BoA Tightens Credit Risk Management Rules

Tirana, 28 Oct. 2008 (AENews) – Bank of Albania tightened credit risk management rules this month, in order to reduce exposure of local banks to international financial crisis. According to the new decision, local banks cannot lend more than 10% of their shareholder capital to parent banks and their subsidiaries.

Former rule do not consider a single borrower parent bank and their subsidiaries in other countries. Risk diversification rule had been tightened also in April, when BOA decided to decrease to 10% from 15% the maximum loan permitted for a single borrower.

The new rule aim to save liquidity in the banking sector. Albania had been widely saved from international financial crisis, but “due to the fact that the majority of banks and banking assets are owned by foreigners, the transfer pricing of funds between the parent banks and Albanian subsidiaries has changed considerably”, – said lately Seyhan Pencapligil, CEO of Banka Kombetare Tregtare, second biggest bank in Albania said for Euromoney.com.

Banks in Albania increased interest rates for time deposits during last months hoping to accumulate more liquidity. Earnings from interests had decreased sharply as a result. During last months, weighted average earnings from interests in lek had decreased to 7.56%, from as much as 9% registered in 2007. Interest earnings from activities in euro had fallen 82 base points to 4.44%, according to BOA reports.

Short URL: http://www.albanianeconomy.com/news/?p=373

Posted by admin on Oct 28 2008. Filed under Banking & Finance, Business, General News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry