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Sejko-Bankave: The high level of inflation requires further monetary policy responses

2023-12-16 12:52:56Biznes SHKRUAR NGA REDAKSIA VOX

Sejko-Bankave: The high level of inflation requires further monetary policy

The Bank of Albania once again warned the banking sector that a further increase in interest rates is likely to happen in the near future.

The Governor of the Bank of Albania, Gent Sejko, said in his speech during the year-end meeting with the Albanian Association of Banks, that the still high level of inflation may require further monetary policy responses and, if necessary, this reaction should be understood correctly and should not be a surprise for commercial banks.

The governor also underlined that the increase in the cost of loans still carries the risk of an increase in problem loans, as long as the solvency of borrowers has not increased proportionally with the increase in prices.

"The management of borrowers' problems in the early stages remains the key to avoiding the accumulation of problematic portfolios, which paralyze the lending process. In this context, the risk that may come from exposure to real estate, whether through direct financing or the high accumulation of collateral from this category, should also be considered.

The Bank of Albania, in order to ensure the creation of adequate reserves to cover this risk, has introduced regulatory changes that require holding a higher amount of capital for speculative financing of real estate, which came into force at the beginning of this the year.

Also, at the beginning of October 2023, the regulation "On data reporting, identification and monitoring of indicators on lending and investments in real estate" was approved, according to which banks will start the standardized reporting of these exposures for real estate residential in March 2024.

We expect from the banks a rigorous implementation and the most correct interpretation of the above provisions," said Sejko.

The governor also emphasized the need for greater attention to cyber security.

"The growth and adoption of developments in information technology, as safely as possible, requires your maximum attention. Not only in theory but also in practice, it became clear during this year the critical importance for banking activity, the security of information systems and all associated processes related to the identification of problems in this area, reporting, resolution and testing Theirs.

Despite the fact that the banking industry as a whole is positively evaluated for the quality of these systems, we believe that they need to be strengthened. This requires your continuous commitment and investment in specialized human resources and special technologies, which are constantly evolving.

It is important to engage in this process consciously, not only highlighting the advantages that new technologies offer, but also understanding the risks that may accompany their hasty adoption.

In this direction, the Bank of Albania will strengthen cooperation with you and the relevant public authorities during the next year, with the aim of improving the effectiveness and applicability of legal and regulatory requirements," said the Governor.

Sejko pointed out that the shocks the sector has faced in recent years have evidenced the still insufficient level of development of the primary and secondary securities markets, as well as the low presence of derivative instruments that offer protection against exchange rate risks of exchange and interest rates.

According to him, the Bank of Albania and commercial banks should do more in terms of the further development of financial products markets.

Finally, the Governor asked the banks to further strengthen their capitalization indicators, taking advantage of this year's high profits.

"Even during the year 2024, in accordance with the regulatory forecasts and the relevant program of gradual application, capital requirements will continue to increase.

The implementation of these requirements, beyond the alignment of our regulatory framework with that of the EU, ensures not only a higher stability of the banking system against the shocks mentioned above, but also the continuity of the provision of financial services, already integrated in life everyday life of citizens and businesses.

The consolidation of the banking system and the increase in the number of banks with a high weight in the system makes it imperative to treat them differently in order to mitigate the systemic risks and the effects on taxpayers' money, in case of possible crises in the future.

I estimate that it is important that this year's higher income be used by banks to increase the medium-term sustainability of capital indicators and support financial intermediation," he said.

 

 


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