TIRANA, May 10 – Albania’s central bank has removed the remuneration rate for compulsory reserve in euro and US dollars. The decision aimed at lowering Albania’s high euroization level means the Bank of Albania will not pay interest rates for compulsory reserve in euro and US dollar deposited by second-tier banks. The compulsory reserve has remained unchanged at 10 percent for deposits in all kinds of currencies. The decision aimed at discouraging the use of euro lowers the remuneration rate for compulsory reserve in euro and dollar to 0 percent but keeps the rate for the national currency, lek at 70 percent of the key interest rate for repurchase agreements and reverse repo deals.
Erald Themeli, the director of monetary policies at the bank of Albania said the measure came after the reflection the central bank had during the global crisis years when euroization level increased.
“The Bank of Albania considered the deepening of its measures against euroization consequences as necessary, adjusting supervisory and regulatory initiatives even with monetary instruments encouraging the use of the domestic currency,” said Themeli.
Under this move, the Bank of Albania gives a clear message in favour of using the domestic currency in the Albanian economy and financial markets. In the long term, the main effect of this move is expected to increase the percentage of lek in the banking system but even transactions in the economy.
While the Albanian national currency continues depreciating against the euro, financial experts are concerned over the high degree of Euroization putting Albanian consumers at risk of facing negative currency exchange risks.
A considerable part of important services and big purchases, including apartments and cars but even ordinary services are offered in euro. Experts say traders do this in order to be protected from exchange risks but also because 70 percent of imports come from the European Union countries.
The high degree of euroization, which is estimated at 40 percent, is another reason why banks are more prone to offer credit in euro at lower rates. However, the ongoing depreciation of the national currency lek against the euro has put individuals and businesses with revenues in lek into a difficult situation.
Credit in euro accounts for almost 70 percent of total lending, according to central bank data.
Lower inter-bank fees
Earlier this year, Albania’s central bank has approved some changes to the interbank payment system which it says will significantly lower fees for customers and increase transparency. The move came after the Competition Authority accused commercial banks of not being transparent with customers and charging higher fees even compared to regional branches within the same banking group.
Under the new changes, small-value payment systems in the Automated Electronic Clearing House System (AECH) will have their threshold increased up to a maximum of 1.5 million lek, from 1 million lek in an effort to increase the use of the system considering the much favourable fees it offers. Currently, AECH fees are a mere 4 lek per payment compared to the 250 lek fee applied for the Albanian Interbank Payment System – AIPS.
