Publication of the Albanian Association of Banks
No. 13, October 2014
Bankieri
PROFITABLE
BANKS
an imperative and objective
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Content
Publication of the Albanian Association of Banks
No. 13, October 2014
Bankieri
Bankieri
No.13, October 2014
Publication of the Albanian Association of Banks
Editor’s Desk
Profitable banks. Think positive!
Elvin MEKA
Frontline
Profitable banks. Is it good or no good?
Silvio PEDRAZZI
Lending downward, profits upward?!
Arben MALAJ
Journalist corner
Increasing bank profits, a
prelude to credit recovery?
Ersuin SHEHU
PROFITABLE
BANKS
an imperative and objective
PROFITABLE
BANKS
an imperative
and objective
Bankieri is the official publication
of Albanian Association of Banks
which mainly focus the Albanian
banking industry. Bankieri provide
readers with valuable information
on the financial industry’s
developments in general, and of
commercial banks in particular.
Albanian Association of Banks
Street ‘Ibrahim Rugova’,
SKY TOWER, 9/3, Tirana
Tel: ‘+355 4 2280371/2
Fax: +355 4 2280 359
E-mail: [email protected];
www.aab.al
Interview
United Bank of Albania - A bank within the
framework of moral and ethical values
Emina ŠIŠIĆ
Banking System
Interest Rates - The Complex Equilibrium
between deposits and loans
Gent SEJKO
Deposit insurance - quality steps forward
Renis ZAGANJORI
Experts’ Forum
Banking system and the new VAT law
Fatmir KAZAZI
Loan sharks - A phenomenon to be considered
Besart KADIA
ECO Investments in business
Alda SHEHU
Editorial Team:
5
6
9
Editorial Board:
11
13
Ioannis KOUGIONAS
AAB Vice Chairman
& CEO of NBG Bank
Albania
14
Christian CANACARIS
AAB Executive Committee
Member
& CEO of Raiffeisen Bank
Albania
17
19
22
24
27
Social capital
Bank activities
31
News
First SWIFT Business Forum Albania 2014
34
Interview with Mr Michael Formann,
Head of SWIFT Austria
Rudina Hoxha
35
Opinion
An overview on Thomas Piketty’s "Capital in the
Twenty”-First Century"
Erjona Rebi
37
38
Financial Auditoriium
Financial education through Junior Achievement
Program40
Rezarta GODO
AAB Trainings
Printed by:
Seyhan PENCABLIGIL
AAB Chairman
& CEO of Banka Kombëtare
Tregtare
Economist Corner
A weakening Euro or a strengthening Dollar
Which scenario lies ahead?
Adrian CIVICI
Tech Topics
HeRa - A module for most efficient use of
human knowledge, talent, skills and capabilities
Dritan MEZINI
Elvin Meka
Editor–in-Chief
Eftali Peçi
Coordinator
Junida Tafaj (Katroshi)
Collaborator
Andis Rado
Photographer
Design & Layout: PIK Creativ
42
Periklis DROUGKAS
AAB Executive Committee
Member
& CEO of Alpha Bank
Frédéric BLANC
AAB Executive Committee
Member
& CEO of Societe Generale
Albania
Bozhidar TODOROV
AAB Executive Committee
Member
& CEO of First Investment
Bank
Endrita XHAFERAJ
Secretary General,
Albanian Association of
Banks
Hysen ÇELA
Chairman of Albanian
Institute of Authorized
Chartered Auditors (IEKA)
Adrian CIVICI
President & Head of
Doctoral School European
University of Tirana
Spiro BRUMBULLI
Chief of Cabinet, Ministry
of Finance
Enkeleda SHEHI
Chairwoman of Albanian
Financial Supervision
Authority
www.aab.al
Bankieri
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Editor’s Desk
Profitable banks
Think positive!
In today’s economic landscape of Albania, the presence
of profitable banks must be the least discussion point
instead it ought to be cheered up, because when banks
are making profit, they are stable and successful banks
help the economy to thrive and contribute to households
well-being.
by Prof. Asoc. Dr. Elvin MEKA1
Editor–in-Chief
T
he news about the profit level
of the Albanian banking system
made the headlines during summer, but not in the sense of logical encapsulating the overall financial results
of it, rather it was dressed with astonishment and raised eyebrows. The most
quoted question was: How could it be
possible for banks, in the frame of current economic developments, to make
such “fatty” profits? From a popular and
ordinary viewpoint, generating profit
in today’s lackluster economic situations may be judged as a bit strange and
abnormal, especially for the financial
industry, but from a professional standpoint, it is quite relevant and more than
welcomed. It is not amazing that banks
in Albania realized profits during the
first half of 2014, and there are a bunch
of technical, business and management
arguments, which could easily explain
such a fact.
Specifically, if anyone reads between
the lines, it is easily understandable that
the substantial curb on provisions’ expenses has been the key for such “dramatic” rise in banks’ profits, by reflecting
the latest regulatory and fiscal changes
in provisions’ calculations. For the time
being, the interest income, usually the
main driver for any bank’s profit, has
played a relatively modest role in this
profit “jump”, typically by following a
stiff competition between banks for extending new loans and building up their
client base, by way of attractive loan interest rates.
In today’s economic landscape of Albania, the presence of profitable banks
must be the least discussing issue, as
there are several substantial issues,
which need to be carefully handled and
addressed by some other stakeholders,
let alone and beyond banks. We all have
to be very attentive about the payday
loans and loan sharks, which should not
be considered as banks’ competitors, but
as a threat to the financial stability and
social security, as well as the current
modest credit growth and the not-sorosy future for bank credit, especially
from businesses. These are real discussing arguments, which will either pinch
the future profits generated by banks,
and not only, or push the brake pedal,
instead of the accelerator, on the growth
of national economy. So, the existence of
profitable banks ought to be cheered up,
because when banks are making profit,
they are stable and successful banks help
the economy to thrive and contribute to
households’ well-being. Profitable banks
mean more direct and indirect jobs within national economy, more tax revenues
for government and more social and
community programs to be supported.
Profit is the “raw material” for strengthening banks’ capital base, which is one
of the main pillars of the stability of the
entire financial system, and also being
the best guarantee for deposits in Albania.
In a few final words, all of us benefit
from profitable bank, either directly or
indirectly, so everyone must think positive about this fact and not questioning
the existence of profitable organizations
within a market economy, even during
tight economic situations.
Deputy Dean & Head of Department of
Finance, UET-EUT
1
www.aab.al
Bankieri
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Frontline
Profitable banks
Is it good or no good?
Good and fair profits normally trigger a lot of
desirable developments, let say a clear positive
spiral. On the opposite, lack of profits could induce
negative consequences only!
by Mr Silvio PEDRAZZI
CEO
INTESA SANPAOLO BANK - ALBANIA
T
o begin with, when it comes to
the fact whether profitable banks
within a financial system are a
good thing, at all, I would say: “Yes,
definitely it is”, and for several different
reasons, despite the fact of actual modest levels of credit growth. We have always to take into consideration that any
company (no matter being a bank or not)
finds its ultimate goal in making profit;
the absence or lack of profits can be just
a temporary and dangerous situation.
Good and fair profits normally trigger
a lot of desirable developments as, for
example, a positive attitude toward new
investments, increase of employment as
well as renewed confidence in the future; let say a clear positive spiral. On
the opposite, lack of profits could induce
negative consequences only!
Of course, when I think of profitability, I mean “sustainable” and not
“one off” profits and, as far as banks are
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concerned, the sustainability is closely
related to the increase of a sound lending activity. On that purpose, I’d like
to point out we should go deeper in
the figures, paying more attention to
the actual growth of the “performing
loans”, that represent the real and main
contribution to the development of the
economy; under this point of view data
are not satisfactory at all yet.
Main causes and factors driving the
rise in Albanian banks' profitability
during the last year
Looking at the official data, it is evident that, the two main reasons based
on which banks are increasing profits
are the substantial stabilization in the
level of the “non-performing loans”
(even if still at an extraordinarily high
level) and the correlated decrease in the
“credit provisions”, i.e. the amount of
money banks put aside for covering such
loans. There is another important factor
to be carefully considered, too. During
the second half of last year, as well as
in the recent months, the yield on Treasury Bills has been constantly dropping,
by reaching historical low levels; as we
know, given the extremely high liquidity of the banking system, banks have
been trying to offset the negative impact
on their margins, by easing the lending
conditions and thus offering quite lower
interest rates for all kind of loans.
Unfortunately, the demand for loans is
The current profitability is very good news for the shareholders,
knowing that the expected future expansion can be currently supported by self-produced financial resources. Actually the drawback
is that, missing a real need of additional equity resources, shareholders could consider to cash-in dividends just in order to optimize the capital allocation.
still weak, even if slightly improving,
and the whole economy couldn’t leverage more than something on such favorable situation. In the medium term, given the forecasted long lasting period of
low interest rates, if we will miss a more
robust demand, the sustainable profitability of the banking system could be
negatively impacted. Moreover, let’s not
forget that, in a globalized world, also
external events could severely impact
the internal situation.
Positive aspects of profitability as a
cheaper capital injection alternative…
maybe!
I don’t really think that, in the short
term, the level of bank capitaliza-
tion could represent an issue for the
Albanian banking system. Actually,
the additional contribution from the
shareholders’ side is not required and,
as previously mentioned, the majority
of the largest banks have an extremely high level of liquidity and one of the
lowest loans-to-deposits ratio in the region. I take the opportunity to stress
that this situation is almost unique and
makes the system absolutely safe. This
fact should be appreciated more than
it is actually considered, especially by
depositors. Nevertheless, also looking
forward, the current profitability is very
good news for the shareholders, knowing that the expected future expansion
can be currently supported by self-pro-
It should be noted that, banks in Albania are only a part of a bigger
system; it is true they are the indispensable backbone of the
economy but without a comprehensive and common effort from all
the stakeholders their efforts are not enough to boost the recovery,
as much as it is needed.
duced financial resources. Actually the
drawback is that, missing a real need of
additional equity resources, shareholders could consider to cash-in dividends
just in order to optimize the capital allocation.
Profit building and positive effects for
supporting quality lending for the Albanian economy and businesses
It should be noted that, this is a very
important consideration. As already
mentioned, the profit building and its
sustainability is a pre-condition for a
steady support of the business through
a sound lending activity. Notwithstanding, it is worth pointing out that other
pre-conditions are necessary and complementary. Albanian entrepreneurs
should be more active in the most promising sectors of the economy as industrial agriculture, tourism, labor intensive
manufacturing (in which Albania enjoys a concrete competitive advantage),
as well as all export-oriented productions. It is necessary to realize that some
sectors that perhaps had ensured in the
past big, quick and easy profits are not
as such anymore.
In addition, as a matter of fact, the
need to compete with other advanced
and developed countries, i.e. in a European perspective, requires an enhanced
business environment, which is able to
attract foreign high-value investments
and technologies. In this light, a more
transparent, efficient and sound comprehensive framework is strongly advisable, including the legislative and
judiciary systems. Under these circumstances, all the ongoing reforms and
the announced ones are more than welcome for the financial system and for
the whole economy.
In short, what I mean is that banks
in Albania are only a part of a bigger
system; it is true they are the indispensable backbone of the economy but without a comprehensive and common effort
from all the stakeholders their efforts
are not enough to boost the recovery,
as much as it is needed.
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Frontline
Lending downward,
profits upward?!
Down to its core, banking does not consist simply in
securing the maximum profit, but achieving the most
sustainable profit. A sustainable profit results from a
sustainable loan-making process, and this is exactly
the necessary condition to achieve the sustainable
economic growth.
by Prof. Asoc. Dr. Arben MALAJ
Lecturer
Department of Economics
Faculty of Economy
TIRANA UNIVERSITY
T
he financial system’s development
is often attributed by researchers
a quite significant impact on economic development itself. Such impact is
outlined lending quality, the allocation
of savings and other sources of lending
to the most successful projects. A high
lending quality helps to increase the
competitiveness level of the economy. In
case of poor lending quality the positive
effect on the economy erodes, as savings are allocated to projects with low
productivity and high risk of return. In
the economic literature there is a widely accepted opinion and also supported
by empirical studies, that the level of
lending to economy is first indicator,
an economist needs to assess its health.
Also, it is a well-grounded fact that the
first symptoms of a banking crisis are
the noticeable differences between credit (lending) growth rates and economic growth, respectively. This difference
distorts the assets’ price in the economy,
as the aggregate demand is artificially
increased whereas the aggregate supply
is small or shrinking. Such relationship
is displayed at inflating prices during
the boom period, while the bubble
outbreak corrects market price distortions. During this period, the level of
non-performing loans increases, lending starts to stagnate until a standstill,
whereas the decreased demand, then-fed
by lending, causes a deep and accelerated price fall, which transforms the
expected high profits into substantial
and instant losses. This chain reaction
effect hurts both borrowers and lenders, where the latter are "victims" of
their own, rather than of other factors.
The experience of countries with
high absorption potentials of financial
resources shows that businesses or individuals who focus their activities on low
productivity entrepreneurships, have a
higher probability to end up in a position of failing to pay back loans. In the
frame of our economic reality, it is concluded that lending activity, during the
last two years, has sailed in very shallow waters, by being in negative terms
during the past 10 months, as well as by
decreasing, each month, by an average
of 2 per cent. In July 2014, according to
the latest data by Bank of Albania, the
total stock of bank loans increased by
0.5 per cent, as compared to July 2013,
thus feeding hopes for a possible revival of lending, during future months1.
The private business has been, by far,
the main contributor to the growth of
total loan stock during this period. The
level of non-performing loans, until
the second quarter of 2014, reached
24.6 per cent, a decrease by 0.02 per-
The faster pace of drop in
deposit interests, compared
to loan interests is viewed as
an "indirect subsidy" from
depositors for losses caused by
the mismanagement of banking
activity. The best guarantee of a
sustainable level of bank profits
is the support they provide to
the economic growth, through
increased credit and improving
its quality, rather than some
pure arithmetical calculations of
short-term profits.
http://www.bankofalbania.org/web/Statistics_Entry_230_2.
1
php?kc=0,3,0,0,0
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9
centage points and 0.33 percentage
points, compared to the first quarter of
2014, and the second quarter of 2013,
respectively 2. These facts reveal the
need to improve the quality of lending.
During the second quarter of 2014
the banking system recorded a profit
261.3 per cent higher, as compared to
the same period of last year, but when
compared with previous quarter, the increase was only 20.4 per cent, or about
ALL 3.9 and ALL 0.9 billion, respectively3. Net profit, by the end of second
quarter amounted to ALL 5.4 billion.
Experts argue about factors causing
such unusual increase, but what are the
real factors, affecting it and how much
sustainable they will be? Getting a clear
response require some in-depth studies
by Bank of Albania, other experts and
scientific research centers. According
to some hands-on analysis it seems
that there are several factors which
have contributed to reach such a level
of profit by commercial banks, during
2014. Thus, net interest income has positively affected banks’ financial results,
by increasing 9.7 per cent (y.o.y) and
102.4 per cent (q.o.q). In annual terms,
such increase was driven primarily by a
sizeable decrease in interest expenses (29.2 per cent), rather than an increased
interest income (- 9.3 per cent). These
figures reflect the easing monetary policy, pursued by Bank of Albania, which
has reduced the key rate just 10 times,
since mid-2011, to 2.5 per cent, down
from 5.25% at that time. This policy
has led to a drop in interest rates on
deposits and loans. Because of tightening bank lending policies, the drop in
loan interest rates was not in tandem,
thus hindering an efficient transmission of monetary policy, as in case of
deposits. It should be noted, however,
that improving the transmission mechanism of monetary policy onto the real
economy is not an easy task for many
central banks throughout the world.
On the other hand, the evidenced
stabilization in non-performing loans
has resulted in a drastic reduction in
provision expenses, which are positioned at the lowest level since 2005,
so being the key factor that has led to
increased bank profits. They scored an
annual decline of 94.3 per cent, or a decrease of approximately ALL 7.4 billion.
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We must admit that the growth rate of bank profit during
2014 was impacted by quite a few factors, directly related
to the success of commercial banks, but in this regard,
an in-depth analysis to identify baseline factors affecting
bank profit rates, is a must.
Such expenses were significantly eroding banks' profits, during several years
in a row. In fact, from a medium-term
perspective, it is easily analyzed that,
during 2014, banks experienced some
corrections in provisions’ deformation,
rather than a sustainable improvement
in bank profits’ level. A non-permanent
factor contributing to the uncommon
bank profit increase during 2014 may
be also the legal clarification of fiscal
principles of provisions’ calculation.
In conclusion, we must admit that
the growth rate of bank profit during
2014 was impacted by quite a few factors, directly related to the success of
commercial banks, but in this regard,
an in-depth analysis to identify baseline factors affecting bank profit rates,
is a must. Also, it should be mentioned
that the analyzed time period is short; it
spans from 2013 to 2014, only. Extending the time period in concern and conducting a thorough analysis is quite indispensable, as the growth rate of bank
profits during 2014 are by far higher
than the credit growth rate, during the
same period. The challenges faced by
the banking system remain bold and
complex and its profit indicators must
be based more upon expanding credit
activity and its respective quality. Benefits reaped from factors not directly
related to banking activity, such as a
reduced cost of money by the central
bank, should not go primarily to improve their balance sheet; instead they
must fuel the expansion of credit activity. The faster pace of drop in deposit
interests, compared to loan interests is
viewed as an "indirect subsidy" from
depositors for losses caused by the mismanagement of banking activity. The
best guarantee of a sustainable level of
bank profits is the support they provide to the economic growth, through
increased credit and improving its quality, rather than some pure arithmetical calculations of short-term profits.
2
http://www.bankofalbania.org/web/Statistical_Report_
3
http://www.aab.al/al/statistics.php.
June_14_7114_2.php?kc=0,27,0,0,0
Journalist corner
D
uring the first half of 2014, banks
recorded a profit of ALL 5.4 billion,
the highest historical record per se,
ever scored for any first half year. Certainly,
breaking such a record of profitability sounds
a bit surprising, when putting it within the
context of actual times, but this result is not
related to the system’s performance during
the first half of the year, only. If we read carefully the sector’s P&L statement, it is clearly
understood that provisions’ balance is the
heavyweight, as the banking system spent
only ALL 445 million during the first half,
not to mention that during the first quarter
such item recorded positive results, with a
total of ALL 1.3 billion in provisions’ reversal to banks’ equity. Reducing the burden of
provisioning leads to a logical conclusion that
the record profits of this half year relates to
an important milestone: the stabilization of
non-performing loans rate, stationed near the
24 per cent level for about a year in a row.
Given that the outstanding credit to economy, during this period, has been declining,
then problem loans are by far less, in nominal
value. According to AAB statistics, in June
2014, the stock of loans with over 90 days
In the light of price component,
and even from the borrower’s
viewpoint, loans are at bargain
rates now, when compared
with those of several years ago.
Although monetary policy is not
fully transmitted and reflected
to loan rates, their trend is
clearly downward.
Increasing bank profits, a
prelude to credit recovery?
It should be mentioned that, even during the crisis
period, the majority of banks continued to expand
their loan portfolio, even with double-digit rates. This
shows that when applying a more upbeat and
dynamic approach, loan opportunities do exist, even
in times of modest economic growth.
in arrears reached ALL 134.4 billion, about
2.6 per cent less, when compared to the same
period a year ago. Therefore, the key to increasing profits is practically pressing a bit
hard the brakes on non-performing loans.
It is also believed that, the new rules adopted by Bank of Albania to facilitate loan restructuring, in the frame of boosting lending
package as approved last year, have produced
a positive impact on banks’ balance sheets.
On the other side, it should be noted that,
the banking system has managed to maintain
adequate levels of net interest income, despite
the overall credit (loan) contraction. Hence,
a helpful hand seems to be a diversified asset
structure, where investments in securities
make up a sizeable share of assets, about 30
per cent, thus coming next to loans. Another element that kept banks afloat has been
the significant growth of other components
within profit structure, during recent years,
especially Forex activities.
The impetus for lending
A banking system with positive results and
healthy balance sheet is definitely a strong
pillar of support for a country's economy.
The crisis caused a sharp drop in credit
growth, going even in negative territory, in
mid-2013. Now, businesses and households
expect a more active role of banks in financing, but this is not that easy, given that the
issue at hand is not Albanian-based rather,
it is virtually global. A prudential approach
by banks was understandable, in terms of a
deteriorating real economy, but according to
banks, even the credit demand by private sector has been pale and most importantly, not
at required or expected quality. Nevertheless,
things are moving forward, as lending in July
returned to positive growth rates on an annual basis, following a 12-month decline. According to Bank of Albania, the bank loan
portfolio increased by 0.5 per cent, compared
to July 2013. Although modest, such increase
marks a turning point. Today, the banking
system more than interested at crediting the
economy, considering that yields of government securities, almost the only alternative
financial investment, have reached historical minimum levels. In the light of price
component, and even from the borrower’s
viewpoint, loans are at bargain rates now,
when compared with those of several years
ago. Although monetary policy is not fully
transmitted and reflected to loan rates, their
trend is clearly downward. According to
Bank of Albania, the average interest rate
for new loans in ALL, for all maturities, was
8.95 per cent in the first half of 2014, down
from 10.9 per cent of the first half of last year.
This means that the cost of new investments
in the economy is lower. Now it’s the right
time for both businesses and banks, to show
entrepreneurship and courage. It should be
mentioned that, even during the crisis period,
the majority of banks continued to expand
their loan portfolio, even with double-digit
rates. This shows that when applying a more
upbeat and dynamic approach, loan opportunities do exist, even in times of modest
economic growth.
by Mr Ersuin SHEHU
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Interview
United Bank of Albania
A bank within the framework of moral
and ethical values
Partnership commitment gives added value to the
investment project and goes beyond a pure lender-debtor
relationship aspect. If practiced strictly according to the
contract, it means additional security for successful
realization of the project, which better protects the
interests of both the bank and the client.
customer needs and offer personal-touch service,
so we build on that existing asset.
Mrs Emina ŠIŠIĆ
Chief Executive Officer
UNITED BANK OF ALBANIA
BANKIERI:
What are the real operational and strategic challenges for UBA, as a small bank of the Albanian
banking system?
The global economic crisis has had an enormous
impact on all the players in Albanian banking
market regardless their size, resulting with high level
of non-performing loans. A sluggish economy and
slow real estate market mean weak loan demand
and low interest rates, both factors that compress
the net interest margin. Running a small bank
under these circumstances is a very challenging
task. Competition in the market is very high,
especially in terms of loan and deposit interest
rates and also in products and technology. Our
banking operations have to be carried out leaner
and under more complex compliance regulations.
Despite increased banking competition, in UBA
we are commited to apply a value-driven credit
culture. Credit quality is our highest priority, and
the earnings pressure in this highly competitive
environment, where high-lending quality opportunities are scarce, will not push us toward an
immediate-performance culture. As a small bank
we try to be flexibile and more responsive to
BANKIERI:
Could you prescribe UBA’s most striking and
unique feature in the Albanian banking market?
UBA is doing business based on Islamic banking
principles, all within the framework of the Albanian banking legislation. The Islamic banking
principles emphasize moral and ethical values, and
all financial relationships have been participatory
in nature. Partnership share of both the client
and the bank in investment projects is defined
before signing the financing agreement. By being
partner in the project, bank not only provides its
portion of investment funds, but also takes care
that the project has been run and completed as
per the contract. Partnership commitment gives
added value to the investment project and goes
beyond a pure lender-debtor relationship aspect.
If practiced strictly according to the contract, it
means additional security for successful realization
of the project, which better protects the interests
of both the bank and the client.
BANKIERI:
How could you describe Bank’s activity for the
current year 2014?
This year, the bank has been diligently working to
address loan problems, raise capital and restructure its balance sheet. We can see improvements
in problematic loans collection, and intensification of lending activities. Our activities were
also focused on improvement and strengthening
of corporate governance and the organizational
structure of the bank. As much as any other
businesses, banks have to keep up with changes
in the digital era. We have prepared for development of new technology platforms which will
enable our customers, especially those located
out of our geographical reach, to consume bank’s
products and services. We paid special attention to
both in-house training programs and customized
workshops and seminars for our employees in
order to enable them to gain expertise on the job
and learn more about Islamic finance.
BANKIERI:
What are your bank’s main objectives and targets
for the near and distant future?
The operational plan for the year 2015 and the
strategic plan for the five-year period underline a
differentiation strategy, based on Islamic banking,
by offering our products to different customer
segments who would like to do banking based on
partnership principles.We will be also working
on enhancement of the level and quality of our
services and introduction of new distribution
channels, with particular focus on retail banking.
The increase of the capital by our main shareholder, Islamic Development Bank, which is a
reputable, Triple “A”-rated financial institution,
shall enable further business expansion, increase
of the market share and customer base, as well
as opening new outlets in the Albanian market.
This should result in increase of bank revenues,
with the positive impact on both return on equity
and return on assets ratios.
www.aab.al
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13
Banking System
Interest Rates
The Complex Equilibrium
between deposits and loans
Optimizing liquidity and asset & liability
management have been a real challenge for all
commercial banks, active in todays’ financial
markets. Liquidity is very important indeed, but
profitability is what it really counts at the end.
by Mr Gent SEJKO
Deputy CEO & Head of Retail Banking
Division
SOCIETE GENERALE ALBANIA
A
s an integral part of a developing
country economy, the Albanian
Banking System has gone through
fluctuating macroeconomic situations,
during the last couple of years, positively affected by measures undertaken from
Bank of Albania to boost the national
economy and investments. Specifically,
the drop of the base rate down to historical levels could be pointed out, which has
directly impacted the commercial banks’
policies.
Today, almost all banks have significantly decreased their deposit rates, both
in local and foreign currency. This may
be considered not only as a good sign,
because it shows a stable and healthy liquidity situation in Albania, but also as a
huge opportunity for businesses and individuals. Lower deposit rates mean lower
cost of funds, and this means enabling
banks to be more flexible on loan pricing,
by applying lower loan rates.
14
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Furthermore, the deposits’ growth and
the stable liquidity situation, that characterized most of banks, have transmitted their own positive effect. Surely, being
over liquid comes with a cost for banks,
but on the other side it creates security
and guarantee for depositors, as important points during todays’ uncertain times.
In the light of these facts, optimizing liquidity and asset & liability management
have been a real challenge for all commercial banks, active in todays’ financial markets. Liquidity is very important indeed,
but profitability is what it really counts
at the end.
But let’s treat deposit and loans separately and in this case let’s start the
analysis from loans. It has been a while
since almost all banks have entered into
a real race, especially when it comes to
interest rates. In the quest for acquiring as much business as possible from
an almost fully-saturated market, the
commercial banks have competed stiffly
with each other through going lower and
lower with the loan rates, thus creating a
big pool of opportunities for individuals
and businesses to take advantage from
this situation. Surprisingly, the response
from the market has not been as expect-
ed, actually far away from it. Uncertainty
and over prudence have led to a certain
hesitation among customers, who have
been quite skeptical in their investment
decisions, thus impacting directly and adversely the loan demand. As a result, lack
of investments has led to longer waiting
time, eventually more savings, so instead
of a boost in lending, banks have been
faced with a growth in deposits.
Under these circumstances, some
other unexpected issues emerged for
banks and they were liquidity, inflation
and higher costs. On one side the funds
collected could not be invested as they
Today, almost all banks have
significantly decreased their
deposit rates, both in local
and foreign currency. Lower
deposit rates mean lower
cost of funds, and this means
enabling banks to be more
flexible on loan pricing, by
applying lower loan rates.
were budgeted to, while on the other side
they were carrying costs that could not
be otherwise discharged in the market.
At this point, in order to overcome such
unpleasant situation, all banks started to
gradually drop their deposit rates and this
solution was found helpful, as it does not
only decrease the costs, by ensuring stability for banking activity, but also allow
them to afford a further lowering of loan
rates, thus creating an increasing facilitating ground for individuals and businesses
to obtain a loan.
However, this was not just a bank’s
problem but has become a problem for
the overall Albanian economy, as everything is a shackle of a chain and each of
them has an impact on the others. The
lack of loan demand and the increase
of savings’ appetite means not only less
loans and more deposits for commercial banks, but also less investments in
the country’s economy, less jobs and a
reduced consumption, therefore making
a direct negative impact on country’s
economic growth. In addition, the debts’
chain between all stakeholders and actors, government to business, business
to banks and partners, has trapped the
financial sector under the dilemma: “to
lend, or not to lend”. The solution to this
equation has become the main challenge
for bankers, since the outbreak of the crisis, just 5 years ago.
Therefore, in order to properly deal
with this phenomenon, Bank of Albania
has intervened systematically, by dropping systematically the base rate and by
strongly suggesting that banks be instrumental to further facilitate and boost
lending and almost all banks reacted,
accordingly. The deposit rates went even
lower, in some cases quite close to the
floor. Additionally, different loans campaigns were launched by nearly all big
banks and the offered rates were the lowest ever. Despite these efforts, there was
a very weak response from the market
again, and still not a proper reaction from
customers; banks were repeatedly facing
the same troubling situation with a lot
of willing and funds to be invested from
their side, but a limited demand from
the other side. Should this trend is not
about to change, than the next question
is: What’s next?
However, the current year has shown,
for the first time, some positive signals
in the lending activity. There is a slight
growth in lending from banks toward all
segments of the business clientele, mainly
individuals but also to corporate banking, as well. The partial repayment of
government debts to large corporates has
already given some breath to some large
companies, enabling them to repay, at
some extent, their bank debts in arrears.
This fact has not only marked a turning
point in the business trend and banking
activity, but what’s more important, has
broken down the “crisis syndrome”, that
had seized banking system during the
last years. Is that the real turning point
into positive economic growth territory?
Maybe it is yet early to judge. Further
evolution of the trends until the end of
this year, up to the middle of next year,
will tell us if we have left the crisis behind
and entered into the era of the positive
economic growth. Let’s wait and see, by
not losing the optimism and continue to
be risk taker in the lending activity, as we
have successfully proven to be during all
these difficult years.
However, the current year has
shown, for the first time, some
positive signals in the lending activity. There is a slight
growth in lending from banks
toward all segments of the
business clientele, mainly individuals but also to corporate
banking, as well. The partial
repayment of government
debts to large corporates has
already given some breath to
some large companies, enabling them to repay, at some
extent, their bank debts in
arrears.
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Bankieri
15
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keni një kompjuter, celular smartphone apo tablet.
Me Credins online ju:
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Kryeni pagesa të faturave utilitare si energji elektrike, ujësjellës,
apo pagesa qiraje etj..
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SHUMË THJESHT
DHE PA ASNJË
KOSTO
REGJISTRIMI.
Banking System
Deposit insurance,
quality steps forward
The ADIA's vision to create an effective deposit
insurance scheme, aiming at strengthening the
depositors’ confidence in the banking system
and contributing to country’s financial stability,
goes in tandem with its aspirations to create a
modern scheme with adequate capacity to fulfill its
obligations.
by Mr Renis ZAGANJORI, LL.M.
Assistant to General Director
ALBANIAN DEPOSIT INSURANCE AGENCY
ADIA
T
he key role of deposit insurance for
the financial stability was one of the
many lessons drawn from the financial crisis the world left behind. In general,
deposit insurance schemes avoided deposits’outflows and contained panic outbreak
among depositors during the crisis period,
therefore providing protection mainly for
retail deposits. Deposit insurance gives
depositors clarity, patience and security,
thereby contributing to a country’s financial and banking system stability. Currently,
ADIA activity is based on the new law "On
Deposit Insurance ", adopted on 22 May
2014, which enables the strengthening and
integrated expansion of deposit insurance
scheme’s capacities. The necessity for a new
law was evidenced within the IMF matrix
for financial sector modernization (DPL
Matrix), whereas the main innovations in
this law were based upon recommendations of World Bank mission and IMF Financial Sector Assessment Program (FSAP)
in Albania in 2013, as well as regulatory
changes of European Union’s acquis communautaire.
New amendments for deposit
insurance legal framework
The ADIA's vision to create an effective deposit insurance scheme, aiming at strengthening the depositors’ confidence in the
banking system and contributing to country’s financial stability, goes in tandem with
its aspirations to create a modern scheme
with adequate capacity to fulfill its obligations. In this context, ADIA is committed to
pursue of international best practices and
initatives, pertaining to deposit insurance,
with regard to legal and regulatory aspects.
In general, the main changes and amendments of the new law consist in improving
the overall process of deposit compensation, clarifying relationships with banks
and SLAs, increasing autonomy of ADIA,
improving financial resources management,
as well as determining the coverage level,
eligible deposits and insurance premium.
Specifically, the new law clearly separates the deposit compensation process and
the ADIA participation with funds’ transfer to the bank being sold or in establishing the bridge bank, thus accomplishing
the ADIA’s main objective. Regarding the
bridge bank, the prescribed provisions are
consistent with the institutional framework
of bank liquidation, where ADIA has a supporting role for Bank of Albania and the
liquidator. These include the ADIA rights
to make partial and early payments, or to
meet its obligation for deposit compensation, by transferring funds to a member
bank or a bridge bank. Under these provisions, ADIA supports solutions given by
the Central Bank, by applying the criteria
of insured deposits level and the lower cost.
As regards the compensation process, the
law has revised the deadline for such process and has specified provisions for matching claims of subjects and depositors in any
insurance event. Similarly, it has revised
the ADIA’s claim priority in reversals, by
completing and clarifying the ADIA’s claim
right during this process.
With regard to membership in the deposit insurance scheme, the law establishes a parallel procedure of their admission
into the scheme with the licensing process
conducted by Bank of Albania. In this way,
the ADIA function is to verify the entities’
eligibility
to comply with deposit insurance requirements, including also their eligibility and
compliance during any transformation
or changes in their activity. Also, the law
provides in particular, some detailed obligations for entities to be a member of the
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Bankieri
17
scheme, mainly consisting in the obligation
to keep and report the electronic data on
deposits and depositors, as well as those for
public information.
In terms of ADIA functions, the law
contemplates detailed functions in compliance with the "principe de specialite" doctrine of the administrative law. On the other
hand, a special article sets forth the powers
of ADIA, aiming at providing a clear separation of these two concepts. These include:
(i) the ADIA financial and functional autonomy, (ii) private law means (an entity’s
capacity and the capacity to contract) and
(iii) public law means (competence to propose and endorse bylaws and ADIA acts,
participation in the compensation and selecting regime for banks and staff employment).
The overall institutional structure is
preserved, whereas the operational autonomy is enhanced, simultaneously with
ADIA accountability and governance, to
minimize potential influence from third
parties. An important part in this respect
is, inter alia, the approval of ADIA budget
by the Managing Board. The law stipulates
the ADIA obligation to report to Bank of
Albania, Albanian Parliament and Council
of Ministers, as a balance for the ADIA enhanced autonomy. Also, it requires ADIA
to publish its audited financial statements,
along with more detailed and tightened
governance provisions, such as the qualifying criteria for ADIA Board members and
staff, conflict of interest, confidentiality and
legal protection while on duty.
A separate chapter is dedicated to internal financial regime, which covers the
prerequisites for ASD risk management
activities. The law includes concepts of reserve funds assessment, their potential deficit and measures that could be taken in this
regard. Also, specific provisions have been
formulated, which guarantee compliance
with accounting principles and legal basis. As another quality step ahead, the law
specifies the ADIA's obligation to manage,
in separate accounts, its funds for deposit
insurance paid by banks and SCAs, especially for compensation processes purposes.
The law provides improved means with respect to investment ADIA funds, according
to principles of liquidity, security, accountability and rate of return.
Regarding the deposit insurance, the
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Bankieri
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an insurance event, within a shorter period
of time.
The credit line guarantees ADIA with
necessary funds to increase its coverage
ratio of insured deposits in the banking
system, from 3.7 per cent to 6 per cent.
Furthermore, in terms of insured banks,
the fund provides full coverage of two ore
banks, compared to ADIA’s current portfolio. Currently, ADIA funds cover 100%
of insured deposits in 8 banks, with a coverage ratio of 3.7 per cent of all deposits
in the banking system. Through this credit
line, ADIA covers 100 per cent of insured
deposits at 10 banks, with a covering ratin
of 6 per cent of all deposits in the banking system. Moreover, the coverage at
four consecutive banks of the system (B3B6) reaches more satisfactory levels (70%
-80%). According to basic principles of
deposit insurance schemes, these indicators
prove the healthy financial situation of the
scheme and its compliance with international best practices and standards. Also,
the credit line will provide funds in euros,
thus serving as a hedge against foreign exchange risk, which could adversely affect
the coverage level in case of any insurance
event (40 per cent of insured deposits are in
foreign currency, 95% of ADIA portfolio is
in ALL, whereas deposits are compensated
in ALL with the exchange rate at the date
of the insurance event).
law makes clarifications about eligible and
non-eligible deposits, by harmonizing them
with respective provisions found at Banking
Act and SCAs Act. Also, the law improves
the methodology for insurance premium
calculation, by changing the calculating basis from annual to a three-month one, for
bank deposits held during last days of each
month of the preceding quarter. The advantages of a quarterly versus annual premium
are ease of calculation and verification, as
well as a continuous tracking of any entity’s deposits progress.
Loan agreement with EBRD
On 16 July 2014, ADIA signed a Loan
Aagreement with the European Bank for
Reconstruction and Development (EBRD),
through which ADIA obtains a credit line
of EUR 100 million for a 5-year period.
The credit lline aims to provide additional funds, along with ADIA's own funds, to
meet legal obligations against depositors,
in case of any insurance event. According
to the Loan Agreement conditions, this
line can be used for direct compensation
to insured depositors, or to transfer funds
from ADIA to a bridge bank, or purchasing
bank, pursuant to legal provisions. Funds
from this line will be made available from
EBRD within 7 days after ADIA’s request,
which allows the latter to meet its obligations to depositors, which may arise from
COVERAGE AT BANK LEVEL (BEFORE THE CREDIT LINE)
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
COVERAGE AT BANK LEVEL (AFTER THE CREDIT LINE)
%
%
%
%
%
%
%
%
%
%
Experts’ Forum
Banking system and
the new VAT law
Issues to be addressed in the forthcoming
instruction, for the law implementation
Given that the new law “On Value-Added Tax in the Republic
of Albania” is based on the EU directives on VAT, it is
necessary that the treatment of financial services be in
accordance with the respective EU directives and with the
best international practices on VAT on financial services.
by Mr Fatmir KAZAZI
Tax Consultant
T
he Parliament endorsed, in July
2014 the new law on “On Value Added Tax in the Republic
of Albania” (Law no.92/2014 dated
24.07.2014), or shortly called as “New
VAT law”, which will come into force
from January 1st, 2015. This law marks
significant steps forward and contains
important improvements and additions,
in accordance with the European Union’s
Directives on VAT. In my personal opinion, the “New VAT law” provides some
clear and complete definitions and provisions about many problems, which do
not find any solutions in the existing law.
It was just for the confusion and gaps in
the existing law that many conflicts have
risen, thus generating administrative and
financial high costs for taxpayers and tax
administration, as well. Specifically, some
of the problems are related to the issue of
“VAT Representatives”, the sale of assets
or goods, for which the VAT for purchases has not been credited (reduced), export
of services, etc. In other words, the element of “uncertainty”, which is unfortunately present in many law and by-law
tax provisions and regulations, has been
substantially reduced and shrunk in the
new VAT law.
Unclear provisions create uncertainty
and unpredictable financial and administrative costs for taxpayers and the state
The purpose of this article is not to make
evidence about the improvements this
law brings into, instead it addresses some
particular issues and problems, related
to the VAT implementation on financial
and banking services and the supplies
that are part, or closely associated with
these services. The unclear provisions create insecurity for taxpayers and tax inspectors, too. They trigger intentional or
unintentional mistakes by taxpayers and
tax inspectors, produce an administrative
and financial burden for taxpayers, tax
authorities, courts, and in some cases,
create premises for corruption. Certainly,
in cases where the law cannot explain the
tax treatment in details, necessary explanations should be given in the related and
forthcoming Instruction of the Minister
of Finance. The taxpayers should clearly
foresee the consequences of their actions
or omissions that arise from provisions
of the Law and the Instruction.
In this context, I think that the VAT
application on financial services, especially in relation to the components or
supplies that are part of, or are closely
Questions to be answered on VAT on
financial services
1. Is the VAT applicable (through
VAT Reverse Charge) on the
following supplies, received from
non-resident companies?
2. Does it make any difference if the
non-resident supplying company
is resident in any EU member
state?
3. How would the VAT reverse
charge and the payment of VAT
occur in cases when the VAT is
applicable?
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19
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related to financial services, are not prescribed in details within the law. Consequently, a detailed prescription is necessary in the Instruction of the Minister of
Finance, expected to be introduced for
implementation of the new VAT law,
which is under drafting process. Should
these problems be not addressed in this
instruction, then the taxpayers (banks)
will implement the law based on previous experience, on multinational group’s
practices to which they belong to, and/or
on consultancy received by experts and
consulting companies. In such cases, the
tax inspectors, presumably being oriented toward increasing the state tax revenues through “discoveries” during tax
audits, or based on any interpretation or
explanation received during the audits or
during tax periods, much after the entry
into force of the law, may estimate, at
their discretion, additional tax dues and
related penalties. In other words, discretionary judgments, or such technical
documents will have an ex post facto,
or retroactive effect and will generate a
long process of tax penalties and appealing procedures, which have high costs
for taxpayers, tax authorities and the
judiciary system. Additionally, taxpayers
feel insecure and cannot make accurate
predictions about fiscal consequences of
their business transactions.
Also, in cooperation with
Albanian Association of Banks,
the experiences of EU member
states, or other countries’
experiences that are in the
process of EU membership,
could be analyzed, in order to
consolidate a sustainable and
clear VAT treatment approach,
in accordance with best
international practices.
Questions to be answered and
addressed
In practical terms, I would like to
bring to attention some questions,
which are not found or do not get a
clear answer in the new VAT Law, and
as I mentioned above, they should
necessarily be treated in the VAT
Instruction, as per following:
1. Is the VAT applicable (through VAT
Reverse Charge) on the following
supplies, received from non-resident
companies? Such examples include:
•Services related to the development
of banking systems, through which
support and implement bank transactions, financial deposits’ administration, operations though accounts,
financial transfers, etc.;
•Services for the maintenance of the
above-mentioned banking systems;
•Royalties (payments for the right to
use intellectual properties, licenses
and patents), related with the banking system;
•REUTERS services, SWIFT and
other similar services related to the
implementation of banking operations;
•Services related to financial operations through debit and credit cards
(Master card, Visa Card, American
Express, etc.);
•Services related to the supply, maintenance and management of ATMs;
•Specialized services for e-banking
operation;
•Other services related to bank data
processing, or other banking operations.
2. Does it make any difference if the
non-resident supplying company is
resident in any EU member state?
3. How would the VAT reverse charge
and the payment of VAT occur in
cases when the VAT is applicable?
In my personal opinion, supplies such as:
SWIFT, REUTERS services, operations
with debit or credit cards (Master Card,
Visa Card, American Express, etc.),
supply and maintenance services of electronic transfer systems that enable financial transactions of cashing, payments,
deposits, loans etc., should be excluded
from VAT, as part of the financial services which are VAT exempted by the
law. In other words, the recipient shall
not apply for VAT reverse charge, in relation to these services, when supplied
by a non-resident company. Meanwhile,
services like: trainings, management services, financial and business consulting,
technical assistance, royalty payments,
related to the right to use licenses and
patents, sale and ATM maintenance,
etc., are VAT taxable services, and when
supplied by non-resident companies, the
Albanian company (the bank), as the recipient of the service, shall be responsible for VAT reverse charge and for VAT
declaration and payment.
Surely, without pretending that I have
analyzed and studied in details the above
transactions or other similar ones, and
moreover, their VAT treatment, I would
like to emphasize that as the new VAT
law is fully based on the EU Directives,
therefore, it is necessary that the VAT
treatment of financial services must be
done in accordance with respective EU
directives on financial services. Also, in
cooperation with Albanian Association
of Banks, the experiences of EU member states, or other countries’ experiences that are in the process of EU membership, could be analyzed, in order to
consolidate a sustainable and clear VAT
treatment approach, in accordance with
best international practices.
It must be emphasized that the purpose of this article is to raise and discuss
the issues and not to make any recommendations, or otherwise find the correct solutions of such issues.
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Bankieri
21
Experts’ Forum
Loan sharks
A phenomenon to
be considered
Such a phenomenon requires elevated attention
of all stakeholders across the Albanian financial
system, even beyond it, as its effects and
consequences are not simply an opportunity
cost, or of financial nature, but instead they are
of a substantial social nature and security.
of 2008 – 2009. To illustrate the revival
by Mr Besart KADIA, PhD Candidate of such phenomenon we could use the
UK data, where the industry funding
Executive Director
payday loans amounted to GBP 4 bilFOUNDATION FOR ECONOMIC FREEDOM
lion in 2012, from GBP 100 million in
FLE
2004. According to studies conducted
in UK, about 38% of respondents who
sought funding through payday loans,
oan sharks are those persons or had borrowed from other family memgroups of persons who lend mon- bers, too. On the other hand, the survey,
ey but are not licensed by the state conducted by Bank of Albania in 2013
and therefore are illegal subjects. In fact, with over 1,210 individuals surveyed in
loan sharks are better known as a defor- 16 districts of the country, showed that
mation in financial markets that occurs the ratio of consumers who receive bank
in times of crisis, as well as for high in- loans is almost the same as that of the
terest rates that they require from bor- informal debt, or the debt that is not rerowers. Usually the parties enter into a corded as such, but that is often a cause
short-term lending agreement, mainly for social conflicts. The two main goals,
with low-income consumers, who find Bank of Albania lists for borrowing,
difficult to borrow from banks. Al- are: purchasing and repairing a propthough the amounts they borrow are erty and the essential consumer goods.
small, let say 100 - 200 Euros, the effec- Specifically, the survey concludes that,
tive rate of return actually ranges from in approximately 40% of borrowing
cases, households have used the formal
300% to 3,000%!
Despite these high costs customers sources (banks and non-bank financial
use this informal sector of the market, institutions) and in the rest of 60%, the
as they do not have a fix job, have lost informal sources (individuals and bortheir job, or have delays in receiving sal- rowing directly from stores). The main
aries, etc. All these concerns get bolder household borrowing purpose remains
when an economy goes through a severe "consumption", with 32% of cases. It
economic crisis, such as the global crisis should be noted that families who have
L
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declared "a decline in solvency" quote,
in 48% of cases, "the decline in household income", as its main reason.
Given that informal lending is not
observable, and therefore, we have no
data, the information obtained from the
above observation raises some concerns
about the financial markets in Albania.
Often informal markets for lending are
not seen as parallel market of the economy, instead they are seen as an outcome
of lending pressure and contraction in
the formal system. What is evidenced
in Albania is that lending penetration,
i.e. the total debt-to-GDP has remained
around 40% of GDP, which is among
At a time when the economic
growth is below potential, when
there are multimillion dollar
public works still unpaid, and
when loan requirements are
tightened significantly, could it
be the case for loan sharks to
have displaced, or replaced, the
banking sector, en masse?
the lowest rates in the region, whereas
non-performing loans are among the
most the highest in the region. Joseph
Stiglitz writes, among other things, that
financial market failures are caused by
high cost and lack of full information.
However, transaction costs give only a
partial explanation the presence and importance of financial intermediaries and
the indirect finance in the functioning of
financial markets.
Another reason is the information
asymmetry, i.e. one party in a financial
transaction has less (or more) information than the other party. For example,
under a loan contract, the borrower has
more information about the risk of the
project which is being financed, than
the individual who gives the loan. The
information asymmetry creates a problem, either before or after the contract’s
signing. In the frame of high risk perceived for granting the loan, due to lower rates of economic growth and high
levels of non-performing loans, banks
have reduced the pace of loan-making
process during recent years, thus fueling maybe involuntarily, the lending
process outside the banking system. To
avoid the problem of adverse selection,
the problem that arises from information asymmetry before the transaction
(signing the contract), the lenders are
based upon "client's reputation in the
market", where the family and social
networking guarantees the borrower’s
reliability. This process is usually quick
and without high initial cost.
At a time when the economic growth
is below potential, when there are multimillion dollar public works still unpaid,
and when loan requirements are tightened significantly, could it be the case
for loan sharks to have displaced, or
replaced, the banking sector, en masse?
Also, another question arises in this regard: does such informal system exist in
parallel with the banking system, or it
could be possibly intertwined with the
latter, in one way or another?
Banks in Albania are making strenuous efforts to find a difficult balance
between maintaining quality lending
standards and avoiding a tightening in
extremis of requirements for their customers. In fact, the Bank of Albania’s
periodic surveys about credit to business
show that banks’ tightening policies,
during the past two quarters, have been
increasing. The even more worrying fact
about the long-term economic growth is
that, the loan standards (requirements)
were tightened for investment purpose
loans, whereas those for the purpose
of funding the working capital, were
relaxed. Under the conditions of tightening loan-making procedures, various
business associations in the country
have often raised the concern of a flourishing informal financing, as an alternative to the banking system in Albania.
Hence, the banks’ main focus on
their asset management cannot ignore
and circumvent what happens with
In the frame of high risk
perceived for granting the loan,
due to lower rates of economic
growth and high levels of nonperforming loans, banks have
reduced the pace of loan-making
process during recent years,
thus fueling maybe involuntarily,
the lending process outside the
banking system. To avoid the
problem of adverse selection, the
lenders are based upon "client's
reputation in the market", where
the family and social networking
guarantees the borrower’s
reliability.
loan sharks, who despite operating on
boundaries of the financial system, may
be associated, perhaps indirectly but not
only, with the banking system. Surely,
such a phenomenon requires elevated
attention of all stakeholders across the
Albanian financial system, even beyond
it, as its effects and consequences are
not simply an opportunity cost, or of financial nature, but instead they are of a
substantial social nature and security.
www.aab.al
Bankieri
23
Experts’ Forum
Business ECO
Investments
ProCredit Bank employs an active approach by
informing, encouraging and supporting financially
various efficient projects, in the business sector,
because business as well as ECO investments
support and help the sustainable development of
our country’s economy.
by Ms Alda SHEHU
Head of Environment Unit
PROCREDIT BANK
E
very business undertaking consumes electricity to ensure production or service continuity. Lack of
financial support as well as modest investments in machinery or production
lines, at the onset of economic activity
for Albanian businesses, have often led
to an abusive use of power and higher
operational costs for companies, not to
mention the impact of pollution on the
environment - because not all business
equipment and machineries, used in many
industrial processes, are highly efficient.
The machineries that many businesses use
during the first stage of their activity are
often second-hand ones and purchased
after a multi-year use at industries of exporting countries.
Today, a growing number of businesses are pondering the need to be more productive, along with reducing operational
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costs, to provide quality goods and services, to expand customer network and
thus increasing their business’ profitability. Businesses, by reducing monthly
operating costs, are more likely to make
further investments in their own economic operations. Also, those businesses
which invest in ECO products improve
their company’s image, as a business that
invests in quality and cares for the environment.
ProCredit Bank has launched ECO
loan, as a special financial service, in the
frame of environmental standards, the
bank promotes and supports during its
own daily financial activity. This financial
service is focused not only in supporting
new efficient technologies, invested in
the business sector, but also in providing
technical and financial consulting, as an
added value of this service. ECO loan includes financing the Energy Efficiency and
Renewable Energies measures, as well as
financing other environment-friendly investments.
Today, the Albanian market is becoming increasingly competitive and
therefore businesses must be headed towards machinery automation and stateof-the-art technologies, aiming to have a
more sustainable and long-term development. ECO investments in businesses
are diverse and vary by different business
sectors (manufacturing, services, etc.), or
by type of investments (equipment, machinery, building, business, etc.)
Manufacturing businesses that provide consistent quality in the market and,
at the same time, a competitive price, will
be those businesses that invest in new and
efficient technologies. By replacing existing machineries with new efficient production lines (which consume less energy
for the same working hours), businesses
in the manufacturing sector will reduce
not only operational costs, but also improve processes and working conditions,
The effect of ECO technology in
businesses goes beyond energy
saving, so saving it is not an aim
per se, instead it is an important
contributor for country’s economic
growth and social development.
thus earning competitive advantage in
the domestic market, and not only. Investment opportunities are numerous, for
example: a bakery or patisserie, will save
up to 30% electricity, should it replace
old ovens with new efficient ones.
In the retail sector, for example supermarkets, by investing in efficient refrigerators and in efficient central heating
and cooling systems, they could save up
to 20-30 per cent electricity, and at the
same time, improve their internal conditions and comfort. In the service sector, like restaurants, by using (investing)
efficient thermo insulation materials for
buildings, they could ensure comfortable conditions for their clients. A thermo insulated building preserves cool air
during summer and heat in winter, thus
achieving an energy saving up to 50 per
cent. Using devices with Class A energy
efficiency label, just halves the energy
consumption, compared to the same devices of Class G energy efficiency. Given
that the transportation sector is one of
the main contributors of polluting gases’
emissions, the bank supports all investments in vehicles that use efficient and
environment-friendly fuels.
ProCredit Bank also supports and
funds the use of renewable energy sources, such as: solar, water, biomass etc. For
example, in the tourism sector where
electricity costs are significant, the installation of solar panels for water heating
provides a reduction of electricity costs
ranging at 70 – 80 per cent. Albania has
very favorable climate for installing solar panels for hot water. This leads to a
significantly reduced energy cost, as the
electricity is substituted for solar energy.
In addition to solar panels, the biomass
use is also increased (biomass is an organic composition - wood, grain, agricultural
waste products such as: fruit and olive
seeds, wheat grain, etc., which can be
used as an energy source), as for example in the case of stoves or furnaces, using
"pellets".
ProCredit Bank goes beyond supporting energy efficiency measures and
renewable resources, by supporting even
environment - friendly investments, such
as: investment for recycling various ma-
terials, waste management, investments
for land, air and water protection, filters
for clean air and water, etc. ProCredit
Bank employs an active approach by informing, encouraging and supporting fi-
nancially various efficient projects, in the
business sector, because business as well
as ECO investments support and help the
sustainable development of our country’s
economy.
Since 2009, ProCredit Bank has incorporated and optimized relevant
service structures, to ensure the best exspertize ever in the country, to
finance new technologies in business. The positive performance in the
market for efficient equipments in Albania has helped our bank to establish
contact points for prospective suppliers of ECO efficient products.
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Economist Corner
A weakening Euro or a
strengthening Dollar
Which scenario lies ahead?
It is crystal clear that the more stronger the
Euro against the Dollar, the more reduced will
be the prices of oil, gas, minerals, etc., which
translates into more lower inflation and serious
deflationary threat, which risks to confront the
Eurozone with Japanese deflationary disease in
the late 90s.
by Prof. Dr. Adrian CIVICI
President & Head of Doctoral School
EUROPEAN UNIVERSITY OF TIRANA
EUT - UET
T
he actual reality and our daily
activity are witnessing a sharply
increasing interest and attention
about the exchange rate performance of
major currencies, such as: Euro or US
Dollar. It is the “bread and butter” not
only for banks or exchange bureaus, but
instead a significant number of economic and financial stakeholders and businesses check and ask for the exchange
rate of these currencies several times a
day, especially the ALL sustainability
against their respective fluctuations. Basic financial and monetary knowledge
and culture is becoming an increasingly
indispensable decision-making tool, and
also is transformed into a certain kind of
knowledge and information, which cannot be absolutely neglected or treated as
something theoretical or a luxury of experts in this field.
Many individuals and economic entities have borrowed in Euros, while their
earnings are in Lek, therefore they are
very interested about the ALL/Euro exchange rate, since the price of their debt
depends substantially on its respective
fluctuation. Naturally, a weakening Euro
lowers the price of their loans, while a
strengthening one makes them more expensive. Traders, whether importers or
exporters, are naturally interested about
Euro and US Dollar’s depreciation or
appreciation, in order to orientate their
purchases and sales to the more favorable markets of Euro or US Dollar zones.
The weakening of Euro and the
Dollar strengthening seems to
be influenced by another factor:
since the beginning of 2013,
when the Eurozone began to
show signs of a post-crisis
stabilization and create more
confidence, it was poured into
numerous large investments,
thus increasing the pressure
on the common currency to
depreciate.
The weakening of Euro favors imports,
by making them cheaper as compared to
ALL, while a strengthening of US Dollar
makes imports more expensive, by appreciating exports positively.
The last 20-22 years have shown
more than once that the geography and
orientation of import – export, even in
Albania, is significantly affected by the
strengthening or weakening of the two
base (reserve) currencies, the Euro and
the US Dollar. As the result of a “strong"
euro and a relatively "weak" US Dollar,
during recent years, the US Dollar-based
countries or markets have been the most
favorite ones for Albanian traders and
business community, thus causing, to a
certain extent, a reduction of the specific
weight of Euro-based trades, in relation
to the "dollar zone" trades or goods,
that are traded in US Dollars. This is
conditioned by the fact that, despite improvements made during recent years,
our trade balance is still overwhelmed
by imports from the Eurozone. In this
context, we must, from now on, pay
more attention and start thinking about
increasing our exports’ competitiveness,
thus making clear markets’ differentiation: imports from markets and countries with weaker currencies and exports
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27
to countries or areas with stronger currency.
Finally, in this view, it should be
mentioned the fact that Albania is part
of countries with a high Euroization
level, although the country is not a EU
member or part of Eurozone, nor it does
use the Euro as its official currency, as
in case of Kosovo and Montenegro. Approximately 30-35% of prices in Albania (for residential apartments, shops
and facilities services, cars, school fees,
building materials, ferry tickets, raw
materials, etc.), are quoted and settled
in Euros (relatively less in US Dollars),
thus being an important factor in setting
the price level, orienting the purchasing
power, consumption level, the structure
of bank deposits and loans, to end up at
the small or large business level, many
individuals or subjects are running and
handling do, by selling and purchasing
different currencies, depending on the
profit realized from such business. In this
sense, it seems quite of interest making
an analysis, or giving some comments,
on current performance and the expected relations between two major currencies, Euro and US Dollar, as well the
respective effects such "clash" between
them, in relation to the Albanian Lek
(ALL).
Beyond the domestic macroeconomic
and structural factors that may affect the
ALL strength or weakness, the appreciation or depreciation of major currencies
is substantially reflected in the exchange
rate between ALL/EUR, ALL/USD, or
ALL/GBP. Surely, actual disciplines and
institutions that study the financial and
monetary problems, deem the medium
and long-term assessments about the exchange rate as difficult, if not impossible,
however, specific analyses, debates and
predictions about its main trends, seem
to be more acceptable.
During the past six months, the European common currency, Euro, has
entered into a strong downward curve,
in relation to the US Dollar, by trading,
in end- September, at the rate EUR/USD
1.25 – 1.27, down form from the rate
EUR/USD = 1.38, in May 2014. Such depreciation was not verified, at least over
the last 15 months. So, what is happen-
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ECB is starting to establish a
correlative link between low
inflation levels in the Eurozone,
weak economic growth and
the strong euro, which means
that one of the important
instruments that will used in
months or years to come, to
cope with the risk of deflation
and to stimulate the economic
growth, will be "weakening the
euro".
ing to the Euro and what explains the
decrease of its purchasing power, or the
opposite, the increasing power of the US
Dollar is merely conjectural, or tells for
a more sustainable trend? Analysts and
the financial and monetary experts explain this trend, and above all, its stability or transience, through some key
following components:
First, the strengthening effect of the
US economy and the changing course
of FED monetary policy. The main indicators of US economy have been stable and in a continuous improvement,
for some months in a row. Institutions
like: IMF, OECD, etc., estimate that the
GDP of the United States, for 2014 and
2015 is expected to grow by 2.1 - 3.1%,
while the maximum forecasted figure
of Eurozone is ranging at 0.8 - 1.1%.
The same can be said about the unemployment rate. During the last months
the unemployment rate in UD dropped
below 6.2%, whereas in Europe it is at
11.5%. FED, following a dynamic poli-
cy, called "quantitative easing", through
which it increased the monetary base by
467%, over five years since 2008, thus
stimulating lending and consumption,
currently has walk away from it, into the
opposite direction. Now that economic
growth has made a comeback, the FED
is changing course, by applying a more
restrictive monetary policy (called "tapering"), through which it aims to stabilize the value of dollar, by reducing the
monetary base with about USD 85 billion, from end-October 2014, and by announcing a progressive increase of base
interest rate, starting from June 2015.
Consequently, the yield of the US sovereign bonds, currently at 2.5%, is found
far more attractive than German Treasury Bills (1%) or French ones (1.3%).
All this provides the effect of a strengthening Dollar against the Euro, while
many monetary analysts estimate that
this factor will continue to be present for
many months to come. But the weakening of Euro and the Dollar strengthening
Monetary analysts and specialized agencies of financial
markets estimate that, through the TLTRO program
(Targeted Long-Term Refinancing Operations) European
banks will be able to be credited with approximately EUR
400 billion, which are expected to go in favor of recovery and
development of the European economy.
seems to be influenced by another factor: since the beginning of 2013, when
the Eurozone began to show signs of a
post-crisis stabilization and create more
confidence, it was poured into numerous
large investments, thus increasing the
pressure on the common currency to depreciate.
Secondly, a new course pursued by
the ECB. The central objective of ECB's
monetary policy, in the area of monetary policy, has always been the control
of the inflation rate and price stability, but during recent months, ECB has
started to be a bit more flexible in relation to this target, by being attentive
to the exchange rate of Euro against
other currencies, such as the US Dollar,
British Pound, Japanese Yen, Chinese
renminbi, etc. Needless to go up to the
institutional evidence of such "second
goal", ECB and its President, Mr Mario
Draghi, have been openly expressed, in
many cases, in favor of the importance
and attention that must be paid "to the
euro exchange rate and its power against
other major currencies".
In this way, it seems that, directly
or indirectly, the ECB is starting to establish a correlative link between low
inflation levels in the Eurozone, weak
economic growth and the strong euro,
which means that one of the important
instruments that will used in months or
years to come, to cope with the risk of
deflation and to stimulate the economic
growth, will be "weakening the euro". In
fact, if we consider that most of the raw
materials that are imported to Europe
are quoted on the exchanges in dollars,
it is crystal clear that the more stronger
the Euro against the Dollar, the more reduced will be the prices of oil, gas, minerals, etc., which translates into more
lower inflation and serious deflationary
threat, which risks to confront the Eurozone with Japanese deflationary disease
in the late 90s. This is why the ECB does
not attempt to conceal its stance in favor
of a weaker Euro against Dollar, that’s
why the ECB lowered the key interest
rate for Euro, in September 2014, from
0.15% to 0.005%, while simultaneously announcing the commencement of a
special program of securitized asset and
bond purchases, ABS (asset-backed securities), in order to facilitate the flow of
new loans to the European economy.
Also, the ECB launched its new program of "new 4-year refinancing operations for European banks", the first
tranche of which was activated on 18
September 2014. Monetary analysts and
specialized agencies of financial markets
estimate that, through the TLTRO program (Targeted Long-Term Refinancing
Operations) European banks will be
able to be credited with approximately
EUR 400 billion, which are expected to
go in favor of recovery and development
of the European economy. A direct consequence of all these operations will be
a further weakening of Euro relative to
the US Dollar, for months and perhaps
years to come. According to analysts of
some of the most important European
and American banks, the above-cited actions and objectives converge naturally
to the conclusion that: "the weakening
trend of Euro and the strengthening one
of Dollar it is not a temporary and conjectural, but rather a more stable and
long-term, at least for a 2-3-year period.
Assessments and projections for them
go further to 2015, when there are projections for an EUR/USD exchange rate
at 1.00 - 1.25, while during the period
2016-2017, based upon the fact that the
European economy and its economic
growth is not expected to experience a
considerable boom, the EUR/USD exchange rate could drop further to 1.00
- 1.15, or even to a parity of 1 USD = 1
Euro, by 2017.
Euro is expected to be in a weakening trajectory for the coming months, in
relation to British Pound, as the British
economy by leaving behind the fear of
any Scotland’s secession, seems more
solid than that of the Eurozone, while
the Bank of England has indicated that
during the first six months of 2015 it
may begin changing the course of its
monetary policy, to increase the interest
rate for the British Pound.
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Social capital
CREDINS BANK
BKT
TRA.KU fest
The Credins Bank became one of the
key supporters and promoters of this
festival, which promoted the values of
and the beautiful Albanian traditions
through certain events, such as: academic
conferences, traditional celebrations, visits
(sightseeing), artistic concerts and many
other activities, which were organized
under the auspices of Ministry of Youth
and Social Welfare and the Ministry of
Urban Development and Tourism.
The reconstruction of summer
resort in Velipoja is over
Banka Kombëtare Tregtare organized
through Facebook a campaign, by
which every sharing of the dedicated
account number to this event, the
bank donated specific amount, which
in total were used for the construction
of The Summer Resort in Velipoja.
This resort, which was built during
‘60, is ready to welcome visitors from
all the orphanages, throughout the
country.
Credins Bank supports the healthcare
in Albania
Under the slogan “Credins Bank
supporting the healthcare in Albania”,
it was the turn of Shkodra regional
hospital to enjoy the bank’s support,
following those for Durrësi and Vlora
regional hospitals. Such an initiative of
Credins Bank will continue by providing
further support for other important
hospital centers, aiming at upgrading the
hospitalization service in our country.
Credit Agricole
Multicultural Festival in Berat
Banka Kombëtare Tregtare supported
the multicultural festival held in
Berat, from 21 - 23 August 2014. The
Festival, a three-night event, included
12 artistic activities, aiming at
promoting cultural legacy and values
of Berat.
“Music Festival”, for the first time in Albania
Crédit Agricole Bank - Albania, as a permanent partner in promoting art and culture
throughout the country, has supported the organization of “Music Festival”, a massive
activity held for the first time in Albania. This event came through the cooperation of
French Alliance in Tirana, Embassy of France, Credit Agricole Bank and other partners.
Under the slogan “Make music”, such internationalized activity encourages amateur
musicians to voluntarily play music in streets, squares and public areas. The festival in
Albania was held in the cities of Korça, Elbasan and Tirana, concluding with a great
concert in “Scanderbeg” Square. This festival is designed to return to a tradition, for
the coming years, and to be added to the country’s artistic events calendar.
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31
Social capital
First Investment Bank
Intesa Sanpaolo Bank
Student’s Credit Card
Over a six months period, Fibank’s
personnel carried out a number of
informative presentations at premises
of public and private universities’
auditoriums, with regard to credit
cards, specifically tailored for
students. Fibank has also invited
students to visit bank offices and to
attend the internship programs there.
“Student’s credit cards” product has
the main objective to inform the new
generation over the opportunities
offered by these means of payments
and to establish a strong relationship
between this generation and banks.
Beer Festival in Korça
Intesa Sanpaolo Bank - Albania participated
with its ecological stand at the Beer Festival in
Korça,from 13-17 August. During this event,
numerous gifts were distributed to visitors, by
transmitting the message of revitalizing the
city’s tradition, as the city where the Albanian
beer was produced for the first time. The festival, already a 8-year old tradition, was visited
by approximately 80 thousands people. The
preservation and development of tradition and
culture, in full accordance with the touristic
and economic development strategy of the
region, is part of the Bank Social Responsibility
in all places where it operates.
VENETO BANKA
Multicultural Festival in Berat
The Multicultural Festival, in the 2400 old
year city of Berat, was organized to enhance
and promote Agro-tourism and the cultural
events in the frame of the city’s economic
development. The bank participation in the
Agro Fair with its wooden stand, branded
lamps and aprons distributed to all visitors
and participants, reinforced the commitment
to sustainable development even through
the usage of ecological and multifunctional
materials. This event reaffirmed the historical,
cultural, ethnographical, architectonical values
of the region, as well as its religious tolerance
as a considerable potential for touristic and
economic development.
Veneto Banka and “Neranxi” Culinary
Institute
Veneto Banka has decided that its
development policies must have the
priority to support youngsters with
vocational education, by providing them
with material basis, and is continuing to
make a real contribution in professional
improvement of new generation, by
creating cooperating opportunities with
successful enterprises.
Supporting sport
The bank was one of financial supporters
of Beach Volley National Championship,
organized by the Albanian Federation of
Volleyball, in cooperation with Himara
and Saranda Municipalities.
Veneto Banka and Lions Club Tirana
The story of Rushani family in Fitore village
of Novoselë commune, Vlorë, is really
heartbreaking. Lion Club Tirana, Mr Gjergj
Liqejza, Consul of Austria in Shkodra and
Veneto Banka, responded to the appeal
in media by the parents of two paralyzed
children, Amarildo and Klodjan, and
provided them with electric wheel chairs.
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Societe Generale Albania
celebrates 150th anniversary
of Societe Generale Group
and 10th Anniversary of Bank
Societe Generale in Albania
Raiffeisen Bank
Supporting Korça regional hospital
Raiffeisen Bank has continued its
support even in Korça, by sponsoring the
reconstruction of the main entrance of
Korça Regional Hospital. The inauguration
ceremony was attended by Mr Petrika
Tollkuçi, Regional Director of Health
Insurance Service, Mr John McNaughton,
Board Member for Retail Banking of
Raiffeisen Bank, Mr Ardit Konomi, Prefect
of Korça District, the Mr Ilirjan Pendavinji,
Member of Parliament, as well as physicians
and nurses form this institution. In his speech,
Mr McNaughton, said: “Raiffeisen Bank will
continue to support further the revitalization
of this sector”.
Kuçova’s Municipality to give the name
“Raiffeisen Bank” to the main street of
the city
The Municipal Council of Kuçova
Municipality decided that the main street
of the city to bear the name: “Raiffeisen
Bank”, as a token of gratitude for the bank.
On this occasion, an inauguration ceremony
was organized, in which Mr Bardhyl
Gjyzeli, city mayor, Mr John McNaughton,
Board Member of Raiffeisen Bank, and
representatives of other institutions in the city,
took part.
On the 3 September, Societe Generale Albania organized a gala dinner
to celebrate the 150th Anniversary
of Societe Generale Group and its
10th Anniversary of Bank Societe Generale Albania. With special
participation of employees, business
partners, client representatives and
certain institutions, this dinner was a
special occasion to celebrate together.
Societe Generale has been present
over these years by financing projects
that symbolize modern world and has
supported millions of private clients,
households, small, medium and big
enterprises throughout the world in
their various projects.
Sponsoring the reconstruction of
Employment Office in Gjirokastra
Raiffeisen Bank, in cooperation with the
Ministry of Youth and Social Welfare and
the National Service of Employment, has
financed the reconstruction of Employment
Office in Gjirokastra. The inauguration
ceremony was attended by Mr Christian
Canacaris, General Director of Raiffeisen
Bank, Mr Erion Veliaj, Minister of Youth and
Social Welfare, businesses representatives and
several organizations, operating in this sector.
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News
SWIFT: “20 years in Albania,
20 years of partnership”
First SWIFT Business Forum
Albania 2014
T
he Albanian Association of Banks,
in collaboration with SWIFT Austria
and CIS, organized the First Business Forum - Albania 2014 with the topic:
“20 years in Albania, 20 years of partnership”. The forum, held on 17 September
in Sheraton Hotel, Tirana, was attended
by representatives of commercial banks
in Albania, Bank of Albania, Ministry of
Finance, non-bank financial institutions,
utility companies, etc. Commercial banks
in Albania are users of SWIFT platform
for 20 years now, and the infrastructure
of country’s payment systems is built upon
this platform.
In her opening speech, Ms Endrita Xhaferaj,
AAB Secretary General, emphasized the
importance of organizing such forum, for
the first time in Albania, which is being
organized every year in many countries
worldwide. Mrs Najada Xhaxha, Head
of AAB Payments Committee and SWIFT
User Group Chairperson in Albania mentioned the mutual benefits, for both banking
system and SWIFT, during these years of
cooperation, as well as the new challenges
and opportunities for the future.
The forum continued with presentations
from the representatives of SWIFT Austria
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and CIS, who introduced their products.
Representatives from the Bank of Albania
and the Ministry of Finance held presentations on the development of payment
systems in Albania, the participation of
these Institutions in the SWIFT network
during these years of partnership, and the
impact from the usage of this platform.
The second section was divided into four
parallel presentation sessions, where solutions that SWIFT offers to all the partners
(banks, governmental institutions, other
financial institutions, utilities, etc.), were
introduced.
Interview with
Mr Michael
Formann,
Head of SWIFT
Austria
By Ms Rudina Hoxha
How did you find the Swift Business Forum held lately in Tirana? In what respect
was this Forum useful for Albania?
My impression it was an event very much
worthwhile to be repeated, hopefully in
a regular interval. Events like this make
sure that local communities get involved in
the global discussions held in the SWIFT
community.
From your perspective, how does the
SWIFT Compliance Roadmap looks like
for 2014?
In a nutshell, I fully believe we are on track
and have progressed a lot over the past 18
months. Nevertheless, still there is way to
go, especially in the context of KYC for
correspondent banking. It is great that
with Erste Bank Group and Raiffeisen International we have players involved who
play a very important role in our region
in CEE.
How do you find the payments system
infrastructure in Albania? Do you have
any practical insights on it?
To my knowledge it is a very robust and
scalable setup that has been implemented.
It uses all of the highly resilient and efficient
messaging channels we have created especially for adoption in Real-Time-Gross-Settlement Systems. And I am also aware that
BoA is always keeping in touch with latest
developments on our side.
Given the present financial crisis, what is
a real boost for the securities?
Unfortunately there is no golden bullet,
but what I have witnessed when travelling
the region, a sound financial system is just
a starting point. We normally see a steeper increase in GDP and other KPIs when
also the state/government makes sure, that
people get tax benefits when e.g. investing
in pension funds to secure their well being
for later.
How can Albania support the standardization and cooperation among the CEE
countries in order to address better the
issues we are facing in this changing and
challenging environment?
This is a process that is already ongoing.
I regularly meet a number of Albanian
colleagues when speaking at conferences
in the region, but also current technolo-
gy makes sure that knowledge sharing is
much easier compared to just a few years
in the past.
In your view, to what extent is Albania on
the road to establishing itself as a financial good reference point in comparison
with the other CEE countries?
Not sure if each and every country requires
at being a reference point, though I strongly believe it is very beneficial to try hard
to be competitive and fight to be amongst
the best in class. From a technical point I
believe a lot of good homework has been
done. From an economical point of view
there is still some mileage left… I still cannot understand why e.g. the tourism industry has not developed much stronger;
I am personally a big fan of Albania, its
very well educated people and the amazing
nature.
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35
NJE BOTE
MUNDESISH REALE
KREDI & PAKETA
PER BIZNESIN E VOGEL
SHUME SHERBIME
ME PAK KOSTO
www.intesasanpaolobank.al
Call Center 08006000 (Falas)
4 22 76 000
36Tel: +355
Bankieri
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Cel: +355 (0) 692080903
Opinion
An overview on Thomas
Piketty’s Capital in the
Twenty -First Century"
When the rate of return on capital exceeds
the rate of growth of output and income, […]
capitalism automatically generates arbitrary and
unsustainable inequalities that radically undermine
the meritocratic values on which democratic
societies are based. (Thomas Piketty)
by Ms Erjona Rebi
PhD Candidate in Economics
I
n the summer of 2014, the book of
French economist Mr Thomas Piketty: "Capital in the Twenty-First
Century", came into the limelight, out
of many books published around the
world. This book made numerous headlines in the international arena, driven
by issues it address, the writing style and
the new approach it brings into lines.
Getting lots praises, but criticism too, it
has become one of the world’s bestsellers,
as it recalls the debate of Karl Marx’s
"Capital" into the current issues of our
time, where wealth concentration and
the deepening disparity between different classes of society has become more
severe and more evident than before.
The main idea Mr Piketty conveys
throughout this book is that the inequality in wealth distribution will be
raised further, either in USA or in Europe, as long as the rate of return on
capital is greater than the rate of eco-
nomic growth. The result of such reality will be the wealth concentration,
which will be accompanied by an increasing inequality between different
social classes and consequently, will
lead to social and economic instability.
To address this problem, Mr Piketty
proposes in his book the use of progressive tax on capital/wealth, which
would prevent that the wealth could
be under control of just a few people.
Through statistical arguments and
facts throughout the book, Mr Piketty
shows that inequality is not accidental,
but rather it is a feature of capitalism,
which can be held back only through
state intervention. As long as this state
of affairs does not change, the democratic regime in the world will be under
threat. The author shows that the upward trend of inequality was becoming
steep by early years of the twentieth
century, but events such as: World War
II and the Great Depression destroyed
many of the existing assets and wealth,
in particular those of country’s elite.
There were just these events that spurred
governments to undertake measures for
wealth redistribution and income distribution, particularly after World War
II. The rapid economic growth that
came later made the inherited wealth
less important. Meanwhile, the author
argues that the world today has returned to sharp inequality of the late
nineteenth century, where economies
are commanded and dominated not by
talented people, but by family dynasties and inherited wealth, which is increasingly strengthening and piling up.
Along with many supporters, there
are many critics on this book, who
think that the indicators, selected by
Mr Piketty to make a judgment about
capital, are evasive. Such indicators
are significantly affected by the financial evaluation of capital in the market
and do not consider its productive use.
Even more arguable and debatable is
the proposal to introduce the progressive tax, as a solution in this regard.
Despite these criticisms, "Capital in the
Twenty-First Century" is an interesting book that must be read and surely
time will be its best judge in the future.
www.aab.al
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37
Tech Topics
HeRa
A module for most efficient use of
human knowledge, talent, skills
and capabilities
Because of large numbers of employees, spread
of branches on different locations and high
turnover of employees, the Banking system
needs to have centralized solutions for the
management of employee data and information.
by Mr Dritan MEZINI
Executive Director
DM CONSULTING
D
M Consulting Services (DMCS),
as Business Support Organization (BSO), was established in
2005 to provide clients with top-quality,
innovative, reliable, cost effective, and
time-saving business, Human Resources and IT solutions. The main areas of
DMCS expertise consist of the following: 1. HR Management, Recruitment
and Training, 2. IT Solutions and Services, 3. Web & e-commerce Solutions
and Services, 4. Outsourcing, 5. Management Consulting. DM Consulting
is composed of a team of professional
experts in the main areas of Human Resources, web development, e-business,
e-commerce, online marketing with education and experience in Albania, regionally and internationally.
Additionally, the above-mentioned
expertise, when intertwined with in-
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formation technology, are transformed
into products and services which help
businesses at facilitating the processes where they are involved, including:
Human Resources (HRMIS); Customer
Relationship Management (CRM), Applicant Tracking System (ATS); Online
Portals; SME Turn-key solutions; IT
Audit; IT Strategy, Feasibility Study, IT
Assessment, IT Consultancy, IT MIS,
Project Management and e-commerce
Training. DMCS is focused on designing high quality and unique web designs
and e-commerce to help the customers
trigger makes us improve radically the
productivity and the success rate of
their business. Human Resources are
considered as a crucial element in developing a successful and competitive
business, because it allows companies to
increase their productivity through better use of their human capital. DMCS’s
HR Management Consulting Services
are designed to help businesses improve
organizational activities, employee productivity, and administration.
HeRa Modules
HERA product life cycle development
includes modules representing the path
to solutions of the main requirements
submitted by clients as following:
• Organizational Structure
• Human Resources (Dossier,
Contract, Leave)
• Payroll
• Training Management
• Recruitment online
• Reporting System
• Administrative Management
• Security (pass card)
• Help module
• Warranty and Maintenance
• Inter departmental relationship
Benefits of implementing HeRa
• Increased Productivity
• More efficient administration
• More operational opportunities
• Reduced labor requirements
• Superior managerial decision
making
• Reduced costs
• Superior control
-2*361%8-32
8)',2303+=
;)&)'311)6')13&-0)
,67)6:-')7
-83987396'-2+
Main Services of Human
Resources Field
DMCS is dedicated to provide the
best possible solutions to all its clients,
whether they are big established companies, small businesses or qualified individuals looking for opportunities to
develop and advance their professional
careers. Our main services in the field of
human resources are:
• Recruitment and Executive Search,
• Employee Assessment Services,
• Training and Development,
• HR Consultancy Services,
• Career Coaching,
• Employment portal:
www.duapune.com
In the meantime, DMCS have just
launched the new version of the employment portal (duapune.com) ver 3.0,
which is much functional and offers new
services for the employers and jobseekers, as per the following: Standard CV
format, Advanced Search, Internal Communication, Social Media Integration
and Multiple documents upload.
IT Solutions and Services
DMCS has provided IT strategies for
a large range of SME in the areas of
information system implementation,
e-commerce, digital marketing and the
integration of IT strategy and processes with the core business strategy of the
organization. We provide a comprehensive set of IT solution and services to
extract structured data to improve decision-making, financial management,
regulatory compliance and customer
service.
HRMIS – HeRa Product
The Human Resource Management Information System is by no means a new
phenomenon – on the contrary, HRMIS
technology has been around for years.
Only recently, however, have companies begun to realize the serious benefits
such systems have to offer. Nearly every
business can stand to gain something in
the realm of efficiency and operational
cohesion, and HR information software
is designed to provide exactly those improvements. These systems collect, store
and analyze the characteristics, actions
and the performance of employees (including future and former employees)
also other pertinent information (e.g.
job, position data, salaries) for management decision making.
Meanwhile, the banking system because of large numbers of employees,
spread of branches on different locations
and high turnover of employees, need to
have centralized solutions for the management of employee data and infor-
mation. Because of lack of automated
systems for the information of employees, absence of generated analytical reports and lack of streamlined processes,
the banking sector very frequently has
not been able to generate strategic approaches to human resources, by automating the processes and reports.
Based on this identified gap and
strong need for intervention especially
on this sector, DM Consulting Services,
in consortium with Komptel Project Engineering, have conceived and moderated the HRMIS, so called HeRa, that has
been tailored to provide a full service
and accurate for companies that have
a large number of employees and to
whom the implementation of this product would be very beneficial especially
on cost and strategic plans terms. HeRa
enables the most efficient use of human
knowledge, talent, skills and capabilities
in order to achieve the objectives of organization. Moreover it offers the possibility to be used in many companies or
branches at the same time, each with its
own rights & users. It consists of typical
HR integrated modules which helps the
HR personnel for a lot of aspects and offers to them the possibility to be efficient
on their work for the benefit of the company.
These modules are the results of
product life cycle management such as
analysis, design, development/customization, implementation and testing and
training. Basing on the needs of the clients and companies, the product undergoes customized solutions and modules
reformatting. The HERA represents
a robust, tested and proven business
management product, already implemented successfully for the last years
at Kosovo Energy Corporation (KEK)
over 8,000 employees, Radio Television
of Kosovo (RTK) over 600 employees,
Raiffeisen Bank Kosovo (RZB) over 500
employees, Central Bank of Republic of
Kosova, Kosova Government, ProCredit
Bank of Kosova, and several public utilities enterprises in Albania, such as Water
Companies in Durrës, Lezha, Saranda
and Fier.
www.aab.al
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39
Financial Auditorium
by Ms Rezarta GODO
Executive Director
JUNIOR ACHIEVEMENT OF ALBANIA
A
lbania and the Albanian market is being faced with numerous challenges of development,
competition, European integration and
globalization in general, which is raising
the awareness of respective stakeholders
regarding the importance of orientating
the society towards a pragmatic and rational approach, either in terms of education, learning with practical knowledge
and experience, or choices for the professional career. It seems that teachers,
parents and youngsters are moving away
from the education and graduation standard in most preferential disciplines with
undisputable prestige, but over exhausted, which lead to oversaturation and
high unemployment. Currently, parents
and youngsters seem to be increasingly
attracted by study fields and choices signaled by the market, technology, or society’s growing needs, and what is meant
is the employment and the guarantee to
yield results from investment made in
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Financial education
through Junior
Achievement Program
education. Parallel to such rational and
well-targeted approach, is the awareness
about the importance of economic independence and proper management of
money, since the early age. When young
people are still at school years and economically dependent on their families,
they need, since their childhood, to understand the value of money, the efforts
and difficulties to obtain it, with the
aim to achieve the desired independence,
self-security and to compete successfully
in the market. Specifically, if young people aspire to manage and run commercial
companies’ departments, they must first
be able to manage themselves, especially
personal finances.
Junior Achievement (JA) Program,
is applied in 150 secondary schools
throughout the country, and is in its
third year of its life in Albania, thanks
to initial funding of Albanian-American
Development Foundation (AADF). It
puts young people in situations where
they experience in practice the core of finance. They are challenged and practices
in several aspects, including knowledge
about financial terminology, cost-benefit analysis, raising the initial capital investment through shareholders, setting
financial goals (manufacturing-sales- net
profit), preparing simple financial statements (inflows-outflows), etc. Beyond
youth-centered learning and their practice, JA provides also the "mentors",
who help young people to digest and understand finance, as well as identify solutions to increase revenues, by avoiding or
minimizing possible risks. Mentors represent a value in educating young people
with knowledge about entrepreneurship,
business and finance, according to JA
program. Especially mentors who are
professionals in the banking industry illustrate some best practices in managing
personal finance, by referring savings deposits (savings as a key learning concept
for young people), investments through
bank loans, etc. Specifically, young people are acquainted not only with practical concepts and ways to exercise proper
financial management, but also with legal and financial responsibilities and obligations, associated with various undertakings, such as: investing through bank
loans.
A quality financial education helps
substantially in preparing youngsters for
the labor market. Surely, they will not
necessarily be professional financiers, but
rather individuals prepared to know the
value of money, manage their coffers meticulously, and earn respect for what they
have managed to save, or gain, thanks
to their efforts as individuals and young
professionals with work ethic, clear objectives, healthy ambitions, and with a
sense of scrupulosity, that conveys trust
in them.
Given the importance of early preparation of Albanian youths with practical knowledge of doing business and
baseline financial knowledge, the future
employers are increasingly aware about
the importance to contribute to well-education of young Albanians. Specifically,
some of the largest banking institutions
in the country have contributed significantly in youth education, through JA's,
by way of financial knowledge of their
mentors, including Raiffeisen Bank and
ProCredit Bank. Meanwhile, Credins
Bank will contribute this year with some
47 mentors, a very significant intellectual
investment for JA program youngsters at
various schools throughout the country.
Alpha Bank and Tirana Bank will also
contribute with their mentors in Tirana
and other districts. Mentors and JA's
subject content will focus, inter alia, on a
careful selection of young people, market
analysis and market needs’ assessment,
knowing clients and their expectations,
setting the competitive price, identifying
and competitive advantages in the market, assessing the short and long term
consequences of different decision-making (comparative analysis), learning the
pillars of a business plan, setting different objectives, conducting a research
for potential competitors in the market,
regular and correct registration of any
financial transaction, evidencing every
purchase-sale act, completing various
forms, including sales orders, etc. Apart
from such exercises, youngsters deepen
financial and non-financial knowledge,
by preparing action plans and strategies
with techniques that lead to lasting success and sustainability.
www.aab.al
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41
AAB Trainings
Training on “IT for non IT-ers”
AAB, in collaboration with the Albanian
Institute of Internal Auditors (AIIA),
organized on 15-16 September a
training course, which was designed for
Financial, Information Technology and
Internal Auditors, IT Security and Information Security Officers. This intensive,
two-day seminar outlined the concepts
of information technology, necessary to
understand the audit concerns in the IT
environment. The training course was
attended by 15 participants.
Training on HR Strategic
Management
AAB, in collaboration with WIFI Albania, organized on 18 - 19 September a
training course on HR Strategic Management. The training aimed to equip
the participants with personal skills
and specialist knowledge, required for a
successful HR practitioner. The course
aimed at providing the opportunity that
newly acquired skills and experience
could be conveyed straight back to the
workplace. The training was attended by
participants of 6 member banks.
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Seminar organized in
collaboration with ICC
Albania
AAB organized together with ICC
Albania two seminars, delivered by Mr.
Andrle Pavel, Secretary of ICC Czech
Republic Banking Commission and
Member of ICC Banking Commission.
The seminar on 15 September on “ICC
Trade Finance Rules” was a practical
seminar on international payment and
security instruments and financing with
special focus on new developments in
open account trading area.
SWIFT celebrates the 20th
Anniversary in Albania
SWIFT Community Albania organized
on 16 September 2014 a dinner party,
supported by CIS, to celebrate the 20th
Anniversary of SWIFT in Albania. On
this occasion, the SWIFT Community
Albania awarded Mrs. Lindita Bendo
from Intesa Sanpaolo Bank, Mr. Valer
Miho from Bank of Albania and Mr.
Alke de Boer from Swift for their contribution and devoted work towards
the modernization of Albanian Payment
Systems, by being the first persons
engaged in this project in Albania.
The second seminar of 16 September on
“INCOTERMS Rules 2010”, defined
the responsibilities of buyers and sellers
for the delivery of goods under sales
contracts. In total, these two trainings
were attended by 23 participants of 7
member banks.
The seminar of 17 September on “Trading Frauds in an uncertain economic
climate” was organized in collaboration
with ICC Commercial Crime Services
based in London and was delivered by
Mr. Michael Howlett, Deputy Director of
IMB and a Director of ICC Commercial
Crime Services and Mr. Dave Cuckney,
IMB Manager. The seminar was attended
by 16 participants.
www.aab.al
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