Macro-Prudential Supervision Lessons learned from the crisis Hilda Shijaku Financial Stability...
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![Page 1: Macro-Prudential Supervision Lessons learned from the crisis Hilda Shijaku Financial Stability Department.](https://reader036.fdocuments.us/reader036/viewer/2022083009/5697bfd31a28abf838cac1d3/html5/thumbnails/1.jpg)
Macro-Prudential SupervisionLessons learned from the
crisis
Hilda Shijaku Financial Stability Department
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Albanian Banking System
Banks operating in the market: 14 banks 2 branches of foreign banks
Activity: universal banking.
Major operations: Deposits Loans Placements Treasury Bills & Government bonds Other foreign securities
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Albanian Banking System
Proprietorship:Foreign capital – strongly prevailingDomestic capital – slightly taking
over
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Albanian Banking System
0%10%20%30%40%50%60%70%80%90%
100%
Others
European Union
US A
A lbanian PrivateCapitalA lbanian S tate Capital
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Albanian Banking System
Presence of foreign banks: Helped building of the entire system
Know-how brought in the country
Widely spread banking services (geographically)
New products offered
Supported the economic growth
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Basel II
Not fully implemented
Pillar I – not implemented Presently working on the implementation of
Standardized Approach
Pillar II – partially implemented. No regulatory framework in place. Actions taken in conform to the supervisory
principles
Pillar III – Partially implemented There is a regulatory framework in place for
publication of information
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Lessons learned from the crisis
Crisis imported First impact – confidence of the public Second impact – real economy
Impact on banking system Deposit withdrawal Liquidity drainage Decreased lending Increased NPL
Impact on economy
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Effects on banks balance sheets
Initial state Dep withdrawal
How much dependent on mother banks?? Stress tests Information and risk management systems not in
place New regulation on liquidity management
Credit growth Npl change in structure
But only gradual Capital adequacy
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FSI
Dec_06 Dec_07 Mar_08 Jun_08 Sep_08 Dec_08 Mar_09 June_09 Sep_09 Dec_09 Mar_10CAR (Reg capital) 18.1 17.1 17.2 17.3 17.5 17.2 17.1 16.9 16.7 16.2 16.1 RC to total assets 6.2 7.0 7.3 7.5 8.0 8.3 8.6 9.2 9.3 9.2 9.1 NPL to RC 6.8 10.1 11.3 13.9 11.4 21.7 22.0 24.6 25.9 28.2 31.6 (ROE) 20.2 20.7 16.3 16.6 16.3 11.4 1.5 1.8 1.8 4.6 7.3 Liquid assets over total assets 57.6 49.8 48.9 47.0 45.9 42.8 41.3 40.9 41.3 27.6 27.9 Liquid assets over current liabilities 69.5 74.0 71.4 66.2 68.4 64.9 57.1 56.8 63.9 32.6 33.1 (ROA) 1.4 1.6 1.3 1.3 1.3 0.9 0.1 0.2 0.2 0.4 0.7 NPL ratio 3.1 3.4 3.9 4.3 4.1 6.6 7.6 8.7 9.7 10.5 11.7 Deposits to loans 265.5 215.5 200.4 187.7 183.9 162.6 151.9 151.7 153.7 154.3 157.7 FC loans to total loans 71.9 72.5 73.1 73.1 73.7 72.6 72.2 70.8 70.0 70.2 70.4 FC liabilities to total liabilities 44.0 46.9 47.8 48.1 50.2 48.5 49.7 47.5 48.3 48.9 49.3 Loans to total assets 31.7 39.4 40.7 43.0 44.1 47.6 50.0 50.7 50.6 50.8 50.2
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The authorities response
Formal Measures taken Liquidity provided to banks through the use of reserve
requirement (from 20% to 40%) Limited exposure to banks’ related parties (from 20% to 10 %) SC decision to stop dividend distribution of the 2008 and 2009
profit Decrease of the monetary policy rate ( 1% in January and October) Change in the auction form (BoA providing liquidity at a fixed rate) Increased deposit insurance coverage
Requirements Improvement of risk management practices Decisions based on prior analysis and stress-testing Maintain good level of capital adequacy at any time Continue lending policy to avoid pro-cyclical effects Smooth the impact on exchange rate regime
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Lessons learned from the crisis
Evidenced weaknesses
Loose credit requirements in good times
risk management practices, structures & policy partially implemented
High exposure to foreign currency lending
Poor attention to macro developments
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Lessons learned from the crisis
Strength
High liquidity
Good capitalization
Low exposure to foreign markets
Good support from mother banks