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© Bank of Albania |
FOREWORD
This is the first issue of the Financial Stability report, which will be published by the Bank of Albania on annual basis. The purpose of this report is to detect and assess the risks the financial system and its infrastructure are faced with, and in order to provide the public authorities with the possibility to identify the relevant measures for the necessary corrections. For the compilation of this report have been used data available at the Bank of Albania, and Information has been exchanged with other authorities, which supervise the activity of the financial market. In order for this report to have a wide and diverse audience, the language used and the Information presented in it is aimed to be as appropriate as possible. The improvement of the Financial Stability report quality, in particular in terms of the data it contains, will be our objective in the future issues of this report.
The stability of the financial system is assessed based on the performance and risks derived from its interaction with the overall economic environment, both internal and external, and from its activity. In order to evaluate the risks arising from the interaction with the surrounding environment, the macroeconomic and markets’ developments in Albania and in foreign partner countries have been analyzed. This report makes an assessment of the general developments and the expectations with regard to economic growth, trade balance, the overall price level, exchange rate and the fiscal indicators. It provides an analysis of the latest developments in the international financial markets and developed economies and makes an assessment of their impact on Albania’s financial system and the banking sector.
In addition, through an analysis of employment, the following report provides an assessment of personal income and its effects on the banking sector’s borrowers’ creditworthiness. In order to assess the risks arising from the financial system activity, we have examined the performance of the main indicators of its financial soundness, namely capital, asset quality and financial performance. The extent of risks has been assessed through the stress-test analysis. The report also makes a brief assessment of the situation in the non-bank financial sector. The data and analysis mainly entail the developments occurred during 2007 and the first quarter of the year 2008. The expectations for future developments mainly cover the entire year 2008.
CONTENTS
FOREWORD
1. SUMMARY
2. INTERNATIONAL DEVELOPMENTS DURING THE YEAR 2007
3. MACROECONOMIC SITUATION IN Albania
4. analysis OF THE FINANCIAL SYSTEM’S SOUNDNESS INDICATORS
5. TECHNOLOGICAL INFRASTRUCTURE
6. STRESS-TEST analysis
7. NON-BANK FINANCIAL institutions AND INSURANCE COMPANIES
ANNEX 1
ENDNOTES
2. International developments during the year 2007
Table GDP growth and inflation in Europe
3. Macroeconomic situation in Albania
Table 2 Annual changes by sectors of production
Table 3 Indicators of construction sector
Table 4 Annual inflation rate during 2007
Table 5 Employment indicators
4. analysis of the financial system’s soundness indicators
Table 6 Ratio of net non-performing loans to capital indicators
5. Technological infrastructure
Table 7 Transactions in the AIPS system
Table 8 Transactions in the AECH system
Table 9 Types of transactions processed in the AIPS system
Table 10 Concentration indicators for the AIPS system
Table 11 Concentration indicators for the AECH system
Table 12 Intra-day loan facility
Table 13 Cheque disbursement in AIPS
Table 14 Use of banking cards
Table 15 Number of ATMs and POSs
Table 16 Debit cards
Table 17 credit cards
Table 18 Use of Home Banking
6. Stress-test analysis
Table 19 Summarized results of stress test analysis
Annex 1
Table 20 Losses stemmed from the mortgage loans’ crisis in the financial sector in some countries
Table 21 Changes in risks and conditions (Since October 2007)
CHARTS
2. International developments during the year 2007
chart 1 Annual LIBOR rate in USD
chart 2 Difference between the interest rate for -month and overnight credit, in basis points ( % = 00 basis points), prior and during the crisis
chart 3 EUR/USD exchange rate
chart 4 Banks losses stemming from the financial crisis since the early 2007 (in billions of USD)
chart 5 Capital increase from banks since the early 2007 (in billions of USD)
chart 6 European banks’ losses since the early 2007 (in billions of USD) 2
chart 7 Capital increase from European banks since the early 2007 (in billions of USD)
3. Macroeconomic situation in Albania
chart 8 House Price index
chart 9 Nominal effective exchange rate
chart 10 USD/ALL nominal rate (January 2007-May 2008)
chart 11 EUR/ALL nominal rate (January 2007-May 2008)
chart 12 Quarterly flows of workers’ remittances in millions of EUR
4. analysis of the financial system’s soundness indicators
chart 13 Performance of deposits and credit in the banking system
chart 14 Clients’ deposits to total credit of the banking system
chart 15 Foreign-currency denominated credit to total credit of the banking system
chart 16 Foreign-currency denominated deposits to total deposits of the banking system
chart 17 Total deposits to total credit by banking groups
chart 18 Foreign currency-denominated credit to total credit by banking groups
chart 19 Foreign currency-denominated liabilities to total liabilities by banking groups
chart 20 Capital adequacy rate for the banking system
chart 21 Capital adequacy rate by banking groups
chart 22 Financial leverage by banking groups
chart 23 Ratio of non-performing loans to capital in the banking system
chart 24 Net non-performing loans to capital by banking groups
chart 25 Return on equity for the banking system
chart 26 Interest rates for ALL-denominated instruments
chart 27 Interest rates for USD-denominated instruments
chart 28 Interest rates for EUR-denominated instruments
chart 29 Return of equity by banking groups in %
chart 30 Exposure to exchange rate risk for the banking system
chart 31 Exposure to exchange rate risk by banking groups
chart 32 credit coverage with collateral
chart 33 Collaterized loan to loan portfolio in main currencies in %
chart 34 Collaterized loan to loan portfolio in foreign currency when the borrower does not have his/her income in foreign currency in %
chart 35 Use of credit to new credit
chart 36 Composition of credit portfolio by maturity term
chart 37 Average duration of credit
chart 38 Distribution of credit by sectors
chart 39 Liquid assets to total assets of the banking system
chart 40 Liquid assets to total assets by banking groups
chart 41 Liquid assets to short-term liabilities of the banking system
chart 42 Return on assets for the banking system
chart 43 Return on assets by banking groups
chart 44 Gross non-performing loans to total loans of the banking system
chart 45 Non-performing loans to total loans by banking groups
chart 46 Distribution of loans by sectors of industry
chart 47 Interest margin to gross income for the banking system in %
chart 48 Interest margin to gross income by banking groups in %
chart 49 Non-interest expenditure to gross income for the banking system in %
chart 50 Interest expenditure to gross income by banking groups in %
6. Stress-test analysis
chart 51 share of financial system’s components to the GDP in % (2007)
chart 52 share of financial system’s components in %
7. Non-bank financial institutions and insurance companies
chart 53 Change in assets of non-bank institutions in %
chart 54 Ratio claims/premiums in the total insurance market
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