Financial Crime World

Risk Management and Compliance at Albania’s Banks

The Bank of Albania has implemented new regulations to strengthen risk management and compliance practices at commercial banks operating in the country.

Key Requirements

According to Article 14 of the regulation, each bank must:

  • Establish a robust risk management structure/unit that can independently assess and challenge decisions affecting the bank’s risk exposure.
    • The head of this unit should have sufficient expertise and experience to provide opposing views on proposed decisions and document their reasoning.
  • Ensure clear communication between the risk management unit and the Steering Council, which is responsible for overseeing the bank’s overall strategy and risk profile.
    • The head of the risk management unit must report regularly to the Steering Council, the Risk Committee, and the Chief Executive Officer.

Compliance Function

Article 14 also outlines the responsibilities of a bank’s compliance structure/unit, which should be:

  • Independent from business lines and internal units that control and manage compliance risks.
  • Responsible for assisting senior management in effectively managing compliance risks.
    • Advise senior management on compliance with laws, rules, and standards.
    • Educate staff on compliance issues.
    • Establish written guidelines for implementing regulations.
    • Verify new products and procedures to ensure they comply with the legal framework.
    • Assess the impact of regulatory changes.
    • Measure compliance risk using performance indicators.
    • Report results of compliance testing.

Remuneration Policies

Article 15 requires the Steering Council to:

  • Clearly determine and approve remuneration policies that align with the bank’s strategy, long-term objectives, and risk profile.
  • Implement risk-based remuneration schemes to ensure that employees are incentivized to manage risks effectively.

The new regulations aim to strengthen risk management and compliance practices at Albanian banks, enhancing their ability to operate safely and efficiently in a rapidly changing financial environment.