Ardian Fullani: A short overview on the latest Albanian banking system
achievements
Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the EBRD 2005 Annual Meeting and
Business Forum, Belgrade, 22 May 2005.
* * *
Ladies and Gentlemen,
It is a great pleasure to participate in this prestigious event of the EBRD Annual Meeting and Business
Forum. For this purpose, I would like to thank the organisers of this meeting who provided us such an
opportunity to present our achievements and ambitions for the future.
Allow me first to tackle an important issue, which within the context of this meeting, I believe, is of
paramount importance. I mean by that the regional co-operation, an initiative that has been completely
supported by the European Central Bank. We have already taken the first steps in this regard through
establishing bilateral relationships in banking supervision with National Bank of Macedonia, Central
Bank of Montenegro and Banking and Payment Authority of Kosovo. Meanwhile, we are in the process
of negotiating with National Bank of Bosnia and Herzegovina, National Bank of Serbia etc... I estimate
that regional co-operation is an important forerunner of the integration process of the region with the
rest of Europe; therefore I will not stop working to encourage a regional co-operation of high standards
among the financial systems of Balkan countries.
I hope that you share the same opinion with me, because only in this way, our region will be more
credible and efficient to have its European dream. On the other hand, a developed and financially
integrated region will be more attractive for foreign strategic investors, opening up the path toward
regional development projects, particularly infrastructure ones where region's banks might be directed
in financing and investment.
Further on I would like to give to you a short overview on the latest Albanian banking system
achievements. After many years of difficult transition, in this late spring of 2005 the banking system is
growing on a stable basis.
Dear participants,
I would like to ensure you that recently there are many qualitative developments of the Albanian
banking system. I use the opportunity of this event to express that positive assessments on the
banking system have been given also in the report prepared by the World Bank and International
Monetary Fund after the completion of their assessment made on the Albanian financial system
(FSAP-Financial System Assessment Program). Of course, this is good news.
Conclusions of FSAP, of this important international passport, are an indication of our earliest
conclusions that the Albanian financial system is characterized by a supervised and effective banking
system. Regardless of what I mentioned above, sincerely feeling myself as a part of the banking
system I would envisage that it needs better and faster motivation to reach higher contemporary
standards in all the aspects of the banking activity.
The banking system has experienced remarkable developments recently. After the licensing of
Popular Bank, with Albanian capital, the number of banks increased from 15 to 16, and a preliminary
license is granted to Union Bank (Albanian capital), which is expected to raise the number of banks to
17 over 2005. The system assets have further increased by 14 percent while there was an increase of
banking products and an expansion of their network after the successful privatisation of the Savings
Bank from Reiffeissen Bank, Austria. During this year there will be sold the public shares of both the
Italian Albanian Bank and United Bank of Albania, which will lead to an increase of effectiveness and
banking competition, paving the way to the processes of selling, merging and acquisitions towards a
new consolidation of the banking system.
The lending activity increased by 38 percent where one can distinguish inter alia the significant growth
of medium-term and long-term loans compared to short-term loans.
The map of coverage of the country with the banking system has further expanded, including new
areas ever covered before. At the end of 2004, the total number of branches reached 88, or 11
branches more that the end of the previous year, while the number of agencies recorded for the first
time a full three-digit number, 100 and the number of the employed people increased by 26 percent.
The high increase of the number of branches relative to agencies shows that banks are not interested
only in providing the service of collecting deposits but also in providing other products like crediting to
the economy. These developments, besides their positive contribution in enhancing the financial
intermediation speak for a better perception of the investing potential from banks, in Albania.
An outstanding development is mainly related to the client service, which is accompanied through
electronic terminals by the increasing number of electronic cards in circulation. Banks offer already
debit and credit cards in co-operation with international companies such as Visa and MasterCard. Six
banks provide the ATM service and the number of ATMs reached 108 by the end of February 2005.
The banking system results to have a profit level, which has been increasing to Lek 5.1 billion. Return
on equity (ROE) was estimated at 21 percent while credit quality is only 4.2 percent, from 4.6 percent
in the previous year.
These positive developments on the banking system were accompanied by a sound macroeconomic
environment. For several years the economy is growing at 6 percent while inflation was kept under
control within the two-to-four percent targeted range of the Bank of Albania. The fiscal consolidation
has been on track while current trade deficit has been financed mainly by remittances and foreign
direct investment inflows. The Bank of Albania has played a crucial role in providing this
macroeconomic environment. Since early 2003, we cut several times the core interest rate bringing it
at its minimum historical level, 5 percent. In taking any monetary policy decisions we had considered
the further invigoration of economic activity, keeping always an eye on inflationary developments and
financial stability as well.
As I would like to often mention in the IMF premises, Albania is considered as a successful story. The
Board of directors have recently declared that Albania is enough mature to sign a new three-year
agreement by the end of this year. The new arrangement will be a more flexible one leading Albania to
a better access in the international financial market.
Of course, what I mentioned above was just a brief resumé regarding the current situation of the
banking system and the overall economic performance. There is no doubt that Albania's attractiveness
has further enhanced, and partially this reflects also the increase of confidence in the Albanian
banking system.
Using the opportunity of this very prestigious forum, I would like to share my voice with that of the
Albanian representatives present in this panel, expressing that my country is more open, more
consolidated, ready to absorb more ambitious projects and, of course, global projects.
I wish you successful and fruitful proceedings of this meeting.
Thank you.