Deposits in credit saving unions included in insurance scheme

TIRANA, July 16 – Deposits in credit-saving micro-finance institutions will also be included in the insurance scheme, according to some changes to the deposit insurance law approved this week by the parliamentary economy committee. Under the changes, deposits up to 2.5 million lek (Euro 17,900) in both commercial banks and credit saving unions will be insured by the Deposit Insurance Agency. People who have unpaid loans will not get full compensation for their deposits in case of bankruptcies, according to the changes.
Finance Ministry officials say the draft law is aimed at increasing security in the financial system under crisis conditions. Opposition MPs described the draft law as delayed also demanding transparency from financial institutions. Credit-Saving Unions hold a relatively small amount of 1.8 billion lek in deposits mostly in rural areas. Only 1 percent of deposits in the credit saving unions is reported to be above the 2.5 million lek insurance ceiling.
The latest report by the Deposit Insurance Agency shows 95 percent of Albanians had their deposits insured, meaning they have up to 2.5 million lek in their bank accounts. The remaining 5 percent of depositors having more than 2.5 million lek in their bank accounts possess around 58 percent of the total amount of deposits in the 16 commercial banks operating in Albania,
deposits in the credit-saving unions, which are classifies as non-banking financial institutions, is not covered by the Deposit Insurance Scheme.
As elsewhere in the region, Albanian banks witnessed substantial panic deposit withdrawals in the face of spillovers from instability of global financial markets, which were compounded by concerns about the health of the Greek banking system in the fall of 2008. Ample liquidity buffers were utilized to meet deposit withdrawals. To boost confidence, deposit insurance limits were raised fivefold to 2.5 million lek (25,000 US dollars), and deposits started to recover from the second half of 2009.
The non-banking financial sector, composed of financial institutions supervised by the central bank and the Financial Supervisory Authority, represented 4.7 percent of the GDP at the end of 2011 compared to 4.9 percent in December 2010.
The sector is dominated by non-banking financial institutions whose assets account for 2.9 percent of the total, followed by insurance companies at 1.5 percent, credit-saving unions at 0.8 percent and the private pension funds at their initial stages representing only 0.01 percent of the GDP.