Supervision Annual Report 2012 Bank of Albania SUPERVISION 2012 ANNUAL REPORT Bank of Albania 1 2012 Supervision Annual Report If you use data of this publication, you are requested to cite the source. Bank of Albania, Sheshi “Avni Rustemi” Nr.24, Tiranë, Shqipëri Tel.: + 355 4 2419301/2/3; + 355 4 2419409/10/11 Fax: + 355 4 2419408 E-mail: [email protected] www.bankofalbania.org Printed in: 350 copies printed by AlbDesign. 2 Bank of Albania Supervision Annual Report 2012 CONTENTS SUPERVISION MISSION 7 1. SUPERVISION IN 2012: IMPLEMENTING THE MEDIUM-TERM DEVELOPMENT STRATEGY OF SUPERVISION 2009-2014 9 1.1 Development of the regulatory framework and approximation with [EU] directives 9 1.2 Cooperation with international and domestic authorities 10 2. REGULATORY FRAMEWOK AND LICENSING PROCESS 12 2.1 Regulatory framework 12 2.2 Licensing 14 3. PERFORMANCE AND RISK ANALYSIS IN THE BANKING SYSTEM AND NON-BANK FINANCIAL INSTITUTIONS 22 3.1 Economic environment 22 3.2 Banking system highlights 22 3.3 Equity ownership structure 23 3.4 Assets and liabilities 24 3.5 Managing banking activity risks 26 3.6 Capital adequacy 38 3.7 Non-bank financial institutions and savings and loan associations 42 3.8 Financial unions and savings and loan associations 45 4. ON-SITE SUPERVISION 47 4.1 On-site supervision 47 4.2 Anti-money laundering and transparency 49 5. CREDIT REGISTER 53 5.1 Overview 53 5.2 Incorporation of non-bank financial institutions 54 Annex 1. Organisational structure of the Supervision Department 55 Annex 2. Each bank’s specific share in the banking system 56 Annex 3. Assets and liabilities 57 Annex 4. Core financial indicators 59 Annex 5. Data on banks’ shareholders (as at 31 december 2012) 60 Annex 6. Geographic distribution of branches and banking agencies within the territory of the Republic of Albania, as at end 2012, by prefectures 61 Annex 7. List of banking supervision regulations in force as at December 2012 62 Annex 8. Banks and branches of foreign banks licensed by the Bank of Albania 65 Annex 9. Bon-bank financial institutions 70 Annex 10. Unions of savings and credit associations 76 Annex 11. Foreign exchange bureaus (FXB) 87 Annex 12. Data on the shareholders/partners of non bank financial institutions 140 Bank of Albania 3 2012 Supervision Annual Report T A B L E S 2. Regulatory framewok and licensing process Table 1 Number of foreign-exchange bureaus licensed in 2012 18 Table 2 Number of money transfer agents operating for the account of non-bank financial institutions as at end-2012 19 Table 3 E-banking products approved by the Bank of Albania (2006-2012) 19 Table 4 Distribution of e-banking products/services by commercial banks as at end- 2012 20 Table 5 List of entities licensed by the Bank of Albania 20 Table 6 Banking system statistical indicators till 2012 20 Table 7 Activities by non-bank financial institutions 20 Table 8 Bank network in 2012 21 3. Performance and risk analysis in the banking system and non-bank financial institutions Table 9 Total banking system assets and loans as a percentage of GDP 24 Table 10 Key banking system asset items 24 Table 11 Key banking system liability items 25 Table 12 Change in off-balance sheet items during 2012 25 Table 13 Herfindahl Index of asset, deposit and loan concentration 26 Table 14 Quarterly credit growth in 2012 26 Table 15 Lending by sector and purpose of use (in ALL billion) 27 Table 16 Outstanding loans by term to maturity, in per cent 28 Table 17 Outstanding loans by currency, in per cent 28 Table 18 Foreign currency loans unhedged against exchange rate risk, in % 29 Table 19 Lending by sectors of economy, in % 29 Table 20 Credit rating as a percentage of outstanding loans 30 Table 21 Type of collateral by sector and currency, in per cent 33 Table 22 Deposits for the three major currencies 35 Table 23 Up to 1 and 3-month maturity gap for the banking system 36 Table 24 Loan-to-deposit ratio, in per cent 37 Table 25 Shareholders’ equity and its components 39 Table 26 Banking system risk-weighted assets 40 Table 27 Main profitability ratios, in per cent (cumulative) 41 Table 28 Profitability ratios from main activity, in per cent (cumulative) 41 Table 29 Average profitability ratios, in ALL million 41 Table 30 Efficiency ratio (in ALL million) 42 Table 31 Total assets of NBFIs classified by their main activity, December 2011- December 2012, in ALL billion 43 Table 32 NBFIs’ loan portfolio on a net and gross basis, December 2011-December 2012, in ALL billion 43 Table 33 Loan portfolio quality for December 2011-December 2012 (in per cent) 44 Table 34 Number of SLAs and membership, December 2011-December 2012 45 Table 35 Assets of unions and SLAs, December 2011-December 2012, in ALL billion 45 Table 36 Loan portfolio of unions and SLAs, on a gross and net basis, December 2011-December 2012 (in ALL billion) 45 5. Credit Registry Table 37 Number of active loans reported to the Credit Registry 53 Table 38 Number of queries in the Credit Registry by reporting institutions 53 Table 39 Number of applications for borrower’s report and borrower’s data review to the Bank of Albania 5 4 Bank of Albania Supervision Annual Report 2012 C H A R T S 2. Regulatory framewok and licensing process Chart 1 Financial and banking sector structure 14 Chart 2 Number of bank branches/agencies in years 17 Chart 3 Geographical distribution of resident population (1) and of bank branches/ agencies’ network (2), by prefecture 17 Chart 4 Foreign exchange bureaus through the years 18 Chart 5 Geographical distributions of foreign exchange bureaus 2012 18 3. Performance and risk analysis in the banking system and non-bank financial institutions Chart 6 Equity ownership structure in the Albanian banking system at end-2012 23 Chart 7 Monthly growth in credit during 2012 (in per cent) 27 Chart 8 Outstanding loans to businesses and households as a percentage of total loans 27 Chart 9 Volume of outstanding loans by term to maturity (in ALL billion), left; and by currency (in ALL billion), right 28 Chart 10 Growth of non-performing loans and loan portfolio (in per cent) 30 Chart 11 Outstanding non-performing loans in the banking system 30 Chart 12 Loan loss provisions 31 Chart 13 Business and household outstanding non-performing loans 31 Chart 14 Outstanding non-performing loans by currency 31 Chart 15 Quarterly ratio of foreign currency non-performing loans to foreign currency outstanding loans unhedged against exchange rate risk 31 Chart 16 10, 20, 50 and 100 largest borrowers in the system as a percentage of total outstanding loans (as at 31 December 2012) 32 Chart 17 Loan volume distribution of 10 largest borrowers by credit rating 32 Chart 18 Loans secured by collateral, by type 32 Chart 19 Customer deposits (in ALL billion) 34 Chart 20 Deposits by remaining maturity 35 Chart 21 Liquid assets by item and liquidity ratio 36 Chart 22 Liquid assets by currency 36 Chart 23 Up to 3-month maturity gap by currency and term to maturity 37 Chart 24 Shareholders’ equity 38 Chart 25 Capital adequacy ratio and its components 39 Chart 26 Net non-performing loans to regulatory capital 40 Chart 27 Risk-weighted off-balance sheet items 40 Bank of Albania 5 2012 Supervision Annual Report 6 Bank of Albania Supervision Annual Report 2012 SUPERVISION MISSION The Bank of Albania, as the central bank of the country, carries out its supervisory function pursuant to the Law “On the Bank of Albania”, No. 8269 of 23/12/1997, amended, and the Law “On banks in the Republic of Albania”, No. 9662 of 18/12/2006, amended. The Bank of Albania, in compliance with its legal responsibilities as the supervisory authority of banks and other financial institutions: • Aims at ensuring a sound banking activity, by drafting and implementing policies and an appropriate and flexible regulatory framework, in line with the country’s development dynamics to safeguard the soundness of banks and the stability of the banking system and beyond, as well as to prevent financial crisis and protect depositors; • Affects the stability of the banking system and beyond, by monitoring market developments and recommending necessary measures for supervised entities to adapt to such developments and be constantly managed according to the best practices; • Promotes market discipline, by requiring enhanced transparency about banking and financial products, and services; • Promotes a fair competition among supervised entities and aims at ensuring equal treatment of licensed entities and their customers, in compliance with relevant supervisory policies and effective rules. In this context, it is guided by the principle that the same types of financial risks and other issues relevant to regulation are subject to the same rules across all segments of the financial market to reduce the potential for regulatory arbitrage. The Bank of Albania fulfils its supervisory function by: a) Drafting and improving the regulatory and supervisory framework, to align to the European directives for effective supervision, the country’s specifics, and the best practices; b) Regulating the entry into the market of potential banks, shareholders and administrators that have a good reputation based on verifiable and reliable information; Bank of Albania 7 2012 Supervision Annual Report c) Conducting a proactive and effective supervision, by implementing principles of risk-based supervision through regular on-site examinations and off-site analysis of licensed entities’ indicators, and through corrective measures to address supervisory concerns; d) Cooperating with supervised entities, other domestic financial institutions, foreign supervisory authorities, and foreign banks operating in the Republic of Albania through their branches or subsidiaries.