TIRANA, August 2 – Interest rates on both the lek and the euro deposits and loans dropped in 2010, says the central bank in its annual report. The key interest rate cut for the lek by 0.25 percentage points in July 2010, was followed by a drop in the weighted average interest rate on new ALL deposits, which performed in line with the monetary policy signals.
Euro deposit rates were also downward.
In average terms, the lek deposit interest rate registered 5.19% in 2010, down 0.27 percentage points from 2009. The average lek deposit interest rate fell in the first months of the year, from 5.66% in January to 5.29% in February, due to completion of end-2009 promotional offers and improved liquidity conditions. During summer, this indicator increased, reaching the
highest level, 5.47% in August, affected by the seasonal offers. In addition, following the increase of deposits in the system, interest rates underwent consecutive cuts until December (at 5.09%). By maturity terms, it is observed that 12-month deposits decreased on average 0.35 per cent compared to 2009.
Interest rates on euro time deposits followed a downward trend even in 2010. Significant interest rate cuts were registered on all maturity terms, particularly on 12-month ones (-0.74 pp). The euro deposit interest rate registered on average 2.24% in 2010, or down 0.24 percentage points from the 2009’s average. This value is still relatively high relative to the ECB’s key interest rate, which settled at 1.0% throughout 2010.
New loan interest rates
2010 was characterized by downward trend of average interest rates on lek and euro loans. As a result of perceived uncertainty in 2009, banks reacted more slowly by easing the conditions over 2010 H1. In 2010 H2, after significantly improved liquidity condition, lower primary market interest rates and Bank of Albania’s signals to reduce ALL lending costs, interest rates recorded consecutive drops for both major currencies.
During 2010, the lek loan interest rate registered 12.59%, from 13.59% in the previous year. The decline reflected the key interest rate cut and is indexed with – 12-month T-bills, whose yield fell on average by 1.15 percentage points over this period. At the beginning of summer, interest rates started to fall significantly, affected also by special promotional policies pursued by the banking system as a result of short-term corporate demand.
The average interest rate cut continued till end-2010, marking historic lows in December (11.84%).
Overall, euro-denominated lending was cheaper in 2010 compared to 2009, although the weighted average interest rate was characterized by seasonal volatility. The weighted average interest rate on euro loans was 7.47% in 2010, compared to 7.89% in 2009.
