The risk of bank investments in Albania, falling by 6.7% in the first six months

Exposure of the banking system to risk has fallen further during the first half of this year. The total of assets corrected at the respective risk coefficients, according to the Bank of Albania data, decreased to ALL 804 billion at the end of June, down 6.7% from the beginning of the year.

Since the beginning of the year, the banking system loan portfolio has shrunk by ALL 20 billion. The weighting of assets with risk coefficients is done mainly in the function of calculating the bank’s capital adequacy. The decline in the value of risk-weighted assets has led to a further increase in the capital adequacy ratio, which in June reached 16.6%, from 15.1% at the end of 2017.

Also, the total of adjusted assets with risk coefficients is an indicator of the type of investment undertaken by the banking system. For example, investment in government bonds has risk coefficients 0 and does not add anything to the total of adjusted assets for the purposes of calculating capital adequacy. Rather, credit has a higher impact on total assets because it has higher weighting coefficients.

ALL credit is weighted with coefficient 1, which means that it is added to the nominal total assets value. While foreign currency lending to ALL borrowers is weighted by a coefficient of 1.5, which means that it has a greater impact on the total adjusted asset growth. Another form of investment that is weighted with high risk coefficients is investment abroad.

SCAN

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