The report states that “loans in foreign currency remain vulnerable to shifts in currency exchange rates”. And the number of these loans is not small. Around half of loans taken out in euros or US dollars, face a similar threat. “In June 2017, loans in foreign currency which were unprotected from the shifts in currency exchange rates accounted for 45% of the total loans in foreign currency or 26% of the total volume of loans”, experts of the Bank of Albania say. Meanwhile, they further explain that “the risk of the banking sector when lending in foreign currency, especially to businesses, remains high”. “According to the Bank of Albania, the indirect impact of the possible shifts of currency exchange rates on the indicators relating to the banking activity, is important, because if the currency exchange rates shifts on the wrong direction, then this will have an impact on the quality of the loan, in cases when the customer has borrowed in a foreign currency”, experts of the Bank of Albania argue, stressing the need to borrow in the same currency that a person operates every day and the currency in which he or she gets paid.
Unprotected loans mainly taken out to purchase homes and shops
Loans, the installments of which change according to the shifts in the currency exchange rate, have been mainly issued for the purpose of purchasing a home or a shop. This is the reason why it is exposed the most toward the risks coming from these shifts, because the installments on these loans are high. This is also confirmed by the Bank of Albania, according to which, this type of loan also has the highest level of non-performing loans, namely, around 15.5%.
“The loans which account for the largest percentage of loans exposed to risks from the shifts of currency exchange rates, are property purchase loans with 49%”, Bank of Albania experts say. This means that one in two loans taken out in euros or dollars to purchase homes or shops, is a high risk loan due to the ups and downs of the exchange rates on these currencies. On the other hand, less risky loan is consumer loan. The latter, which is smaller in value compared to property purchase loans, is mainly issued in lek. “Consumer loans are the less risky loans in the category of loans which are threatened by the shifts in currency exchange rates and these loans account for 3.8%. Meanwhile, these loans account for 1% of the general volume of non-performing loans”, the Bank of Albania explains.
More loans are being issued in lek
Albanians have a greater tendency to borrow in lek now, due to the fewer “troubles” that they will encounter as a result of the shifts in currency exchange rates. “The volume of the new loans in lek accounted for 53% of the total volume of new loans. Based on the currency and maturity, new loans were dominated by loans in lek and short-term maturity loans”, experts of the Bank of Albania say. In other words, one in two loans issued by banks in the first half of the year, was in lek. Meanwhile, if compared to the first half of last year, loans in lek were 15% higher. During the first six months of this year, the volume of new loans issued by the banking sector amounted to 128 billion lek. “The tendency that has been noticed in the recent years to issue more loans in lek has led to fewer loans exposed to the abovementioned risks”, Bank of Albania assesses.
