Problematic loans at the end of 2009 increased to 10.48 percent of the total loans, up from 6.64 percent at the end of the previous year
TIRANA, July 19 – The Albanian banking system faced severe difficulty with liquidity needs and credit quality last year, an annual supervisory report issued by the central bank showed this week.
However, liquidity in the banking system has continued to improve this year, driven by deposit inflows. Following the IMF-EU program with Greece, Greek-owned banks, which had earlier seen some deposit withdrawals, are now also part of the system-wide deposit growth, said IMF.
Monitoring carried out by the central bank’s Inspections Office showed problems related to risk management with many banks suffering the consequences of relaxed lending standards in previous years. Shortcomings were also identified in meeting credit approval deadlines and monitoring problematic loans in time.
The Bank of Albania report said even the commercial banks’ IT systems, which in many cases were not efficient in transmitting information in time, contributed to the poor risk management.
The supervisory report said banks need to install new computerized systems or modules to support their main activities.
Several banks violated a series of regulations on credit risk management, capital adequacy, foreign currency, prevention of money laundering, use of IT, transparency on banking services and products as well as consumer and mortgage loans, said the 2009 supervisory report.
Inspections also identified similar problems in credit-saving companies while no controls were carried out in currency exchange shops.
Gross problematic loans at the end of 2009 increased to 10.48 percent of the total loans, up from 6.64 percent at the end of the previous year. The report says the quality of credit portfolio will continue deteriorating, not only because of internal factors but also because of the crisis in Greece, where thousands of immigrants working in agriculture and tourism have been hit, affecting the remittances they send home.
The report says the volume of banking activity will continue being limited even in 2010 with the further increase of deposits depending on improved public confidence in the system. Banks are expected to tighten lending.
