TIRANA, July 14 – With lending at sluggish growth rates of 2 to 3 percent since more than one year and the key interest rate at a historic low failing to boost credit due to the high level of non-performing loans and poor demand, the country’s central bank has undertaken some new measures by increasing customer transparency on banking products considering allegations of abuses by commercial banks.
In a new regulation on consumer and mortgage loans, the country’s central bank which is responsible for supervising the 16 commercial banks operating in Albania, the overwhelming majority of which are foreign-owned, has approved a new regulation on consumer and mortgage loans increasing transparency on pre-contract and contract credit information in a bid to reduce alleged abuses customers often complain of.
The regulation makes it compulsory for bank and non-bank financial institutions to provide customers with all necessary pre-contract information including the kind of loan, the disbursement terms, the maturity of the loan, the effective interest rate, the installment amount, notification in case of a change in loan terms, and the right to early payment.
A special article has also been included on consumers’ right to withdrawal from the loan contract within 14 days from the signature of a consumer loan contract and in 7 days in case of home loans.
Banks are also forced to make a fair reduction of loan costs in case of early repayment.
The central bank warns it will take measures in case commercial banks and non-bank financial institutions fail to apply the new regulation which has legal effect only for new loan contracts starting July 2015 when the regulation entered into force after its publication on the Official Gazette.
Back in 2011, when credit was still growing by double-digits, Albania’s Competition Authority found that commercial banks operating in Albania were not transparent with their customers and charged higher fees even compared to regional branches in the Balkans, creating barriers in the use of banking services in Albania.
The study covering the end of 2009 and 2010 showed banks often charged fees in euro and not in the national currency for some services such as current accounts or cheques putting consumers at risk of facing negative currency exchange rate effects. The monitoring also revealed second-tier banks in Albania, which are overwhelmingly foreign-owned, applied different fees for the same services and did not notify their customers when commissions increased, violating the regulation on the transparency of banking products and services.
“Comparison with service tariffs in regional banks, within the same banking group confirmed that banks operating in Albania apply higher banking service tariffs (such as commissions charged for closing current accounts, maintaining accounts, and bank cards) compared to their counterparts in the region, making the customer access to these services and the possibility to change the bank more difficult,” said the Competition Authority.
The Authority also recommended that the Consumer Protection Commission at the Economy Ministry should push for a legal initiative to establish an Ombudsman to protect consumers from banking sector abuses. “The Ombudsman on bank customers should be established as a public authority to examine customers’ complaints about different products offered by second-tier banks.”
Three years after the Bank of Albania launched its interest rate and commission transparency project for the 16 commercial banks operating in Albania, information on the central bank’s website is only partly available. While information on commissions and deposit interest rates is available for almost every bank, information on interest rates for consumer and business loans are available for only few banks.
More than half of Albanian businesses consider high interest rates as the key barrier in borrowing from banks, according to a survey carried out by the Bank of Albania. Businesses also consider credit insurance terms, the appropriateness of the credit structure and lack of transparency in the approval and monitoring of loans by banks as factors of average difficulty.
