BoA amending regulation to cope with restructuring of loans
The Bank of Albania has drafted several changes to the regulation that is applied for the restructuring of loans.
According to the draft decision entitled “On Amendments to the Regulation on Credit Risk Management by Banks and Foreign Banks”, the rating criteria of restructured loans will be tightened, abolishing some of the alleviating measures imposed in 2013.
Those measures aimed at facilitating loan restructuring and, among other things, provided that restructured loans would not automatically be classified as non-performing loans.
With the new regulation, this condition is slated to undergo a change.
Restructured loans are expected to be downgraded in the sub-standard category.
Meanwhile, the loans that at the time of restructuring were classified as non-performing will remain in the same class.
According to the regulation of the Bank of Albania, loans are classified as non-performing in cases when they have at least 61 days of delay from the payment date of the next regular installment.
The loan may be removed from the list of non-performing ones only after the borrower has regularly paid at least four installments for a period covering at least 12 months.
According to the current regulation, the reclassification of the restructured loan can only be made after six months and following the payment of three installments without interruption.
The tightening of the restructuring criteria was in fact envisaged long ago, considering that the revised 2013 regulation was conceived as a temporary measure in order to encourage restructuring at a time when non-performing loans grew at a rapid rate.
SCAN
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