BoA expected to take measures to tackle high level of euroisation
The increasing level of euroisation of the financial system in Albania, and, in particular, the significant growth of deposits in euro over the past year, has prompted the Bank of Albania to consider increasing the reserve in foreign currency.
The financial system is still characterized by a high degree of euroisation, despite all regulatory attempts to restrict the use of the European currency in the last decade.
About 60% of loans and 52% of bank deposits are in foreign currency, mostly in euro.
Regarding lending, in the past two years there has been a tendency towards the growth of the weight of Albanian currency, Lek, due to the drastic reduction of interest rates in local currency.
In the meantime, the euro has gained ground on the liabilities side, due to a rapid increase in the deposits in that currency.
While it is drafting a strategy for reducing euroisation, the Bank of Albania is prepared to increase the level of safety in order to precede the emergency needs for foreign currency that the financial system might have in the future.
According to information published by the International Monetary Fund, this will be done through increasing the value of foreign exchange reserves by buying foreign currency auctions, which are expected to be held this year.
Currently, foreign currency reserve serves as an instrument intended to cover possible emergency needs of the economy for currency and to soften possible strong blows from the exchange rate.
But, the Bank of Albania aims to increase the reserve in question, ecven to serve the objective of stability of the financial system.
The Bank of Albania does not possess instruments of support in foreign currencies, but, however, specific forms of assistance may be applied in exceptional circumstances.
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