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Albania's bad loans go down in Q2, new loans expected to boost economy

Xinhua, August 7, 2015 Adjust font size:

Albania's bad loans in the second quarter decreased to the lowest level of the past three years and the reduction of non-performing loans is a positive indicator which will help in the revival of this sector, Governor of the Bank of Albania Gent Sejko said.

At the end of June, Albania's non-performing loans in the second quarter fell to 20.3 percent from 22.7 percent at the first quarter and 24 percent in the same period of last year, according to latest official data published on Thursday by the Albanian central bank.

The decrease by 2.4 percentage points in a quarter is the strongest ever recorded since the beginning of the crisis and is linked with several factors.

The greatest impact was given by the new regulatory measures, which force banks to remove non-performing loans created more than three years ago from their balance-sheets, according to Albanian daily news.

In parallel with this measure, the reduction of non-performing loans was also helped by their restructuring and the increase of total lending for the economy.

The main objective of the Bank of Albania is for non-performing loans to go below 20 percent within this year, a target which seems achievable judging by the figures of the second quarter of 2015.

Strong economic slowdown and the deep crisis in some of its sectors after 2009, led to the rapid increase of non-performing loans, reaching up to 25 percent of the total.

This level was considered as alarming by the International Monetary Fund and the World Bank and it increased uncertainty in the financial system of the country.

Due to the fear of failure to get their loans back, the banks started to block giving new loans for businesses and individuals, striking the economic growth even further.

At present, bank authorities hope that the reduction of non-performing loans will inject more confidence in the banking system and encourage it to provide more lending for the economy, which would help consumption and its investments.

"The Supervisory Council of Albanian central bank deems that the successful implementation of the measures for reducing the non-performing loans stock will boost banks' willingness to lend," Sejko said. Endit