Constraints for non-cooperating banks as BoA’s Tirana Approach aims to tackle NPLs
Borrowers who have exposure to more than one bank for at least ALL 100 million will be subject to the Bank of Albania’s new regulation on extrajudicial treatment of clients in financial difficulties.
This regulation will be the core of the so-called Tirana Approach plan, which provides for a framework for coordinated treatment of businesses that are borrowers in several banks.
The Regulation provides that for borrowers with a delay of more than 60 days, banks may sign a co-operation agreement for the joint handling of the case.
Banks’ participation in the agreement is not mandatory, but the regulation provides that the Bank of Albania may take restrictive measures against those banks that refuse to cooperate.
Thus, the Bank of Albania may set specific objectives for reducing non-performing loans or require a higher capital adequacy ratio for banks that do not participate in the agreement or that impede achievement of common objectives.
The process of joint decision-making will be managed by the participating banks themselves, through special structures, meetings and periodic information exchange, while the Bank of Albania will have a monitoring role.
Solutions that can be made under the deal will be credit restructuring, additional funding to strengthen business sustainability, including debt conversion into equity, as well as the sale of special debt assets or assets.
The regulation in question will have a two-year duration up to June 2020 and is designed mainly to manage some of the existing problematic credit in the corporate segment.
SCAN
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