Reinvigoration of lending: Banks increase borrowing from the Bank of Albania

Commercial banks have considerably increased borrowing from the central bank through repurchase agreements.

According to data from Bank of Albania, in March this year the value of the loan for the banking sector amounted to ALL 42 billion, about 60% more compared to the same period of the previous year.

The growth of central bank lending has risen sharply since the second half of last year.

Among other things, this is an indicator of the vitalization of lending to the economy.

According to the Bank of Albania, loan portfolio in ALL was 7.2% higher at the end of March compared to the same period of the previous year.

When banks require more loans from the Central Bank for short-term needs, this usually shows that they are more active in lending or in other forms of financial investment.

One-week repurchase agreements are the most common form of Central Bank liquidity short-term support for commercial banks.

The price of this instrument represents the key interest rate, which is currently 1.25%, the lowest rate ever applied in Albania.

The base rate reduction makes it cheaper for banks to borrow from the Bank of Albania and, through the transmission mechanisms, it is conveyed in other interest rates of long-term financial instruments such as deposits and bank loans or government debt securities.

The more banks use this instrument, the more the Bank of Albania reaches its goal of conveying its monetary policy in the financial market.

In the present case, the Central Bank’s goal is to make money as cheap as possible to fuel consumption and investment.

SCAN

*Material i përgatitur nga portali SCAN. Ripublikimi mund të bëhet vetëm kundrejt citimit të autorësisë dhe burimit origjinal.