Bad loans make up about 10.5 percent of total loans, and figures show that both individuals and businesses are having problems paying their loan installments.
Although there has been an increase in problematic loans in Albania as a result of the global economic crisis, the country’s leading banking association says it hasn’t led to a stop in crediting by Albanian banking institutions.
The head of the Albanian Commercial Banks Association said this week that an increase in bad loans is normal in a recession, but it will not stop the banks’ lending activities. Banks need to loan to successfully operate, Libero Catalano told Albania’s Top-Channel television station.
Catalano also demanded more attention from banks in how select their clients, adding that he has already noticed a higher care for business clients.
“The problem is not only from banks, because companies, and even the individuals themselves, now appear to be prudent. Their decreased demand for loans shows this. The restoration of confidence will bring both sides closer,” Catalano told Top-Channel.
According to the latest data problematic loans, also known as bad loans, make up about 10.5 percent of total loans, while 18 months ago that indicator was only 3 percent. The figures show that both individuals and businesses are having problems paying the loan installments.
Banking sector experts say there are a number of causes that have led to strong growth of bad loans. They include shrinking family incomes, businesses in crisis and depreciation of the local currency, mainly against the euro. These factors have made it harder for people to pay back the banks for loans they took in better times.
Bank of Albania has for several months urged Albanian commercial banks to lend more. It repeated in its latest statement that it stands ready to help the banking system with the necessary measures to reactivate the credit markets.
“Support your customers and continue lending to reliable borrowers, because it is helpful to your customers, to you and all of the economy. I am convinced that you have real opportunities to do so in competitive conditions, particularly for loans in the national currency,” BoA Governor Adrian Fullani told the Albanian banking executives at a recent event.
Between 2007 and 2009, the worst of the global economic crisis, bad loans in Albania increased 300 percent. Bank of Albania’s latest data on those who had defaulted on their loans or were behind in their payments showed that bad loans continued to grow although 2009’s last quarter saw a lower pace in that growth.
According to the BoA data, by the end of December under-performing loans reached 10.3 percent of the total, or 0.5 percent more than third quarter last year. Compared to 2008, bad loans increased by about 5 percent, while compared with the end of 2007, they have increased three times.
