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Albanians "abandon" the euro, credit euroization falls for the second year in a row

2025-03-12 07:33:00, Ekonomi CNA

Albanians "abandon" the euro, credit euroization falls for the second

According to figures from the Bank of Albania, at the end of 2024, foreign currency loans accounted for 45.3% of the total banking sector portfolio. Compared to a year earlier, the share of foreign currency loans has decreased by almost two percentage points.

During this period, foreign currency loans increased, but the increase in total loan balance was somewhat higher due to the faster growth of loans in lek. The ratio of foreign currency loans to total loans decreased for nine out of 11 banks in the sector. Compared to the end of December 2016, this indicator decreased for 10 out of 11 banks in the system.

On the other hand, the balance of foreign currency loans unhedged from the exchange rate (where loans in euros account for about 93%) has marked a further decline in its share of total foreign currency loans. At the end of December 2024, these loans accounted for 22.83% of foreign currency loans, or 10.7% of total loans.

In absolute terms, there is a decrease of 5.95% and 11% in unhedged loans compared to the end of the previous half-year and a year ago, respectively. This significant and rapid decrease also reflects some structural changes in classification by a small number of banks.

Loans exposed to exchange rate risk, that is, cases where the borrower's income is in a currency other than the currency of the loan, are those with the highest risk profile. For this reason, this indicator carries particular importance in monitoring measures to reduce euroization.

At the end of 2024, the indicator that measures the share of foreign currency deposits in total deposits stood at 52.1%. The ratio level decreased slightly by 1.2 percentage points compared to the previous six months and decreased by 2.2 percentage points compared to the previous year. For this ratio, in annual terms, an increase in total deposits was recorded at 2.1% and a decrease in foreign currency deposits at 2%.

According to the Bank of Albania, the current level of foreign currency deposits to total deposits remains above the target threshold of 30%, but the general trend shows a slowdown in the use of foreign currency in savings.

It turns out that 9 out of 11 banks operating in the banking system record a value of this indicator above 50%, which potentially makes them subject to a 20% reserve requirement.

In the periodic analysis of the performance of indicators that are the subject of the deeuroization strategy, the Bank of Albania assesses that the performance of indicators monitored to assess the effects of deeuroization measures has been generally in line with the intended objectives.

However, structural changes in the economy in recent years, notably the strong growth in tourism revenues, have been accompanied by changes in economic and monetary policies, as well as in the behavior of real economy agents.

For these reasons, the Bank of Albania estimates that distinguishing the effects closely related to de-euroization measures remains a difficult process. However, the Central Bank estimates that these measures have maintained their inhibitory effect on the progress of euroization and in their absence the magnitude of the movement of any of the indicators, or even its direction, would have been different.

In 2017, the Bank of Albania signed a memorandum with the Ministry of Finance and the Financial Supervisory Authority, with the aim of expanding the use of the national currency in the financial system and in the Albanian economy.

So far, only the Bank of Albania has taken concrete regulatory measures that aim to increase the use of the local currency in the banking sector. These measures aim to increase the costs of financial intermediation in foreign currency and, in parallel, reduce them for the lek./ Monitor Magazine





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