BoA governor urges banks cooperate more with each other

TIRANA, Oct. 29 – Ardian Fullani, Governor of the Bank of Albania, said last week at the General Assembly of the Dealers Association that the interbank money market did not fulfill their required assumptions, making its work difficult in carrying out this essential function.
The interbank market began in 2002. During the last five years, the trading volume has increased fifteen fold, climbing from a daily average of 130 million lek in 2002 to a daily average of around 2 billion lek in 2007.
Also, there has been an increase in the maturity of the traded funds and of the volume of traded funds.
But Fullani said that these developments has been very slow.
During the last five years, the lek liabilities of the banking system have increased by 135 billion lek, which makes the increase in the trading volume of interbank market on a daily average of 1.9 billion lek, very small.
Longer term transactions are very sporadic.
The banking system can not be developed as an isolated market, said the governor, adding that its progress is directly connected to the economic development in general, and the development of other financial markets in particular. The financial market is still characterized by the domination of the banking system, while its other segments continue to be in a minor part of its development.
In the latest survey conducted by the Bank of Albania on “Money Market Issues”, seven out of 14 respondents (commercial banks), (which possess 59 percent of the market share), outlined “excess structural liquidity” as the main barrier to the development of the interbank money market, while four out of 14 banks (which have a market share of 30 per cent) highlighted “the credit risk” as the second most important barrier.
The tendency to keep excess structural liquidity as a bank policy was pinpointed by 13 out of the 14 interviewed banks, otherwise meaning that banks that share 92 per cent of the market have a tendency to keep excess cash on hand.
Fullani said that the reasons and obstacles brought up by banks were mostly subjective at a time when they could invest this liquidity at fair market prices.
Another important issue is the existence of limits that certain banks apply in lending relations with one-another.
He added that the bank had prepared and would soon implement a complete package of regulations, whose purpose was to establish incentives and minimize risks in the Albanian financial market.
The Bank of Albania is making all efforts to create the necessary conditions to minimize the trading risks, as well as create and support initiatives to active trading in the these markets, according to Fullani.