However, the share of non-performing loans secured by collateral was larger than a year earlier, accounting for about 81% of the non-performing loan portfolio. Also, the banking system increased the loan loss provisioning by 31%. Liquidity indicators improved in 2012. The ratio of liquid assets to short-term liabilities was 36.7%, being above the minimum level for both the lek and foreign currencies. Deposits were the main source of financing the  BIS central bankers’ speeches  3  banking activity and the parent-bank lines of credit decreased significantly compared to end2011. The reduced dependency on parent-bank financing in Albania is a positive development that has increased the domestic banking system’s resilience to foreign shocks. The banking system is hedged against market risks. Our estimates point to a banking system that is slightly exposed to interest rate risk. It is also slightly exposed to direct effects from exchange rate volatility and its foreign-currency open position is obviously below our limits. The banking system continues to be exposed to indirect exchange rate risk due to foreign currency loans granted to borrowers whose income is not in foreign currency. The control on operational risk improved in 2012, by improving the framework of procedures. The banking system has the necessary technological infrastructure to meet the regulatory requirements, hence ensuring that the activity is carried out even in extreme circumstances. Transparency and publication of information continue to be in focus of the Bank of Albania, as important pillars to protect customer and foster discipline in market competition.

Aiming to enhance transparency and boost competition among banks in the market, on July 2012, the Bank of Albania started publishing on its website the interest rates and banks’ commissions on their products. However, we are well aware that there is still room for improvement in reference interest rate used in credit contracts and in the information that banks publish on their websites. Addressing the prevention of money laundering and of terrorism financing was an important part of the regulatory and supervisory process in 2012. Besides improving the regulatory framework in line with the new Law and EU standards, we have also strengthened our cooperation with the Department of Money Laundering Prevention and have fostered the supervisory process of financial institutions. On-site and off-site examinations revealed that entities have taken appropriate, preventive measures and have established a proper infrastructure to identify and report suspicious cases. The year 2012 highlighted important developments in the area of financial activity licensing. Hence, two branches of foreign banks turned into their subsidiaries, reducing the risk of their exposure to parent-bank risks, enhancing their independence and the control level exercised over them by the Bank of Albania. An important change was also the transfer of 100% shares of the Emporiki Bank from Emporiki Bank of Greece to IUB Holding France, contributing to long-term and stable development of the banking industry. Finally, in 2012, the number of non-bank financial institutions and the range of financial products and services provided in the market by the financial system increased.