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Albania’s banking sector: Facts & Figures

Updated December 2021 – For earlier editions of Facts & Figures click here


The economy of Albania grew by 3% at the end of December 2020. Fiscal policy played an active role in withstanding the shocks to the economy in the previous year, at first due to the consequences of the November 2019 earthquake, and then the pandemic. The measures undertaken included an extension to tax obligations; issuance of sovereign guarantees to protect employees’ income and mitigate credit risk to borrowers; an increase in public spending focused on reconstructing buildings damaged by the earthquake and on meeting public health needs. As a result, similar to the experience of other countries, fiscal deficit and public debt recorded a rapid increase throughout 2020. It is estimated that by the end of 2020, the budget deficit had increased by around 7% of GDP (or around ALL 110 billion) and public debt by about 80% of GDP by the end of the period. The budget deficit was mainly financed by both foreign and internal borrowing.

Following the negative shock caused by the Covid-19 Pandemic Bank of Albania reduced the policy rate and maintained an accommodative monetary policy and adopted its weekly monetary operations from “variable price – fixed quantity” to “fixed price – unlimited quantity” to provide abundant liquidity and keep interest rate in the interbank market close to policy rate. On the macro-prudential and supervisory policy side, the Bank of Albania undertook significant regulatory changes to alleviate the possible effects to financial institutions, in order to create facilities to borrowers for the repayment of loans:

  • In March 2020, the moratorium on credit repayments was undertaken through regulatory changes, which eased the mandatory classification and provisioning of loans until May 2020;
  • In May, the deadline of the moratorium was extended until August 2020 and re-determining an easier framework on the classification and provisioning of restructured loans, until December 2020.

The banking sector’s assets expanded by 7% compared with the end of 2019. The share of foreign currency assets and liabilities to total balance is around 50% and has slightly decreased over the year due to a stronger increase in lending and deposits in lek.

As at the end of 2020, the structure of the banking and financial system consisted of 12 banks (four of which with Albanian capital and eight with foreign capital. Of the latter, six originate from European Union countries.), 30 non-bank financial institutions (NBFIs), 538 foreign exchange bureaus, 14 savings and loan associations (SLAs) and one union of SLAs. The share of the banking system in the economy, measured by the ratio of total assets to the Gross Domestic Product (GDP), remains high. This ratio increased by 10.43 percentage points this year, standing at 98.35%.

The Capital Adequacy Ratio recorded around 18% (17.95%), downwards in the last two periods. The performance of the indicator during the period was mainly affected by the increase of risk-weighted assets which exceeded the effect of the increase of regulatory capital.

The banking sector recorded a positive financial result of around ALL 10.5 billion. This result was 47% higher compared with the previous year. Activity in lek contributed around 2/3 to the growth of the net financial result. The growth in net interest income and other activities income coupled with the decrease of expenses for loan provisions provided the main contribution to the increase of the banking sector’s profit. The banking activity’s expenditures increased during the period, but their ratio to banking activity’s income declined to 57% from the previous year.

The increase in the profit of the sector is also reflected in the performance of the average profitability indicators of the banking sector: RoA and RoE climbed to 1.3% and 12.8%, respectively. The liquidity position of the banking sector is assessed to be in good levels,

During 2020, the assets of the banking system grew by 7.22%, while credit portfolio increased by 5.76%. The credit portfolio quality improved slightly during the year, as the non-performing loans ratio fell by 0.26 percentage points, reaching at 8.11% at the end of the year.

Deposits held in the banking sector recorded high rates of growth over the period. Customer deposits remain the main source of financing for the Albanian banking system, sharing 81.3% (80.9% in December 2019) of total liabilities. In December 2020, the total value of deposits in the system amounted to ALL 1.286 billion, recording 7.8% annual growth from the previous year. The share of the domestic currency in total deposits slightly increased to 49.5%, from 48.51% in December 2019.

Total assets of NBFIs in December 2020 reached ALL 59.6 billion, increasing by ALL 1.5 billion, or 3%. Assets of NBF Is accounted for 3.8% of the total banking system assets, up by 0.1 percentage points compared with the previous year.

Contributor: Altin Tanku atanku@bankofalbania.org