profits – because they can.
If competition does not exist in a sector like banking, then one has to wonder about the essence of the type of capitalism Albania is constructing.
