Bank of Albania announces additional easing measures for the classification and provision of bank lending

28/05/2020

As you are aware, in March and April of this year – against the backdrop of the aggravated situation in the country, the Albanian economy, and particularly, in the banking system and other financial institutions due to COVID-19 pandemic – the Bank of Albania undertook several measures and regulatory amendments for banks – but not only – with the purpose mainly to ensure the solution of costumers’ requirements for temporary extension periods of payments, and at the same time, to safeguard  the soundness of banks and of the system in general.

In the conditions where there are still identified difficulties for borrowers and banks – as a result of this situation – as well as to work out the concerns raised by firms and by the Albanian Association of Banks, the Bank of Albania as the supervisory authority, with respect to the analyses and considerations of proposals presented by banks, as well as based on the best experiences of other countries and the guidelines issued by  the European Banking Authority (EBA), has adopted some amendments  to the rules on credit risk management by banks, mainly through:

  1. Temporary suspension of the implementation of the obligation derived by the requirements on credit risk management for the classification and provisioning of loans to all categories of customers, for an additional period, from 1 June to 31 August 2020, due to the financial difficulties and the decrease of solvency of borrowers affected by the situation;
  2. Temporary suspension of the creation of reserve funds for real estates obtained versus the payment of loans until December 2020;
  3. A mitigating provision on restructured loans, according to which banks are enabled to restructure current loan agreements in order to find adequate solutions depending on without deteriorating the status of the borrowers;
  4. extending by 1 year the entry into force of tighter requirements for the classification and provision of restructured loans, until January 2022. This measure enables banks to use in 2021 the same criteria for the classification and provision of restructured loans as those before the pandemic; and
  5. extending by 1 year the effects of the Regulation “On out-of-court treatment of distressed borrowers by”, until January 2022. This easing measures will provide banks with more time to find the most appropriate solution for joint distressed borrowers.

Meanwhile, borrowers whose solvency is neither affected nor damaged by this situation should normally continue to pay their liabilities to banks.

Once again, the Bank of Albania and the Albanian Association of Banks, assure the entire Albanian public that they remain fully committed to offer all the necessary support in overcoming this difficult situation.