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IN LOVING MEMORY fjalori termave të bankës termave të bankës fjalor bankës fjalor i termave kës fjalor i termave të fjalori termave të bankës termave të bankës fjalor bankës fjalor i termave kës fjalor i termave të fjalori termave të bankës termave të bankës fjalor “The Dictionary of Banking Terms is a product of joint efforts of Terminology Division at the Institute of Linguistics and Literature and the Faculty of Economics at Tirana University. The dictionary contains terms widely used in documents, textbooks, economic periodicals, publications on banking issues of various national and international organizations, but also in the economic activity in general. This dictionary is expected to increase the interest of economists, especially that of banking specialists, regarding terminology issues, and to act as an incentive to expand and welcome their participation, through remarks and suggestions, for a further unification of such terminology.”
On 26 June 2014 Mr Artan Santo, CEO of Credins Bank and one of its shareholders died tragically after several fatal shootings, near the bank headquarters. This event came a terrible shock and surprise, not only for his family but also for the entire banking community, a part of which Mr Santo used to be for many years in a row. Mr Artan Santo was a professional banker, who spent the last 25 years of his career in some banking institutions, at high ranks, like: as Deputy Director of Foreign Department of the State Bank of Albania, General Director of Savings Bank and Chief Executive Officer of Credins Bank. He successfully led the experts’ team which undertook the establishment of Credins Bank, the first whollyowned Albanian private bank, thereby setting a milestone in the development of the Albanian banking system, in the era of market economy. The tragic death of Mr Santo interrupted and ceased an established and consolidated banking career and the Albanian banking system has a noticeable absence, already. Mr Santo will be missed to all, but his professional achievements will always be part of the journey made by the Albanian banking system!
To obtain copies of the dictionary, please write to marsela.bulku@aab-al.org, requesting the type (soft or hard cover publication) and number of copies, as well as further information, if necessary.
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REST IN PEACE, MR ARTAN SANTO!
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Contens
Bankieri No.12, July 2014 Publication of the Albanian Association of Banks
Editor’s Desk Mortgage Loans: Did they turn the corner? Elvin MEKA Frontline Mortgage loans have made a comeback Aida APOSTOLI The real estate market gains momentum Erjona ÇELA Construction, the lost land of fantasies Irena BEQIRAJ Interview Société Générale Albania, a French touch of banking services Frederic BLANC
MORTGAGE LOANS
...a revival?
Bankieri is the official publication of Albanian Association of Banks which mainly focus the Albanian banking industry. Bankieri provide readers with valuable information on the financial industry’s developments in general, and of commercial banks in particular.
ALBANIAN ASSOCIATION OF BANKS Street ‘Ibrahim Rugova’, SKY TOWER, 9/3, Tirana Tel: ‘+355 4 2280371/2 Fax: +355 4 2280 359 E-mail: bankieri@aab-al.org; www.aab.al
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EDITORIAL TEAM:
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Banking System Investments in the Albanian banking market 14 Edlira HEBA dhe Rinald GJYLI Agribusiness, a challenge to be overcome 17 Anjeza KELMENDI Experts’ Forum Controlling Mergers & Acquisitions: Points to be considered 19 Ermal NAZIFI Security traps 22 Roland TASHI The development of Card Sector in Kosovo 24 Fisnik BEHXHETI Economist Corner How real is the fear of a deflationary scenario? Adrian CIVICI
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Social capital Banks’ Activities
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News
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Tech Topics E-Channels and banking industry: Challenges and opportunities as recognized by HALCOM Marko VALJAVEC Prepaid cards, a successful innovation Marsela KUSHTA
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AAB Trainings
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Editor’s Desk
Elvin Meka Editor–in-Chief Eftali Peçi Coordinator Junida Tafaj (Katroshi) Collaborator Andis Rado Photographer Design & Layout: PIK Creativ
Did they turn the corner? It is easily understandable that, despite problems of a cyclical and non-cyclical nature that usually accompany construction and mortgage loans, their financing will continue incessantly. At this point, the remaining challenge for banks is to ensure and obtain an efficient and balanced combination between a manageable exposure to them and selecting quality clients.
Printed by: EDITORIAL BOARD: Seyhan PENCABLIGIL AAB Chairman & CEO of Banka Kombëtare Tregtare Ioannis KOUGIONAS AAB Vice Chairman & CEO of NBG Bank Albania Christian CANACARIS AAB Executive Committee Member & CEO of Raiffeisen Bank Albania Periklis DROUGKAS AAB Executive Committee Member & CEO of Alpha Bank
by Prof. Asoc. Dr. Elvin MEKA1 Editor–in-Chief
Frédéric BLANC AAB Executive Committee Member & CEO of Societe Generale Albania
“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. Franklin D. Roosevelt!” It is for such interesting statement of the 32nd President of the United States of America, Mr. Franklin D. Roosevelt, that anyone could easily understand the exclusivity which characterizes the real estate, construction sector and its respective financing. Technically, the approach of banks and other financial institutions towards real estate, construction & housing and financial products, they model and design, differ quite substantially from all the rest of products and services they offer in the market. This is simply explained by the special role and place, the “home” plays and takes, as one of the most important investments throughout everyone’s life. On the other hand, the construction sector has, by contrast to all other sectors of national economy, the ability to create a typical interlinking net, between industries and many other sectors of the economy, be they in the manufacturing, or service
Bozhidar TODOROV AAB Executive Committee Member & CEO of First Investment Bank Endrita XHAFERAJ Secretary General, Albanian Association of Banks Hysen ÇELA Chairman of Albanian Institute of Authorized Chartered Auditors (IEKA) Adrian CIVICI President & Head of Doctoral School European University of Tirana Spiro BRUMBULLI Chief of Cabinet, Ministry of Finance Enkeleda SHEHI Chairwoman of Albanian Financial Supervision Authority
Mortgage Loans:
sector, along with employing a relatively high number of labor forces. Construction and housing remain quite interesting for bank financing, for many reasons, like: no one could provide that sort of collateral they do; mortgage loan installment would be reasonably among the first obligations anyone would pay regularly; no other assets are not assessed or revalued, over time, as real estate and assets do; the absolute advantage these assets have, in relation to other types of assets, to serve as underlying assets for designing and creating structured financial products, which are widely traded in global financial and securities markets. But the relatively high exposure to the construction sector and mortgage loans is usually associated with certain risks, particularly in the frame of financial and economic crises, and also when the economy enters its contracting and downswing cycle. Moreover, the long-lasting international experience has shown that abnormal exposure to real estate, construction sector and mortgage loans constitutes one of three elements that typically and classically accompany a financial crisis, along with the excessive use of financial leverage and weak risk management & analysis. Now it is crystal clear the weight and effect, real estate, construction and mortgage loans portfolio, had and still continues to exert, on non-performing loans of the
Albanian banking system, as well as the actual situation and the near future of this sector, within the national economy. Surely, the cost weathered by banks in this regard was and is not modest, but nevertheless, it served to gain a valuable experience, to carry on with construction and mortgage financing, but through a more prudent and better quality management process. It is for this experience that is helping banks now to reshape their approach towards construction and mortgage loans, which in turn, is resulting in some interesting and attractive offers for customers. They are quickly adapting to the new trends of citizens’ lifestyle and market requirements, by paying maximum attention, of course, to comply with 5 Cs of lending process, at the fullest possible. It is easily understandable that, despite problems of a cyclical and noncyclical nature, that usually accompany construction and mortgage loans, their financing will continue incessantly. At this point the remaining challenge for banks is to ensure and obtain an efficient and balanced combination between a manageable exposure to them and selecting quality clients. This is so, because the loan quality, which is fundamentally based upon the borrower’s creditworthiness, remains the cornerstone for a quality and profitable loan portfolio! 1
Deputy Dean & Head of Department of Finance, UET-EUT
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Frontline
Mortgage loans have made a comeback Mortgage loan demand has seen an upward trend and borrowers have shown a changing client profile, as dictated by the lifestyle’s evolution. GROWTH
by Mrs Aida APOSTOLI Head of Retail Banking, NBG Bank Albania
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n its first steps, the Albanian banking system has been skeptical of lending to individuals, whereas moreover the construction sector was financially supported by remittances. In the early 2000s, some banks weighted market needs and dared to undertake long-term investments (in the form of mortgage loan), but initially as a project to finance customers with secured and above average income, only. Initially, the profit margin was too high and the maturity period did not exceed 10 years. It goes without saying that, under these conditions, the number of loan beneficiaries was very limited. As the economic indicators were somewhat stabilized and the economy flourished, the banking market reassessed its product positioning, by considering it not as elitist, but affordable for masses, thus implementing relaxing risk indicators, longer maturities and lower interest rates. Undoubtedly, this new approach had a positive effect on development of the construction sector.
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During the period 2005-2007, banks got interest and competed with each other for market share, taking into consideration the advantages of this product: a good relation between profit margin and loan risk, as well as the establishment of a long-term relationship between the client and the bank. It was that time when NBG Bank led the market, making it possible the dream of having a home to many citizens. The emblematic offer: “5x5�, backed by a simple and fast loan-making process, and an expert sales force, turned NBG Bank into a market leader for such product. The global crisis had an immediate effect in the Albanian financial market. Following the emergence of first signs of deteriorating financial indicators and the apparent increase of non-performing loans, banks
Now we have a banking system willing to lend, with enough experience and also a clientele which is able to accomplish its plans for a better life, with optimal offers and complete and transparent information. Of course, the solution of major problems, such as: the legalization and registration of immovable properties, as well as the reduction of informality will give a further boost to lending activity.
adopted their lending policy immediately, by increasing prudence at all components, such as: financial analysis and quality of collateral. The establishment and functioning of the Credit Registry in 2008 marked a qualitative step for the whole banking system. Having information about the payment history for each customer was a remarkable contribution, in the process of loan analysis, by completing this process with the key element of customer behavior. Surely, the crisis factor had a direct impact on individuals themselves, by reducing the overall demand for loans, especially for long-term loans. All the above factors as a whole, as well as directives from local and international supervisory bodies, pulled reins too hard on the lending process as a whole, whereas the lending rate for mortgages slowed significantly. But since two years from now, the situation is turning different. On one hand, markets give positive signals and show improved financial indicators, and on the other hand, the clientele has displayed increased interest for borrowing. The message for a lending boost is clear in all directives, issued by supervisory bodies. REVIVAL
Banks in Albania are well-capitalized, and this is achieved, inter alia, as a result of prudent conservative policies, conducted by Bank of Albania. Also, the liquidity ratios are stabilized, and are currently at high levels. Although the level of non-performing loans remains high, proper changes made to the legislation have improved the collateral enforcement procedures. The above sit-
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uation has created necessary conditions for financial institutions to turn back to lending process. Lending activity remains essential and with a direct impact on banking system’s profitability and of course is the promoter of economic development. Mortgage loan demand has seen an upward trend and borrowers have shown a changing client profile, as dictated by the lifestyle’s evolution. The number of family members is going lower steadily, and a rising living standard
Frontline
is becoming an important target. On the other hand, the falling interest rates, as cut by the Central Bank and with a direct impact on fostering lending, as well as competition among banks has driven interest rates at historical lows. Now we have a banking system willing to lend, with enough experience and also a clientele which is able to accomplish its plans for a better life, with optimal offers and complete and transparent information. Of course, the solution of major
problems, such as: the legalization and registration of immovable properties, as well as the reduction of informality will give a further boost to lending activity. NBG Bank - Albania has adapted its strategy and policies, under the new market conditions, by improving structures, procedures and the lending process, itself. Loan offers have been successive and very attractive, associated with communicating and publicity materials, easily understandable by all potential clients.
The real estate market gains momentum The demand growth is mainly driven by a combination of several important factors, such as: the fall of apartments’ prices, the ongoing process of registration of collateral and growth of confidence indicator for the construction sector.
by Ms Erjona ÇELA Manager Retail Banking Products and Sales Department Alpha Bank Albania
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he results of the first half of 2014 represent a positive change related to the demand for purchasing immovable properties; as a result, the disbursed loan volumes in favor of individuals have shown signs of growth, compared to the 2013 year. It should be underlined, however, that according to statistics for the last three years, loan portfolios for housing in the banking sys-
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tem, have been shrinking, under the effect of economic and financial crisis. Now we estimate that the demand growth is mainly driven by a combination of several important factors, such as: the fall of apartments’ prices by 30 per cent, the ongoing process of registration of collaterals, guaranteeing mortgage loans, growth of confidence indicator for the construction sector, by 13.9 percentage points, referring to Q1 2014 data, etc. On the other hand, banks have been consistently present with various favorable offers and loan products for individuals. As a result, during the year 2014 interest rates and other tariffs related to loan products, especially for housing loans, have been among the lowest, offered during the last two years. Such fact is also backed by a gradual decrease of
costs for bank deposits, thus supporting in the best way possible the individuals’ demand for bank financing with affordable installments. Based upon positive forecast of key economic indicators, as well as the expectations on a real reduction of the stock of unsold immovable properties and following the growing demand for apartments’ purchases (according to the survey on Businesses and Individuals Confidence), the construction industry have been increasing investments significantly, during the first six months of 2014. Also, individuals have expressed a higher interest and demand for investing in residential complexes, where other services are also offered. This change is recently reflected in projects that construction companies are currently developing, by including
children, recreational and amusement facilities, etc. Another growing tendency is the demand for residential housing complexes on the outskirts of Tirana, or other touristic cities, which aim at improving the quality of life, in terms of privacy, air cleanliness, surrounding environment, silence, etc. Despite the fact that some indicators have shown a real improvement, it should be highlighted, therefore, that income’s high informality is still one of the main factors which hampers banks’ financing support for individuals or businesses. Following continuous and different offers launched during 2013 for individual loans, Alpha Bank has launched innovative products and offers for credit cards, consumer loans, etc., even during the first five months of 2014. The favorable offers and products, launched by Alpha Bank, have been accompanied with relaxing criteria and requirements, employed during approval and risk management policies, applied to individual loans. By the beginning of this year, Alpha Bank launched “Alpha Realizo” (“Alpha Accomplish”), a successful consumer loan product, which enables individuals to obtain a loan amount up to EUR 2,000 (ALL equivalent) without guarantee or any guarantor, and up to EUR 7,000 (ALL equivalent), without collateral. It should be mentioned that, the actual housing loan offer “Alpha Plan”, which enables our customers to purchase a new house with the best possible interest rates (starting from Euribor +4.75%, during the whole loan tenor for “Alpha Paga” (“Alpha Salary”) customers), and loan costs, compared to other banks in the market. The offer package includes also the internal design project for the purchased house, as a gift financed from Alpha Bank. Other innovative products for individuals with relaxing terms will be designed, developed and launched by Alpha Bank, throughout the year. However, Alpha Bank’s projections for the end-2014 and also for the mid -term period, are very positive and the bank is ready to inject proper liquidity in the market, by supporting various projects, as the case may be, by continuing to launch innovative and versatile products, thus satisfying all customers’ needs.
Individuals have expressed a higher interest and demand for investing in residential complexes, where other services are also offered. This change is recently reflected in projects that construction companies are currently developing, by including children, recreational and amusement facilities.
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Frontline
Construction, the lost land of fantasies Prosperity ends in a crisis. The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born, not an infant, but a giant. (Arthur Pigou)
by Ms Irena BEQIRAJ, CFA Consultant
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he construction sector has been, for a long period of time before the crisis, the land of fantasies and fueled the high profits fantasies of not only entrepreneurs, but also banks that provided lending to this sector. In “Financial Instability hypothesis”, H.P. Minsky categorizes borrowers into three groups: 1) hedge borrowers which can fulfill all of their contractual payment obligations (interest and principal), 2) speculative borrowers that can meet their payment commitments on “income account” (only interest payment, by taking new debt to repay the existing one) and 3) Ponzi borrowers who are unable to pay either the principal or debt. During the period of Albania’s economic growth, building & construction companies were put in “hall of success”, whereas after crisis an altering approach is evidenced towards them. There are some well-understandable and objective reasons, affecting it, such as: financial information asymmetry, but I think
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that, such approach/behavior, seems to be caused primarily by banks’ “groupthink” attitude in the market, which is supported by similar, if not same, loan terms, loan products offered and requirements the applicant must meet. Such reality feeds the idea that the vision of such institutions for the business as a whole is unified, according to the principle: “One size fits all.” Consequently, the implementation of this philosophy, under tighten economic conditions, can lead to “en masse” exclusion of the construction sector from lending portfolio. Now the construction industry is no longer the land of fantasies, neither for developers and constructors nor the banker, but we should not forget that it is relatively important sector for the Albanian economy and the baseline industry, which improves the infrastructure and transport. Construction is one of the most threatened sectors by crises, given the fragmented nature of the industry, stiff competition, low entry barriers, high uncertainty in terms of cash flows and forecasting volumes of construction in the future. Default or bankruptcy in any business is the result of a complex process that rarely depends on a single factor, only. The study of Arditi 2000 clearly defines that financial management and cost issues are the main reasons which lead to defaults of construction companies, along with industry’s weaknesses. According to the study, more than 80 per cent of defaults of such companies are caused
by: (i) insufficient profits (27%), (ii) industry’s weaknesses (23%), (iii) considerable operating costs (18%), (iv) insufficient capital (8%), (v) expensive (high interest) or financially unjustified bank loans (6%). In addition to those factors, the Albanian construction companies are negatively affected by lack of managerial experience and selective treatment in issuing permits for private commercial buildings. The main reasons for the default of a subcontracting companies for public works are: (i) mismanagement of very rapid growth rate; (ii) contracts for works in previously unexplored geographical regions; (iii) contracts for various kind of works (some of them quite unknown); (iv) inadequate working capital; (v) inappropriate assessment of cost of labor and materials; (vi) weak accounting systems; (vii) negative cash flows; (viii) lack of management and the last, but not least, very low profit margins. FUNDAMENTAL ANALYSIS, FINANCIAL INDICATORS
In the financial language, the opportunity and the ability to distinguish “hedge borrowers” translates into a lower risk portfolio and less problem loans in the future. Every analyst knows the general rule that, the higher the profitability and liquidity level the lower the debt level, the better the company’s financial health. Ellis’ study (2006) suggests the following indicators (ratios) (see BOX), to define the “best” in the construction industry,
indicators which differ a bit from usual financial reports. These differences reflect the characteristics of financial information, which derive from construction contracts’ accounting and the approach many companies have towards paying taxes. Meanwhile, the study of McCall (2006) states that, the working capital is the main indicator for SMEs in construction, and even more for companies hired as subcontractors for public works. Working capital is a direct indicator that displays the financial strength and the contractor’s ability to ensure the project’s continuance in the short-term. The characteristics that distinguish financially distressed construction companies from stable ones could be summarized as follows: • Financially distressed companies have not only a very low ROA, and often a negative one, but are featured by a low long-term profitability ratio. Financially stable companies display a good long-term profitability ratio, which is mainly as a result of retained earnings and provisioning. • Financially distressed companies have, usually, significantly low asset and labor efficiency ratios, compared to those in good financial conditions. The labor efficiency ratio is widely used in analysis of construction companies, due to the high need for labor force. • Financially stable companies can afford a debt ratio up to 63 per cent. Such ratio is higher than the recommended debt ratio of 50 per cent, but it should be known that, the default of construction companies is caused by high levels of short-term debt. This level, especially the bank loan level, combined with ongoing losses and low levels of equity, cause construction companies’ bankruptcy, in the frame of economic recession. • The use of acid test (L2)1 of the construction companies is eliminated, because they have low inventories, so (L3) will produce approximately the same result as (L2). Construction companies which experience problems with liquidity, usually
A) Profitability indicators
Ratios
Return on assets (ROA) EBIT / Total assets Long term return on assets (retained Earning + capital reserve + EAT) / Total assets B) Efficiency indicators Assets efficiency [(Production – cost of production) + ( sales – cost of sales ) ] / Total assets Labor efficiency [(Production – cost of production) + ( sales – cost of sales ) ] / Labor cost C) Capital structure indicators Debt ratio Total debt / Total assets Short term debt ratio (Short term liabilities + short term portion of long term debt & Overdrafts)/Total assets Long term debt ratio (long term liabilities + long term debt & Overdrafts) / Total assets D) Liquidity indicators Current ratio (L3) Cash ratio (L1)
Current assets / Current liabilities Current assets / Current liabilities
E) Turnover indicators Total asset turnover Short term liabilities turnover Receivables turnover
[(production + ( sales – cost of sales ) ]) / Total assets [(production + ( sales – cost of sales ) ] / ( account payable+ short term bank loans & Overdrafts) [(production + ( sales – cost of sales ) ]) / Account receivable
F) Other indicators % of long term assets % services offered by third parties (subcontractors) Age of the company and the legal form
If investors (bankers and owners) are open-minded, and base their opinion upon fundamental analysis, by leaving out the “groupthink” psychology, whether optimistic or pessimistic, then the construction sector will never be “the land of fantasies”, but instead, an “arable and profitable” land for all those who know how to handle it carefully.
represent a 1.17 level of (L3) and a (L1) level well below 0.2. • There are no differences in values of asset turnover ratio for financially distressful companies, as compared to companies with a financial stability. What is noticed is that defaulting construction companies sell their long-term assets, ether
to finance the existing operations, or to reduce idle assets caused by reductions in capacity. • There are significant differences in the level of “Long-term assets / Total assets” ratio. Distressed companies usually have a level of “Longterm assets / Total assets” ratio. They possess very short-term assets, primarily accounts receivable, which could reach up to 60 per cent of the assets. By treating all construction companies under a pessimistic view, thus classifying them as “Ponzi” or “inappropriate” clients, is not a proper rational decision. If investors (bankers and owners) are open-minded, and base their opinion upon fundamental analysis, by leaving out the “groupthink” psychology, whether optimistic or pessimistic, then the construction sector will never be “the land of fantasies”, but instead, an “arable and profitable” land for all those who know how to handle it carefully. 1
Liquidity Ratios: L1, L2 and L3.
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Interview
Société Générale Albania, a French touch of banking services The bank has tried to provide sophisticated service excellence through a wide range of products and services, continuous network expansion and professional and well-trained staff. tried to consistently play a very active role in the Albanian economic and social environment. As a result, these have been 10 years with a lot of work and quite impressive results and during all this period, the bank has absolutely proved to be a decent member of one of the most prestigious groups in the world and banking area.
Mr Frederic BLANC Chief Executive Officer Société Générale Albania
BANKIERI: Société Générale has just celebrated its 150-th anniversary and is one the oldest banks in France and is approaching its first decade in Albania. How would you summarize this French experience within the Albanian banking system? Société Générale genesis goes a long way back to 1864, when the Bank was originally founded. During all this time our main target has been that to be not just another commercial bank, but a key positive player in the economy of France, and all the other countries we are present. This year we do not only celebrate the 150th anniversary of Société Générale Group but also the 10th anniversary of our bank activity in Albania. Albania is a country with a lot of potential in many sectors therefore, being present here has been quite an experience, both, interesting and satisfactory at the same time. We have continuously worked on nailing all the above mentioned pillars of our SG Group and I must say that the positive ground we found in here makes it even easier. On the other side, we have
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BANKIERI: Could you please mention the key achievements to date for Société Générale Albania? Société Générale Albania is one of the main commercial banks, who operates in the Albanian market through a wide spread network of 42 branches and with about 400 employees. Today we have total loan portfolio of EUR 300 million and a deposit one of EUR 400 million. Not less obvious are the achievements in the other main indicators from whom we can point out a customer base of 130.000 customers and an outstanding quality of the lending portfolio, whose ratio of just 8% has become almost a reference in the whole system, which has a NPL ratio of 25%. We must also mention that during the last years, despite the presence of the financial crisis which is felt even on international level, we have never ceased financing different sectors of the Albanian economy and we have succeeded to disburse almost EUR 100 million every year, thus keeping not only a very high pace, but also a high level of quality at the same time. BANKIERI: As one of the most efficient banks in the world, what could be the most distinguishing pillars of Société Générale Albania’s activity? We have always put all our efforts to have a diversified but holistic approach, tailored upon our customers and Albanian society
needs. Lending is one of them. We have provided significant amounts of financing to almost every segment and to every sector. Deposits and day-to-day banking activity is another one. We have maximally exploited our prestigious name and brand to build trust and confidence inside our customers, in order to make them choose us as their primary bank. We have tried to provide sophisticated service excellence through a wide range of products and services, network expansion and professional and well-trained staff. In addition, our Bank has always offered its collaboration in different projects and programs undertaken from domestic and international actors and has played also a significant role through sponsorships and other social events. BANKIERI: What could be the future position and role of Société Générale Albania within the Albanian banking system, as well as some key priorities for the years to come? We will continue to be a factor and a very active player not only of the banking system, but of the overall economy at the same time. Our mission will continue to be alignment of the SG Group values with Albania characteristics. In this context, our key priorities will remain strong and clear as they have been in these last 10 years. Healthy, through being selective in financed transactions, close monitoring of the portfolio and proper liquidity positioning. Sustainable, relying on new clients while consolidating the customer base by intensifying the relationships with existing clients. Innovative, bringing new ideas and solutions. Social, through offering support and sharing the international experience of a 150 years old gigantic Group.
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Banking System
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inancial markets worldwide seem more calm and investors more hopeful, following troubles and shocks, produced by the crises of 2007 - 2008 period. Peripheral economies and those of developing countries are increasingly influenced by global economies and monetary policies, pursued by central banks of developed countries during recent years. Investing in the banking market can be described, in a simplified way, as the process of purchasing a monetary asset now, with the hope of gaining more money in the future. Banks and financial institutions design and offer attractive and easy-to-understand investment products for individuals. Individuals should be careful in choosing the investments they want to make, by understanding all the risks associated with them. Of course, it is quite logical that, during the decision making process for a new investment, all questions by individuals are acceptable and banks should be prepared to provide proper clarifying and explanatory answers. It should be emphasized that, “investing in the banking market” does not mean get-rich-quick, because many individuals misunderstand such concept. The investing individual should be aware s/ he must work closely with the bank, to have control over their funds. It is worth noting that pretty much work is needed to find appropriate combinations of investments, by always considering the business and risk profile of each investor. Well-defined techniques and strategies, each individual will pursue for her/ his long-term investments in the banking market, since the initial phase of investing, is the basis for a sound investment, and creates a robust relationship with the bank as a partner. Increasing revenues through investments in banking market is an established practice in developed countries for decades. Now it’s time that individuals in Albania could become participants in global financial market. In recent years, commercial banks have accelerated the creation and
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Ms Edlira HEBA Director Treasury Department Credins Bank
Mr Rinald GJYLI Deputy Director Treasury Department Credins Bank
Investments in the Albanian banking market Individual investor should always be informed in advance about the financial products that banks offer, diversify her/his savings in some financial products and always consult with competent employees of the bank, with regard to products s/he wants to invest in. launching new financial products, in accordance with the directives set by Bank of Albania and the Financial Supervisory Authority, as well as complying with international standards in this regard. Because of an easing monetary policy, conducted by Bank of Albania, the interest rates of time deposits have decreased significantly, during the last year. Investment opportunities are numerous and diverse, and therefore, investors will have more requests for information about financial products that offer more benefits and which are linked with world stock markets. A key point in the investment strategy, recommended to each individual, is that s/he must be advised by a bank and s/he must have
a clear understanding of products, as well as knowledge about characteristics of each investment product. The following points try to explain briefly some of these products. Deposits with different maturities. This investment is widely recognized and preferred by individuals in Albania. In the frame of declining interest rates on deposits, individuals tend to transfer and deposit funds in time deposits with longer than 12 month-to-maturity. Banks in Albania offer numerous types of deposits, which add flexibility and benefits, according to the investors’ needs. Participation in primary auctions for Treasury Bills and Government Bonds, in Albanian Lek. This is an investment
opportunity for individuals, where investors can participate, not only in auctions for the short-term (up to 1 year maturity) papers, but also in those with long-term maturities, such as: 5 year, 7 year and 10 year-bonds. Albanian Government Bonds in Euro. During the last two years these securities have created opportunities for investors to benefit returns from public debt even in foreign currency. The establishment of investment funds. Their presence in the market has boosted the investors’ interest to invest idle funds in new financial opportunities. Regarding current conditions in the market for local currency, this option continues to be related with long-term bonds of the Albanian Government and in terms of risk and benefits, it offers almost the same figures, as the individual participation at government bond auctions would provide. In the near future, this will present the opportunity to invest in various financial assets, in foreign currencies, or securities of Eurozone countries. Bonds issued by joint stock companies. Private companies with a multi-
year history in Albania, have now the opportunity to issue bonds with long-term maturities. Such bonds may offer investors higher interest rates, compared with other products. Credins Bank issued, for the first time in the banking market, in December 2011, long-term bonds with a fixed coupon. Credins Bank’s bond issuance, through private offering, continues to be very successful and this shows that individuals are attracted by long-term investments and with higher interest rates. In an imminent functioning of the stock exchange in Albania, the securities market for joint stock companies has rooms for a fast development, because the interest offered is relatively high. Investing in foreign exchange. It is one of the most popular investments in the world. This market provides the largest daily volume and banks offer the opportunity for exchange in more than 5 foreign currencies, with a very low cost. Profit opportunities in this popular market are vast, where liquidity is provided at any moment. In Credins Bank, the exchange facility is offered not only in major currencies, like: EUR, USD, GBP,
A key point in the investment strategy, recommended to each individual, is that s/he must be advised by a bank and s/he must have a clear understanding of products, as well as knowledge about characteristics of each investment product.
CHF, but also in AUD, CAD and JPY. Before investing in foreign exchange someone should make analyses of the risk, accompanying the currency, as well as the investing horizon for such position. Foreign exchange in different currencies offer diverse volatility, and not forecasted in one direction only, but instead are influenced by many macroeconomic factors, and not only. Foreign exchange offers diversification opportunities in more than two pairs of currencies. The foreign exchange market is accessible by all individuals, in banks where they have their own savings. Investing in precious metals. This type of investment is particularly preferred by investors, who believe more in precious metals, especially gold, compared to investments in other assets, or paper money. The investment in gold has recently motivated the Albanian buyers. Thus, investors who prefer investing in precious metals can actually buy and sell gold at Credins Bank, by following fluctuations of metal exchanges in the world. Buying bonds issued by developed countries is another investment opportunity. However, under current conditions when central banks of developed countries are pursuing ultra easing monetary policies and the respective interests of those countries’ (sovereign) bonds produce are at record low levels. Investing in bonds of developed countries provides a diversification in savings portfolio and security, too. Trading in securities (stock) of foreign companies that are listed on stock exchanges in Europe and USA would add up the list of financial products as investment opportunity in the domestic market. Daily volatility in stock exchanges may enhance long-term benefits for individuals in Albania. Individual investor should always be informed in advance about the financial products that banks offer, diversify her/ his savings in some financial products and always consult with competent employees of the bank, with regard to products s/he wants to invest in. Credins Bank offers professional and dedicated advice for this purpose. The risk level in various investments is different for every investor and it directly affects the profit expectations.
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Banking System
Agribusiness, a challenge to be overcome In order to ensure an effective and productive functioning in all sector’s components, and thus providing quality products and services, it requires huge and continued investments and substantial technical support.
by Ms Anjeza KELMENDI Coordinator for Agrobusiness Retail Division Intesa Sanpaolo Bank Albania
T
he agricultural sector is one of key pillars of national economy, whereas the country has a relatively significant rural population. Over the years there has been a large movement of population from rural to urban areas, or even abroad, which has conditioned the changing ratios, but the high concentration of population in rural areas is a remaining fact. Also, the land structure and the country’s nature create a great impact on agriculture’s performance and results. During the last five years there has been a very positive move, in terms of investment in this sector. These investments are focused on three shackles of the agribusiness chain: (1) agro-production, (2) agro-processing and (3) agro-trading. A very positive trend is evidenced in the greenhouse business, milk processing, construction of collection & trading points, etc. These businesses are developed not only as a result of market
demand, but also as a result of the attention shown by subsidizing programs, or grants from international programs, such as: IPARD. Undoubtedly, business growth will be accompanied by the need for an increased support from the banking system. Investment plans in technology and business growth require significant investments, so these businesses have increased their demand for support from the banking system. Financing is one of the most important elements for businesses, but in case of agribusiness, financing from banking sector is extremely at low levels. Over years, Intesa Sanpaolo Bank has demonstrated its ability to recognize the market needs, and therefore, even those of customers. Thus, the bank will need to respond to the market needs in the best possible way, by offering high service standards and thus contributing to the development of such very important sector for the economy. WHAT ABOUT THE CLIENTS’ INTEREST FOR LOANS IN THIS SECTOR?
Clients’ interest for agro loans has been growing continuously; the sector itself is in a developing stage and has a long way to go, to achieve the required standards of product quality and service. Albanian products are of high quality, but the European food standards require appropriate licens-
ing for these products and as a result, a very high quality. The vast need of businesses to improve their products, reduce production costs and grow their business, has led to the need for investments in technology. These investments are partly covered by businesses’ internal resources, but the rest of funding cannot be provided by the businesses, themselves. Also, the initiative to invest is positively triggered by government subsidy programs for agribusiness and its products, as well as by subsidized interest rate programs for loans taken from the banking system. What is noticed is that, despite growing interest and specific financing of this sector, funding needs are even greater. In order to ensure an effective and productive functioning in all sector’s components, and thus providing quality products and services, it requires huge and continued investments and substantial technical support. Ensuring a healthy balance between three shackles of the sector (agro-production, agro-processing and agro-trading), i.e. continuous and simultaneous investments in those three shackles, could cause a positive flow and overall development of the agribusiness sector. WHAT ARE THE DIFFICULTIES?
The difficulties faced by the agribusiness sector itself directly affect its rela-
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tionship with the banking system. Thus, the relatively small size of farms in Albania brings negative consequences for them, because they fail to use their resources well and this is associated with high production cost. In turn, this high cost of production, affects the overall production, which reaches the market with a high price, and is easily beaten by foreign products. The existence of free trade agreements between countries of the region is a good element of cooperation between their economies, but in our case such agreements are often turned against domestic production. Thus, once the Albanian farmers come to the market with their products, as a result of competition from foreign products, they encounter difficulties in selling these products, and in some cases they are forced to sell it at a price below the cost of products. This fact harms them and their business development. This is a very important point and a concern raised by farmers, who ask for a solution to establish a balance of this relationship, with the aim that the domestic market in is provided with quality products and affordable prices, while ensuring the market for domestic products. Market orientation and finding it remains a crucial point for this sector. At the time these businesses want to establish and grow their own business, they should be capable to market their own products. The marketing of agricultural and livestock products is a very weak shackle in the country’s development chain and requires immediate development, because unless strengthening this shackle, there is no way to guarantee the agribusinesses market, and consequently, a sustainable development for them. In case of a loan application, in its financial analysis the bank takes into account the agribusiness technical knowledge and management, along with aforementioned points. As long as the business is small, it is noted that a relatively good management is generally provided to it. When the business aims and heads to grow, it is exactly the point when the need for technical and managerial expertise is born, and this is currently lacking in the agriculture sector in Albania. The
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formalizing process remains a point that hinders the lending process for Albanian agriculture. Banks must have very good knowledge and specialized employees, in order to serve this sector, under such formalized conditions. The significant lack of financial documentation creates difficulties in analyzing these businesses, in the case of bank loan financing. Ownership issues are already a thorny problem. However, banks are constantly maintaining an open approach, to increase flexibility in this regard, by recognizing perfectly the difficulty of this case. Intesa Sanpaolo Bank has issued financial products which are flexible in terms of collateral requirements, by responding to this problem, and also showing a desire to contribute to the sector’s development.
Intesa Sanpaolo Bank is conscious in dealing with these difficulties, by confronting the challenge of working with this sector. The bank has a direct support from the AgriVenture Bank in Italy, which contributes consistently across the Intesa Sanpaolo Group, to increase and improve services to Agribusiness customers. Thus, we are aware that, the knowledge the bank owns, specialized and experienced employees, tools and products tailored according to customers’ requirements it offers and is expected to offer to customers, and all our commitment, in cooperation with all relevant stakeholders in the agribusiness sector, will bring into the banking system a substantial contribution for this important sector for the national economy.
As long as the business is small, it is noted that a relatively good management is generally provided to it. When the business aims and heads to grow, it is exactly the point when the need for technical and managerial expertise is born, and this is currently lacking in the agriculture sector in Albania.
Experts’ Forum
Controlling Mergers & Acquisitions: Points to be considered An important aspect in this regard is considering the regulatory aspects and control of such transactions, by several public entities. The concentration’s control by Competition Authority is an important element of procedures to be followed and undertaken, because concentrations’ control is precisely one of main pillars of the scope of activity of this authority.
by Attn. Ermal NAZIFI PhD Candiate in concentrations’ control
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he first mathematical exercise we all have learned is: 1 + 1 = 2. No one has ever doubted such simple equation, as even the most skeptical could prove the validity of such equation, by counting the fingers. However, there are cases when 1 +1 > 2, and sometimes, 1 +1 < 2. This is true in the case of mergers, acquisitions, or similar transactions between companies, called as concentrations, by the competition legal framework, or simply M & A, under international terminology. So, in case of a successful M & A transaction, the combined value of two companies will be larger than the value of each company before M&A transaction, and vice versa. Concentrations in financial markets, especially banking M&A transactions, are undoubtedly the most important ones. According www.businessinsider. com, the list of most important M & A transactions in history, since 19981, includes the acquisition of Royal Bank of Scotland (RBS Holdings NV) by an
investors’ group in 2007, valued at USD 100 billion, or the merger of Citicorp with Travelers Group, thus creating Citigroup, with an approximate value of USD 70 billion. According to CMS, a renowned legal services group in such field, a growing number of M&A transactions are expected in financial markets of the Southeastern Europe, during the coming years, as banks from Western Europe are curbing their presence in the region, with the aim to increase their asset value. Typically, Greek banks, according to this group, are pressed to withdraw their assets from the region, following claims by country’s creditors, that commercial banks must not transfer funds to strengthen their branches in the region. 2 This situation could lead to an increase of banking M & A transactions in the region, which are likely to affect Albania, too. This means that Albanian banks and various interested investors should be prepared for this process, thus conducting their proper financial analysis to successfully accomplish these transactions. However, an important aspect in this regard is considering the regulatory aspects and control of such
transactions, by several public entities. The concentration’s control by Competition Authority is an important element of procedures to be followed and undertaken, because concentrations’ control is precisely one of main pillars of the scope of activity of this authority. The Competition Authority conducts an analysis, ahead of any concentration’s practical implementation, in order to assess whether the proposed transaction will bring any negative consequences, or not, for competition within the market. WHAT IS A CONCENTRATION?
The competition protection act prescribes concentration as operations bringing about a lasting change in the control of the undertakings concerned and therefore in the structure of the market (kete formulim perdor rregullorja e BE)Practically, it occurs when: • the merger of two or more previously independent undertakings or parts of undertakings, or • the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of
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securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings. • The creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity. It should be noted, however, that not all the above – mentioned transactions should be notified and reported to the Competition Authority, because the legal framework requires that only those transactions, which have a turnover higher than the legally required levels, must be notified and reported. This is so, because not all types of concentrations may affect the competition in the market. Specifically, the eligible concentrations to be notified for authorization to the Authority include those cases for which the combined turnover in the international market for the last financial year, preceding the concentration, for all companies concerned, exceeds ALL 7 billion, whereas the turnover of at least one company, as part of the domestic market, exceeds ALL 200 million. Meanwhile, in cases of companies with no international turnover and activity, the domestic turnover of all companies in concern should be more than ALL 400 million, and turnover of at least one company, as part of the domestic market, is more than ALL 200 million. Given banks’ turnover, it is more than likely that their concentrations are eligible for notification to the Authority, and therefore, such notification should not be overlooked by bank managers and respective experts. The law prescribes hefty fines, up to 1% of the annual turnover for the previous year, should a company fails to notify about the concentration, within a prescribed 30 day-period, from the date of signing the merger agreement, acquisition of control, or the establishment of the joint venture. In cases when the purchase will be effected through a public offering, the 30-day period begins from the moment of its disclosure, irrespective of the fact that such transaction is made in cash, or through exchange of shares, percentages of assets, etc. Even the agreements, which are in a verbal form within the
As the practice of Competition Authority has shown, there are countable cases where banks have encountered problems with delays in notifications, thus being fined for such breach. This has occurred since the early days of the Authority, but also by end-2012, practically after a decade of its operation. prescribed time period, must be notified to the Authority. CONCENTRATION’S ASSESSMENT
The concentration’s assessment aims at avoiding negative consequences for the competition. So, the first step is to analyze whether the concentration will constitute, or strengthen any dominant position in the market. Also, the assessment considers the increasing happening of other anti-competitive practices, i.e. colluding on prohibited agreements, even silent ones, between remaining companies in the market, after the concentration is accomplished. However, the concentration is prohibited, only in cases when it significantly impedes effective competition in the market, or in some parts of it, in particular as a result of the creation or strengthening of a dominant position. So, concentrations’ control is subject to a detailed assessment, as it is not simply the establishment or strengthening of any dominant position, in order to not allow it. Another important element to be considered in this regard is the efficiency that is expected to follow the concentration. If the efficiency is greater than the cost or damage, which may
be caused to the competition, then the concentration should be allowed. If a company is on the verge of bankruptcy and there is no other competitive way rather than concentration, the concentration will be allowed; even if it would not be allowed, under normal conditions. The Competition Authority may allow a concentration, should the parties accept certain conditions and take appropriate measures to mitigate the anti-competition effects of the transaction. Such measures may constitute the enterprise’s behavior, but also structural measures, such as the sale of certain parts of the company. Concentrations could make companies more efficient, increase competition and bring benefits to consumers, but companies involved in these transactions must show proper prudence and be prepared to obtain approval form the Competition Authority, as a legal requirement, without which the transaction risks to be annulled. http://www.businessinsider.com/16biggest-acquisitions-of-all-time-2014-2 , 2 http://www.cmslegal.com, Emerging Europe M&A deals report Dealwatch 2013/2014. 1
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Experts’ Forum
Security traps The “security trap” means building a protective tactic, which hinders criminal initiatives, and enables the investigation of occurred events, thus helping in capturing the perpetrators.
HOW TO UNDERSTAND THESE “TACTICS” AND HOW TO BUILD THEM UP?
by Mr Roland TASHI Chairman AAB Bank Security Committee
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riminal actions committed against banking business units, foreign exchange bureaus and other financial entities that handle monetary values, do not primarily intend to damage and injure physically the employees serving in these objects and their customers therein; they only intend robbing the money as quickly as possible. It should be understood that the psychological pressure exerted by displaying and using of firearms or other strong objects, through heavy camouflage and other elements, including kidnapping, aims only at achieving a rapid act of robbery. In order to prevent robberies, physical and psychological violence, and to protect human life and monetary values, banks use various forms and methods of physical and electronic security, depending on their security policies, as well as on the trends of criminal activities.
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“Security trap” means building a protective tactic, which hinders criminal initiatives, and enables the investigation of occurred events, thus helping in capturing the perpetrators. “Cage Systems” at the entrance of the business units, are typical physical traps that do not allow the access to the bank by criminals who carry firearms, strong objects or camouflaged people. Such systems not only impede wrongdoers to enter the bank, but they can are trapped within, if they have committed a robbery at the bank and attempt to exit. By blocking and catching a robber inside such cage, has a significant restraining effect for the robbery, as robbers are reluctant to undertake any robbery on banking facilities that implement such system at their entrance. Currently, in Albania this tactic is used by some banks only, which for the period 2000-2013 have not experienced any robbery cases. “Banknotes” can also be used as a “trap” to capture robbers. A simple, but very effective method, is the identification of the serial number of the banknotes in one stack (pack of 100 banknotes), which is always placed, along with other monetary values, in the cash counters, or in the safes. If during a robbery, this stack with the registered serial numbers is stolen along with other monetary values, it will serve as a very valuable material evidence for the police, prosecution and the court, in proving the crime.
This trap worked for capturing robbers in the event at the American Bank of Albania, back in 6 June 2005. The police found in the apartment of one of the authors of the robbery several notes with serial numbers previously recorded by the bank, which served as proper evidence needed from the law enforcement authorities to arrest the criminals. “Painting” the banknotes with a special ink, invisible to human eye, is another way of building traps. The painted banknotes stand together with other monetary values at counters, safes, etc., as described above. The color used is personalized for specific banking subjects and is verified after laboratory examinations, which deter-
In order to prevent robberies, physical and psychological violence, and to protect human life and monetary values, banks use various forms and methods of physical and electronic security, depending on their security policies, as well as on the trends of criminal activities. In addition to physical security, a very efficient method for the prevention and capture of crime perpetrators is setting up and functioning of the “security traps”.
mine accurately the color and the bank they are robbed from. These notes will be used for the detection of bank robbers. “Dye Pack” is a more advanced trap for catching robbers. The “dye pack” device is a small metallic box, hidden inside a stack, usually filled with red pressured paint. The stack, holding inside the “dye pack”, stands along with other monetary values in counters, cash transporting vehicles, safes rooms, etc. The small metallic “box” is equipped with an electronic system, which activates its explosion, once the box is removed from its environment, marking the stolen cash with red dye. The security trap in this case shall be the stained money, which serve as a proof for capturing the robbers. It should be emphasized that, while leaving quickly the crime scene, and under psychological pressure, the robber does not pay attention to stolen goods. The dye explosion may not stain only the money but also clothes and body parts of the robber him/her/ self, thus providing valuable proof for law enforcement agencies. A stained robber “confesses” to have committed a robbery. The person who commits criminal act, operate almost with the driver mentality, who thinks he cannot make an accident, while driving the vehicle. Similarly, the robber shall not step back from the crime, thinking that he will not be detected, stopped and punished. The reality is different: the sophistication of physical and electronic security measures, as well as the setting up and functioning of security traps, influence the change of such mentality, posing the bank as a place hard to be robbed, where traces are left, where money and you can be dyed, etc., thus taking evidences with oneself, which prove the crime and enable its punishment. Executives in charge of the security structures in banks must be familiar with these alternative security methods, in order to be able to convince the high levels of management on their necessity and effectiveness and to implement them in business units, by assessing beforehand the level of risk of these units.
Albanian Association of Banks and Kosovo Banking Association organize the 3rd National Forum on Banking Security
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AB and Kosovo Banking Association (KBA) co-organized together, for the first time, the Third National Forum: “On Banking Security”. The Forum, held on 28 May 2014, at Theranda Hotel, in Prizren, Kosovo, was attended by representatives from commercial banks in Albania and Kosovo, central banks of both countries, Police and National Agency of Data Protection in Kosovo, and representatives from companies which provide services in relevant fields. This year, the Forum covered two fields of banking security: the Physical Security and Information Security. In their greeting speeches, Mr. Ilir Aliu, Deputy Head of KBA’ Board of Directors, Mr. Petrit Balija, KBA Secretary General and Ms. Endrita Xhaferaj, AAB Secretary General, welcomed the cooperation of the two Associations and emphasized the need for further local and regional cooperation in this sector. Mr Balija appreciated this event as one of the most important events in the banking industry and said that: “Given the fact that this forum is organized by KBA and AAB, we aim at organizing such forum in a regional level, where we may discuss and
exchange experiences between our banking industries in the region”. Representatives from commercial banks in Albania presented the work done by AAB Bank Security Committee and Information Security Committee, as well as current issues in Albania in these two fields. Mr. Roland Tashi, AAB Bank Security Committee Chairman, during his speech quoted: “The function of the physical security structure and its efficiency in commercial banks is the cornerstone, from where it starts to raise, develop and operate the whole edifice of security”.
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Experts’ Forum
The development of Card Sector in Kosovo More resources are now involved on the education of the bank clients, and as a result the use of cash is replaced with cards. inquiry, PIN change, cash withdrawal, etc. The roots of services related to cards, are found back in 2002, when banks began printing them. In 2002 there were 15 ATMs only, throughout Kosovo, and some 200 POSs, with just 15,000 cards printed, by all banks together. The number of card increased
by Mr Fisnik BEHXHETI Senior Officier of Card Operations TEB, Kosovo
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osovo started developing its card sector immediately after the war of ’99, much later than the other Central & Eastern European countries. The infrastructure of network terminals (ATM and POS) is growing and developing but not at a comparable pace as that in other countries in the region. The number of banking cards is increasing; however Kosovo still lags behind other countries in the region and Central Europe. Currently the number of ATMs in Kosovo has reached 500, so 4 times less than Slovenia and 2 times less than Macedonia. In terms of POS terminals, Kosovo comes second largest in the region, with an estimated number of POS at roughly 8,700. In Kosovo, the ATMs provide additional services like: utility payments, mobile Top Up, Credit Card Payments, Inter Bank Transfers/National Transfers, Obtaining 3D Secure PIN, increasing credit card limit, etc., along with standard services, such as: balance
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in 2004, with the introduction of cards licensed by Visa and Mastercard. The certification by these two companies enabled card holders to use them even beyond the network of card issuer (the bank). Card business in Kosovo market has been developing rapidly after 2010 and especially in 2013, where all banks invested heavily in marketing,
FIGURES OF CARD SECTOR DEVELOPMENT IN KOSOVO In 2002, the Kosovo market had
In 2013:
• 15 ATMs
•
500 ATMs
• 200 POS
•
8,700 POS
• 15,000 issued cards
•
Approximately 2.8 million issued
cards (including the expired cards,
lost/stolen, etc.)
THE RANGE OF ELECTRONIC PRODUCTS, OFFERED BY BANKS IN KOSOVO: • Credit cards with instalments, with minimal payments and rewards; • Prepaid cards, with functions of virtual card and P2P (opportunity for payments to friends and family) • Debit cards for ATM/POS with opportunities to pay through internet and with bonuses • E-banking and Mobile Banking • Payments for local services and other utilities (electricity, water, heating, customs, and landline phones, insurance policies, foreign exchange) • SMS Banking/Top up/Info • cell phone balance recharges, internet services payments • E-commerce
The roots of services related to cards, are found back in 2002, when banks began printing them. In 2002 there were 15 ATMs only, throughout Kosovo, and some 200 POSs, with just 15,000 cards printed, by all banks together. The number of card increased in 2004, with the introduction of cards licensed by Visa and Mastercard.
security, infrastructure, launching of new products and customer education. Banks pay more attention on educating bank clients, and as a result they are increasingly using cards instead of cash. Also, a sizeable slice of banks’ budget is allocated for marketing purposes of various products they offer, aiming at promoting banking services. Now, bank cards are displayed everywhere on billboards, televisions and various advertising/informative channels. On the other hand, banks in Kosovo have invested heavily on increasing the level of card security, especially during the last 3 - 4 years. It should be emphasized that, new cards issued in Kosovo market are personalized with DDA chip, while some banks have started to implement the 3D Secure for cards they issue. THE FUTURE OF E -PAYMENTS IN KOSOVO
It is estimated that there are over 1 million people in Kosovo who own a mobile phone, and 1 out of 4 phones are smartphones. This group is thought to be potential clients for various banking payments through mobile phone, which is expected very soon to revolutionize the payment system in the future. At the same time, considering the efficiency, the ease of use and practicality of mobile payments, therefore they will be an easy and preferable choice for clients.
AAB organized for the 4th consecutive year the Albanian National Card Forum
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AB and its Card Committee, comprised of representatives from member banks of AAB, organized, for the fourth consecutive year, the Albanian National Card Forum on 16 May 2014, at Sheraton Hotel, Tirana. The forum with main topic: “Card Business – Developments and Innovations”, was chiefly focused on card industry developments. The forum was attended by representatives from commercial banks in Albania and Kosovo, Bank of Albania, Visa and Master Card, Paylink, local and international companies which provide technology services in electronic payments services and utility companies. In the opening speech, Ms. Endrita Xhaferaj, AAB Secretary General and Mrs. Irida Huta, AAB Card Committee Chairwoman, greeted the participants and emphasized the role of this roundtable which gathered experts of card sector and payment systems, and briefly presented the developments and opportunities, that card business have in Albania. During the first section of the forum, the presenters brought and explained card industry innovations and analyzed the development trend of the sector. During the second section, banks’ representatives presented the new payment models that banks offer to their clients.
At the end of the forum, now an annual opportunity for presenting the opportunities offered by this sector, participants discussed on conclusions and suggestions, regarding the domestic card sector and e-payments growth.
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Economist Corner
How real is the fear of a deflationary scenario? The experience has shown that fight against deflation is far more delicate and difficult, as compared to inflation, whereas monetary policies are recommended to be “reactive” against inflation and “preventive” against deflation.
by Prof. Dr. Adrian CIVICI President & Head of Doctoral School European University of Tirana
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he unstoppable drops of the inflation level in Albania, Eurozone and in a wider specter, in many other developed countries of the world, are unfurling fears and deep concerns about facing with deflation. It seems that central banks are focusing their monetary policy analyses and decisions on base interest rate precisely on the issue of a possible confrontation with the devil called “deflation”. However, some substantial questions are prevailing in all debates, explanations and views of central and commercial banks, in the context of expectations and adaptations with a potential deflationary reality, such as: Is it a real the fear of a deflationary scenario? Are central banks taking “historic decisions”, intended to prevent a deflation show up? Is this a real war and imminent risk, or it is mainly done for psychological effects and as a preventive therapy? The last 12-15 months proved that these doubts or assumptions came true, not only for large systems such as:
Eurozone, U.S., etc., but also for small and developing countries. The Eurozone’s prices rose merely 0.5 per cent in May, while the ECB’s target is 2 per cent; in Albania they hovered between just 1.6 - 1.7 per cent, whereas the BoA’s minimum floor (objective) is 2 per cent. In all cases, it appears that the most disturbing fact is that “factors which affect the drop in inflation are currently resulting more powerful and more influential than factors affecting the opposite side.” For their part, monetary policies appear to be approaching limits of their conventional nature and central banks are starting to think about a possible need to apply selective or largely unconventional monetary policies. However, a certain category of experts and specialists of monetary policy and inflation/deflation relation think that “no one should be afraid of deflation,” at least for the time being, or for a short period of time ahead. Anytime the word “inflation” is mentioned, the economists in general and bankers in particular, perceive it as a “more harmful phenomenon compared to high inflation”. Based upon the negative experience of the Great Depression crisis of 1929-33 in US, the Asian deflation, and especially the Japanese deflation of 1990-2002, etc., it is concluded that, “when the deflationary spiral ex-
pands and extends in time, monetary policies start to lose efficiency and the economy slips, unavoidably, towards recession, ths making governments and central banks powerless. The experience has shown that fight against deflation is far more delicate and difficult, as compared to inflation, whereas monetary policies are recommended to be “reactive” against inflation and “preventive” against deflation. The above mechanism goes through several stages: 1) it begins with the outbreak of the real estate or monetary bubble, following the failure of monetary policy, or the exchange rate, as a result of structural problems produced by the economy or the banking sector, which hinder the efforts to recover and stabilize the economy, after various shocks from crises, which above all, trigger a constant decline in prices; 2) the decrease in prices does not stimulate demand at all, but instead weakens and asphyxiates it, so that the decrease of inflation provokes a decline in production or undercapacity performance in many branches of industries and services. In order to stimulate the economy, central banks walk up to the limits by reducing the key interest rate near (or almost) zero, but such move does not produce the expected effects, because budgetary policies are not likely to be expanding ones, in a time when fiscal incomes will
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follow a downward trend, as a result of declining economic activity; 3) At the moment when the the deflationary trend emerges, central banks are far more interested in having a higher inflation rate, possibly in the range of 3-4 per cent, in order to avoid “catastrophic scenarios”, that economists describe as “the liquidity trap”, because handling and containing the deflation, in the frame of a low inflation situation, ensures a limited outmaneuvering by monetary policies, if not a deterioaration in their creditworthiness. So, in other words, deflation is characterized by 5 basic parameters: a significant decrease in price levels and staying in such levels for a long time; a declining demand and consumption; meagre economic growth or recession-like situations; almost zero base interest rates applied by central banks; and significant reduction of credit to economy. In theoretical terms, such scheme is specifically analyzed by economists like: Fisher, Summers, Akerlof, etc., or generally by the supporters of the financial theory of cycles. In an empirical plan, alongside classical cases of deflation of end - nineteenth century (caused by the contradiction between a limited money supply and the explosion of technological progress and industrial revolutions), and Great Depression of 1929-33, during the last 2-3 decades the world has experienced some difficult cases of deflationary situations: Japan during the 1990-2002 period (as caused by the outbrake of the real estate bubble and the banking system crisis), U.S. during 199697 period (by an overvalued consumer price index), the Asian crisis of 1997-98 (massive depreciation of assets), Argentina and Hong - Kong in 2000-2002, several sporadic cases of stock exchange shocks in U.S. and Europe in the coming years, etc. But, is deflation an “absolute” phenomenon, is the “Japanese disease” a virus that could contaminate every economy of different countries in the world, and above all, is there any recipe to be saved from deflation? Some economists such as: Becker, Sterling or Blanqué think that “some economies are more immune to deflationary risks, thanks to their structural rigidity in their banking and economic sphere”, so when talking about the likelihood of facing a deflation situation, someone must carefully anal-
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Deflation is characterized by 5 basic parameters: a significant decrease in price levels and staying in such levels for a long time; a declining demand and consumption; meagre economic growth or recession-like situations; almost zero base interest rates applied by central banks; and significant reduction of credit to economy.
yse “the structural situation of key strategic markets” in each country. The situations could be different in U.S., Japan, Eurozone, BRICS countries, developing countries, etc. Mrs. Christine Lagarde, IMF Managing Director, joined the deep concern about such global-scale issue, when in January 2014 from Washington, she declared that “with inflation running below many central banks’ targets, we see
rising risks of deflation,”…“if inflation is the genie, then deflation is the ogre that must be fought decisively. [...] We see rising risks of deflation, which could prove disastrous for the recovery.” In these conditions, Lagarde advises that, “central banks should return to more conventional monetary policies only when robust growth is firmly rooted.” It is the first time that one of the most important international institutions, such
as IMF, so openly articulates the risk of deflationary scenario, while most central bankers believe and estimate that “such danger is still hypothetical and is not a threatening one in the short-term”, although they admit, in figurative terms, that it is like “Sword of Damocles”. According to them, the deflation materialized in a general price decrease for long periods, should be distinguished from disinflation, which means a situation in which the price decrease follows a slow pattern. In such situations, “public policies should not put more emphasis on budgetary rigidity and austerity, because such policies may provoke a reduction of public expenditure, incomes and they do favor deflationary expectations, thus reinforcing a deflation happening. The real fear is based upon doubts that perhaps “the current disinflation of last months or year, as evidenced in the U.S. and Europe, could evolve into a deflationary spiral.” Such a situation, may inter alia, risk provoking a decline in investments and consumption, and it will overvalue and overprice real interest rates, by making more difficult public and private debt repayments. It was typically the fear of inflation which drove some of most powerful central banks in the world, such as: Fed and ECB to make “drastic” decisions in their monetary policies and key interest rates, noting that “a very low inflation requires ultra loosening monetary policies.” In early 2014, the European Banking Authority (EBA) decided, under the pressure of deflationary risk, that the key criterions of passing the stress-tests by European banks should include indicators which showed banks’ stress resistance and their abilities to weather a hypothetical deflationary situation, that may emerge within the eurozone, in the months or 1-2 years to come. In the U.S., the fear of deflation emereged since the 2008-2010 period,
when Fed was headed by Mr. Ben Bernanke, an expert on deflation issues, with many academic work and contribution in this area. Bernanke’s motto was “Deflation: Making Sure “It” Doesn’t Happen Here”. By imagining the devastating consequences, a long cycle of low prices and a meagre economic growth could produce, Fed embraced an unprecedented supportive policy for markets and the U.S. economy. This policy, called “quantitative easing”, led the U.S. to “create” dollars, via Fed, aiming at buying longterm government bonds, from January 2008 to March 2014, which in turn increases the monetary base by 467 per cent, while keeping an almost zero key interest rate (0-0.25%). By “responding to the demand for currency,” Fed “encouraged economic agents to abandon their logic of reducing expenses, regain confidence and intensify borrowing to invest and consume.” Actually, the U.S. economic growth appears in a positive trend, which is reflected in a changing course of Fed’s monetary policy, in the form of “tapering” , that aims to stabilize the dollar, by reducing the monetary base with USD 10 billion in several stages (from January 2014). However, Fed does not think the U.S. economy is immune from the “deflation virus” and it does not exclude the possibility of experiencing a period characterized by a decrease in prices, credit and wages, that would in turn provoke a decline in investments and consumption, would complicate the public debt service, as a result of increasing percentage real interest rates, as well as deepening the gap between rich and poor people. Therefore, the “quantitative easing” policy is not considered as lapsed and closed, but it is kept “in vault”, in case of any real emergence of the deflationary scenario. Even ECB, which has privileged the LTRO (Long Term Refinancing Operations) policy until recently, which unlike
Monetary policies appear to be approaching limits of their conventional nature and central banks are starting to think about a possible need to apply selective or largely unconventional monetary policies.
the American model, has privileged the lending method. In this case, ECB has provided commercial banks with a significant loan amount, thus increasing the monetary base, not as a direct and outright intervetion, but instead as a response to banks’ needs for borrowed funds. The larger or smaller the loans’ demand, the more the monetary base was increased or decreased. This policy gave significantly less positive effects, compared with the U.S. model; the monetary base in Europe during January 2008 - March 2014 period grew by only 25 per cent, whereas the inflation in May 2014 fell to historical levels of 0.5 per cent, significantly below the ECB’s target of 2 percent. In response to the deflation risk and the necessity of increase the European economy’s competitiveness, the ECB took an “historic” decision: it lowered the euro base interest rate at 0.15%, announced the launching of two major 4-year loan packages to European banks, and decided the remuneration rate for liquid deposits with the ECB “in a negative territory (-0.10%)”. This unconventional measure provoked immediately a significant decrease by EUR 25.4 billion for bank deposits at eurozone’s central banks, although it remains unclear whether these liquidity will be injected immediately into the economy in the form of loans, and therefore will affect the rise of inflation, within the ECB’s objective. Mr. Draghi, ECB President, described these measures as “encouraging lending and injecting liquidity into the real economy” and as a challenge in efforts to stem disinflation and more importantly, the fear of deflation’s emergence. Meanwhile, Mr. Weidman, President of Bundesbank noted that, “we did our best to encourage the increase in inflation. Now it is important to look at a return of economic growth in the Eurozone “. Even Mr. Noyer, Governor of the Banque de France, stressed that “the largest challenge the eurozone is facing is the risk of an installated low inflation rate and strong deflationary pressures” that, among others, are caused by a “strong euro”. Under these conditions, during coming months, “the ECB should seriously consider the implementation of unconventional monetary policy.”
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Social capital
BKT
ALPHA BANK ALBANIA Volunteer Day Every year Alpha Bank Group organizes “The Volunteer Day - Alpha Bank”. This year, the Bank chose to revitalize the “Selman Stermasi” park in Tirana, and another park in the town of Ballshi. Ms Brunilda Isaj, member of management board and retail banking business unit manager at Alpha Bank Albania said: “The goal was to provide citizens with a clean and friendly environment and I think we achieved it. Today is the National Children Day and it’s everyone’s duty to provide them with a healthier environment to grow and teach them about loving and caring for the nature.
Together we donate blood! Alpha Bank Albania, in collaboration with Red Cross Albania, organized for the fourth consecutive year the Blood Donation Day, on 11 June 2014. Mr. Periklis Drougkas, CEO of Alpha Bank Albania said that the bank regularly undertakes initiatives to support various social issues. In order to increase the community’s awareness about the importance of blood donation, Alpha Bank launched a Facebook campaign named “I donate 5 minutes of my time! What about you?’’
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“Let’s Clean up the Coast” organized by Green Line Albania. This initiative, supported by BKT, aims at mobilizing citizens in a one-day voluntary action to clean the coast and raise awareness on keeping the environment clean. The National Circus The Albanian National Circus, with the support from BKT, hosted “The Knocks of Spring” show. The great masters of circus, who shared the same passion for art and circus, played many tricks for children in the arena.
CREDINS BANK Close to the new generation In the occasion of 1st June, Credins Bank supported financially the feast of children, organized at Kindergarten no.24 and also supported the charity show, “You should love, too”. The bank organized a gala evening, in support of orphaned children, where special guests attended the event, with the aim to raise awareness about real needs of this special social group. Sport support Credis Bank provided financial support for Albanian Weightlifting Federation, which was prepared for a decent participation at the World Weightlifting Championship, in Kazakhstan.
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PROCREDIT BANK
Social capital
“Burn calories, not fuel” Crédit Agricole Albania and Ecovolis continue to promote the clean environment, through raising the awareness of citizens to use bicycle as a healthy form of movement. Such cooperation is made possible through the joint bicycle station, positioned at “Skënderbej” Square and under the motto: “Burn calories, not fuel”
CREDIT AGRICOLE Crédit Agricole and TKOB bring back Angelin Preljocaj on stage The bank joined the National Theater of Opera and Ballet (TKOB) to support two ballet shows of Maestro Angelin Preljocaj, titled: “Le Royaume Uni” and “La Stravaganza”, from 9 - 11 May 2014.
“French Feast” in Gjirokastra In the frame of the Francophone Spring, the bank and the “Rumbo Urani” elementary school organized a “French Feast” in Gjirokastra. Promoting memory book: “Albania in the trenches of wars” The photo album: “Albania in the trenches of wars”, prepared by the researcher Walter John, with the support of Crédit Agricole Bank Albania, was promoted on 18 April 2014, at the National Historic Museum.
For a clean environment On the eve of opening the tourist season, the bank undertook the initiative to clean up the largest tourist areas in the country. On the same day, the bank’s staff divided into areas of Dajti National Park and 4 largest beaches of the country, such as: Velipoja, Durrësi, Vlora and Pogradeci, gave the example of a responsible civil behavior. Meeting with Albanian and Macedonian businesses About 40 businesses, clients of ProCredit Kosovo and Macedonia, were gathered in a meeting on 27 May 2014 in Tirana. The customers had the opportunity to promote their products in a mini-fair and at the same time introduced their financial services, such as ProPay transfers. RAIFFEISEN BANK Bank to donate 20 computers to “Zyber Hallulli” Children’s House Raiffeisen Bank donated 20 computers to “ZYBER Hallulli” Children’s House, in Tirana. In his welcome speech, Mr. Christian Canacaris, CEO of the bank, gave his thanks for organizing such event and for the opportunity given to the bank to become part of it.
INTESA SANPAOLO BANK ALBANIA
Social activities and initiatives • A story of altruism in the International Thalassemia Day, 8 - 9 May • Gifts to orphaned children and their families in Gjirokastra, May 20 • Work & Career Fairs, more opportunities for students • TEDx Tirana - in support of innovation, May 3
Activities and initiatives in the environmental field • Let’s Clean Uup the Coast, 23 May, 2014! • World Environment Day, 5 June, 2014 – “Let’s raise our voice not the sea level!”
The inauguration of the first service centre for children with Down syndrome The bank supported the reconstruction of new premises for Down Syndrome Albania Foundation and its centre of services for children, individuals with Down syndrome and their families. This is the first center of its kind in Albania.
Arts & cultural activities and initiatives • The Feast of the Italian Republic, 2 June 2014
Sponsorship for new uniforms of the employees of QSUT Bank joined the initiative of the University Hospital Center Directory “Mother Teresa”, in supporting financially the project for producing the uniforms.
Financial education activities and initiatives • Donation to support “De Rada” elementary School • Children visits at the Bank, 6 June, 2014 SOCIETE GENERALE ALBANIA Societe Generale Albania sponsored several initiatives, both in Tirana and other cities, through a network of 43 branches, located throughout the country. One of the initiatives was sponsoring Hudenisht Municipality for the lake shore cleanup in Lin, on the occasion of touristic season opening.
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Social capital
UNION BANK Summer Day Union Bank supported several activities organized in Elbasan, on 14 March 2014, on the occasion of the “Summer Day” Feast.
TIRANA BANK Tirana Bank supports Opera “Orpheus” Tirana Bank was one of the main sponsors in putting on stage the opera “ Orpheus and Eurydice”, by bringing this masterpiece to the Albanian audience.
Children’s Festival - Fest 2014 Union Bank supported, for the third consecutive year, the organization of Children’s Festival “Fest 2014”, held in Kukës, on 29 May, 2014.
VENETO BANKA Sponsor of a children’s show Veneto Banka supported the show of children of Shkodra: “Promessi Sposi”, organized by the Italian Embassy. This show was part of the celebrations organized in the National Day of the Republic of Italy. Tirana Bank supports excellence in teaching system Tirana Bank helped the Directorate of Education in Pogradec, in its new project: “The digitalization of teaching classes.” In this context, Tirana Bank sponsored the purchase of a digital interactive board (Smart Board), which will help in updating teaching methods.
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Rally Albania - “Smiles and Energy” The “Smiles and Energy” team from Veneto - Italy, consisting of Giampietro Dal Ben and Michele Sartori and the supporting team, competed in Rally Albania. Together with Veneto Banka they donated a truck with aids for people in need in Durrës and Elbasan. The aid distribution was supported by Mr. Erion Veliaj, Minister of Social Welfare and Youth.
Ecovolis - Clear the lanes! Ecovolis Albania, with the support of Veneto Banka, is successfully continuing the campaign to raise awareness for the use of bicycles in the city, and especially clearing the bike lanes.
News
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he European Bank for Reconstruction and Development (EBRD) presented on 21 May 2014 the “Enterprise Expansion Fund” (ENEF) at Tirana International Hotel. The event brought together representatives of banks and business community. ENEF is a financial instrument for Western Balkan countries which supports established SMEs with a highgrowth potential, incorporated in the Western Balkans or investing in projects implemented in the Western Balkans, by providing equity finance to support the development and expansion of these businesses. ENEF supports innovation and introduction of technologies which help boost competitiveness, improve quality and efficiency of production. This fund aims to introduce standards for corporate governance, encouraging companies to raise the bar in business behavior. The fund size is €77 million and it provides funding to local SMEs whose ever growing needs are not fully met by other funding sources. Mr. Fabio Serri, the head of the EBRD Office in Tirana, said that Albanian businesses and companies can obtain investments under ENEF and expressed EBRD’s readiness to work with banks in this regard. “Banks can be partners in this financial instrument and the EBRD is willing to work with banks,” he added. Mr. Arben Ahmetaj, Minister of Economy, said that this innovative fund, comes at the right time to Albania as it brings ideas, innovation and finance, as well as a need for further development. Mr. Ahmetaj continued: “This financial instrument is fantastic. It doesn’t require collateral. The instrument will encourage all of us, enterprises and the government, to think more about the new structure of SMEs”. ENEF focuses on SMEs in the Western Balkans (Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro and Serbia) with a high growth potential.
EBRD and partners provide financing for Western Balkans’ SMEs with high growth potential Enterprise Expansion Fund (ENEF) WHAT IS ENEF?
ENEF supports established SMEs with a high-growth potential, incorporated in the Western Balkans, or investing in projects implemented in the Western Balkans, by providing equity finance to support the development and expansion of these businesses. ENTERPRISE EXPANSION FUND (ENEF)
• Key features • For SMEs with a high growth potential, • Provides equity financing for the expansion of these businesses, • Eligible SMEs can obtain investments of EUR 1 million up to EUR 10 million on average, • Advised by the European Bank for Reconstruction and Development (EBRD), • Expected financing available at second closing: up to EUR 110 million. WHICH TYPE OF FINANCING DOES ENEF PROVIDE TO SMES?
ENEF provides primarily equity and quasi-equity, as well as convertible bonds, to the selected investee companies, with the aim to strengthen their
balance sheet and support their growth potential by providing liquidity. WHO ARE ENEF PARTNERS?
The initial investors into ENEF are the European Commission, EBRD, the European Investment Fund (EIF), Kreditanstalt für Wiederaufbau (KfW) and the Italian Government. WHO IS MANAGING ENEF?
ENEF is internally managed and advised by The European Bank for Reconstruction and Development (EBRD). THE ENTERPRISE EXPANSION FUND – BACKGROUND
There is a growing demand in the Western Balkans to finance expansion capital of local SMEs. There has been few successful homegrown equity funds in the Western Balkans, because of high costs associated with establishing and developing investment funds in the region. In this context, ENEF was created to encourage the expansion of SMEs in the Western Balkans. SMEs can clearly benefit from cooperation with equity investors to make the transition to the next level of development and realise in full their growth potential.
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Tech Topics
E-Channels and banking industry: Challenges and opportunities as recognized by HALCOM Halcom’s strong initiative is to support Albanian banks and other financial institutions with offering a full range of banking and financial services in a modern digital environment.
by Mr Marko VALJAVEC, Ph.D. Chief Executive Officer HALCOM d.d.
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alcom has been established in 1992 and has pioneered modern e-banking and e-payments systems, focusing on generating value for banks and their customers. HALCOM provides modern, reliable and value-based solutions to its customer base, consisting of more than 70 commercial banks, 150,000 companies, processing over 20 million transactions in a value of USD 80 billion monthly, across 10 global markets in Southeast and Eastern Europe, North Africa and the Middle East (Albania, Bosnia and Herzegovina, Iran, Kosovo, Montenegro, Qatar, Morocco, Poland, Serbia and Slovenia). HALCOM IN ALBANIA
HALCOM is present in Albania from 2005 and since then HALCOM is striving to shed all the experiences, gained in 10 different markets across the world, into the solutions that it is developing for the Albanian market, too. In Albania, HALCOM provides e-banking services to 4 commercial banks (Société
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Générale Albania Bank, Crédit Agricole Bank, Raiffeisen Bank and Veneto Bank). HALCOM has also a presence in Kosovo (servicing Raiffeisen Bank and ProCredit Bank) and in Montenegro (servicing Erste Bank, Komercijalna Bank and NLB Montenegro Bank). AREA OF BUSINESS
HALCOM is committed at attaining the very highest standards of quality. Through innovation, HALCOM is thus constantly at the forefront of the following areas: • e-banking: a suite of products, which represents an effective, end-to-end solution for all areas of electronic banking services, supported according to specific needs of all customer segments (Retail, SME, Corporate), • mobile banking: is a simple, fast and safe solution for usage of electronic banking services on mobile devices, • e-invoicing/e-billing: the solution for distribution of e-invoices uses your electronic bank as a safe communication channel. Recipients of e-invoices can thus prepare payment orders with just one click, while issuers of e-invoices can entirely automate
coordination between payments and invoices due to accurate data, • inter-bank clearing systems: for automated processing of payments on national level within a central bank or a clearing house, • mobile payments: it is a solution offering an easy-to-use and secure mobile payments with protection that functions on all mobile telephone handsets. CHALLENGES OF BANKING INDUSTRY WHEN IT COMES TO SERVICING CLIENTS
Banks have been striving to align their access channels (branches, ATMs, e-channels, etc.) as close as possible for a long time. Benefits behind this are obvious - a financial institution can be twice as profitable and experience greater customer loyalty when its channels are aligned. But aligning the channels is a complex task that places new demands on the bank and means overcoming two considerable obstacles - complex organizational barriers as well as fragmented legacy IT systems. The name of the game is Omni-Channel. In an organization where channels are well converged, clients access the services they want on their preferred channel mix and
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Halcom’s next generation Omni-Channel products
their experience is consistent, regardless of the entry point, comprehensive customer information is available on any channel irrespective of where the information originate from, and finally, the client has access to real-time progress or status on his activities, be it a mortgage application or a complaint letter. OBSTACLES TO OMNI-CHANNEL
Channels usage varies across different products, segments, activities and it changes overtime, not least because of banks’ efforts to direct activities into channels that are able to handle them most effectively. Moreover, clients are increasingly using multiple channels to complete a single activity. Consequently, in the past years the challenge for banks was to achieve an optimal customer journey that gives the most efficient balance between different channels in online and physical worlds. Achieving this kind of seamless channel integration is very difficult under the current set-up. Banks have to struggle with multiple disparate yet often overlapping systems, which are usually inflexible, hindering the bank’s ability to respond to fast-changing business requirements. As a result, processes are often duplicated in each channel, data are stored locally in the channel, and messages across all the bank channels are inconsistent and their language is not adapted to the specific channel audience.
• Increase in the number of interactions per customer; Improved efficiency: • Increase in channel efficiency, “interaction specialization”; • Increase in service agent and branch employee productivity; • Increase in channel transparency and flexibility; • Increase in time-to-market of services and products; Increased revenue: • Increase in the first-contact sales ratio; • Increase in cross-sell ratio. WHAT DOES OMNI-CHANNEL IMPLY FOR INTERNET BANKING?
An Internet Banking solution is just another channel in bank´s overall channel mix. Nevertheless, being part of a complex multi-channel strategy, judging a solution by the range of its functionalities is no longer enough. Among the most important demands towards Internet Banking are the following: • The bank needs to make sure that the solution provider has sufficient experience in bringing together mul-
BENEFITS OF OMNI-CHANNEL
A number of banks on the global market currently lead the game in terms of Omni-Channel. Among the most important takeaways are: Support of the customer centricity / relationship management initiatives: • Decrease in attrition rates; • Spreading out of retention efforts: from only physical to all channels;
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tiple electronic channels (internet banking, mobile and tablet banking, invoicing, mobile payments, social networks etc.) under a single umbrella for a seamless and complimentary end-user experience. • As banks are fighting systems fragmentation and the overcapacity locked into each of those disparate systems, banks should also consider opting for solutions that are able to cover multiple client segments, such as retail, SME and corporate. • As channels will become more open and interconnected between each other, human resources administering them will also be shared. A single Contact Centre will be sitting on top of all bank-client relationships, having a single overview of all customer information as well as environments. The Internet Banking channel should be flexible to allow “handing over” of client management tasks to the Contact Centre. One of the main goal of Halcom´s solutions is enabling banks to lower the costs of servicing clients, by transferring a major part of banking business with clients from branches into the e-banking environment, especially for low-added-value services (checking balances, statements, monitoring transactions, submitting payment orders, etc). Halcom’s integrated Omni-Channel e-banking platform enables banks to engage customers via multiple channels providing them with a seamless customer experience. Alternatively to visiting branches, customers can conveniently connect with their bank using various touch points such as the Internet, mobile phones and tablets. Halcom’ solutions are designed to help banks sell more products and services to their customers. Modular architecture empowers banks to roll out all the channels at once or individually and provides a quick time-to-market of new services. On Halcom’s e-banking platform, the banks can leverage the e-channels to cross-sell and up-sell new products and services to their customers, anytime and anywhere. For more information regarding efficient and successful servicing of clients at your Bank via e-channels please write us directly at info@halcom.com.
Prepaid cards, a successful innovation Prepaid cards can be recharged with a limited amount, especially designated for purchases and payments, thus preventing the risk of financial losses, in cases of fraud. Also, the charge in the desired amount allows the cardholder to have control and manage better her/his expenditure budget. marking an increase of 124 per cent of issued cards in the first quarter of 2014, compared with the total number of cards issued in 2013.
HALCOM’S E-BANKING PLATFORM1
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Halcom Omni-Channel Experience
Tech Topics
by Ms Marsela KUSHTA Head of Sector Operations, Risk Management and Fraud Card Department Credins Bank
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REDINS Bank is the first bank in the country licensed to issue the prepaid VISA card, one of the latest forms of the use of electronic money. The launch of prepaid cards follows bank management’s vision and objectives to be close to customers and offering them products and innovations coming from global markets, in the area of electronic payments. The comfort, safety and speed these new forms of electronic payments offer, are the reasons that Credins Bank introduced the prepaid VISA card into the banking market, by offering more flexibility and opportunity for individuals, be they bank clients or not. The project with VISA International and the licensing for prepaid cards was finalized with the issuance of the first card in February 2012. The prepaid cards performance exceeded the project’s forecasts and expectations, by
WHAT IS THE PREPAID VISA CARD?
Prepaid Visa cards are VISA Electron debit card, designed for different clients segments. Currently, the following three types of cards are launched in the market by Credins Bank: • General Purpose Card • Student Card; and • Internet Card.
Prepaid card is an optimal solution for customer categories that do not have a bank current account, such as: students, or other segments with irregular incomes. Since such cards are not personalized, therefore they are easily transferable from one person to another, by adding also another usage feature as Gift Card.
According to their type, prepaid cards have specific functions and limits, up to a five-year term of their validity. They are used for pre-determined purposes, although they operate essentially as normal debit cards. As the name implies, prepaid cards can be recharged with the needed amount, within the limits defined in contract terms, depending on the type of card and the primary purpose of its issuance. Like all other cards issued by Credins Bank, even the prepaid card is a safe one, equipped with a magnetic strip and chip, which is valid and works with PIN, only. As an instrument of electronic money, the prepaid card is linked to an account in the system, which uniquely identifies it. Through its use, the cardholder is provide with access to available funds in the account. WHO MAY OBTAIN THESE CARDS?
Prepaid cards are easily obtainable by all. They are not personalized and do not have restrictions on their issuance. Anonymity makes them accessible for any person, be a bank client or not, employees or even students. Specifically, an identification document is the only requirement to apply at any counter of Credins Bank. The prepaid VISA card offers customers who do not have a bank account, or contacts with banks, access to banking system and international markets through online shopping,
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giving them the opportunity for a lifestyle beyond cash usage. Prepaid cards can be used anywhere where VISA logo appears, for domestic and abroad purchases, where a POS is located, online purchases and ATM cash transactions. The transactions processed by merchants in this case are quite identical, as those in case of any other debit or credit card. The prepaid VISA card is used along with an existing debit or credit card. It is the best solution for all users and regular online buyers, who do not want to risk their personal account limit, or to expose existing card data. Prepaid card is an optimal solution for customer categories that do not have a bank current account, such as: students, or other segments with irregular incomes. Since such cards are not personalized, therefore they are easily transferable from one person to another, by adding also another usage feature as Gift Card. THE FUNCTIONS OF PREPAID CARDS - SPECIFIC ACCORDING TO CARD TYPE
Student Card aims mainly the students who do not have a personal bank account, but on the other hand are potential consumers for products and services, possibly for online shopping, among others. In this point of view, the prepaid cards for students could be considered as a strategic product, which brings closer to the bank this segment of clients. Student cards can be used for domestic and abroad purchases, POS terminals, internet transactions and cash withdrawals at ATMs, within the usage limits of the card. Internet Card is a card designed to be used mainly for online transactions. By using this card and recharging it with the desired amount, the risk of copying card data during online transactions is significantly reduced. For this purpose, the recharging amount may be limited up to the value of the product or service, intended to be purchased. General Purpose Card has a more general character, compared to the first two types of prepaid cards. The list of allowed transactions with this card is longer and includes both cash and online transactions. The principle of its functioning is based upon advance recharge
Prepaid cards can be recharged with the needed amount, within the limits defined in contract terms, depending on the type of card and the primary purpose of its issuance. Also, as an instrument of electronic money, the prepaid card is linked to an account in the system, which uniquely identifies it. Through its use, the cardholder is provide with access to available funds in the account.
of account balance with funds which become available to the card client. Prepaid cards can be recharged with a limited amount, especially designated for purchases and payments, thus preventing the risk of financial losses, in cases of fraud. Also, the charge in the desired amount allows the cardholder to have control and manage better her/his expenditure budget. With the proliferation and development of technology it seems that
money is becoming ever more electronic. The payment system and the opportunities that business brings into the system will continue to evolve with technology progress. The prepaid cards offered by Credins Bank are the latest innovation in electronic commerce. Further challenges of Credins Bank will lie in the field of providing the newest products and technological developments, especially designed to best suit the growing clientsâ&#x20AC;&#x2122; demand.
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AAB Trainings
TRAINING ON CIA EXAM REVIEW (PART 1), 09-10 MAY 2014
AAB Internal Audit Committee members, with the support of AAB, attended CIA Exam Review Part 1: Internal Audit Basics Training, offered through a partnership between JP Consulting and Albanian Institute of Internal Auditors (AIIA). The Certified Internal Auditor® (CIA®) is the standard by which professional internal auditors demonstrate their knowledge and competence.
TRAINING COURSE ON SELLING IN A PHYSICAL CHANNEL, 17 APRIL 2014
AAB, in cooperation with the “EP & partners consultancy”, organized a one-day interactive seminar with the participation of 13 bank employees. TRAINING COURSE ON BANKS GUARANTEES, 16 - 17 APRIL 2014 TRAINING COURSE ON DYNAMIC PRESENTATION, 10 - 11 APRIL 2014
AAB, in cooperation with “Lincoln Center” in Tirana organized a two-day training on “Dynamic Presentation”, focused on presentations’ structure, the use of visual aids, and delivery.
ICC Albania organized with the support of AAB and Raiffeisen Bank a two-day course on bank guarantees. The training was headed by Dr. Andrea Hauptmann, Member of ICC Austria. More than 25 participants from banks, legal firms and other companies attended the training course. TRAINING COURSE ON LEADERSHIP SKILLS, 21-22 APRIL 2014
TRAINING ON INTEGRATED MARKETING COMMUNICATION, 29- 30 MAY 2014
AAB, in cooperation with WIFI Albania, organized a two - day training on Integrated Marketing Communication (IMC). The seminar provided the 9 participants of member’s banks, who attended the training, with the opportunity to equally understand and apply the IMC-contents on their individual companies and walk out with a bunch of new ideas how to best promote the product.
Mr. Paul Gauci delivered a two-day training course on Leadership Skills for Mangers, Supervisors and Team Leaders. The training course was attended by 10 employees from member banks.
TRAINING COURSE ON EXCELLENCE IN SALES, 16 APRIL 2014
AAB in cooperation with WIFI organized a training course designed for sales managers, who want to refine sales’ planning techniques, build leadership skills and become more powerful decision makers, motivators, communicators and counselors. The course, lectured by the international trainer Mr. Eric Molin, was attended by 9 managers from 4 member banks.
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Training Seminars organized in cooperation with the School of Magistrates “ON CIVIL SECURING MEASURES FOR LAWSUITS”, 25-26 JUNE 2014 This training
TRAINING ON RISK, CONTROL AND GOVERNANCE, 07-08 MAY 2014
AAB, in cooperation with the Albanian Institute of Internal Auditors, organized a twoday training course on Risk, Control and Governance. The training was attended by 10 participants of 8 member banks.
“EXECUTIVE TITLES IN CIVIL PROCEDURES AND EXECUTIVE TITLES IN THE SPIRIT OF THE SPECIFIC LAW”, 9-10 JUNE 2014
The seminar were addressed and discussed issues such as: the objection to the bailiffs’ actions and the invalidity of executive titles; the standards according to Article 6 of the European Convention of Human Rights and the jurisprudence of the European Court of Human Rights, regarding the execution of a final decision within a reasonable timeline; the acts of lending as executive title; legal problems faced in court regarding the issuance and the objection of the order of execution.
seminar addressed the following issues: the integral treatment of Civil Procedures provisions, regarding the collateral enforcement; the judicial and unified procedures, regarding the issuing the security measures; objections in cases of dropping the security measure; application procedures, in cases of execution of bank loans contracts.
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