TIRANA, April 15 – Both public and private enterprises, excluding those that provide vital services, depending on their ability to adopt even partially, may face a disruption in the chain of trade relationships and will experience on average a considerable drop in the sale of goods and services, according to the Bank of Albania. In turn, this will cause a decline of revenues and difficulty to pay the financial liabilities related to fixed and variable expenses.
According to BoA, this situation will also affect the employees and the overall households’ income, as the fall of the activity of enterprises may bring about a reduction of income or interruption of salary. In a chain reaction and for as much as it is not compensated by the savings of households and the state economic protective measures, it further may affect the weakening of their consumption and the difficulty to meet the financial obligations. The latter may include also the difficulty to repay loans taken at financial institutions, driving to a fall of credit quality in these institutions and a negative impact on their financial result.
In this line, the Bank of Albania recommends that public authorities undertake rapid and important actions to interrupt the free occurrence of the above-stated scenarios and to support enterprises, households and the financial system in mitigating and countering the negative effects that accompany such scenarios.
The Bank of Albania has undertaken its actions regarding the institutional management, communication with the supervised entities, particularly banks, and in the framework of its legal policies.
The Bank of Albania has activated its emergency plan where in the centre are the health security of its staff and the continuation of critical functions of the central bank.
In the framework of its policies, the actions undertaken by the Bank of Albania may be divided into two groups: 1) in the monetary policy area; and 2) in the area of banking supervision and financial stability. The first group aims to supporting the liquidity situation of the financial system and the well-functioning of the money market. The Second group is aimed at mitigating the impact of the situation on credit portfolio quality, releasing banks’ resources from activities that may be postponed, and maintaining the good situation of liquidity and capitalisation of banks, so that the basis for a recovery of the activity at the end of pandemic situation remains solid.
In the framework of monetary policy, the Supervisory Council in its meeting of 25 March 2020, decided to:
- reduce the policy rate by 0.50 percentage point, to 0.5%; in this way banks may receive loans from the Bank of Albania at a lower cost and may reflect this lower cost in the liquidity they pass through into the economy. This is the lowest historical level of the policy rate of the monetary policy;
- narrow the spread between the interest rates on overnight lending facility and overnight deposit facility, by reducing the interest rate for the overnight lending facility to 0.9%; once more, in this way banks that may need short-term liquidity, may meet such need by the special facility of the Bank of Albania.
Previously the Bank of Albania had decided to change the type of the daily auction of liquidity injection, to provide banks with unlimited liquidity at the policy rate.
