Supervision Annual Report Supervision Annual Report 2007 B a N K O F a L B a N I A

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Supervision Annual Report Supervision Annual Report 2007 B a N K O F a L B a N I A 2007 Supervision Annual Report Supervision Annual Report 2007 B a n k o f A l b a n i a SUPERVISION ANNUAL REPORT 2 0 0 7 PB Bank of Albania Bank of Albania 2007 Supervision Annual Report Supervision Annual Report 2007 If you use data from this publication, you are requested to cite the source. Published by : Bank of Albania, Sheshi “Skënderbej”, No., Tirana, Albania Tel : 55-4-222220; 225568; 225569; Fax : 55-4-222558 www.bankofalbania.org For enquiries relating to this publication, please contact: Publications Section, Foreign Relations, European Integration and Communication Department e-mail: [email protected] Printed in: 000 copies 2 Bank of Albania Bank of Albania 2007 Supervision Annual Report Supervision Annual Report 2007 CONTENT S A. DOCUMENT “ON SUPERVISION MISSION” 7 B. REGULATORY FRAMEWORK AND LICENSING PROCESS 9 . Legal and regulatory framework 9 2. Licensing C. ON-SITE SUPERVISION 7 . Activity of the on-site supervision function 7 2. Cooperation with other authorities 7 . Problems observed during the examinations 8 D. BANKING SYSTEN AND NON-BANK DEVELOPMENTS 22 . Economic environment 22 2. Main banking system highlights 24 . Banking system structure 26 4. Managing banking activity risk 5. Capital adequacy 40 6. Profitability indicators 4 7. Non-bank financial institutions 49 E. CREDIT REGISTRY 52 . Overview 52 2. Main characteristics of the Credit Registry 5 . Reports and information designed by the Credit Registry 54 F. OTHER 55 . Housing loans. Financial stability implications 55 2. Albanian banking system position related to IFRS 60 G. AnneX 66 Annex . Organisational chart of the Banking Supervision Department (dated December 31, 2007) 66 Annex 2. Each bank’s specific share to the banking system 67 Annex . Assets and liabilities 67 Annex 4. Basic financial indicators 69 Annex 5. Bank network extention indicators as at end 2007 and the number of employees 70 Annex 6 List of licensed entities 7 Annex 7 List of Banking Supervision Regulations and Guidelines in force as of July 2008 0 Endnotes 06 2 Bank of Albania Bank of Albania 2007 Supervision Annual Report Supervision Annual Report 2007 T A B L E S B. Regulatory framework and licensing process Table Electronic products supplied by banks, December 2007 4 Table 2 Number of cases of administrators approved according to these categories 5 Table List of entities licensed by the Bank of Albania in years 5 Table 4 Geographical distribution of banking branches and agencies as at end 2007 6 C. On-site supervision Table 5 Examinations performed over 2007 8 D. Banking systen and non-bank developments Table 6 Banking network extension indicator as at end 2007 28 Table 7 Coverage with banking services 28 Table 8 Total asset share of the banking system to GDP 29 Table 9 Performance of main asset items of the banking system 0 Table 0 Performance of main banking system liability items 0 Table H (Herfindahl) index of assets, deposits and loans concentration Table 2 Credit outstanding structure by terms, in percentage 2 Table Credit outstanding structure by currencies (in %) Table 4 The share of foreign currency credit unhedged against foreign exchange risk (in percent) Table 5 Credit rating in % to credit outstanding 4 Table 6 Region developments on lending quality 6 Table 7 Performance of short-term assets to short-term liabilities of the banking system 7 Table 8 Monthly and quarterly maturity gap of the banking system 8 Table 9 Shareholders’ equity structure of the system and its components performance in years 4 Table 20 Performance of net overdues to regulatory capital ratio (in %) 42 Table 2 Performance of risk-weighted assets of the banking system by years 4 Table 22 Performance of capital adequacy ratio by bank groups 4 Table 2 Performance of core elements of net result (non-cumulative) in ALL million 44 Table 24 Core profitability indicators in percentage (cumulative) 45 Table 25 Indicators of profitability from core activity in percentage (cumulative) 47 Table 26 Average indicators of profitability in ALL million (quarterly average) 48 Table 27 Efficiency indicator (non-cumulative) in ALL million 49 Table 29 Assets quality 50 Table 28 Asset structure 50 F. Other Table 0 Housing loan indicator in some EU member states 56 Table Housing loan indicator in Albania and in some new EU member states 56 4 Bank of Albania Bank of Albania 5 2007 Supervision Annual Report Supervision Annual Report 2007 C H A R T S B. Regulatory framework and licensing process Chart Number of branches/agencies (in per cent) by peer groups 6 D. Banking systen and non-bank developments Chart 2 Paid in capital structure of the system by origin 27 Chart Capital origin by peer groups, December 2007 27 Chart 4 Number of employees (in per cent) by peer groups 27 Chart 5 Share of peer groups to the system by total assets 0 Chart 6 Share of peer groups to total credit outstanding of the banking system (in %) 2 Chart 7 Credit outstanding to enterprises and households (in % to total credit outstanding) 2 Chart 8 Credit outstanding volume by terms, in ALL billion Chart 9 Credit outstanding volume by currencies, in ALL bn. Chart 0 Performance of non-performing credit outstanding of the banking system 4 Chart Non-performing loans to credit outstanding of the previous year (in %) 4 Chart 2 Provisions for non-performing loans 5 Chart Non-performing credit outstanding by sectors 5 Chart 4 Non-performing credit outstanding by currencies 5 Chart 5 Performance of liquid asset composition in years 7 Chart 6 Asset liability structure by residual maturity (in ALL billion) 7 Chart 7 Performance of total deposits (in ALL million) and their growth rate (in percentage) during 2002-2007 8 Chart 8 Deposit structure by availability 8 Chart 9 Deposit structure by final maturity 9 Chart 20 Performance of deposit share in ALL and in foreign currency to total deposits (in percentage) 9 4 Bank of Albania Bank of Albania 5 2007 Supervision Annual Report Supervision Annual Report 2007 6 Bank of Albania Bank of Albania 7 2007 Supervision Annual Report Supervision Annual Report 2007 A. DOCUMENT “ON SUPERVISION MISSION” Supervision function is carried out by the Bank of Albania, which comprises the central bank of the country, pursuant to the Law “On the Bank of Albania”, No. 8269 of 23.12.1997 and the Law “On Banks in the Republic of Albania”, No. 8365 of 02.07.1998. Supervision mission The Bank of Albania, in line with its legal responsibilities, as the supervisory authority of banks and other financial institutions licensed by it, is committed to: • Ensuring a sound banking activity that is in good harmony with the Bank of Albania laws, rules and regulations, in order to protect depositors and prevent financial crises; • Safeguarding the banking system stability and even broader, by monitoring the market developments and recommending adequate measures, so that banks adapt to these developments and are continuously managed according to best principles; • Strengthening the banking system credibility and promoting a healthier market discipline, by requiring higher transparency in the system; • Providing a fair competition in the banking system and beyond, and ensuring equal treatment of licensed entities and their clients; • Providing continuous and professional communication with financial market operators and other institutions which influence the activity of the Bank of Albania, in the framework of enhancing the functioning of the financial market and its operators. The Bank of Albania will carry out its supervisory function through: a) Continuous establishment and improvement of the supervisory regulatory framework, so that it is in harmony with the best international principals and applicable in practice; b) On-site and off-site examinations of licensed institutions indices, as well as through corrective measures taken for sorting out various problems. c) Orientation of supervisory process towards risk identification the licensed institutions are faced with, recommending proper solutions. d) Implementation of policies which focus toward a development-oriented 6 Bank of Albania Bank of Albania 7 2007 Supervision Annual Report Supervision Annual Report 2007 banking system; e) Co-operation with financial institutions under supervision and with other domestic financial institutions, as well as with international supervisory authorities; f) Ongoing improvement of the supervisory capacities. The Bank of Albania, in compliance with the requirements of the supervisory function, strives for the highest levels of integrity, professionalism, efficiency and transparency. 8 Bank of Albania Bank of Albania 9 2007 Supervision Annual Report Supervision Annual Report 2007 B. REGULATORY FRAMEWORK AND LICENSING PROCESS 1. LEGAL AND REGULATORY FRAMEWORK 2007 challenges and priorities, the new Law “On Banks in the Republic of Albania” and the regulatory framework were comprehensive processes in progress of the work for reviewing and drafting regulatory acts that regulate the activity of entities licensed and supervised by the Bank of Albania. The Bank of Albania, in order to precede the process of adapting the regulatory framework to new requirements of the Law “On Banks in the Republic of Albania”, to the Directives of the European Council, to the Basle Committee principles for effective supervision and to the New Capital Accord concepts, even during 2007 aimed to complete the draft regulations. They have effectively reflected the banking industry thought, subject of implementing the requirements of regulatory acts and have also taken into account the recent developments of the Albanian banking market. 1.1 NEW REGULATORY acTS 2007 finalised the drafting of two new regulations and witnessed changes to some banking supervision regulations. Decision No. 57 of 15.10.2007 adopted the Regulation “On operational risk management at branches of foreign banks”. The regulation was drafted in implementation of the new banking law and in the framework of the national strategy for legal harmonization with the European Union Directives.
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