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Albania posts biggest drop in NPL ratio in CESEE in 2021 - Vienna Initiative

Albania posts biggest drop in NPL ratio in CESEE in 2021 - Vienna Initiative License: CC0 Creative Commons

SOFIA (Bulgaria), June 20 (SeeNews) - Albania recorded the highest annual decline in the ratio of non-performing loans (NPLs) out of 17 countries in Central, Eastern and South Eastern Europe (CESEE) last year, by 2.3 percentage points (pp) to 5.4%, the European Bank Coordination "Vienna" Initiative said.

On average, NPL ratios in the region continued to decline last year despite the effects of the pandemic, shedding 0.5 pp to 2.8%, the lowest level since the inaugural half-yearly NPL Monitor report in 2016, according to findings in the latest issue published by a subgroup of the Vienna Initiative last week.

Montenegro was the only country in the region which saw an increase in the NPL ratio, by 1 pp to 6.8%.

In the CESEE as a whole, NPL volumes fell 6.8% to 32.9 billion euro ( $34.6 billion) in the 12 months to end-2021, which marked their lowest level in six years.

North Macedonia, Montenegro, Romania and Serbia were the SEE countries where NPL volumes increased in the course of 2021.

Slovenia recorded the highest coverage ratio in the region, at 88.7%, closely followed by Croatia at 85%. Slovenia was also the country with the biggest increase in coverage ratio, of 7.0 pp in the past 12 months and with the largest drop in NPL volumes, by 24.6% to 0.9 billion euro.

With banks' exposures to Russia and Ukraine limited at just 0.3% of total assets and concentrated in only a few banks, the ongoing war in Ukraine is deemed not to be a fundamental threat to the stability of the EU banking system in terms of first-round risks.

However, both the European Banking Authority and the European Central Bank agree that "second-round effects may be more material and are more worrying from a financial stability perspective," according to the report.

The working group identified the fiscal impact, the effect of sanctions on all actors involved, cybersecurity risks and the impact on supply chains in the longer term as key drivers of a potentially damaging effect on financial stability in Europe as a whole.

Details on the NPL profile of ten SEE countries follow:

NPL ratio %, Dec 2021 NPL ratio (y/y change, pp) NPL volume, Dec 2021 (bln euro) NPL volume (y/y change, %)
Albania 5.4 -2.3 0.3 -21.8
Bosnia and Herzegovina 5.5 -0.6 0.6 -4.8
Bulgaria 5.1 -0.7 2.7 -6.8
Croatia 6.3 -0.9 2.5 -7.8
Kosovo 2.1 -0.3 0.1 -2.1
N. Macedonia 3.1 -0.1 0.2 4.4
Montenegro 6.8 1.0 0.2 19.9
Romania 3.6 -0.2 2.9 6.9
Serbia 3.6 -0.1 0.9 6.9
Slovenia 2.1 -1.0 0.9 -24.6
CESEE 2.8 -0.5 32.9 -6.8

The Vienna Initiative is a framework for safeguarding the financial stability of emerging Europe co-founded by the EBRD, EIB, the European Commission, IMF and the World Bank. It was launched at the height of the first wave of the global financial crisis in January 2009. The initiative brings together all the relevant public and private sector stakeholders of EU-based cross-border banks active in emerging Europe, which own much of the banking sectors in the region.

($ = 0.95005 euro)

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