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Banking System Assets See Sizable Decline in 2010

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TIRANA - According to a report released by the Bank of Albania, the banking system assets in Albania saw a significant decline in 2010 compared to the previous year.

Key Findings

  • Treasury and interbank transactions decreased by ALL 28.7 billion (31.9%) due to a decline in “T-bills and other eligible bills” by ALL 19.2 billion (59.6%) and a decrease in loans received by ALL 15.4 billion (33.6%).
  • Operations with customers increased by ALL 121.2 billion (17.7%), mainly driven by an increase in transactions with the private sector by ALL 118.1 billion (17.4%).
  • Permanent resources also saw an increase of ALL 8.8 billion (9.1%).

Liquidity Assets

Liquid assets grew by ALL 20.9 billion (8.8%) to ALL 257 billion at the end of 2010, accounting for about 66.5% of total liquid assets in the form of securities. Current accounts and bank deposits with a remaining maturity of up to seven days accounted for 20.5%.

Gap between Assets and Liabilities

The gap between assets and liabilities with a remaining maturity of up to one and three months remained negative, but narrowed compared to 2009.

Expert Insights

Experts say that the recent international crisis has highlighted the importance of liquidity risk management in the banking system. “Liquidity is crucial for banks to cover expected and unexpected fluctuations in their balance sheet and provide funds for growth,” said Brunilda Duraj, a financial expert.

The report concludes that the banking system needs to review its theories on managing liquidity risk and adopt more efficient systems to identify, measure, monitor, and manage it. “Liquidity risk assessment can be made in accordance with standards set by the Basel Committee on banking supervision,” added Juliana Imeraj, another financial expert.

References

  • Bank of Albania, Financial Stability Report, QII 2010.
  • Bank of England (2008), Handbook No. 27 Liquidity forecasting.
  • Basel Committee on Banking Supervision (2000), Sound Practices for Managing Liquidity in Banking Organizations.
  • Duraj B., Imeraj J., (2012) “Reaction of Albanian Banking System: protection against risk or increase of its effects?”
  • European Central Bank (2004), Liquidity, information, and the overnight rate.

Figures

  • Figure 16.4 - Monthly liquid assets and liquidity
  • Figure 16.5 - Liquid Assets by currency
  • Figure 16.6 - The structure of assets and liabilities by maturities