Annual progress report 2015 albanian contribution – input I september 2014 – may 2015 table of contents
Table 2: National Registration Centre: Initial Registrations
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- Sept. Oct. Nov. Dec.
- Total %
- Total 1,262 1,363
- Table 6: National Registration Centre: Written off
- Total 375 412 308
- Table 2: Information on the activity of the National Licensing Centre
- 1.5. Legal System For further information please see chapter Political Criteria 1.6 Financial sector
- The statistical data of non-banking financial market Voluntary pension market
- Statistical data for the period January- February 2015
Table 2: National Registration Centre: Initial Registrations
Source: National Registration Centre Table 6: National Registration Centre: Written off
Source: National Registration Centre Business Licensing During September 2014 – April 2015, the Law nr. 6/2015, “For some changes and additions in the Law Nr. 10081, date 23.2.2009, “For the licenses, authorizations and permits in the Republic of Albania” has been approved. By the approval of this law, the process of the authorization shall be handled in accordance with the conditions and the procedures stipulated in the Law Nr. 10081. In this framework, it is being worked on the drafting of the Draft-DCM “For some changes and additions in the DCM Nr.538, date 26.05.2009 of the Council of Ministers, “For the Licenses and Permits processed by or through National Licensing Centre and other common legal amendments”, in which there shall be stipulated the authorizations that shall be handled through the National Licensing Centre, the necessary documents to be submitted at the moment of the application for the obtaining of the respective authorizations, the procedures of the review and decision-making, the time periods and the validity of each authorization, as well as the authorizations that shall be handled without the involvement of the National Licensing Centre. Meanwhile, below there are the statistics for the period September 2014 – April 2015 Table 2: Information on the activity of the National Licensing Centre
Source: National Licensing Centre 1.5. Legal System For further information please see chapter Political Criteria 1.6 Financial sector
The non-banking financial sector The FSA supervises the non-banking financial markets that according to the estimates for 2014, reached total assets of ALL 89,16 billion or 636 million Euro, The statistical data of non-banking financial market
During the reporting period in the market continued to operate three management companies of voluntary pension funds and 3 banks as depositories of pension funds. Data analysis for the private voluntary pension market in 31.12.2014 shows a total assets under management about ALL 629, 14 million (4, 49 million Euro), and an increase of approximately 44,7% compared with the year 2013. The number of members in the Pensions Funds, at the end of 2014 was 8.491 members, with an increase of 7.7% compared with the end of 2013.
During the reporting period, 10 insurance companies exercised in the Albanian insurance market of which 7 non-Life insurance companies, 2 life insurance companies and one life and non-life insurance company.During 2014, it was a decrease of the number of insurance companies as a result of merger of two insurance companies “Sigma Vienna Insurance Group” and “Interalbanian Vienna Insurance Group” into a single insurance company “Sigma Vienna Insurance Group”. Foreign capital in this market accounted for about 40%, compared with the registered capital of the insurance companies, The total assets of insurance market in 2014 reached 24, 49 billion ALL (175 million Euro) or said otherwise about 27, 5% of total assets of non-banking financial market in supervision. Income from gross written premiums of insurance in 2014 amounted ALL 11,6 billion (82,7 million Euro), or 36,15%,more compared to the same period 2013, average increase in last 5 years of 8,95% .The market continued to be dominated by non-Life insurance, which share was 90,93% of the total volume of premiums, compared to life insurance with 8,83% and reinsurance by 0,23%. Viewed from the point of view of the market by type of insurance, compulsory and voluntary insurance, gross written premiums of voluntary insurance occupied 40,5% and gross written premiums of compulsory insurance took 59,5% of the total market. During the year 2014, gross claims paid was amounted to about 2, 82 billion ALL (20, 1 million Euro) or 4, 7% more, compared with the year 2013. Statistical data for the period January- February 2015 The gross insurance written premium revenues for the period January- February 2014were about 2 billion ALL ( 14,3 million Euro), or 16,75,% more compared to the same period in 2014. The market continued to be dominated by non-Life insurance, whose share was 92, 36 % of the total premium volume; life insurance market share was 7, 64 %. Market shares of voluntary and compulsory insurance gross written premiums were respectively 42, 12% and 57, 9%. During the period January- February 2015, the total of paid claims was 439 million ALL (3, 13 million Euro) or 7, 6% more compared the same period 2014.
Investment Funds During 2014 in the market of investment funds exercised their activity two funds, respectively "Raiffeisen Investment Fund Prestige'' and" Raiffeisen Invest Euro Fund''. According to the data analysis for development of the Investment Funds on 31.12. 2014, their net asset value amounted ALL 63,74 billion (455 million Euro) with an increase of 26,64% compared to 31.12.2013. The number of members who have invested in investment funds on 31.12.2014 was 32.669, against 28.442 members on 31.12.2013. This market is dominated by investment in Government Bonds, which represent 76,12% of fund assets, with an increase of 14,94% compared to 31.12.2013. Data on the securities market During the reporting period, the most active segments of the securities market was the retail trade securities Albanian Government (treasury bills and bonds) market. In this market there continued to operate 8 banks and the Albanian Post Office, licensed by the Authority to carry out this type of activity. The performance of the Government Securities retail market outcomes may be followed on a daily basis via the official website of the FSA, in the GSRM section. The volume of secondary market of Government securities in 2014 was dominated by transactions in short-term instruments (T-Bills) at 77, 74% and the other part was by long-term instruments (notes and bonds) at 22,26%. In terms of the number of transactions, 98,4% of all transactions in the secondary market of Government securities were in T-Bills.
The capital market during 2014 continued to remain undeveloped. Tirana Stock Exchange (TSE), wholly owned by the state as the sole shareholder, has not started to trade in securities and there is no company listed.
The developments recorded in the Albanian banking sector in the end of 2014 and at the first months of 2015 were mostly positive. The banking sector remains liquid and well-capitalized and sufficiently profitable. Even with a positive financial situation, the banking sector exposure to risks remains similar to the previous period.Credit risk is considered high, although the ratio of nonperforming loans decreased at the end of the period. Exposure to market risks remains controllable, but should be monitored and evaluated regularly. Exposure to exchange rate depreciation mitigated by currency positions generally "purchase" of the banking sector. Continued reduction of interest rates, improves the solvency of borrowers, but the risk of a return to their highest levels is present and must be considered. The banking sector continues to be the main segment of financial intermediation in Albania, accounting for 90.4% of financial system's total assets in the end of 2014. The non-bank financial sector share in total financial system assets was about 6.9%, in December 2014 comparing with 8.7% at the same period last year, due to the increase of total assets of the financial system (5.9% y-o-y). The capital adequacy ratio stands on a satisfactory levelsupported by improved net financial result at the end of year 2014. The level of the capital adequacy ratio reached 16.84% in December 2014 from 17.9% previous year, as a result of the large increase in risk investments (risk weighted assets). The last one increased by 8%year-on-year while regulatory capital by only 1.3%. Credit activity recovered significantly, underpinned by favourable domestic currency lending interest rates and easing credit standards by banks. Private sector credit growth rebounded to +4.7% in annual term in December 2014 from -2.2% annual increases in December 201328. In the same time, resident private sector credit increased by +2.6% annually in December 2014 from -1.3% annual increases in December 2013. Specifically, corporate lending, amounting to 70% of total loans, was the engine of credit activity, increasing by 6% annually, while household’s loans rose merely by 1.2% in December 2014.This positive trend reflects easing credit standards by banks, in anticipation of an improvement in their asset quality, as the Government is set to clear its accumulated arrears (unpaid bills to corporates and VAT refunds)29, amounting to 2.4% of 2014 GDP, by end-2016. From a currency perspective, the domestic currency component, although it represents only 37% of total loans was the main driver of the rebound in lending activity in 2014. It increased on average 9% during 2014Q4 (the highest annual increased in the last 2-year) against a rise of 2.4% in December 2013. The strong domestic currency lending performance was underpinned by a sharp decline in Albanian Lek lending interest rates. In fact, since the start of the cycle of monetary policy loosening in September 2011, the average local currency lending interest rate has declined by 3.3 percentage points to 7.75% (in December 2014). Lending continued its expansion at the beginning of the year, where in February 2015 annual growth marked 6.7% (or +37.1 billion ALL) and reached the level of 594.2 billion ALL. An important role on the expansion of outstanding loan played, the big demand on Loan, which is reflected by the y-o-y increase of new- loans, 12% (or +27.4 billion ALL). The loan expansion was mostly affected by the increase in lending to businesses and foreign currency lending. Credit risk in banks’ portfolios as expressed by the ratio of NPLs to residents decreased on annual basis but still remains the primary concern of the banking sector. The ratio of non-performing loans to total loans reached 22.5 % at the end of February 2015, against 24.2% in February 2014 and 24.18% at the end of 2014. Improvement oncreditqualityisaffected by thedecline on the stock of non-performing-loansto the private sectorandlocal currency. Provisioning rules are conservative, and total provisions represented 67.3 percent of NPLs at end-February 2015. Deposits amounted to ALL 1,072.2 billion in December 2014, increasing by 4.6% from a year ago. Annual growth in domestic currency deposits was 2.8% while foreign currency deposits growth were 3.7%. Household deposits grew at an annual rate of 2.6%, while business deposits grew 9.2% year-on-year. This trend was also affected by the settlement of overdue payments to government to business. The ratio of loans to deposits stood at 55.5%. In February 2015, total deposits amounted to ALL 1,076.9 billion. The banking sector appears more hedged against direct market risk, but remains exposed to the effect of credit quality from unwanted exchange rate and interest rates fluctuations. During the second half of 2014, outstanding foreign currency loans where the borrower's income is in ALL (hereinafter, "unhedged foreign currency loans"), grew by 11% to 186.4 billion level. This loan represents 31.3% of outstanding loans and 50% of outstanding loans in foreign currency. Despite that the sector has narrowed currency lending within this portfolio, the share of unhedged loans by exchange rate movements remains considerable levels and stable. The quality of the unhinged loan portfolio in foreign currency improved slightly during the period, due to the expansion of the loan portfolio in foreign currency. Overall, unhedged outstanding loans in foreign currency rose during the period by 6%. In December 2014, the ratio of nonperforming loans to unhedged foreign currency credit score 29%, against 30.3% at the end of June 2014. The main impact in this performance has given credit in the euro vulnerable. Total loans classified as unhinged from the risk of exchange rate levelled ALL 176 billion the first quarter of 2014, a downgrade of 2.97% compared to the end of 2013. Credit risk is the main source of risk to the banking sector. On this topic, through its supervisory function, the Bank of Albania has requested commercial banks to provide, in parallel, accurate and timely identification of non-performing loans and create relevant provisions, as well as implement established actions to recover the loss loans through collateral execution. These actions, combined with measures for reducing operational costs, would establish, gradually, the conditions for generating a stable and positive financial result, which would better support the medium-term needs of the banking sector for capital. The banking sector remains profitable. At the sector level, the net financial result was positive in value ALL 11.2 billion in December 2014, compared with ALL 6.6 billion a year ago. The main contribution to this result was the decreasing level of provision expenditures and the increased net interest income supported in securities investments and to credit activity. Profitability indicators RoE and RoA increased at the level of 10.5% and 0.89%, from 6.4% and 0.54%. Banking sector net financial results in February 2015 were positive at ALL 5.4 billion levels. Profitability indicators, RoE and RoA, increased at the level of 28.3% and 2.5% from 16.9% and 1.4% same period previous year. Efficiency of financial intermediation: provide information on the development of interest rate spreads (average lending/deposit rates); degree of competition in banking sector; share of non-performing loans; The banking system continued to display a stable trend in terms of allocating and using financial resources. This was also reflected in the Herfindahl Index [1], which measures the level of concentration in the banking system. Concentration indicators, as measured by the Herfindahl Index, for total assets, deposits and loans, provided evidence for a relatively high concentration in the banking system in terms of assets, deposits and (less for) loans. However, there seems to a slightly better distribution of shares in the market through time and, consequently an improved competitiveness. 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