TIRANA, June 17 – A new bankruptcy law the Albanian government is drafting has sparked concerns among local banks which claim the protection of households from the seizure of the assets they have placed as collateral will have a negative impact by promoting a culture of non-payment.
In a letter sent to the country’s highest authorities, the Albanian Association of Banks representing 16 commercial banks operating in the country, says the new draft law conveys a wrong message with households offered protection from seizure of homes in case they fail to pay off the loan through restructuring of loans.
“These public messages have a very negative impact on the banking system and the whole of the economy by creating a culture of non-payment which will be reflected on consumers’ real behavior,” says the Association, adding that the draft law risks further increasing non-performing loans, already at around a quarter, and make lending standards tighter.
The new bankruptcy law which has not been made public yet makes restructuring of loans compulsory in case households and businesses have trouble making payments on their debts offering borrowers in difficulty to pay over a longer period usually with a lower installment amount.
