Tirana Times
TIRANA, July 12 – Bank of Albania governor Ardian Fullani and Finance Minister Ridvan Bode have reiterated the need for the quick execution of collateral to keep the Albania banking safe from the risk of rising bad loans, which have doubled to 15 percent during the past couple of years.
Addressing a seminar on “collateral, loans, the market and law,” central bank governor said on Tuesday the execution of collateral remains a key pillar for the further consolidation of the banking system, because of legal and bureaucratic barriers from institutions involved in the process.
According to the Bank of Albania, delays in court, bailiff real estate registration procedures remains a key concern for the normal activity of the banking system and lending in particular. Fullani called for the review of legal and regulatory framework to eliminate identified obstacles and training of staff.
Meanwhile, Finance Minister Ridvan Bode said failure to execute collateral in time was having a major economic impact. “The total unpaid obligations pending collateral execution is estimated at 20 billion lek. Although the value of collateral is almost twice higher than the obligations, unsafety and delays in execution system make compensation for banks a very difficult goal to achieve.”
Bode said government remained determined to undertake every legal improvement to provide the necessary guarantees and responsibilities to the banking system so that the Albanian economy performs in the best possible way.
Describing collateral execution an issue of public interest, he said the banks’ insecurity in this direction would make banks more conservative to lend.
Bad loans, which the central bank and financial experts describe as the key risk to Albania’s banking sector, continued rising even in the first quarter of this year while banks’ profits more than halved. Latest data published by the Bank of Albania show bad or non-performing loans climbed to 14.42 percent of the total portfolio in the first quarter of 2011, up from 13.61 percent in the final quarter of 2010 and 11.46 percent in the first quarter of 2010.
The Bank of Albania recently called on the 16 commercial banks operating in Albania to cooperate with their customers in case of temporary difficulty in paying off installments but to be strict and timely in executing collateral in the case that bad loans are identified. With regard to the high interest rates in Albania, Fullani said “When we compare Albania to regional countries we should be aware of the shortcomings of the banking and financial system regarding the registration and execution of collateral which is a major problem and needs important structural intervention.” Credit to the private sector grew by 10 percent in 2010, but total lending continued suffering from lack of demand and realistic business plans.
