Albania's Bank makes public three measures limiting euro use

The Bank of Albania's Supervision Council adopted three measures, whose implementation would curb the use of the euro in the domestic economy. Measures concern limiting currency credit and increasing capital demand in this currency

1-limitation of currency credits

Restricting loans to vulnerable currency from the exchange rate risk. This measure will be implemented through the Supervisory Council decision “for credit risk management by banks and branches of foreign banks”, Article 15.

Money loans, data for vulnerable borrowers from the risk of exchange rate (so where borrower income is in Lek) should not exceed the bank's 400% level of regulatory capital value. Any value on this level is derived from the value of regulatory capital.

2-Permission to Active liquids in Money

The minimum requirement for the value of the liquid active ratio to short-term obligations will be introduced, at 15% level, applied separately to Lek and the main currency (euro, US dollar), and to a total 20% level.

3-high capital demand

Higher capital demand, over Money loans exposed to the risk of exchange rate. Loans in currency to vulnerable borrowers from the exchange rate risk are being dishonored by higher risk cofficiators (150%) for the purposes of calculating the bank's capital surplus index.

Albania's Basnka argued that these measures were taken based on the performance of recent years, the increase in currency deposits is found. The current level of the private sector's currency deposit report to total deposits near the banking sector, of about 53%, is evidently higher than the average level of this report for countries similar to Albania.

On the other hand, the credit portfolio for the private sector has recognised a drop in currency credit weight. Although in decline, vulnerable loans to the exchange rate continue to constitute considerable weight of the credit portfolio for the private sector. Public debt has come on the rise in recent years, where the main contribution has made the increase in currency debt, provided mainly by non-resident subjects.

The cash exchange rate to the main waves has been stable, even easily strengthened. The performance of these indicators reflects cyclical factors as well as the dynamics of interaction between them. 80 90 100 110 120 130 140 150 dollars/ Euro-Leke 15 Based on this data, it can be said that the Albanian financial system represents high levels of Euroisation, reflecting the use of currency on a large scale in the Albanian economy.

Under these conditions, taking measures to control and lower these levels is gradually necessary. The Bank of Albania recently approved some measures addressing the obligations and activities of the banking sector. Based on the relevant Memorandum of Co-operation, it is expected that the Ministry of Finance and Economy, and the Financial Supervision Authority, will identify similar measures for markets and instruments they oversee. Through this report, the performance of the indicators will be followed to assess the impact of future measures and the need for their fulfillment. /Monitor/