Albanian Banking System The Past the Present and the Futuree

Abstract

The Albanian banking system is a relatively new system and has been developing mainly during the last 10-15 years, whereas its significant growth and progress was recorded 10 years ago, via the privatization of Savings Bank. Along with privatization, the development path included, also, greenfield investments form foreign banks and capital pooling by Albanian venture capitalists. This process has undoubtedly been crucial and instrumental, in providing the economy with the so-much-needed finance, as the actual ratio of loans-to-GDP stands at 42%, starting from a negligible basis, during 1990s. The Albanian banking system, as well as the global financial system, felt the pinch of the global financial and economic crises, through two almost simultaneous warning events: the deposit withdrawal from the fourth quarter of 2008 till around mid-2009 and the steep increase in non-performing loans, which almost doubled in 2008. Actual data show a stabilized rate of non-performing loans, which indicate that we are now in the upper frontier of natural adjustment of credit to economy. The now days reality is putting the Albanian banking system in front of serious challenges, like: (1) the “paradox” of ever-growing external financing sources and the (2) “difficulty” to invest disposable funds efficiently, (3) effective management of banking system’s maturity phase, and (4) continuous deepening of the Albanian financial system.Conclusively, the Albanian banking system must be obviously prepared to manage and cope with macroeconomic challenges, in the frame of some-years moderate economic growth, as well as the unavoidable consolidation of banking operators, typically with M&A process, spurred by the need to improve the economic efficiency and eventual increase of competition by non-bank financial institutions.