Transcript ALBANIA Economy and Banking System

ALBANIA
Economy and the
Banking System
ALBANIAN ASSOCIATION OF BANKS
SHOQATA SHQIPTARE E BANKAVE
Dr. Elvin MEKA
ALBANIAN ASSOCIATION OF BANKS
26th EBF Associates’ Meeting
5 June 2008, Tirana, ALBANIA
ALBANIAN ECONOMY
ALBANIA - Located in Southeastern
Europe (Western Balkans)
Economic Policy Framework
 Open Market Economy,
 No restrictions on profit and capital
repatriation,
© Source: CIA Factbook 2008
 No exchange rate restriction, floating managed exchange
rate regime,
 Albania signed its Stabilization & Association Agreement
with the European Union, the first formal step to eventual
EU membership (12 June 2006).
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Main Economic Features & Indicators
 Macroeconomic performance of the Albanian economy has
been good overall, with sustained growth and low inflation.
 Annual economic growth has been around 6% during the
last 5 years; end-2007 at 6%.
 Domestic demand mainly driven by migrants’ remittances
(EUR 936 million by end-2007) which have significant
impact on fiscal revenues and expenditures, as well as by
other external current transfers, and rapidly expanding
financial intermediation & credit.
 Services, agriculture and industry share are respectively at
45%, 22.1% and 14.3%.
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Main Economic Features & Indicators (2)
 EU is the main trading partner: 87.7% of exports and 57.5%
of imports. SEE is the second trading partner: 9.3% of
exports and 16.9% of imports.
 Exports and imports for 2007 reached respectively EUR 790
million and EUR 3,07 billion – Net importer
 …but all current account financed by remittances.
 Foreign Direct Investments, until Sep.07 reached ~ EUR
370 million.
 Foreign reserves EUR 1.5 billion, covering more than5
months of imports of goods and services.
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Main Economic Features & Indicators (3)
Key economic figures
2003
2004
2005
2006
2007
Population: 3.2 mn
GDP (EUR bn)
GDP growth (% yoy)
GDP per capita (EUR at PPP)
Industrial output (% yoy)
Unemployment rate (avg, %)
Inflation rate (% yoy)
Gen. budget balance (% of GDP)
C/A balance (% of GDP)
Public debt (% of GDP)
Gross external debt (% of GDP)
Official FX-Reserves (EUR bn)
ALL/EUR, avg
ALL/USD, avg
6.0
5.8
4,250
3.0
15.0
3.3
(4.8)
(7.0)
60.7
20.7
0.8
137.5
121.9
6.0
6.2
4,640
3.1
14.6
2.2
(5.1)
(4.7)
55.3
17.8
1.0
127.7
102.8
6.7
5.5
4,860
3.1
14.2
2.0
(3.4)
(8.7)
54.9
16.8
1.2
124.2
99.8
7.28
5.0
6,224
5.0
13.8
2.5
(3.2)
(7.6)
55.9
17.2
1.36
123.1
98.1
7.95
~6.0
n/a
5.0
13.1
3.0
(3.4)
(11)
56
17.4
1.50
123.62
90.43
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Macroeconomic Environment
POLICIES
Upward tendency of consumer prices during 2007. Inflation reached
3%.
Fiscal Policy
Prudential implementation of fiscal policies, by observing
the planned parameters of fiscal indicators, has not transmitted
excessive inflationary pressures and has contributed to maintaining
price stability. Flat tax rate (10%) introduced by July 2007.
Monetary Policy
Monetary policy of the Bank of Albania has generally had a neutral
stance, but following the inflationary pressures during 2007, BoA has
taken prudent measures to put reins of inflation and bring it within
2-4% target. Lending economy has been the main source of monetary
expansion during 2007, unlike in the preceding years, when this
function had been realized by government borrowing or foreign
currency inflows.
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Macroeconomic Environment (2)
Albanian economy experienced
relatively high growth rate.
Source: IMF
With the exception of 1997
(following the collapse of the
pyramid schemes), Albania has
consistently outperformed
the CEE countries.
Source: IMF
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Macroeconomic Environment (3)
Economic Growth Rate 2001-2007
8
7
in %
Economic Growth
Continuous and sustainable
economic growth (5-6%
annually).
6
5
6.5
4
3
5.8
6.2
5.5
6
5
4.7
2
1
2001
2002
2003
2004
2005
2006
2007
Year
4
3.5
in %
Price Stability
Inflation is one the lowest
within SEE countries (ranging
between 2-4%).
Inflation rate 2000 - 2007
3
2.5
3.3
3.5
2
1.5
1
2.5
3.01
2006
2007
2
2.2
1.7
0.5
0
2001
2002
2003
2004
2005
Year
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Macroeconomic Environment (4)
Income & Employment
 GDP growth has enabled rise
of income per capita beyond
EUR 2,500 per year, which,
however, remains among the
lowest figures in the region.
 Notwithstanding the ongoing
GDP growth in years, employment performance reflects a
moderate behavior.
 Unemployment rate reduction continues to be not
significant, either in absolute value or in relative terms
(Unemployment rate for 2007: 13.1%).
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Macroeconomic Environment (5)
Remittances
 Albania’s receipts from workers’
remittances are, relative to GDP,
among the highest in the world.
 Remittances are considerably larger
than exports (1.2 times – Sep.07)
and FDI (1.9 times – Sep.07).
 Remittances have significantly lowered the current account
deficit and helped Albania build a comfortable level of
external reserves.
 Although the bulk of remittances is still sent through
informal channels, the importance of the formal channel
has increased in recent years.
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ALBANIAN
BANKING SYSTEM
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ALBANIAN BANKING SYSTEM
Brief History
Genesis
The establishment of Imperial Ottoman Bank branch (1863)
in Albanian territories.
Central banking
Establishment of the National Bank of Albania, jointly with
Italian and Austrian banking groups, 4 October 1913.
Mixed Central & Commercial Banking
Establishment of National Bank of Albania (NBoA), 02
September 1925.
Communist era
NBoA was nationalized in 13 January 1945 and the Albanian
State Bank (ASB) was established, with both functions as
central & commercial bank.
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Brief History (2)
Market Economy
Two-tier banking system introduced and Bank of Albania
established as the central bank of the Republic of Albania
(1992).
To date
Albanian banking system has 16 commercial banks (by
01.01.2008).
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Main Features
Universal banking system,
The dominant sector within Albanian
financial system, managing more than
97 % of total financial assets,
Mainly foreign-owned (14 out of 16
banks are foreign-owned),
Some big International names entered
Albanian banking system in 2007:
- Intesa SanPaoloIMI bought American Bank of Albania and Italian-Albanian
Bank (both banks were merged and by 01.01.08 they operate under
American Bank of Albania trademark);
- Société Générale bought 75.01% of Popular Bank.
 Almost all privately-owned (some minor state shareholdings),
 A highly concentrated banking system, where top four banks
have a share of ~ 73% of total assets.
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Main Features (2)
Continuous institutional expansion and development…
No
Subjects[1]
1
Banks and branches of foreign banks
2
Non-bank financial institutions
3
Foreign exchange bureaus
4
Save & loan associations
5
Unions of Save & Loan associations
2001
2002
2003
2004
2005
2006
2007
13
14
15
16
17
17
17
4
5
7
7
7
5
6
38
58
58
54
58
60
97
113
131
130
131
125
129
2
2
2
2
2
2
Other non-bank financial institutions
No
[1]
Subjects[2]
2001
2002
2003
2004
2005
2006
2007
1
Insurance Companies
5
5
5
10
10
10
10
2
Pension Funds
1
1
1
1
3
3
3
3
Leasing Companies
1
1
1
1
2
3
3
Subjects licensed by Bank of Albania.
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[2]
Subjects licensed by Financial Supervision Authority, except for Leasing Companies.
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ALBANIAN BANKING SYSTEM
Main Features (3)
More coverage with banking services…
Number of employees
Number of outlets
Number of employees per:
- bank
- bank unit
Number of residents per:
- bank
- bank unit
- bank employee
2004
2005
2006
2007
2,816
188
3,479
250
4,263
292
5,206
392
176
14
217
13
251
15
306
13
194,971
16,593
1,108
184,410
12,539
901
188,235
10,958
751
186,235
8,077
608
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ALBANIAN BANKING SYSTEM
Main Indicators
Performance of total assets
Indicator
Dec ‘02
Dec ‘03
Dec ‘04
Dec ‘05
Dec ‘06
Dec ‘07
Total assets (mln EUR)
In % of GDP
2,420.1
51.6
2,486.2
50.2
3,375.1
51.9
4,050.9
59.5
5,071.5
69.4
6,100
76.6
Steady growth of banking assets…
Banking system assets vs. GDP 2001 - 2007
2004
2005
2006
8000
7000
Interbank & Treasury
Operations
74
60
51.5
Credit Outstanding
17
26
32
mln EUR
Asset structure (in %)
9000
6000
5000
4000
3000
2000
Securities Operations
Fixed Assets
7
2
12
2
15
1.5
1000
0
2001
2002
2003
2004
Year
Banking assets
2005
2006
2007
GDP
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Main Indicators (2)
Deposits’ growth
2002
2,061.3
45.8
1,137.7
25.3
Total Deposits (mln EUR)
in % of GDP
Retail Deposits (mln EUR)
in % of GDP
2003
2,124.0
44.1
1,106.5
23.0
2004
2,974.6
48.4
2,581.0
42.0
2005
3,569.5
51.2
3,069.3
44.0
2006
4,151.1
57
3,343.4
46
2007
5,299.0
66.55
4,223.3
53.03
Continuous deposit growth – among the highest in SEE countries.
Deposits' Composition 2001 - 2007
2007
13.1
2006
44.3
16.5
2005
45
18.2
2004
42.6
38.5
46.3
9.4
35.5
59.2
31.4
2003
6
63.4
30.6
2002
7.7
60.2
32.2
2001
8.7
59
32.3
0
10
20
30
40
Demand Deposits in ALL
50
60
70
in %
Time Deposits in ALL
80
90
100
FX Deposits
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Main Indicators (3)
Credit performance
2002
275.5
5.7
11.5
13.5
Credit to Economy (mln EUR)
in % to GDP
in % to total assets
Credit/deposit ratio
2003
340.9
6.8
13.7
15.7
2004
552.4
8.4
16.9
19.0
2005
1,042.2
14.6
25.1
28.5
2006
1,553.3
21.3
31.3
37.4
2007
2,401
30.1
39.3
46.4
Experiencing a credit boom, but credit ratios still low compared to
EU and SEE standards.
2500
in %
mln EUR
2000
1500
1000
500
0
2001
2002
2003
2004
Credit to Economy (mln EUR)
2005
2006
in % to GDP
2007
Credit/Deposit ratio 2001 - 2007
6000
50
5000
40
4000
30
in %
32
30
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
in mln EUR
Credit to economy 2001 - 2007
3000
3000
20
2000
10
1000
0
0
2001
2002
2003
Credit to Economy (mln EUR)
2004
2005
Deposits
2006
2007
Credit/deposit ratio
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Main Indicators (4)
Private Sector Loan Structure
Corporate loans (mln EUR)
Retail loans (mln EUR)
2001
182
2002
238
2003
279
2004
375
2005
666
2006
1,040
2007
1,549
31
54
89
168
309
513.3
852
2006
90.00
10,00
2007
85.00
15,00
Credit Quality
2001
88.74
11.26
Standard Loans
Classified Loans
2002
89.89
10.11
2003
92.35
7.65
2004
92.70
7.30
2005
93.86
6.14
Still good credit quality despite credit boom; retail loans in expansion.
Loan structure 2001 - 2007
35%
65%
33%
2006
2005
32%
68%
2004
31%
69%
24%
2003
2002
2001
15
67%
13
11
in %
2007
Credit quality 2001- 2007
76%
18%
7
5
82%
15%
9
3
85%
1
0%
20%
40%
retail
60%
corporate
80%
100%
2001
2002
2003
2004
2005
2006
2007
classified loans
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Main Indicators (5)
Average Interest Rates
in ALL
Treasury Bills rate 12-M (in%)
Deposit Rate 12-M (in%)
Lending rate 12-M (in%)
2001
2002
2003
2005
2004
2006
10.5
7.80
12.62
9.30
9.56
7.62
8.11
5.99
6.91
5.57
7.89
5.46
11.9
16.00
10.52
13.73
12.6
11.16
2007
8,41
6,33
13,255
Average ALL Interest Rates 2001 - 2007
18
Still high interest
rate spreads in ALL,
despite declining
trends in deposit
interest rates.
16
14
in %
12
10
8
6
4
2
0
2001
2002
Treasury Bills rate 12-M
2003
2004
2005
Lending rate 12-M
2006
2007
Deposit Rate 12-M
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Performance Indicators
Liquidity
in mln EUR
1. Short-term Assets
2. Short-term Liabilities
1/2 in %
2006 A highly liquid and solvent
2003
2004
2005
1,101
1,027
107
1,212
1,253
97
1,339
1,674
80
2003
2004
2005
2006
2007 Capital
28.5
21.6
18.6
18.1
17.1
2006
342.5
2007 Well–capitalized
465 banks
1,616 banking system
2,184
74
Capital adequacy
Capital Adequacy Ratio in %
at
levels
adequacy
satisfactory
Shareholders’ Equity
in mln EUR
Shareholders’ Equity
2003
160
2004
203
2005
266
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Performance Indicators (2)
Profitability
in %
2003
2004
2005
2006
2007
RoAA
1.20
1.30
1.40
1.36
1.6
RoAE
19.5
21.10
22.4
20.17
20.7
A highly
profitable banking
system
Return on main operations
in %
Interest income/interest bearing
average assets (1)
Interest expenses/interest bearing
average assets (2)
Net interest margin (NIM) [(1)-(2)]
2003
2004
2005
2006
6.81
6.78
6.96
7.05
3.08
3.23
3.88
2.83
3.73
3.55
3.08
4.22
Banks moving towards
more profitable assets
within the structure of
earning assets.
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Exchange Rates
Average Exchange Rates
EUR/ALL
US$/ALL
2001
2002
128.5
143.5
LEK (ALL) has been
appreciated significantly
during last years, then being
quite stable.
in ALL/FX unit
in ALL
132.4
140.1
2003
137.5
121.9
2004
2005
127.7
102.8
124.2
99.8
2006
123.1
98.1
2007
121,78
83,03
Average Exchange Rates 2001-2007
145
140
135
130
125
120
115
110
105
100
95
90
85
80
2001
2002
2003
2004
EUR/ALL
2005
US$/ALL
2006
2007
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ALBANIAN BANKING SYSTEM
Electronic Cards
Electronic Cards
Type
Cashtronic + Debit Cards
2004
33.288
2005
223.227
2006
343.711
2007
603,384
806
2.686
9.754
12,991
Total
34.094
225.913
353.465
616,375
ATM
93
205
335
433
POS
155
779
1,183
1,776
Credit Cards + Prepaid Cards
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ALBANIAN BANKING SYSTEM
Regulatory Framework
Law no.9662, dt.18.12.2006 “On Banks in the Republic of Albania”.
Main Licensing Requirements for Credit Institutions:
 Banks shall be founded as joint stock companies. No discriminatory
restrictions in terms of capital participation and formation.
 The minimum amount of initial capital required, paid in cash, in
respect of a bank, is not less than ALL 1 billion (for existing banks:
ALL 850 million, but from March 1st, 2008 is raised to
ALL 1 billion);
 Administrators having a business or professional history for the past
3 years,
 The bank shall have at least two general executive directors.
Licensing Requirements for bank’s branch office:
Similar requirements as those required for Albanian banks.
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Regulatory Framework (2)
Licensing
 Preliminary approval or deny, within 3 months from the
date of its receipt of the application for a license at Bank
of Albania.
 A bank or branch of foreign bank, which has been granted
preliminary approval shall, within one year starting from
the day of the preliminary approval, request in writing
from the Bank of Albania granting of the final license.
Scope of activity
 Universal banking principle.
 The range of allowed banking & financial activities a bank
may provide is subject of central bank’s approval (no
capital quota qualifications).
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Banking Supervision
Prudential Banking Supervision
The supervision process is carrying out through the following
instruments:
Periodic data reporting regarding banking financial
indicators, through unified reporting system (reporting
various balance and off-balance sheet items, as well as other
indicators, as the supervision regulatory framework
requires);
Ad hoc (special) reporting of various data;
On-site (full scale or targeted) examinations;
Off-site analysis.
CAMELS system is employed during on-site examinations
(CAMELS rankings range from “1” – top performance- to “5”
– poor performance).
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Banking Supervision (2)
Bank of Albania has already approved a set of all necessary and
well-detailed rules and regulations, whose implementation help
to ensure prudential banking supervision, as follows:








Regulation “On Capital Adequacy”,
Regulation “On the amount and fulfillment of minimum
initial capital of the allowed activities of banks and
branches of foreign banks”,
Guideline “On Bank’s Regulatory Capital”,
Regulation “On Market Risks”,
Guideline “On the Liquidity of the Bank”,
Regulation “On Significant Risk Management”,
Regulation “On Open Foreign Positions”,
Regulation “On Bank Relations with persons related to
bank”.
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Credit Register
Bank of Albania passed the Regulation “On Credit Register
Operation”, (18.07.2007), which has entered into force by
01.01.2008.
Its purpose is to define the organization and operational
rules of the Bank of Albania Credit Register, as an electronic
database.
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Payment System
The Albanian payment system is run and regulated by Bank of
Albania.
Postal service network, part of payment system also, mainly for
money transfer ordered by individuals.
Bank of Albania is the operator of two payment systems:
AIPS
(Albanian Interbank Payment System), a real-time gross
settlement system (RTGS), which processes all interbank
big value (equal to or exceeding ALL 1,000,000 (~USD
10,000)) payments (a SWIFT-based Y-copy service, “live”
from January 2004).
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Payment System (2)
AECH (Albanian Electronic Clearing House) System, an
automated clearing system, for processing banks’
payments to their clients (small value payments;
“live” from 2005). The system is fully integrated
with AIPS and the net clearing position is settled daily
in AIPS.
Both systems are owned by Bank of Albania.
Yet to come:
Regulation “On usage of IBAN” (mandatory by May 2009);
Regulation “On Direct Debit”.
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ALBANIAN BANKING SYSTEM
Future Developments & Challenges
 Reduction of informal economy,
 Further expansion of banking retail networks and
products, more banking service coverage,
 Introduction of new technology: e-banking,
 Full implementation of IAS/IFRS, by January 2008,
 Increasing the beneficial effects of remittances, by
attempting to channel most of them through the
financial system.
ALBANIAN ASSOCIATION OF BANKS
ALBANIAN ASSOCIATION OF BANKS
SHOQATA SHQIPTARE E BANKAVE
Contacting AAB
URL: www.aab.al
E-mail: [email protected]
ALBANIAN ASSOCIATION OF BANKS
ALBANIAN ASSOCIATION OF BANKS
SHOQATA SHQIPTARE E BANKAVE
THANK YOU!
ALBANIAN ASSOCIATION OF BANKS
ALBANIAN ASSOCIATION OF BANKS
SHOQATA SHQIPTARE E BANKAVE