No trouble in the short run: Albanian banks OK BoA’s deeuroization measures
The Albanian Association of Banks supports the measures that the Bank of Albania has taken to lower euroization at more acceptable levels.
Secretary General of the Association of Banks Spiro Brumbulli said that a reduction in the rate of use of the euro would reduce the risks to the economy and the financial system.
He also added that the measures taken by the Bank of Albania could be accompanied by interventions by other institutions, to limit the unjustified use of the euro in domestic economic transactions.
“The use of national currency has several benefits because it eliminates exchange risk for all borrowers who do not have foreign currency income but have income in ALL. So, what you get today at nominal value, you know that you will pay them according to the interest rate you receive. If you have a foreign currency, this means that you are exposed in the years to come and with a devaluation or a valuation of one currency or another, you will always be unbalanced. So you may have cases when you can pay the installment, so you can have 300 euros at 140 ALL, it’s not the same amount of money as it is with 133 lek.”
Mr. Brumbulli said that the regulatory changes adopted by the Bank of Albania on Wednesday will not bring problems in the short run for the banking system.
According to him, the purpose of these measures is the long-term reduction of the euro’s weight on bank balances.
“Fortunately, we are in a situation where banks are very liquid, either in the euro or in the lek, because the demand for credit has not been high and considering the conditions we are in this is not a problem. If we talk about the medium and long-term, of course if such a ratio is maintained with the deposits and the austerity measures is that the loan is linked to the currency, therefore it should be related to the lek. Of course, this may be something difficult. That is why the process has already begun.”
The Bank of Albania decided on Wednesday to increase the mandatory reserve for foreign currency liabilities to 12.5% from 10% currently.
In parallel, the required reserve ratio for ALL will decrease to 7.5%.
Mandatory reserve is the part of the foreign currency liabilities that banks are obliged to keep unused in an account at the Bank of Albania.
In essence, this move aims to orient the banks’ public deposits towards the Lek.
Also, the Bank of Albania decided to increase the demand for liquid assets in foreign currency, at 20% of short-term liabilities, a measure that discourages lending in the European currency.
At present, the banking system is quite liquid and it is not expected that this will cause problems, but the goal is to make deposit and lending policies more oriented toward the Lek in the long run.
SCAN
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