1. Macro-Prudential Supervision Lessons learned from the crisis
Macro-Prudential Supervision Lessons learned from the crisis Hilda Shijaku Financial Stability Department

2. Albanian Banking System
Banks operating in the market:
14 banks
2 branches of foreign banks
Activity: universal banking.
Major operations:
Deposits
Loans
Placements
Treasury Bills & Government bonds
Other foreign securities

3. Albanian Banking System
Proprietorship:
Foreign capital – strongly prevailing
Domestic capital – slightly taking over

4. Albanian Banking System

5. Albanian Banking System
Presence of foreign banks:
Helped building of the entire system
Know-how brought in the country
Widely spread banking services (geographically)
New products offered
Supported the economic growth

6. Basel II Not fully implemented Pillar I – not implemented
Presently working on the implementation of Standardized Approach
Pillar II – partially implemented.
No regulatory framework in place.
Actions taken in conform to the supervisory principles
Pillar III – Partially implemented
There is a regulatory framework in place for publication of information

7. Lessons learned from the crisis
Crisis imported
First impact – confidence of the public
Second impact – real economy
Impact on banking system
Deposit withdrawal
Liquidity drainage
Decreased lending
Increased NPL
Impact on economy

8. Effects on banks balance sheets
Initial state
Dep withdrawal
How much dependent on mother banks??
Stress tests
Information and risk management systems not in place
New regulation on liquidity management
Credit growth
Npl
change in structure
But only gradual
Capital adequacy

9. FSI

10. The authorities response
Formal Measures taken
Liquidity provided to banks through the use of reserve requirement (from 20% to 40%)
Limited exposure to banks’ related parties (from 20% to 10 %)
SC decision to stop dividend distribution of the 2008 and 2009 profit
Decrease of the monetary policy rate ( 1% in January and October)
Change in the auction form (BoA providing liquidity at a fixed rate)
Increased deposit insurance coverage
Requirements
Improvement of risk management practices
Decisions based on prior analysis and stress-testing
Maintain good level of capital adequacy at any time
Continue lending policy to avoid pro-cyclical effects
Smooth the impact on exchange rate regime

11. Lessons learned from the crisis
Evidenced weaknesses
Loose credit requirements in good times
risk management practices, structures & policy partially implemented
High exposure to foreign currency lending
Poor attention to macro developments

12. Lessons learned from the crisis
Strength
High liquidity
Good capitalization
Low exposure to foreign markets
Good support from mother banks