{"id":15359,"date":"2023-04-13T12:58:51","date_gmt":"2023-04-13T10:58:51","guid":{"rendered":"https:\/\/altax.al\/?p=15359"},"modified":"2023-04-12T13:02:44","modified_gmt":"2023-04-12T11:02:44","slug":"non-performing-loans-the-market-and-interest-rates-at-the-beginning-of-2023","status":"publish","type":"post","link":"https:\/\/altax.al\/en\/non-performing-loans-the-market-and-interest-rates-at-the-beginning-of-2023\/","title":{"rendered":"Non-performing loans, the market and interest rates at the beginning of 2023"},"content":{"rendered":"

Lending has started to decline in 2023, although expectations are for a recovery in the following months. This impact is expected as long as credit has become more expensive and this cost of commercial banks should remain short-term, otherwise the latter manage to recover lower profits by increasing the cost of operating expenses.<\/p>\n

In a recent publication of the Business and Consumer Confidence Survey [1]<\/a> by the Bank of Albania, ordering contracts both domestically and for export have decreased during the first 3 months of 2023, while the production to be sold is in large volumes, which indicates a stock of products and lack of liquidity.<\/p>\n

Meanwhile, inflation expectations are on the rise, and liquidity reserves show a significantly lower level than last year.<\/p>\n

The sudden and widespread increase in consumer prices after decades of low and stable inflation has forced the Bank of Albania to tighten monetary policy even against the growing risk of economic slowdown, which poses a clear threat to the real estate market. .<\/p>\n

But, before starting to correct the behavior towards the housing market, the Bank of Albania, coordinating with the institutions that monitor and influence regulatory and fiscal policies, should perform\/require resistance tests for banks and other non-bank financial institutions that have exposures high to real estate and possibly require higher provisions for mortgage loans for those that turn out to be vulnerable based on the results of the analysis according to the tests.<\/p>\n

In the meantime, government institutions that are showing situations of waiting to the point of inaction must also solve the long-standing deadlocks in the reforms started and not finished in the previous years. The impact of the weak productivity of the reforms is also having an impact on the increased costs of businesses and individuals, increasing the risk of increasing bad or problematic loans.<\/p>\n

BSH should continue to strengthen risk-based on-site and off-site inspections and conduct focused asset quality reviews. Its continued efforts to increase banks’ capital reserves are welcome.<\/p>\n

More dedicated programming is needed for close monitoring and management of potential risks from strong credit growth in recent years, including increased foreign currency lending.<\/p>\n

In this context, BSH’s efforts to address significant data gaps for real estate and construction require an expanded oversight of the impact of this sector on financial stability.<\/p>\n

Beyond the remit of the BH, the insolvency and resolution framework already in place should be swiftly implemented, including credit restructuring, to prepare for any significant increase in non-performing loans.<\/p>\n

[1]<\/a>https:\/\/www.bankofalbania.org\/Politika_Monetare\/Vrojtimet\/Vrojtimi_i_bizneseve_dhe_i_konsumatoreve\/Analiza_VBBK_mars-2023_34588.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Lending has started to decline in 2023, although expectations are for a recovery in the following months. 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