The changes focus on converting foreign bank branches into subsidiaries and the establishment of bridge banks
TIRANA, Nov. 8 – Fearing possible spillover effects from international financial crisis, Albania’s central bank has proposed some legal changes that would protect branches of foreign-owned banks in case their mother banks go bankrupt. The changes focus on converting bank branches into subsidiaries and the establishment of bridge banks as similar measures the European Union has adopted to prevent crisis effects. The Bank of Albania supervisory powers over the banking system are also strengthened by having to decide if a bank branch needs to be converted into a subsidiary.
“The conversion of foreign bank branch into a subsidiary is compulsory when judged necessary under a decision by the Bank of Albania on credit risk management grounds,” says the amendment proposed by the central bank.
The changes also foresee the creation of bridge banks, a new concept in Albania but widely known in the EU, effected through transfer of property from a failing bank to a bridge bank, a new company that will be wholly managed by the Bank Albania.
The changes to the law on banks operating in Albania have already been submitted to Parliament and are already being discussed in the parliamentary economy committed. Opposition Socialist MPs of the parliamentary economy demanded on Tuesday that the draft-law discussion is postponed to give the opposition time to get acquainted with it, a request which was approved by majority members of the committee.
The changes come at a time when the country’s central bank has adopted a new regulation on credit risk management determining risk assessment criteria and calculations for provision coverage.
Despite bad loans jumping by six times to around 18 percent of the portfolio in the past three years, the central bank assures that the banking system remains well-capitalized, liquid and profitable. “Stress tests carried out by the Bank of Albania show a solid situation of the loan portfolio. The Bank of Albania has the situation under control considering the appropriate collateral and provision ratios. Future special attention should be paid to the execution of collateral so that the lending activity in the country is eased,” said Governor Ardian Fullani earlier. Central bank data show Alpha Bank Albania and the National Bank of Greece – Albania are the only two banks operating as branches in Albania with Greek capital. Tirana Bank is also a Greek capital bank while the Emporiki Bank majority stake is owned by French-based Credit Agricole Group.
Some 16 banks operate in the Albanian banking system, which is overwhelmingly foreign-owned.
