TIRANA, Jan. 19 – Banks slightly eased lending standards in the final quarter of 2015 and expect them to further ease in early 2016 driven by a recovery in demand and lower interest rates, according to a survey conducted by the country’s central bank.
The survey shows lending standards eased for both businesses and households in the final quarter of 2015 fuelled by higher demand for new business and home loans.
While competition in the banking system and decisions by the central bank eased lending standards, the specific problems in the sector where businesses operate, the macroeconomic situation and the high level of non-performing loans were rated as factors contributing to tight lending standards. Latest data by the country’s central bank provide a rather different picture with credit failing to return to positive growth rated for the fourth month in a row last November when it contracted by 2.2 percent year-on-year.
Tight lending standards because of non-performing loans standing at 20 percent and poor demand for new loans have contributed to the situation.
Interest rates on both lek and euro-denominated loans at historical lows are also proving inefficient to fuel demand on new loans.
Since late 2011 when the key rate was at 5.25 percent, the central bank’s easier monetary policy has been mostly reflected on deposit rates and T-bill yields on government’s internal borrowing, rather than lower loan interest rates.
The loan rates in the national currency, although considerably lower compared to the pre-crisis period, are still considered high and unaffordable by the business community because of being six times higher compared to the deposit rates which have dropped below the average inflation rate for the past year. The key rate currently stands at a historic low of 1.75 percent.
