TIRANA, Nov. 3 – Albania’s Competition Authority has launched an enquiry into the country’s banking system over allegations of limited competition leading to high loan interest rates and standstill in lending.
The decision came after a preliminary monitoring in the country’s banking system unveiled signs of limited or distorted competition as a result of behaviour by one or several banks. That despite the Albanian banking system seeming highly competitive on paper with 16 commercial banks operating, the overwhelming majority of which foreign-owned.
A preliminary monitoring unveiled that during the past few years the Albanian banking market has displayed characteristic of a market with relatively high interest rates under conditions of stagnation in lending.
“There have been very low interest rates on deposits (as low as 0.55 percent on an annual basis and below the inflation rate), a relatively high difference (spread) between loan and deposit interest rates, a trend of rising interest rates on government securities, especially long-term debt financing instruments (bonds) under conditions of an easy monetary policy and at a time when the key rate has been on a downward trend. There has also been an increase in bank commissions mainly on domestic payments,” says the Competition Authority.
These circumstances raise allegations that the competition in the banking system could be limited or distorted or a result of banned deal or abuse of a dominant position under the law on protection of competition, says the Authority.
The loan rates, although considerably lower to the pre-crisis period, are still considered high and unaffordable by the business community because of being six times higher compared to the deposit rates which have dropped below the average inflation rate for the past year.
The thorough investigation into the banking system will probe the 2014 period and the first three quarters of 2015.
The conclusions over the levels of competition for banking products and services are expected to be released in a report by March 2016.
Banks posted surprise profits of about €59 million in the first half of this year as non-performing loans dropped by 4 percent to 20 percent but lending strived to remain at positive growth rates.
Back in 2014, banks’ profits reached a historic high of 11.2 billion lek (€78.4 million) as bad loans registered a slight decrease and provisioning against loss more than halved.
The financial sector in Albania is concentrated and dominated by foreign banks whose subsidiaries represent more than 90 percent of total banking sector assets. The largest five banks hold about three-quarters of system assets and deposits.
Subsidiaries of foreign banks, which include four of the top five banks, including from Austria,
Greece, Italy, and Turkey represent about 90 percent of total banking sector assets, says the IMF.
Back in 2011, Albania’s Competition Authority found that commercial banks operating in Albania are not transparent with their customers and charge higher fees even compared to regional branches in the Balkans, creating barriers in the use of banking services in Albania.
The study covering the end of 2009 and 2010 showed banks often charged fees in euro and not in the national currency, lek, for some services such as current accounts or cheques putting consumers at risk of facing negative currency exchange rate effects. The monitoring also revealed second-tier banks in Albania did not notify their customers when commissions increased, violating the regulation on the transparency of banking products and services.
