Parliament asks BoA to strengthen monitoring of loans for construction and real estate

2025-11-12 07:24:00, Aktualitet CNA

Parliament asks BoA to strengthen monitoring of loans for construction and real

The Albanian Parliament has asked the Bank of Albania to strengthen the monitoring of loans to the construction sector and projects backed by real estate.

In the resolution on the assessment of the Bank of Albania's activity for 2024 and recommendations for the ongoing work of the institutions, the Assembly also requests that supervision be strengthened regarding the banking system's exposure to large borrowers and that the loan portfolio be diversified, with the aim of mitigating concentration in the sector and territory, by increasing the capacity of banks so that the banking system can maintain capitalization and stability even in cases of difficulties of major borrowers, as well as guaranteeing sustainable development.

Since July 1 of this year, restrictions imposed by the Bank of Albania on several risk management criteria have come into force, specifically for the indicators "Loan-to-value ratio" (the percentage of the purchase price of the apartment that the bank undertakes to finance through the loan) and "Debt service-to-income ratio" (the ratio between the installment or installments of the property loan to the borrower's income).

The ceiling loan-to-value ratio in Lek should not exceed 85% for the first home and 80% for the second home, while in foreign currency 75% for the first home and 70% for the second home.

The debt service to income ratio for loans in Lek is capped at 40% for the first home and 35% for the second home. In foreign currency, the ceiling level is set at 35% for the first home and 30% for the second home.

According to the Bank of Albania, the implementation of these limits will enable the reduction of the risk of borrower failure and the reduction of banking losses associated with these loans, as a result of possible unfavorable developments in real estate prices or in the country's macroeconomic framework.

In recent months, the non-performing loan ratio has been showing a slight upward trend and in September reached close to 4.4%, the highest in the last 10 months.

The Assembly has also requested the Bank of Albania to adopt a measured and cautious approach to interventions in the foreign exchange market, limiting them to cases necessary and justified by market circumstances, in order to strengthen the function of the exchange rate as a self-regulating mechanism of the economy, which helps to mitigate external shocks, maintain competitiveness and support a stable macroeconomic balance.

Last year, the Bank of Albania purchased 933 million euros, while according to statements by Governor Sejko in the Albanian Parliament, for the first nine months of this year, purchases have reached about 800 million euros. These figures clearly indicate the high supply of the Euro in the foreign exchange market. In the absence of purchases by the Bank of Albania, the exchange rate of the European currency would be at even lower levels.

The intervention of the Bank of Albania has significantly slowed the decline in the Euro-Lek exchange rate. Currently, the annual decline in the exchange rate is close to 2%.

The Assembly also requests the Bank of Albania to strengthen supervision over non-bank financial institutions, aiming at the full implementation of the regulatory changes approved last year, to improve the quality of the loan portfolio and the protection of borrowers.

Also, the Central Bank is required to increase ongoing supervision over the activity of foreign exchange offices, specifically to meet new regulatory requirements, with the aim of guaranteeing the integrity and transparency of the financial system.

The Bank of Albania is also required to continuously harmonize and update plans for responding to cyber attacks in the banking sector and in the payment systems operated by it, as well as to continuously commit to carrying out security tests for each systemic bank./ Monitor