TIRANA, Nov 23 survey held by the Central Bank of Albania (BoA) showed that the lending standards remained tight in the third quarter of 2009, although at a lower level than in the previous quarter. Expectations for the last quarter of 2009 show that banks will continue to apply similar lending standards, both for business and household loans.
The most important driving forces behind the tightened lending standards remain the business-specific problems, the macroeconomic situation in the country, and the performance of non-performing loans.
Banks have applied tighter lending policy mainly through the application of higher commissions, the reduction of the loan amount and that of the maximum loan maturity, the survey showed.
In addition, there is a lower business demand for investment-related loans, mainly as a response to the banking system loan policy. Business in Albania lacks alternative financing resources, such as the use of domestic funds or borrowing from other non-bank institutions, which would contribute to their growth.
By contrast, household demand for loans improved slightly. Households’ needs to finance consumption and the house purchase are the main factors to have provided a positive contribution to the growth of household demand for loans. On the other hand, the developments in the real estate market continue to represent the main driving force behind the fall of household demand for loans. Other factors, namely the use of alternative financing resources (lower savings or borrowing from other institutions), consumer confidence and the lending standards applied by banks, have provided additional contribution to the fall of household demand for loans, although at lower intensity, the report shows.
Banks expect the lending standards to slightly loosen for the remaining of 2009. According to experts, the loosened lending standards will be evident only for SME loans and for working capital-purposes loans.. As a result demand for loans, both from businesses and households, will continue to be negative to the end of 2009.
