AlbanianEconomy.comYour News from Albania
Albania Banks Accused of Abuse
Tirana | 05 June 2009 | By Gjergj Erebara
Albania’s government watch dog Competition Authority has opened an investigation into the public debt market based on suspicions that some local banks are running abusive practices.
The commercial credit market worth 400 billion leks (3 billion euro) is almost entirely denominated in the local currency lek and it is considered very lucrative, offering interest rates up to 9.3 per cent and producing some 35 billion leks (263 million euro) in net profits every year for local financial institutions.
A few major banks control the lion’s share in that market. Albania’s Central Bank tried to open the market to all citizens back in 2002, offering government bonds. Albanians showed interested in such investments and in 2004, small investors bought up to 17 per cent of government issued treasury bills.
“We are very happy with small investors because they helped us in keeping down interest rates for loans and the market is now very liquid,” former finance minister Arben Malaj said in the time.
However, new Central Bank governor Ardian Fullani put an end to the service for small investors that same year, redirecting small investors to commercial banks.
The move was criticized by representatives of the International Monetary Fund, IMF. Although small investors still have the possibility to invest in government bonds, commercial banks that should act as agents have not shown much interest in promoting such investment opportunities.
An investigation by local media carried out in 2005 discovered that the major banks, now under investigation, were pushing discriminatory fees that made the investment in treasury bills less attractive compared to interest rates offered on savings accounts.
During the last quarter, interest rates in the domestic credit market reached a multi-year high, and some experts believe that reopening the market for small investors could help to bring interest rates down and create more liquidity in the market.
“I do not understand why the government wants to sell a product but at the same time is not really interested in informing people about the opportunity,” former Central Bank governor Shkelqim Cani told Balkan Insight. “Opening [government bonds] to small investors will certainly help the government to stabilize the market,” he added.
Attracted by lucrative interest rates, many emigrants invested their savings in treasury bills when the Central Bank desk was open, thus flooding market with euros, and helpting to strengthen the lek.
Last year, seeing that the share of small investors in the treasury bill market decreased sharply, the watchdog launched an investigation to determine whether the closing of the direct desk for small investors violated the principles of competition.
The decision on the investigation is expected is expected to be made later this year. If found guilty, banks under investigation risk fines of up to 10 per cent of their yearly revenues for the period in which the law was violated.
The Albanian Competition Authority was founded in 2005 and has investigated and fined several companies from mobile phone operators to insurance companies and concrete producers. These fines, however, are rarely collected by the Finance Ministry. Souce: Balkaninsight
